10:15 | 17/01/2016 Cooperation
(VEN) - Vietnam reaped a bumper crop of free trade agreements (FTAs) in 2015. The country concluded FTAs with Korea and the Eurasian Economic Union (EEU), while announcing to conclude negotiations on the FTA with the European Union (EU) and the Trans Pacific Partnership (TPP) Agreement.
Deep and wide integration
Vietnam’s international economic integration began in 1995 when the country officially became a member of the Association of Southeast Asian Nations (ASEAN). It signed a US-Vietnam Bilateral Trade Agreement in 2000, joined the World Trade Organization (WTO) in 2007. A number of FTAs were concluded in 2015 and will be signed in the near future opening the door for Vietnam to integrate with economies worldwide.
Vietnamese Minister of Industry and Trade Vu Huy Hoang and the South Korean Minister of Trade, Industry and Energy Yoon Sang-jick inked the Korea-Vietnam FTA on May 5, 2015, which took effect on December 20, 2015.
With this FTA, the Republic of Korea will liberalize 97.2 percent of total import value accounting for 95.4 percent of total tariff lines related to many categories of Vietnamese major agricultural and seafood exports.
In its part, Vietnam has committed to open its market for 200 items, most of which are production materials and a full range of services such as machinery and equipment leasing.
For this reason, the Korea-Vietnam FTA is expected to positively affect production and processing businesses helping them prevent great reliance on Chinese materials, slash production costs and renew technology.
Vietnamese Prime Minister Nguyen Tan Dung and his counterparts from EEU member countries including Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan concluded an FTA on May 29, opening up major opportunities for Vietnamese agricultural and industrial exports.
Immediately after the FTA between Vietnam and the EEU takes effect, 71 percent of the tariff lines on seafood and 36 percent of the tariff lines on textiles, garments and wood furniture imports from Vietnam will be terminated.
For its part, Vietnam will immediately terminate its import tariffs on several categories such as machinery and equipment, fertilizer, and iron and steel.
The road to 65 percent of global GDP
Vietnam’s effort to integrate with the world economy continued to achieve great results in 2015 after the negotiations on the EU-Vietnam FTA (EVFTA) were officially completed on December 2.
Immediately after the FTA becomes effective, the EU will terminate import tariffs on 85.6 percent of total tariff lines, or about 70.3 percent of Vietnamese total exports to the EU.
Seven years later, the EU will terminate 99.2 percent of its tariff lines benefiting 99.7 percent of Vietnamese exports to this market.
As for the remaining 0.3 percent of Vietnamese exports (including rice, sweet corn, garlic, mushrooms, sugar, high-sugar products, cassava starch and canned tuna), the EU has pledged to open its market for Vietnam following its tariff quotas with the quota-based import tariff rate of zero percent.
The business community has placed great hopes on the TPP with the negotiations concluded on October 5, 2015. Here in this vast free trade area, goods and services will circulate freely among the 12 member countries without any tariffs, quotas, technical barriers or administrative procedures.
According to the US’ commitment, 98 percent of Vietnamese agricultural exports to this market will enjoy the zero percent import tariff right after the agreement takes effect. Of these, 92.68 percent of seafood exports and 100 percent of wood exports will not be subject to tariff immediately after the TPP is implemented.
The Ministry of Industry and Trade’s Multilateral Trade Policy Department Director Luong Hoang Thai said that with these four FTAs with 45 partners Vietnam has established free trade relations with a large market which accounts for 65 percent of global gross domestic product. This is a new engine for Vietnamese export growth in future years.
Businesses need to be active
Concluded and future FTAs mark a milestone in Vietnam’s international economic integration. However, both government and businesses need to make careful preparations to make the most of opportunities and overcome challenges. Businesses have little choice but to strengthen themselves to cope with increasing competition. State managers must also change their thinking in order to increase transparency of their policies and the interaction with businesses.
Deputy Minister of Industry and Trade Nguyen Cam Tu underscored that after FTAs take effect, domestic integration activities must combine with reforms and economic institution improvements with a focus on amending and bettering the law system and the business environment in a bid to effectively implement Vietnam’s commitments.
For years now, the Ministry of Industry and Trade and other ministries and agencies have made great efforts to raise awareness over the contents of these FTAs. However, Head of the Governmental Negotiation Team and Deputy Minister of Industry and Trade Tran Quoc Khanh said that governing agencies and businesses need to stay active in studying the contents of these FTAs to understand their impacts.
Thanks to FTAs, Vietnam will be able to maintain high economic growth via increasing foreign direct investment, receiving advanced technology and management skills, and expanding and persifying the export market on the basis of fair partnership and without discrimination.