EVFTA, EVIPA: Wide Room for Expanded Trade and Investment

10:26:52 AM | 6/11/2020

On June 8, the National Assembly of Vietnam officially voted to ratify the EU - Vietnam Free Trade Agreement (EVFTA) and the EU - Vietnam Investment Protection Agreement (EVIPA).

Access to a market of 500 million people

Mr. Nicolas Audier, President of the European Chamber of Commerce in Vietnam (EuroCham), said that the EVFTA is the second deal of the EU with an ASEAN country after Singapore. The trade pact will open a new era of increased trade and investment, starting the roadmap of eliminating nearly 99% of tariff lines and trade barriers in the next 10 years, and also open up a new market for EU investment and innovation that promotes sustainable development in Vietnam.

He affirmed that free, fair and rules-based trade is the best roadmap for economic growth. This agreement represents mutual benefit, not only for EU and Vietnamese businesses, but also for the peoples of both sides.

Minister of Industry and Trade Tran Tuan Anh said, the EVFTA is the first agreement to reach the highest level of preferences compared to other pacts Vietnam has signed. Specifically, within the first seven years of enforcement, EU countries will cut tariffs on 97% of Vietnam's product lines.

The EVFTA facilitates Vietnamese businesses to develop the market, expand production capacity and enhance competitiveness. Institutional reforms and bilateral cooperation mechanisms will continue to support Vietnam to assert its position as a regional investment hub. At the same time, the pact helps Vietnam further improve its technology level, human resources, labor productivity and specific opportunities to restructure the new supply chain disrupted by the Covid-19 pandemic as well as new regional and global developments, he added.

Mr. Tran Thanh Hai, Deputy Director of Import and Export Department under the Ministry of Industry and Trade, said, some other countries have advantages of incentives of the EU's Generalized scheme of preferences (GSP+) and Everything But Arms (EBA); however, within the EVFTA, Vietnam has a great strength. Very few countries have a trade agreement with the EU. In Asia, the EU only signed a cooperation agreement with South Korea and Singapore, but these two Asian peers do not have the same product structure as Vietnam. Therefore, in the long term, the agreement will create a stable advantage for Vietnam's exports. Businesses can utilize this to penetrate the market and build brands for Vietnamese goods in the EU market. In addition, the access to the EU market is also a stepping stone for Vietnamese goods to make inroads into other developed markets.

Identifying challenges

Regarding challenges posed by the EVFTA and the EVIPA, Mr. Vu Ba Phu, Director of the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade, said that the EU is a big market but it requires strict quality, hygiene, food safety and environmental standards while not all businesses can meet such requirements. For Vietnamese enterprises, language barriers, cultural differences and limited knowledge of EU market regulations will be a major difficulty when they carry out trade promotion in the EU market.

Mr. Truong Van Cam, Vice Chairman of the Vietnam Textile and Apparel Association (Vitas), said, the Covid-19 pandemic drove garment and textile companies into extreme difficulty. In May 2020, the garment and textile export value tumbled 36% year on year. From January to May, the garment and textile export fell 15.5% to US$ 12.37 billion. EU quality and standards are not an issue for garment and textile firms because they have conquered the European market for many years. However, the biggest difficulty is origin. Therefore, preparations need to be very thorough and meticulous to catch benefits right after the agreement is ratified and effective.

Ms. Phan Thi Thanh Xuan, Vice Chairwoman of the Vietnam Leather, Footwear and Handbag Association (Lefaso), said, what matters most to utilize advantages and opportunities to bring Vietnamese products to the EU market is enforcement. Ministries and branches should continue to have specific guidelines for businesses to enable them to take advantage of opportunities most effectively.

Mr. Nguyen Van Than, Chairman of the Vietnam Association of Small and Medium-sized Enterprises, said that Vietnamese companies will face a series of technical barriers such as food safety, epidemiological hygiene, codes of conduct, environmental regulations, origin and localization rate. In addition, EU countries tend to apply anti-dumping, anti-subsidy or safeguard measures to protect domestic production. Meanwhile, Vietnamese enterprises still lack information about this market as well as regulations on imports.

He proposed increasing financial resources and facilitating small and medium-sized enterprises to access soft loans to carry out EVFTA projects. The Government should further accelerate administrative procedure reform, review and complete institutions, and submit amendments and supplements to current laws to the National Assembly to comply with this agreement.

Five groups of solutions

Joining new generation FTAs ​​such as the EVFTA means that Vietnam will enter the big playground where it must accept new difficulties and challenges to compete with major countries. In order to adapt to this context, the Government will issue the EVFTA Implementation Plan to promptly provide directions, plans and roadmaps to ministries, sectors and localities in order to properly, fully and promptly fulfil EVFTA commitments and help realize its benefits for enterprises.

In this implementation plan, five main groups of solutions are: Providing insight into the EVFTA and EU market; building laws and institutions; improving competitiveness, developing human resources, supporting Vietnamese businesses to join regional and global production networks, value chains and supply chains; improving the legal system to adjust labor relations and labor standards in accordance with international standards, commitments and conventions to which Vietnam acceded; acceding to remaining ILO Conventions. Regarding social security, environmental protection and sustainable development policies, the country will essentially develop and issue regulations on society, environment and sustainable development.

Huong ly (Vietnam Business Forum)