EVFTA implementation especially important in post covid-19 period

06:00 | 02/06/2020 EVFTA

(VEN) - The EU-Vietnam Free Trade Agreement (EVFTA) is expected to be ratified by the Vietnamese National Assembly (NA) during its forthcoming session and take effect in July 2020. This means economic cooperation between Vietnam and the European Union (EU) is to enter a new period with more opportunities. 

evfta implementation especially important in post covid 19 period
The EVFTA will open opportunities for Vietnamese goods to access the EU market at preferential tariff rates

Accelerating procedures

In a recent phone conversation with EU Trade Commissioner Phil Hogan, Minister of Industry and Trade Tran Tuan Anh said the government had submitted to the NA the necessary dossiers for the ratification of the EVFTA during its May 2020 session.

At the same time, preparations for implementation are underway. The Ministry of Industry and Trade (MoIT) has drafted an action plan for EVFTA implementation and submitted it to the government for approval.

For the EU’s part, on March 30, the European Council ratified the agreement, completing the final legal procedure according to the EU’s internal ratification process. Once the Vietnamese NA ratifies the agreement and the two sides complete announcement procedures as required, the EVFTA will officially take effect. This is a very positive signal in the context of the Covid-19 pandemic heavily affecting production and trade, opening opportunities for Vietnamese businesses to promote exports to the EU.

Impetus for exports, investment

Economists believe the acceleration of EVFTA ratification and support measures will help businesses overcome difficulties, access markets and restore production. The EVFTA is also expected to help them diversify export markets, thus reducing their reliance on certain markets and contributing to Vietnam’s economic security. Economist Vo Tri Thanh believes the EVFTA will offer the Vietnamese economy great opportunities in the post-pandemic time and especially in the medium and long term. Careful preparations, including by the government, are required to enable Vietnam to benefit the most from the agreement, he said.

In the opinion of Deputy Minister of Industry and Trade Tran Quoc Khanh, the EVFTA will help Vietnamese businesses access the EU market with more preferential tariff rates compared with their competitors. With high-level commitments to open the domestic market to foreign investors and improve the business environment, the EVFTA is expected to create a major impetus for investment attraction and strengthen manufacturing capacity.

According to Deputy Minister Khanh, while export growth is the first and most easy-to-realize effect, improvements in the business environment and investment attraction from both domestic and external sources, which help enhance manufacturing capacity, are the most desired effect because these improvements will enable more sustainable gross domestic product (GDP) growth in the long term. “Our task is preparing the best conditions, especially resolving bottlenecks in terms of infrastructure, human resources and mechanism, to receive this investment flow,” Khanh emphasized.

Nicolas Audier, Chair of the European Chamber of Commerce (EuroCham) in Vietnam, affirmed that while everyone is experiencing a difficult period due to Covid-19, the EVFTA is a step towards long-term changes in EU-Vietnam relations, which is expected to open a new wave of trade and investment. In his opinion, however, the two sides need to ensure smooth implementation of the agreement so that Vietnamese and European consumers can make the most of its opportunities.

Restoring post-pandemic exports

The EU is one of Vietnam’s largest export markets. In 2019, Vietnam exported US$41.48 billion worth of goods to the EU and spent US$14.91 billion on imports from this market. Economists forecast that after the EVFTA takes effect, it will boost Vietnam’s exports to the EU, especially farm produce, seafood and advantageous products such as textiles, garments, leather, footwear and wood products.

Nguyen Thi Thu Trang, Director of the Vietnam Chamber of Commerce and Industry’s WTO and International Trade Center, said consumer demand in the EU market may decrease amid Covid-19, but when the pandemic is over, the demand will increase, creating opportunities for greater exports. Therefore, in her opinion, the business community should keep a close watch on the pandemic situation in order to devise suitable production and trade plans. At the same time, businesses should utilize online marketing channels to maintain and develop markets so that they can restore operations as soon as the pandemic subsides.

The Vietnamese trade office in the EU, Belgium and Luxembourg recently warned domestic businesses to manufacture and stockpile goods in order to be ready to fill orders from the EU when Covid-19 is over.

Moreover, there will be major changes in the way EU businesses carry out import, export activities in the post-pandemic period, which require domestic companies to get ready to meet new requirements.

The Ministry of Planning and Investment expects the EVFTA will help increase Vietnam’s exports to the EU by about 42.7 percent by 2025 and 44.37 percent by 2030. Total export value is expected to grow 5.21-8.17 percent annually in the first five years of implementation; 11.12-15.27 percent in the next five years and 17.98-21.95 percent in the next five-year period.

Quynh Huong