Vietnam–EAEU Free Trade Agreement: Spurring Vietnamese exports

08:18 | 21/08/2016 Cooperation

(VEN) - The Vietnam-Eurasian Economic Union (EAEU) Free Trade Agreement provides big opportunities for Vietnamese businesses, creating favorable conditions for Vietnam to export to a large market with 182.7 million people and gross domestic product (GDP) accounting for 3.2 percent of the world.

Vietnam–EAEU Free Trade Agreement: Spurring Vietnamese exports

Current opportunities

It is a new-generation free trade agreement which includes a range of fields from trade to sustainable development and intellectual property, Dang Hoang Hai, Head of the European Market Department said in a seminar on introducing markets of EAEU members and opportunities to promote exports via the Vietnam-EAEU Free Trade Agreement.

Trade turnover between Vietnam and EAEU members remains low with annual average volume of around US$4 billion. This figure could reach around US$10 billion by 2020 thanks to the implementation of EAEU commitments.

The agreement could be possible to take effect this year, Dang Hoang Hai said. Its entry in force will able Vietnamese goods to access the big Eurasian market, especially thanks to preferential tariffs for  garments and textiles, agricultural products and seafood, leather and footwear.

The EAEU will apply a tax rate of zero percent for all Vietnamese seafood when the agreement takes effect. In addition, the two sides will positively implement the Chapter on Sanitary and Phytosanitary (SPS), including the contents in terms of the relative recognition of measures or management systems in related fields, the mutual recognition of concepts on adapting to local conditions, the using of the audit results and the profiles of major international organizations.

Vietnam will also open its market following the set schedule for some livestock products and industrial items including machinery, equipment and vehicles. About 90 percent of tariff lines within 10 years will be eliminated, accounting for 94 percent of Vietnam’ imports from the EAEU. In particular, around 53 percent of tariff lines will be reduced to zero immediately when the agreement takes effect, while eliminating more 1.5 percent of tariff lines in 2018 focusing on processed meat, fish, fruits and vegetables, spare parts of agricultural machines and transformers, pearl, gems and precious metals.

Careful preparations

In addition to opportunities, the Vietnam-EAEU Free Trade Agreement will pose challenges for businesses as their competitiveness remains low. Private businesses have faced many difficulties due to its small scale and poor financial and technological capacity. After the agreement takes effect, Vietnam must comply with stricter rules as well as ensure fair competition.

Bui Hong Minh from the Ministry of Industry and Trade’s Agency of Foreign Trade worried also about geographical distance, which is an obstacle for Vietnamese businesses when trading with EAEU members. In fact, while Vietnam has had long-term trade relations with countries in the EAEU, especially the Russian market, trade turnover between the two sides remains low due to high transport costs.

The Ministry of Industry and Trade’s Europe Market Department Deputy Director Nguyen Khanh Ngoc said that to help Vietnamese goods deeply enter the market, businesses need to carefully prepare plans to cope with competitors. In particular, selecting appropriate segments in terms of prices and product quality is needed.

Enterprises must carefully study each tariff line and each kind of goods in the agreement, especially the rules of origin to enjoy incentives under the provisions of the agreement. To catch more opportunities from the agreement, they should know about the tariff reduction roadmap relating to their sectors and actively develop suitable business and production strategies.

 Enterprises must also know about the tariff reduction roadmap relating to their sectors and actively develop suitable trade and production strategies in the short and long term in order to make most of opportunities provided by the agreement. 

Deeper cuts of tariffs in a number of free trade agreements will reduce costs of imported raw materials for processing serving exports, contributing to improving the competitiveness and expanding exports.

 The Vietnamese state needs to better mechanisms and policies to encourage all economic sectors to promote their potential. Approving long-term measures to support and overcome difficulties for enterprises is mentioned as necessary.       

The free trade agreement between Vietnam and the EAEU including Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan was signed on May 29, 2015. The agreement was approved by the parties and is expected to take effect in September 2016.

 

Nguyen Huong

Theo ven.vn