The upcoming EU – Vietnam Free Trade Agreement (EVFTA) would help Vietnam form a new value chain with the EU, in turn enhancing the country’s economic competitiveness, according to Tran Tuan Anh, minister of Industry and Trade.
Minister of Industry and Trade Tran Tuan Anh. Source: Vietnam News Agency.
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On June 25, the European Council approved the EVFTA and the EU – Vietnam Investment Protection Agreement (EVIPA), and authorized the European Commission (EC) to sign the deal with the Vietnamese side on June 30 in Hanoi.
According to Anh, the EVFTA, considered a next-generation free trade agreement, is essential for Vietnam’s strategy of global integration, consisting of high level standards that require extensive efforts from both Vietnam and the EU to conclude legal procedures for the signing of the deal in June.
A notable difference between the EVFTA and other FTAs is high requirement for market opening, while the EU and Vietnam makets are highly complementary in the sense that both could export products that would not face direct competition in their respective markets.
Vietnam is expected to remove 65% of import tariffs for European goods right after the deal becomes effective. The remaining would be gradually phased out in the next 10 years.
In return, the EU is committed to removing 71% of import tariffs for Vietnamese items, and the remaining in the next seven years.
Moreover, the comprehensive nature of the deals is made up of its coverage of all major fields, including trade of goods and services, investment, preferential treatment on government purchase, trade protection, small and medium enterprises (SMEs) operations, and intellectual property, among others.
EVFTA, along with the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), would push Vietnam towards perfecting the legal framework for the development of the socialist-oriented market economy, Anh stressed.
Anh is convinced the EVFTA would lead to greater interest from European businesses in Vietnam, especially in the fields of food processing, high technologies, automobile and electronics manufacturing, among others.
Through Vietnam, the EU would have an opportunity to access ASEAN market with a population of over 660 million, bringing huge opportunities for European companies, Anh added.
It is estimated that the EVFTA will add 0.1 percentage point (ppt) on average to Vietnam’s real GDP growth each year based solely on its trade impacts, according to HSBC’s report.
The European Commission estimates that Vietnam’s exports to the EU would grow by around 18% as a result of the agreement, while the EU’s exports to Vietnam are slated to increase by around 29%.
Over the past ten years, trade turnover between the EU and Vietnam has increased 10-fold to US$53 billion in 2018. The EU is currently Vietnam’s third largest trading partner, while Vietnam is the bloc's 19th largest partner in the world, and the second largest in Southeast Asia, behind Singapore, according to the Vietnam Chamber of Commerce and Industry (VCCI).
