EVFTA offers opportunities to Vietnam to diversify markets
Analysts say that Vietnam will be able to ease reliance on some trade partners because of the EVFTA.
They believe it is risky to rely on certain trade partners, especially for Vietnam, which has an open economy with import/export accounting for a high proportion of its GDP.
Official reports showed that the China-Vietnam border closure means a 22-24 percent decrease in Vietnam’s farm export turnover.
Nguyen Quang Trung from RMIT University also warned that the high trade surplus with the US and the continued sharp rise in exports to the market may be unsustainable. If the Trump administration changes its trade policies, Vietnam’s enterprises will fall into difficult situation.
Vietnam has had a deficit in trade with China over many years, while the surplus in the trade with the US has been increasing. Trung believes that building balanced overall trade will help stabilize the economy and increase its resistance to external shocks such as the Covid-19 pandemic.
|Under EVFTA, Vietnam’s enterprises will get benefits from preeminent products with low prices from EU and can use products in their production process, which helps improve productivity and profit of Vietnam’s exports.|
In such conditions, EVFTA can be of vital significance, alongside with other international agreements such as CPTPP.
An economist commented that EVFTA is a good agreement for Vietnam because it sets stricter rules and requirements for both sides to observe. This means that there will be fewer opportunities for countries to follow the beg-thy-neighbor policy for short-term benefits.
The next-generation FTAs will also bring Vietnam opportunities to improve its position in the global trade map, and bring advantages, which exceed low labor cost and abundant agricultural resources.
The EU has committed to remove 99 percent of tariff lines, equal to 99 percent of Vietnam’s total export turnover to the EU, within seven years after the EVFTA takes effect.
The competitiveness of Vietnam’s products, especially garments, footwear and farm produce, will improve once the energy sector changes to meet low carbon emission standards.
Under EVFTA, Vietnam’s enterprises will get benefits from preeminent products with low prices from EU and can use products in their production process, which helps improve productivity and profit of Vietnam’s exports.
As competition increases, Vietnam will have more reasons to boost trade through the harmonization of legal conditions, rules of origin, and administrative and customs regulations, as well as the recognition of each other's standards and regulations.
However, Vietnam has been warned of big challenges. The provisions in EVFTA related to the protection of laborers’ interests and public procurement differ from current regulations and standards. The private sector will have to be prepared to meet requirements on supply and value chain upgrading.
Trung said it is necessary to assist SMEs, which are flexible, but weak and vulnerable to the changes of circumstances because of a lack of resources.
Vietnam is looking forward to receiving high-quality investments from Europe once the EU-Vietnam FTA (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) take effect.
The EU-Vietnam trade deal is the largest new-generation free trade agreement in Vietnam’s history in terms of direct benefits.