06:00 | 14/09/2022 Cooperation
(VEN) - The UK-Vietnam Free Trade Agreement (UKVFTA), which took official effect in May 2021, not only lays the foundation for increased bilateral trade and investment but also facilitates the access of Vietnamese and UK companies to each other’s markets.
The UK and Vietnam have established strong bilateral trade relations and share common strategic commitments on global trade and free capital and investment flows. Trade between the two countries reached US$6.6 billion in 2021, up 17.2 percent compared with 2020.
The UK Department for International Trade considers Vietnam a potential market and an attractive investment destination. With a population of nearly 100 million and per-capita income of about US$3,560 (in 2021), Vietnam is a large consumer market. Vietnam has also been liberalizing the national economy gradually since major reforms were launched in 1986.
|Beverage is a major Vietnamese import from the UK|
The Vietnamese government has put in place legal frameworks and regulations to promote private sector development, protect foreign investors through bilateral trade agreements and laws and provide them with a level playing field without undue government interference.
Experts believe the UKVFTA not only lays the foundation for increased bilateral and investment but also provides guarantees for UK trading companies in the following sectors:
The first sector is pharmaceuticals. Vietnam allows foreign invested enterprises (FIEs) to import licensed pharmaceutical products. FIEs are allowed to sell to wholesalers in Vietnam, build their own warehousing facilities and hire health experts to carry out marketing activities. Vietnam allows FIE access to the public procurement market for all types of pharmaceutical products licensed by the Ministry of Health, the health departments of Hanoi and Ho Chi Minh City, and 34 hospitals.
The second sector is food and beverage (F&B). The Sanitary and Phytosanitary Measures (SPS) chapter of the UKVFTA contains commitments related to mutual recognition, the approved list of exporting units, commitments to abide by international standards and commitments to simplify import procedures. Geographical indications (GIs) for the following UK products are protected: Irish whisky, Irish cream, Scotch whisky, and Scottish farmed salmon. Major F&B products that Vietnam imports from the UK include wine and brandy, fish and crustaceans, finished products from cereals, wheat, starch or milk and milk products. The MFN (Most Favored Nation) taxes applied to these products in Vietnam range from 3-60 percent. Tariff cuts under the UKVFTA provide UK exporters with considerable market advantages.
|The Vietnamese auto market will become mostly tax free for major UK automobile manufacturers by 2030|
The third sector is the automotive industry. This is one of the most protected sectors in Vietnam where special tariff and non-tariff barriers are used to hinder the access of foreign products originating from countries that have yet to sign a free trade agreement with Vietnam. Currently, Vietnam applies MFN taxes from 0-75 percent to automobiles and spare parts (zero percent for very few products), with the average MFN tax rate of 36.7 percent in 2020. The MFN taxes for automobiles range from 15-70 percent, averaging 53.9 percent. Under the UKVFTA, the Vietnamese auto market will become mostly tax free for major automobile manufacturers of the UK by 2030.
Fourthly, Vietnam has high import demand for machinery and equipment, which are also the UK’s major exports to Vietnam. The UKVFTA has eliminated taxes for nearly 70 percent of the UK’s chemical exports to Vietnam, with the remainder to be removed in the next 2-6 years. The trade deal has also eliminated taxes for most of the UK’s textile and garment exports to Vietnam, with only some products to become tax-free after a maximum of six years.