Vietnam and UK Sign Free Trade Agreement
On Tuesday, December 29th, 2020, Vietnam and the UK officially signed the bilateral free trade agreement which has been in progress for over two years. The free trade agreement will ensure that there is no interruption in trading activities between the two countries due to Brexit, which will take place right after December 31st, 2020. Besides, the UK – Vietnam Free Trade Agreement (UKVFTA) is believed to give Vietnam more competitive advantages over other countries in the region as most countries have not established trade pact with the UK yet.
Vietnam is currently the second largest Southeast Asian exporter to the UK after Thailand with bilateral trade value equaling 6.7 billion USD in 2019. During the period 2012-2019, the growth rate of Vietnam – UK bilateral import and export turnover increased by an average of 12.1% annually.
On Vietnam’s side, its main exports to the UK include electronic equipment, garments and textiles, and seafood, which winded up more than 50% of UK’s total imports value from Vietnam. As import taxes on 99.7% of export turnover to the UK will be eliminated by the time of full implementation (within six years from January 1st, 2021), Vietnam is expected to save around 151 million USD in tariff from the deal. Besides the traditional industries mentioned earlier, other industries that present great opportunities for UK businesses in Vietnam includes education, renewable energy, technology, infrastructure, and healthcare.
On UK’s side, its top exports to Vietnam include machinery and mechanical appliances, pharmaceutical products, and electronic equipment, taking up around 45% of Vietnam’s total imports value from the UK. Although the UK expects to save only 36 million USD in tariff from the deal, the signing of UKVFTA helps the UK to achieve its goal of securing free trade agreements with countries that cover 80% of the UK’s trade within three years.
Moreover, the deal between Vietnam and the UK also acts as a key step towards Britain’s entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2021.
The UKVFTA was signed at a special time which marks ten years of the UK – Vietnam Strategic Partnership. It not only benefits supply chains and consumers of imports from Vietnam to the UK, but it also presents more opportunities for British investors to expand business into Vietnam. In addition, the trade deal paves the way for the UK to establish new FTAs in the future with some of the most dynamic economies and thus defines its role in the world for decades to come.