The Impact of the ASEAN - China Free Trade Agreement on Investment Promotion Measures of the Battery Electric Vehicles Manufacturing Industry in Thailand

Abstract

Under the framework of the Free Trade Area (FTA), an exemption from import customs duties is mainly used to eliminate the tariff barrier between the parties under the free - trade agreement which will be helpful for reducing cost of domestic production. However, such exemption from import customs duties can also be an obstacle to the development of domestic industries as it also emasculates the investment promotion measures for specific manufacturing industries of the country. As a result of the negotiation of the ASEAN–China Free Trade Area (ACFTA), an exemption from import customs duties will also be applied to Completely Built Unit (CBU) Battery Electric Vehicles (BEV) imported from China, HS code 8703.80, by Thailand, Cambodia, and Singapore. This article will elaborate on the impact of the exemptions from import customs duties in such cases, which contradicts the idea of investment protection and promotion for manufacturing industry of battery electric vehicles manufacturing industry in Thailand. Consequently, it will cause an adverse impact on the effectiveness of the government’s measures for investment promotion of this very industry in Thailand, the transfer of BEV technology and innovation, as well as an investment diversion from Thailand to other countries. This article proposes to the Thai government that, in order to withdraw from “The exemption from import customs duties”, concession it should seek to negotiate with the Chinese government for such purpose. In parallel to the negotiate, it should apply the government’s policy encouraging the domestic investors to improve their BEV businesses’ competitiveness.