Vision of trade pact with Europe nears realization with EU ratification

09:00 | 07/03/2020 Cooperation

(VEN) - The European Parliament ratified the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) on February 12, 2020, marking an important milestone in the 30-year partnership between Europe and Vietnam. 

vision of trade pact with europe nears realization with eu ratification
Minister of Industry and Trade Tran Tuan Anh

New integration step

Speaking to the media immediately after the ratification, Minister of Industry and Trade Tran Tuan Anh said the two agreements create a sustainable foundation for improving the quality of comprehensive cooperation. The ratification also shows the EU values Vietnam as a trustworthy partner in Southeast Asia, the minister said.

He described the EVFTA as a lever for growth, opening up opportunities to access a market with a gross domestic product (GDP) of US$18 trillion. Under terms of the pact, import tariffs on nearly all Vietnam’s exports to the EU will be eliminated in the short term - the highest level of commitment that a partner has given to Vietnam in signed free trade agreements, Anh said.

As soon as the EVFTA comes into effect, probably in the summer of 2020, the EU will eliminate about 85.6 percent of import tariff lines, equivalent to 70.3 percent of Vietnam’s export value to the EU. Seven years after the agreement takes effect, the EU will eliminate 99.2 percent of import tariff lines, equivalent to 99.7 percent of Vietnam’s export value to the EU. The EU has committed to apply a zero percent tax to the remaining 0.3 percent of Vietnam’s exports.

Under the agreement, Vietnam will cut 65 percent of import taxes on EU commodities after the deal takes effect, while the rest will be erased over a 10-year period. Meanwhile, the EU will cut more than 70 percent of tariffs on Vietnam’s commodities after the deal takes effect, while the rest will be abolished over the seven subsequent years.

According to research by the Ministry of Planning and Investment, the two deals will help Vietnam increase its GDP by 4.6 percent and its exports to the EU by 42.7 percent by 2025. The European Commission, for its part, has projected a US$29.5 billion growth of the EU’s GDP and 29 percent increase in its exports to Vietnam by 2035.

The investment commitments will replace bilateral investment agreements between Vietnam and EU members, helping the country continue to reform its economic structure, perfect business environment and institutions, and facilitate EU investors’ business in Vietnam.

The Ministry of Industry and Trade has drafted and submitted to the government an action plan for EVFTA implementation to serve as the basis for the EU to coordinate and supervise implementation. The document has been prepared for submission to the National Assembly for approval.

vision of trade pact with europe nears realization with eu ratification
The EVFTA offers Vietnam new opportunities

Taking advantage of EVFTA opportunities

European and Vietnamese business communities, individuals and organizations will soon benefit from the agreement. In socioeconomic development management, Vietnam should not only focus on economic restructuring to improve competitiveness, and help businesses penetrate EU markets, it also needs to develop domestic markets, and ensure the efficiency and benefits of its economy, businesses and citizens during the agreement’s implementation.

It is very important to disseminate the agreement and related action plans, laws and policies among industries, organizations and individuals. A huge workload is awaiting the government and the Ministry of Industry and Trade. Not only ministries but also local governments, industry associations and business communities should create joint efforts to realize the agreement’s commitments.

Vietnam set a target of reaching an export value of US$300 billion in 2020, but the coronavirus (Covid-19) outbreak in China is threatening the target and even the country’s GDP growth. The EVFTA will prove that multilateralization and diversification of political, economic and trade relations is the right way.

The EVFTA is expected to boost exports, diversify markets, increase added value through establishment of new supply chains, and promote independent foreign relations, autonomy, multilateralization, diversification and national defense and security strengthening.

Quang Loc