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EVFTA is “once-in-a-decade” opportunity for Vietnam to integrate into global value chain

In the best scenario, the agreement could be effective in January 2020. In the worst case, there will not be a specific deadline for the deal. However, whether the EVFTA is ratified or not depends on the Vietnamese government’s determination.

Due to its full-scale impact, the EU – Vietnam Free Trade Agreement (EVFTA) presents Vietnam a “once-in-a-decade” opportunity to integrate itself into the global value chain, Viet Dragon Securities Company (VDSC) has said in a report. 
 
Illustrative photo.
Illustrative photo.
According to VDSC, many companies have massive expectations on the benefits from EVFTA, similar to what they had with the Trans-Pacific Partnership (TPP) three years ago. However, the ratification of EVFTA is still in a bit of a gridlock due to pending issue of Vietnam’s illegal fishing and the EU’s political changes. 

Recently, a representative for the Directorate of Fisheries said that the EU decided to delay the date to remove the “yellow card” issued to Vietnam’s fishery sector until May or June 2019, although they appreciate Vietnam’s efforts in improving the situation in the last 14 months. 

The EU is setting up tight inspections of Vietnam’s exported seafood products, leading to corporate risks and higher costs. 

In ASEAN, there are some countries facing the similar issue such as Cambodia, the Philippines and Thailand. While the Philippines spent 10 months on getting out of the EU’s blacklist, the EU removed Thailand from the countries punished with yellow cards due to the illegal, unreported and unregulated fishing issue (IUU).
 
In general, the EU’s decision will make the process of ratifying EVFTA more challenging because it will faces important political changes in upcoming months. There are concerns about the scenario of a no Brexit deal in March 2019 while the EU Parliament will face an election in May. 

Therefore, the EVFTA is likely to be handled by the new EU Parliament. Notably, populism within the EU, highlighted by the “yellow vests” protests in Paris and other right-wing groups, makes it a difficult year for Europe. 

In the best case, the EU Parliament can approve the agreement by October and Vietnamese leaders will sign it in the upcoming National Assembly meeting. As a result, the agreement could be effective in January 2020. In the worst case, there will not be a specific deadline for the deal. Currently, whether the EVFTA is ratified or not depends on Vietnam government’s determination.

Vietnam still has some comparative advantages over regional countries, such as Indonesia, Thailand and Malaysia. While Indonesia is still in the negotiating phase, Vietnam has completed it and waits for a signature. The EU has committed to restart FTA negotiations with Thailand after a democratically elected civil government is sworn into power in February. In the case of Malaysia, the EU does not seem satisfied with the deal on the table. 

Currently, ASEAN countries are in a race to attract huge foreign investment flows due to the escalation of trade tensions between China and the US. In addition to each countries’ basic advantages, signing the EVFTA could make Vietnam a promising FDI destination.
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