Vietnam Signs “Most Ambitious Free Trade Deal Ever Concluded with a Developing Country” with The EU
The European Union and Vietnam signed the European Union Vietnam Free Trade Agreement (EVFTA) and an Investment Protection Agreement on 30 June 2019. The EVFTA is described by the EU as “the most ambitious free trade deal ever concluded with a developing country”. Although it still needs the European Parliament’s approval, which could be an issue since some experts are concerned about Vietnam’s human rights record.
Vietnam is the EU’s second largest trading partner in the Association of Southeast Asian Nations (ASEAN), with main exports such as electronics, garment, pharmaceutical products etc. In 2018, Vietnam exported about €38.3 billion worth of goods to the EU and imported about €12.5 billion value of goods. Other than the trading relationship, the EU is one of the largest foreign investors in Vietnam with a total direct investment of €6.1 billion in 2017, especially in the industrial processing and services sectors.
The EVFTA between the partiess expected to open up the public procurement and service markets, such as marine food, textile, banking and postal industries. Once the Agreement is approved, the elimination of tariff barriers will be at the highest level, which will benefit the exports of both parties. The Europe Union will drop about 85.6% of import tariffs on Vietnamese goods. Within 7 years of the agreement taking place, the European Union will remove 99.2% of import tariffs equivalent to 99.7% of Vietnam’s revenue from exports to the EU. Meanwhile, Vietnam will waive 49% of its import duties on EU goods once the agreement is approved and will be phased out over following 10 years. The effective elimination and improvement on regulations will boost Vietnam’s revenue from exports to the EU by 20% by 2020, according to the Vietnam Ministry of Planning and Investment.
The key highlights of the Agreement include examples of specific rules that EU will apply to in terms of exports in different sectors.
Benefited from the tariff & duty relieve, Vietnam will soon become one of the fastest growing economies. Also, Vietnam will ride to the worldwide stage, attracting foreign investors eyeing the growing potentials of the country.
To other countries, this agreement might not be the greatest news, especially not for China, who is one of the largest exporting countries in the Asia Pacific region to the EU and US. Moreover, due to the low labor cost and geographical advantages that Vietnam holds, more companies might choose to move their business towards Vietnam in order to cut cost and catch ongoing business opportunities.
In all, once the EVFTA is approved, many countries will benefit from it by participating in the trade activities. Vietnam, as the key player should seize the opportunity and better present the national image to the rest of the world. To deal with the country’s environmental issues, Vietnam should focus on some actions such as establishing laws on labors that fulfill the International Labor Organization’s requirement, developing more techniques with high-technology, enhancing supply chain management and strictly following the international trading rules signed with the EU. By doing so, Vietnam will move towards a bright future.
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