Vietnam is committed to improving its own standards to meet international ones and compared with other trade deals, the EU-Vietnam Free Trade Agreement (EVFTA) is the best that Vietnam has in short and long terms, according to Minister of Industry and Trade Tran Tuan Anh.
Overview of the meeting. Source: Ngoc Thuy.
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Anh also noted Vietnam is the country with the lowest development level that has signed a free trade agreement with the EU, making the EVFTA “the best for Vietnam” with reference to long-term planning.
Referring to the assessment by the European Commission regarding “the most ambitious agreement”, Anh said the deal would help improve the trade foundation for Vietnam and create momentum for growth, perfecting legal institutions and sustainable development strategy.
“Improvements in the legal framework and governance will make an impact on our strategy and orientation. I hope that with the EVFTA coming into effect, Vietnam will thrive further,” Anh asserted.
Instead of setting up barriers to protect local production, Vietnam welcomes more products from the EU and also the competition that comes along with it, Anh said.
“Given this context, it showcases our willingness to deliver sustainable development and our goodwill to take steps to address any imbalance during the course of development,” he said.
Anh urged both Vietnam and the EU to complete the ratification process of the EVFTA at the end of this year.
Minister of Industry and Trade Tran Tuan Anh. Source: Ngoc Thuy.
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“We would like to send a message to the world despite the rising protectionism and countries putting blame on trade for economic interdependence,” she stressed.
Malmstrom also added the deal is a stepping stone for the EU to target a wider market in ASEAN.
With EVFTA, the EU would become a major investor in Vietnam, tightening the relations between Vietnam and the EU, said Malmstrom.
On this issue, Ambassador – Head of the EU Delegation in Vietnam Bruno Angelet expected a stronger capital inflow from Europe to Vietnam.
“Now they know there is a proper legal instrument in place to protect their rights,” Angelet added.
Support for local companies needed
Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said the business community is “thankful” for the agreement, as the EVFTA would facilitate opportunities for them to thrive.
“For Vietnam, EVFTA and IPA will become major drivers fostering reforms in Vietnam. We are expecting a second wave of reforms to further promote the institution building in Vietnam,” Loc said.
Loc acknowledged there will be more competition pressure for local companies, but played down its impacts. "We have been opening up the market for other countries such as New Zealand, Australia, Japan or South Korea in the CPTPP.”
More importantly, the EVFTA also takes into account the development level of Vietnam and puts it into a road map for gradually removing the tariffs in the Vietnamese market, Loc said.
Loc said a main challenge for Vietnam to realize the full potential from the EVFTA is meeting requirements on the rule of origin, especially as the country currently is importing a lot of input materials from China and Asian countries, not Europe.
Meanwhile, the technical barriers in EU countries are very high. Loc suggested more support from the EU so that Vietnamese companies can improve their products.
Loc said the government also needs to put in place a policy to help the business community address the issue of cost for compliance. “We know that the agreement is very demanding so the business must invest in corporate governance and operation to meet the requirements of the EU community.”
Vietnam is expected to remove 65% of import tariffs for European goods right after the deal becomes effective. The remaining would be gradually phased out in the next 10 years.
In return, the EU is committed to removing 71% of import tariffs for Vietnamese items, and the remaining in the next seven years.
It is estimated that the EVFTA will add 0.1 percentage point (ppt) on average to Vietnam’s real GDP growth each year based solely on its trade impacts, according to HSBC.
The European Commission estimates that Vietnam’s exports to the EU would grow by around 18% as a result of the agreement, while the EU’s exports to Vietnam are slated to increase by around 29%.
Over the past ten years, trade turnover between the EU and Vietnam has increased 10-fold to US$53 billion in 2018. The EU is currently Vietnam’s third largest trading partner, while Vietnam is the bloc's 19th largest partner in the world, and the second largest in Southeast Asia, behind Singapore, according to the VCCI.
