EU-Japan FTA may affect only 0.3 percent of Thai exports to Japan (Current Issue No. 2865 Full Ed.)

A major implication of the EU-Japan Economic Partnership Agreement, the ‘EU-Japan FTA', is that it will further liberalize the Japanese agricultural market for EU farm produce. Japan is one of the world's most protected farm produce markets. The agreement may lead to trade diversion of Thai agricultural food exports to Japan. Once the EU-Japan FTA lowers tariff barriers for EU products entering the Japanese market, that could affect the Thai agricultural and agro-processed exports sent there now, even though Thai products are relatively competitive in international markets.

KResearch projects that the agreement can result in limited trade diversion for farm produce exports to Japan. Japanese importers may buy more agricultural products, e.g., animal feed, from the EU, or Thai exporters may find it more difficult to further penetrate the Japanese market, especially for processed pork meat. The scope of trade diversion should be insignificant or merely about USD64 million (0.3 percent of our total exports sent to Japan) because most Thai agricultural exports are associated with geographical identifications and Thai producers have the potential to meet the demand of the niche market in Japan. Moreover, Thai farm produce exports have unique properties that differ them from those of others.

Nonetheless, the market shares of certain Thai products in Japan have begun to shrink. Therefore, Thai exporters should rethink their strategies toward Japan by focusing on products that respond better to new trends in Japanese consumer behavior such as favoring organic agricultural produce, chemical-free vegetables and other ‘healthy foods'.