UKVFTA ushers in a bright future for UK – VN ties, ensures smooth post-Brexit trade
The UK – Viet Nam Free Trade Agreement (UKVFTA) was officially signed in London on December 29.
On this occasion, Heather Wheeler, MP and British Prime Minister’s Trade Envoy for Cambodia, Laos, Viet Nam and Vietnamese Minister of Industry and Trade Tran Tuan Anh spoke about opportunities and challenges of the newly-signed trade deal which is expected to take force from early 2021.
Vietnamese Minister of Industry and Trade Tran Tuan Anh.
Another trade deal, EU-Viet Nam Free Trade Agreement (EVFTA), took effect on August 1. Could you tell us the difference between the EVFTA and UKVFTA?
The UKFTA was negotiated based on the inheritance of commitments in the EVFTA with necessary adjustments to ensure the compliance with the bilateral trade framework between Viet Nam and the UK and to ensure the balance of benefits between the two countries.
The agreement includes nine articles, one appendix, one protocol and one exchange letter between Viet Nam and the UK.
Basically, the contents of UKVFTA are similar to the EVFTA’s, including trade in goods, rules of origin, customs and trade facilitation, sanitary and phytosanitary, non-tariff barriers to trade, trade in services, investment, trade defence, competition policy, State-owned enterprises, Government procurement, intellectual property, trade and sustainable development, cooperation and capacity building, and transparency.
In the context of the UK’s official exit from the EU, the signing of the UKVFTA will ensure that the bilateral trade will not be interrupted in the post-Brexit period.
The UKVFTA will also create a comprehensive, long-term and stable economic cooperation framework between Viet Nam and the UK, which will create impetus to strengthen and deepen the multi-faceted cooperation between the two countries.
This bilateral agreement is the start of a new phase in the relationship between the two countries in developing key trade areas.
The UKVFTA will not only liberalise trade in goods and services but also incorporate many other important factors such as green growth and sustainable development.
What are the impacts of the UKVFTA on Viet Nam?
The UKVFTA plays the role of ensuring the bilateral trade between Viet Nam and the UK is not interrupted after the transition period of the Brexit process ends.
For Viet Nam, the country will have more opportunities to promote export of goods to the UK thanks to commitments related to the opening of market for goods coupled with additional quotas on products which Viet Nam has high competitive advantages such as agricultural and fishery products.
It is estimated that the UKVFTA will reduce import tariffs on Vietnamese goods by around VND3.5 trillion per year.
While the ongoing COVID-19 pandemic is causing a lot of difficulties to production and business, the UKVFTA is expected to help stabilise the market so that enterprises can recover and grow quickly.
In addition, the UKVFTA will contribute significantly to promoting the bilateral relationship in a more comprehensive and broader manner, a solid base for Viet Nam and the UK to maintain and strengthen the strategic partnership that the two countries have just established.
The trade deal is also the basis for the two countries to promote other regional and multilateral cooperation frameworks.
What are the opportunities and challenges the UKVFTA will bring?
The UK is the third largest trade partner of Viet Nam in Europe.
According to the General Department of Customs, the bilateral trade reached $6.6 billion in 2019, in which Viet Nam’s export to the UK accounted for nearly 88 per cent.
The two countries saw an average annual growth of 12.1 per cent in import-export revenue during 2011-19 period, higher than Viet Nam’s average level of 10 per cent.
Viet Nam mainly exports phones and components, garment, footwear, fishery, wood and wooden products, computers and parts, cashew, coffee and pepper to the UK, while importing machinery, equipment, pharmaceuticals, steel and chemicals. Import and export products between the two countries are complementary rather than competitive.
There is large room for expansion of Vietnamese products in the UK because Viet Nam’s export goods account for just below 1 per cent of the UK’s import which was nearly $700 billion in 2019.
After the UK leaves the EU, the preferential tariffs of the EVFTA will not be applied in the UK market. Therefore, the signing of a bilateral agreement will facilitate the reform activities, market opening and trade between the two countries and prevent disruptions in trade due to impacts of Brexit.
Besides, the UK also commits to give additional tariff quotas to more than 10 products including eggs, garlic, sweetcorn, tapioca and surimi.
Amid the COVID-19 pandemic, the UK’s demand for agricultural products, food, electronic products, personal protective equipment and laboratory equipment are increasing, thus, the UKVFTA will give significant opportunity for Viet Nam to increase exports to this market.
However, the UKVFTA will insert certain competition pressure on the domestic economy, especially in sectors and industries which the UK has strength in such as financial services, pharmaceuticals and chemical industries.
The UK also has very high standards and quality requirements on imported products. Thus, Viet Nam needs to improve product quality and ensure uniformity of products to conquer this fastidious market.
What message do you want to send to British and Vietnamese businesses regarding the official signing of the UKVFTA?
On this historic day I want to wish all existing exporters and importers of UK-Vietnamese goods and services a huge pat on the back. If it wasn’t for their hard work, especially over the last ten years when trade has doubled, the importance of the negotiations means that 65 per cent of all tariffs have been eliminated and this will increase to 99 per cent over the seven-year transition period. Both our Governments have realised how crucial trade is between us, providing jobs and steady access to great food, clothing and other products and services for our two nations.
As a Trade Envoy of British Prime Minister Boris Johnson to Viet Nam, what will you do to promote the trade ties between Viet Nam and the UK?
It is an honour to be made the Prime Minister’s Trade Envoy to Viet Nam and having visited the country I will build on my contacts at government and industry level to promote tariff free and trade barrier free exchange of goods and services.
The UK’s expertise in sustainable development and technology will form early parts of our conversations. Sadly with coronavirus many new opportunities will have to be worked on remotely but I have already made appointments and spoken to leading businesses in the education, financial and insurance, delivery and legal services fields of business who have existing companies in Viet Nam and see the opportunities this trade agreement gives them to expand. As soon as I can travel to Viet Nam I intend to. Equally, I will be delighted, with the support of the Department for International Trade, to welcome Vietnamese businesses here to assist them to expand their exports here in the UK.
How do you see the potential trade development between the two countries in the post-Brexit period?
In the post-Brexit era I see the expansion of exports from, first, Viet Nam to include an expansion of their hi-tech industries in a new growth area. With the talent that the young people of Viet Nam have, I see tech services having real potential. I also see future potential for new factories to be built, expanding the semi-conductor business for export too. For the UK, I can see our service industries, particularly professional services, whether they be architectural or legal or accountancy, growing.
Our two countries have great educational tie-ups, especially at university level, where I visited accountancy students on my last visit. This trade agreement widens government procurement opportunities to 50 per cent of all contracts and I can see huge growth there for UK businesses. — VNS
Heather Wheeler, MP and Prime Minister’s Trade Envoy for Cambodia, Laos, Vietnam talks about the newly-signed UKVFTA.