Trade agreements get robust support in Hanoi . . .
Vietnam ratified the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) today. The 457-member National Assembly passed both agreements with 95 per cent approval. The EVFTA is expected to come into force in August and to increase the integration of trade and investment between the EU and Vietnam. After the agreement takes effect, 71 per cent of duties on Vietnam’s exports to the EU and 65 per cent of duties on the EU’s exports to Vietnam will be eliminated. The FTA will gradually eliminate up to 99 per cent of the remaining trade tariffs over seven-to-10 years.
Vietnam’s economy could get a big boost . . .
Trade talks behind the double-shot deal were initiated between the EU and Vietnam in June 2012 and concluded in June 2019. Although the EU had some concerns over human rights in Vietnam, the EVFTA, which was ratified by the EU in February, has become the second trade deal between the EU and a Southeast Asian country. The first was an FTA with Singapore in 2019. According to Vietnam’s Ministry of Planning and Investment, the EVFTA will boost Vietnamese exports to the EU by 44 per cent by 2030 and increase the country’s economic growth by 7-to-8 per cent over 10 years. The agreements are also expected to generate 146,000 jobs in Vietnam.
With opportunities come challenges . . .
Despite the benefits, Vietnamese officials are concerned that the EVFTA could pose challenges for businesses, especially small and medium-sized enterprises (SMEs), which account for 97 per cent of all businesses in Vietnam. Specifically, SMEs could face fierce competition from European goods and services. The two agreements will challenge Vietnam’s SMEs to compete on strict food safety requirements, environmental protection standards, and intellectual property regulations. At the same time, Vietnam sees an opportunity in these agreements as global value chains shift, possibly making Vietnam a manufacturing destination for a wave of EU investors seeking to leave China.
- East Asia Forum: Understanding the EU-Vietnam Free Trade Agreement
- Nikkei Asian Review: Vietnam greenlights EU trade pact in bid for China-exit deals
- Vietnam News: SMEs urged to have deep understanding on EVFTA