At the end of 2012, the European Union (EU) issued a revised Generalized System of Preferences (GSP) scheme for developing countries most in need, which will take effect January 1, 2014. With the new scheme, three Thai product categories will no longer get preferential access to the EU, i.e., processed meat and seafood products (HS 16), processed food products and animal feed (HS 17-23), plus gems and jewelry (HS 71). Thai gems and jewelry have already experienced GSP cuts before.
Also, starting in 2015, it is expected that the EU will rescind preferential access to Thailand exports based on our Gross National Income (GNI) per capita. Once effective, Thai shipments to the EU will be adversely affected, because they will only be allotted most favored nation (MFN) tariff rates, which are higher than GSP rates.
Given this, we at KResearch are of the view that Thai products that are heavily dependent on the EU market and their GSP privileges will be those most adversely affected, e.g., canned pineapple, processed shrimp and animal feed in 2014, plus motor vehicles, wall air conditioners and chilled/frozen shrimp products in 2015.
Based on our assessment, the value of our exports that will be eligible for EU GSP privileges and those vulnerable to GSP cancellations could be in a range of USD9-11 billion in 2015. The impact of such cancellations on Thai outward trade to the EU might be lower than that figure, though that would depend on the types of product.
To ease such impact on Thai exporters sending goods to the EU, the government might consider accelerating Thai-EU FTA talks, in such a way that it could be enforced by 2015 or 2016, though priority should be placed on the public interest. Meanwhile, businesses will need to make swift adjustments to brace for intense competition ahead, too.
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