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EU-Vietnam FTA to be signed shortly

Released at: 17:05, 26/06/2019

EU-Vietnam FTA to be signed shortly

Image source from hanoimoi.com.vn

Trade pact approved on June 25 in Brussels, with official signing scheduled for June 30.

by Nghi Do

Minister of Industry and Trade Tran Tuan Anh has said the EU-Vietnam Free Trade Agreement (EVFTA) and the Investment Protection Agreement (IPA) between Vietnam and the EU will be signed on June 30.

The EVFTA and IPA will better develop bilateral relations, especially in economics and trade, according to the Ministry of Industry and Trade. The EVFTA is a comprehensive, high-quality agreement that ensures a balance of benefits for both Vietnam and the EU and notes the differences in levels of development.

It will be a major driver of Vietnam’s exports, helping diversify markets and products, especially agricultural and aquatic products and others with competitive advantages. Commitments to equal treatment, equality, and safe and adequate protection of each other’s investments and investors in the IPA will also contribute to the construction of a legal framework and more private investment from the EU and elsewhere.

The commitment in the EVFTA to open up a strong market will certainly promote Vietnam and EU trade relations, helping to further expand the markets for Vietnamese exports. With the commitment to abolish nearly 100 per cent of import duties and the commercial values agreed to by the two sides, the opportunity to increase the export of Vietnamese products with advantages, such as textiles, footwear, agriculture and seafood (including rice, sugar, honey, and vegetables), and wooden products is substantial. The level of commitment in the EVFTA is the highest of any FTA Vietnam has signed. This is even more significant when, at present, only some 42 per cent of Vietnam’s export turnover to the EU is entitled to zero per cent tax rates under the GSP.

According to the Ministry of Planning and Investment, the EVFTA will help Vietnam’s export turnover to the EU increase about 20 per cent by 2020, 42.7 per cent by 2025, and 44.37 per cent by 2030 compared to no agreement. Imports from the EU will also increase, but at a lower rate: about 15.28 per cent by 2020, 33.06 per cent by 2025, and 36.7 per cent by 2030.

The EVFTA will contribute to increasing Vietnam’s GDP by an average of 2.18-3.25 per cent in 2019-2023, 4.57-5.30 per cent in 2024-2028, and 7.07-7.72 per cent in 2029-2033.

Commitments on services and investment and government procurement as well as specific regulations on market opening and technical measures in specific areas will also create opportunities for EU businesses and their products and services to gain greater access to Vietnam’s market of nearly 100 million people. Local consumers will be able to access high-quality products and services from the EU in fields such as pharmaceuticals and healthcare, together with infrastructure construction and public transportation works.

Commitments on state governance will ensure a stable and open business and legal environment for investors of both parties in general and EU enterprises and investors in particular.

Regarding customs clearance measures in the EVFTA and IPA, EU investors will also have opportunities to access markets that have signed FTAs with Vietnam with more preferential treatment. The EVFTA also helps promote relations between the EU and each ASEAN country in particular and the ASEAN region in general, creating a basis for discussing an FTA between the EU and ASEAN in the future.

Ms. Cecilia Malmström, EU Commissioner for Trade, and Romanian Minister for Business, Trade and Entrepreneurship Mr. Ștefan-Radu Oprea, will sign the agreement on the EU’s behalf in Hanoi on June 30. “I am very pleased to see that Member States have given the green light to our trade and investment agreements with Vietnam,” Ms. Malmström said. “Vietnam is a vibrant and promising market of more than 95 million consumers and both sides have much to gain from stronger trade relations. Beyond the clear economic benefits, the deal also aims to strengthen respect for human rights as well as protect the environment and workers’ rights.”

“I welcome Vietnam’s engagement in the process so far. Its recent ratification of the International Labor Organization Convention on collective bargaining is an excellent example of how trade agreements can encourage higher standards.”

According to the European Commission, Vietnam is the EU’s second-largest trading partner in the ASEAN region after Singapore, with trade worth 49.3 billion euros ($56 billion) for goods and over 3 billion euros ($3.41 billion) for services. While EU investment stock in Vietnam remains modest, standing just at 6 billion euros ($6.82 billion) in 2017, an increasing number of European companies are establishing in the country to set up a hub to serve the Mekong region. Main EU imports from Vietnam include telecommunications equipment, footwear and textiles, furniture, and agricultural products. The EU mainly exports goods such as machinery and transport equipment to Vietnam, as well as chemicals and food and beverages.

The agreements reached with Vietnam, alongside those signed recently with Singapore, help pave the way for a future region-to-region agreement with the entire ASEAN bloc.

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