Relocation of Thailand's automotive, computer, garment and electric circuit industries to Vietnam is possible once the EU-Vietnam free trade agreement (EVFTA) takes effect this year, the Commerce Ministry warns.
Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office under the Commerce Ministry, said the office's research found that Vietnam, armed with a FTA with the EU, will gain an edge over Thailand.
After negotiations for three years, the EU signed the bilateral FTA with Vietnam on Dec 2, 2015.
The pact is pending ratification by the two sides and is scheduled to come into force some time this year.
The EVFTA will liberalise goods and services trade, government procurement and related issues such as sustainable development.
Tariffs on more than 99% of import products will be cut under the agreement.
Once the EVFTA is effective, Vietnam will immediately cut tariffs for 65% of imported EU products and gradually cut tariffs for the remaining items within 10 years.
The EU will immediately cut tariffs for 71% of imported Vietnamese products and gradually cut tariffs for the remaining items within seven years.
"Following our study, we found the competitiveness of some Thai exports, particularly automobiles and components, alcoholic drinks and beverages will sharply drop," Ms Pimchanok said.
"This may lead certain affected export products to move their factories to Vietnam."
Thai-based car makers should speed up their industrial transformation and shift to electric vehicle production, she said.
Ms Pimchanok said the EVFTA will greatly benefit Vietnamese garment and textile products bound for the European market. Vietnam also has an advantage in terms of cheaper wages and a higher labour force.
Thailand needs to hone its skilled labour force and apply more modern technology and innovations to add value to products and maintain competitiveness, she said.
In 2017, trade volume between Vietnam and Europe increased 11.6% to US$50.4 billion, with exports accounting for $38.3 billion, a gain of 12.6%, and imports for $12.1 billion, an increase of 8.7%.
Meanwhile, bilateral trade between Thailand and Europe totalled $44.5 billion in 2017, up 11%. Of the total, exports from Thailand represented $23.7 billion, up 8%, and imports were worth $20.8 billion, an increase of 14.5%.