An overview over the Free Trade Agreement:
- The European Parliament on February 12 ratified the EVFTA and the EVIPA agreements between Vietnam and the EU.
- The FTA will now need to be ratified by the Vietnam National Assembly which is expected in May 2020.
- The EVFTA is an ambitious pact eliminating almost 99 percent of customs duties between the EU and Vietnam.
The European Parliament (EP) on February 12 ratified the European Union Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA). The next step before the agreements can come into force is the ratification of the agreement by the National Assembly of Vietnam which is expected in May 2020.
The EVFTA was signed on June 30 in Hanoi paving the way for increased trade with the EU and Vietnam.
The EVFTA is an ambitious pact providing almost 99 percent of elimination of custom duties between the EU and Vietnam. As per the Ministry of Planning and Investment, the FTA is expected to help increase Vietnam’s GDP by 4.6 percent and its exports to the EU by 42.7 percent by 2025. While the European Commission has forecast the EU’s GDP to increase by US$29.5 billion by 2035.
65 percent of duties on EU exports to Vietnam will be eliminated while the remaining will be gradually phased out over a period of 10 years. 71 percent of duties will be eliminated on Vietnam exports to the EU, with the remaining being eliminated over a period of seven years.
The EVFTA is considered a new generation bilateral agreement – it contains important provisions for intellectual property (IP) rights, investment liberalization, and sustainable development. This includes a commitment to implement the International Labor Organization (ILO) standards and the UN Convention on Climate Change.
What are the main Vietnamese export products that will benefit from the EVFTA?
As a high quality agreement, the elimination of tariff barriers would be at the highest level and that will benefit for Vietnamese enterprises and products. For example, agricultural products, seafood, sugar, rice, honey, processed agricultural products, wood products, textiles, footwear, furniture and the automobile industry will enjoy preferential treatment from Europe.
In addition, when committing to open markets, industries such as processing, manufacturing, automotive, IT, livestock, agricultural products and processed foods must take into account competitive pressure. However, at the level of deep integration, Việt Nam must identify competition with positive meaning, to meet quality requirements, create competitiveness for Việt Nam to restructure, improve capacity and efficiency as well as investment in development.
This is an opportunity for Việt Nam to have better development as well as value chains with its partners and thereby bring higher investment efficiency to the economic sectors.
In term of investment , the EU is the leading partner of Việt Nam with a scale of nearly $22 billion.
The EU’s strong sectors such as services, finance, automobile, processing and manufacturing, IT, high technology, agriculture and food processing are the areas that Việt Nam needs investment for comprehensive development.
How should businesses prepare for the EVFTA?
The conclusion of negotiations is the prerequisite, but the readiness of enterprises which will be directly impacted by the deal is more important.
Businesses should be more proactive in accessing resources, particularly, small and-medium-sized enterprises should make comprehensive preparations and do careful research of opportunities and challenges, thus rolling out responding solutions to improve their products’ quality, competitiveness and productivity.
Businesses should ensure that their products meet requirements on traceability, technical standards, as well as plant and animal safety and hygiene criteria of the EU. — VNS.