EVFTA - a lever for Vietnam’s economic growth
The signing of the EU-Vietnam Free Trade Agreement (EVFTA) in Hanoi on June 30 after six years of negotiation is expected to serve as a lever for the growth of Vietnam’s economy and business community.
At the signing of the EVFTA.
The EU is currently the third largest trade partner, and one of the two’sbiggest export markets of Vietnam, with two-way trade hitting 50.4 billion USDin 2018.
With EVFTA, Vietnamese businesses have opportunities to make deeper inroad intothe EU market with a population of 508 million people, and total gross domesticproduct (GDP) of around 18 trillion USD.
According to the Ministry of Planning and Investment’sresearch, EVFTA will make Vietnam’s gross domestic product (GDP) expand by an average2.18-3.25 percent during 2019-2023, 4.57-5.3 percent during 2024-2028, and7.07-7.72 percent during 2029-2033.
Thanks to the deal, Vietnam’s shipments to the EU are expected to pick up anadditional 4-6 percent compared to without the deal, equivalent to 19 billionUSD, in 2019. Revenues from exports to the EU would increase by 20 percent in2020, 42.7 percent in 2025 and 44.37 percent in 2030 compared to without theFTA. Imports from the EU will also rise, but at a slower pace, estimated at15.28 percent in 2020, 33.06 percent in 2025 and 36.7 percent in 2030.
The pact is considered one of the first new-generationand high-quality trade deals, as it not only covers trade-related issues but also those in investment, governance,protection of workers’ rights and benefits and the environment. The EVFTA also ensuresa balance of benefits for both Vietnam and the EU and takes into considerationthe development gap between the two sides. At the same time, the agreementcomplies with the provisions of the World Trade Organisation (WTO).
The level of commitment in the EVFTA is the highest of any FTA Vietnam hassigned. It has significant meaning especially when only 42 percent of Vietnam’sexports to EU now enjoy zero tariff under the generalised system of preferences(GSP).
Deputy Director of the Ministry of Industry and Trade’s European-AmericanMarket Department Tran Ngoc Quan, the EVFTA will open up market-accessopportunities for businesses from both sides, and create a favourable legalenvironment for signatory countries in doing business and access markets.
However, with the establishment of an even playgroundunder the pact, Vietnamese enterprises will have to compete with EU firms rightin the domestic market.
Furthermore, foreign direct investment firms will jump into the Vietnamesemarket to make use of the trade pact, posing great challenges for localbusinesses.
Minister of Industry and Trade Tran Tuan Anh
However, Minister of Industry and Trade Tran Tuan Anh said that if Vietnam cantake full advantage of the EVFTA, coupled with the country’s improvement inbusiness climate and institutional reforms, the country will definitely enhancethe quality of growth.
Vietnam and the EU have agreed on a cooperative mechanism on building capacityfor Vietnam to implement the trade pact, he said, stressing that as theinteraction and complementary natures of the two markets are large and wide,enterprises have more opportunities to collaborate rather than compete witheach other.
On the other hands, Vietnam will have to reform its legal system and mechanismsto ensure that exports are qualified to enter the EU market, he said, pointing outthat the EVFTA has strict stipulations on investment and customs procedures,trade facilitation, technical standards, quarantine measures, intellectualproperty rights, government purchase, and sustainable development, among others.
He also said that local businesses must be well prepared to expand theirmarket. They can only benefit from the deal if they are able to improve productquality and packaging to satisfy the EU’s requirements in product origin, technicalstandards and food safety and hygiene.
In October 2010, the Prime Minister of Vietnam and the President of theEuropean Union agreed to start negotiations on the EVFTA after technicalprocedures were all completed. EVFTA is a new-generation trade pact betweenVietnam and 28 member states of the EU. Both sides officially launchednegotiations on the pact on June 26, 2012.
On December 1, 2015, negotiations concluded, and the preliminary text of theagreement was announced on February 1, 2016. On June 26, 2018, the two sidesagreed that the EVFTA was split into two agreements, one for trade and one forinvestment. In June 2018, both sides accomplished legal review for the EVFTAand the EU-Vietnam Investment Protection Agreement (EVIPA).
After the two agreements were inked, they would be presented to the EuropeanParliament (EP), and the parliaments of 28 EU member states for approval. TheEVFTA will be adopted at the end of 2019 or the beginning of 2020 while it willtake at least two years for the pact to be passed by the EP and the parliamentsof its 28 members.
According to Ambassador - Head of the Vietnamese mission to the EU Vu AnhQuang, Vietnam and EU have made concerted efforts to remove legal and technicalbarriers, as well as accelerate the approval of the pact by EU’s committees.
Lobbies were made at all levels, including the highestlevel, at all bilateral and multilateral forums. In addition, the Ministry ofForeign Affairs and the Ministry of Industry and Trade directed Vietnam’sdiplomatic delegations in EU to give top priority to push the EVFTA in the pastyear.
As for the EU side, business associations and consulting organisations alsoworked hard to promote the two pacts through many workshops on the EVFTA andarranging for Vietnamese and European firms operating in Vietnam to introduce Vietnamese businessclimate in the EU.
To date, Vietnam has signed more than 10 bilateral free trade deals. However,EVFTA is considered very important as the EU is a large market besides the US andJapan. Furthermore, the EU is an important partner in Vietnam’s foreign policyof diversification and multilateralisation. -VNA
The European Union-Vietnam Free Trade Agreement will help increase the competitiveness of Vietnam as well local enterprises and commodities, said Pham Tat Thang, a senior researcher at the Vietnam Trade Research Institute.
Once the EU-Vietnam Free Trade Agreement (EVFTA) takes effect, over 99 percent of tariff on goods from both sides will be lifted, a Vietnamese official has said.