Bangkok Post – Work together for rule-based trade

This photo, dated Jan 26, 2023, shows negotiations on a free trade agreement between Thai and European Union delegates. (Photo: Courtesy of European Union)

For almost 80 years, the multilateral rule-book has been the basis for international trade relations. Under the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), world trade has expanded at an unprecedented rate, contributing to growth and prosperity around the world. Our countries, Thailand and Sweden, share a long tradition of support for the rule-based trading system.

Sweden joined the GATT in 1950, and Thailand in 1982. As such, both our countries were founding members of the WTO in 1995. In 2025, we therefore celebrate our 30th anniversary of WTO membership together. In cooperation with other like-minded countries, we have worked to improve and protect the system ever since. It is therefore fitting that we are now a long way toward finalising a free trade agreement between us, in Sweden’s case via the European Union.

Recently, the US stopped using WTO rules as a point of reference in its trade policy. As a consequence, the rule-based trade that has served us well for many years is under grave threat. Even if the US does not formally leave the WTO, much damage has been done. If the world’s leading economic power pursues a trade policy where it sees itself as unbound by international commitments, there is a great risk that more countries will take steps away from a rule-based trading system.

Hopefully, this critical situation will serve to clarify minds and priorities when we enter the final phase of EU-Thailand FTA negotiations. We should never let a good crisis go to waste.

As we face the risk of a new era of protectionism and unilateralism, a great trade paradox is emerging. Twenty-first century research has uncovered stronger links between trade and productivity than predicted by earlier trade theory. And some of the most important productivity effects materialise through imports. At the same time, tariffs and protectionism are in vogue in the political world. We are told that exports are good and imports are bad, that the playing field is unfair, and that trade can do more harm than good. In other words, while trade is used to score populist points in the world of politics, in the real world, where people live, work and do business, trade benefits human welfare more than we knew a generation ago. And some of the main gains come from imports.

One example of a recent trade agreement that we are now beginning to see the effects of is the EU-Vietnam Free Trade Agreement (EVFTA). Hanh Vu of the Vietnam Briefing recently wrote that, as a result of the agreement, “Vietnam has established itself as the leading exporter to the EU within Asean, driving economic growth, job creation, and greater consumer access to premium European products… Vietnam’s export value to the EU has surged by nearly 50%, while imports from the EU have also grown by over 40%.”

There are many more examples of what I would call real-world evidence of economic integration that deliver on trade, investment and human welfare.

The US represents around 10% of Sweden’s external trade. Our analysis shows that current tariff levels will affect our trade with the US negatively, particularly for some sectors. Damage control in trade relations with the US is important, but it’s not the only thing that occupies us now. The main effect of US tariffs is to restructure trade so that the US trades less with other countries, while the rest of us trade more with each other.

In the end, that is mainly a problem for the US. Given such a trade restructuring scenario, it is critical that the EU, Thailand and other like-minded trading partners work together in support of rule-based trade. The best way to do this is to build new supporting structures. The EU-Thailand FTA would be an important pillar in that work. EU trade integration with the CPTPP — a trade agreement that Thailand has also shown an interest in joining but has not yet submitted a formal application to join — would be another.

Ultimately, a broad rule-based trade coalition could emerge as the centre of gravity in world trade. Thailand is well-positioned geographically to benefit from such a coalition. As long-standing supporters of such trade, such a development would also be in the broader interest of both Sweden and Thailand.

As mentioned, this year represents Thailand’s and Sweden’s shared 30-year anniversary of joining the WTO. Hopefully, the current crisis will propel us into action that adds new layers to the rule-based order. If that happens, we will be able to meet again in 20 years to celebrate 50 years of rule-based global trade.

But if we fail the current test, there is a great risk that we enter an era where raw power and unilateralism dominate. Such a system would breed uncertainty, injustice, and economic coercion. The strong would impose their will on the weak, ultimately hurting economic progress, also for their own countries and peoples. Poorer nations, lacking the political or economic clout to defend their interests, would be particularly vulnerable. Instead of rule-based global markets, we would face a trading system where might makes right. Let’s work together to make sure that doesn’t happen.

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