Rules of origin, investment environment improvement, government procurement and sustainable development are relatively broad and rigorous commitments addressed in the EU - Vietnam Free Trade Agreement (EVFTA). With this pact, Vietnam expects to boost its exports, attract investment capital and raise its position in global supply chains. However, Vietnamese enterprises are still passive and few have specifically prepared for the passage of EVFTA.
Expected export growth of 20 percent
Mr Le Trieu Dung from the Multilateral Trade Policy Department under the Ministry of Industry and Trade said the EVFTA will bring many benefits to Vietnamese exporters in the EU market and enhance Vietnam’s magnetism to EU capital flows. Vietnam’s export revenue to the EU was projected to climb 15-20 percent per year.
The EU is also the second largest donor of official development assistance (ODA) and the largest supplier of non-refundable aid for Vietnam. From 2007 to 2013, the EU provided US$5.2 billion of ODA for Vietnam, of which 43 percent was non-refundable aid.
"FTAs to which Vietnam is a signatory mainly focus tariff reductions and trade facilitation, rather than on innovating growth models, improving the business environment and enhancing economic efficiency," he said. EVFTA is a comprehensive agreement which not only covers trade in goods, but serves as a tool for macroeconomic improvement and an opportunity for investment climate betterment as the agreement also encompasses contents of institutions, rules of origin, intellectual property rights, competition policy, quality recognition and dispute resolution terms, transparent customs, and cross-border trade procedures. EVFTA also addresses many regulations on sustainability and environment, introduces institutional framework and mechanisms for establishment of monitoring and reviewing agreement execution process and impact on both sides.
Dr Nguyen Thi Thu Trang, Director of WTO Centre under the Vietnam Chamber of Commerce and Industry (VCCI), said the sectors to benefit most under the EVFTA are garment and textile, leather and footwear, and food processing.
Ms Pham Thi Lan Huong, an expert on the EU-Vietnam MUTRAP Project, advised enhancing import promotion from the EU in the fields of machinery, equipment and quality materials to grasp high-tech resources.
Elusive opportunities
Trang said businesses are increasingly interested in integration information and FTA terms. This is very encouraging. However, more than a few are still perplexed and unclear on the rules and tax rates they should know to better prepare for cooperation with EU firms.
She added that Vietnam should not only focus on the competitive advantages from reduced tariffs, as EVFTA tariffs on Vietnam’s exports are as high as 7 percent. To enjoy the zero tariff, Vietnamese companies must fulfil intra-region rules of origin (ROO) conditions. However, at present, Vietnam is now mostly importing raw materials from non-EU countries. Failing to meet the rules of origin, Vietnam’s exports of course cannot enjoy full preferential tariffs.
In addition, origin certification is not an easy job. Businesses must show all documents and papers relating to purchase price, origin, production process and others, perhaps so-called ‘trade secrets’ to competent authorities.
With the eight FTAs Vietnam has signed, 30-40 percent of exports enjoy the highest preferences while 60-70 percent are still subjected to ordinary tariffs, Trang noted.
"Information on FTA commitments is abundant but instructive documents for businesses are few. Even when FTAs are signed, it must take some time to have the full text translated into Vietnamese and to issue guidelines,” she stressed. In fact, negotiation details are kept secret and businesses hardly have enough accurate information to get well-prepared.
Huong Giang
Vietnamese
