EVFTA – IPA: Unprecedented Benefits for European and Vietnamese Businesses

9:38:19 AM | 1/7/2019

 Vietnam and the European Union signed the trade and investment agreements in Ha Noi on June 30, making Vietnam the second ASEAN nation to sign this kind of agreements with the European Union.

Present at the signing ceremony included Prime Minister Nguyen Xuan Phuc, Permanent Deputy Prime Minister Truong Hoa Binh, Deputy Prime Minister and Foreign Minister Pham Binh Minh, Deputy Prime Minister Vu Duc Dam, Deputy Prime Minister Trinh Dinh Dung from the Vietnamese side.

Speaking at the signing ceremony, PM Nguyen Xuan Phuc extended thanks to the EU side for having assisting Viet Nam during the signing process. PM Phuc labeled the signing of the trade and investment deals as the “significant milestone” in the Viet Nam-EU relations while calling on both sides to work together to ensure successful realization of the two deals.

The EU - Vietnam Free Trade Agreement (EVFTA) and the Investment Protection Agreement (IPA) are initiated and concluded in the context of better Vietnam - EU bilateral relations, especially in economic and trade fields. EVFTA is a comprehensive, high-quality agreement that balances benefits for both Vietnam and the European Union (EU). It also takes into account development divides between the two sides.

With EVFTA and IPA, EU investors will also have more opportunity to access markets that signed FTAs ​​with Vietnam with more preferential treatments. This pact also helps promote relations between the EU and each ASEAN country in particular and the entire ASEAN bloc in general, thus providing a premise for discussing the EU - ASEAN FTA in the future.

With 17 chapters, two protocols and a number of memorandums attached, EVFTA is considered a comprehensive, high quality agreement that ensures balanced benefits for both Vietnam and the EU, complies with regulations of the World Trade Organization (WTO) and takes into account the development gap between the two sides. Especially, with duties on nearly 100% of Vietnam's exports to the EU to be eliminated duty after a short time, this is the highest commitment that an FTA partner gives to Vietnam.

For Vietnamese exports, as soon as the agreement comes into effect, the EU will abolish import duties on about 85.6% of tariff lines, equivalent to 70.3% of Vietnam's export value to the EU. Seven years after the entry into force of the pact, the EU will abolish import duties on 99.2% of tariff lines, equivalent to 99.7% of Vietnam's export value. For the remaining 0.3% of the export value, the EU pledged to provide Vietnam with tariff quotas with the import duty of 0%.

Thus, it can be said that nearly 100% of Vietnam's export value to the EU will be exempted from import duty after a short roadmap. So far, this is the highest commitment that a partner has given to Vietnam in FTAs. This benefit is particularly significant when the EU is always one of Vietnam’s two largest export markets.

For EU exports, Vietnam is committed to eliminating 48.5% of tariff lines (accounting for 64.5% of import value) as soon as the deal comes into force. After seven years, 91.8% of tariff lines, equivalent to 97.1% of the export value of the EU to Vietnam, will be abolished. After 10 years, the tariff elimination will be subject to 98.3% of tariff lines or 99.8% of the import value. For 1.7% of remaining tariff lines on EU goods, we will abolish import duties longer than 10 years or apply tariff quotas under WTO commitments.

Preliminary calculations show that, by 2020, if the agreement is enforced, Vietnam’s export growth to the EU will rise 20%. The growth rate may reach 80% by 2025 and 2030, thus strongly boosting the nation’s GDP growth. In addition, performance synergy, market access and institutional perfection will help us attract technology and finance to restructure the economy, improve competitiveness and increase added value to key industries.

Creating an enabling investment environment

Trade, service and investment commitments of Vietnam and the EU are aimed to create an open and favorable investment environment for businesses of both sides. Vietnam's commitment has gone far beyond its WTO commitments. The EU’s commitment is higher than WTO commitments and on par with the EU’s highest commitment in recent EU FTAs.

The fields that Vietnam is committed to facilitating EU investors include professional services, financial services, telecommunications services, transport services, and distribution services. The two sides also made commitments on national treatment for investment and discussed contents of dispute settlement between investors and the government.

Vietnam and the EU agreed on contents equivalent to the Government Procurement Agreement (GPA). With some obligations such as online bidding and bidding information on electronic portals, Vietnam has a roadmap to implement it. The EU is also committed to providing technical assistance to Vietnam to fulfil these obligations. Vietnam reserves the right to keep a certain percentage of bid packages for domestic contractors, goods, services and workers.

Intellectual property commitments include copyrights, inventions, patents, pharmacy and geographical indications. Basically, Vietnam's intellectual property commitments are in line with current law provisions. Regarding geographical indications, when the agreement comes into effect, Vietnam will protect over 160 geographical indications of the EU (including of 28 members) and the EU will protect 39 geographical indications of Vietnam. Geographical indications of Vietnam are all related to agricultural products and foodstuffs, which will help Vietnam's agricultural products to build and affirm their brands in the EU market.

For Vietnamese exports, as soon as the agreement comes into effect, the EU will abolish import duties on about 85.6% of tariff lines, equivalent to 70.3% of Vietnam's export value to the EU.

The EVFTA also has chapters concerning competition, state-owned enterprises, sustainable development, cooperation and capacity-building, law and institution. These contents are in line with Vietnam's legal system, thus formulating a legal framework for the two sides to strengthen cooperation and promote bilateral trade and investment development.

As for IPA, the two parties pledged to grant national treatment and most favored nation treatment to investors of the other party, with some exceptions, as well as fair and satisfactory treatment, safe and complete protection, freedom to transfer capital and profits from offshore investment, rational compensation for acquisition or nationalization of investors’ assets, and appropriate compensation for investors of the other party or a third party in the event of war, riots and other factors.

In the event of a dispute between a party with an investor of the other party, the two parties agree to give priority to resolving the dispute in good faith through negotiation and mediation. In the event that a dispute cannot be resolved by consultations and mediation, the case will be settled in the mechanism specified in this agreement.

Huong Ly