Vietnam Signs Historic Trade Agreement

The European Union Vietnam Free Trade Agreement (EVFTA) is expected to boost the economy of both parties.

The EVFTA, described as “the most ambitious free trade deal ever concluded with a developing country” by the European Union (EU), was signed in Hanoi on June 30th. The deal between the EU and Vietnam is aimed to reduce barriers on tariff and non-tariff imports for both parties. While Vietnam is one of the few ASEAN countries to have successfully concluded a trade deal with the EU, the EVFTA is expected to help solidify ASEAN’s position as one of the EU’s largest trading partners.

European Union Trade Commissioner Cecilia Malmstrom and Vietnam’s Minister of Industry and Trade, Trần Tuấn Anh, signed the agreement with the goal to eventually reduce tariffs on 99 per cent of goods traded between the EU and Southeast Asian countries.

EU exports to Vietnam will have 65 per cent of duties eliminated and the remainder will be gradually phased out during the next 10 years. Duties on Vietnamese exports to the EU will be eliminated by 71 per cent with the remainder being phased out over a period of seven years.

This is expected to benefit export industries such as electronic product manufacturing, textiles, footwear, and agriculture, by expanding them in regard to both capital and increases in employment.

Beyond reduction in tariffs, the deal is also expected to change many key aspects.

Remanufactured goods, which Vietnam previously considered as ‘used’ and thus did not allow for import, will be allowed, opening up the trade of high-value products such as car parts and medical devices. However, Vietnam still retains the right to restrict the importation of specific used goods.

Duties on repaired goods for temporary import and export will also be eliminated.

For the first time ever, Vietnam will except non-agricultural items ‘Made in the EU’ as a part of the EU market’s integration. This comes with the exception of pharmaceuticals, which are still allowed but subjected to national approval.

For three years post the EVFTA’s signing, consular authentication will not be required and consular transactions will be completely eliminated.

As beneficial as this deal sounds, it comes with challenges. When Vietnam and the EU started discussing the deal in 2015, the U.K. had yet to decide to leave the EU. With the U.K. being one of Vietnam’s biggest export markets, after the U.S., and one of the biggest investors, trade and investment between the two countries will remain in stasis. The strict standards and quality control requirements of the EU, one of the biggest factors in other ASEAN countries’ failure to secure a deal with the EU, might prove to be another obstacle faced by Vietnam in the future.

This post is also available in: Tiếng Việt

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