EUROPEAN UNION - VIETNAM FREE TRADE AGREEMENT
The European Union and Vietnam reached an agreement on a free trade deal (The European Union - Vietnam Free Trade Agreement, EVFTA for short) after three years of negotiations and five years of structuring, signing and ratifying the agreement.
The FTA will remove nearly 99 percent of all tariffs on goods traded between the two economies and contribute to further market access, albeit with long transition periods for certain products (from 3 to 10 years).
EVFTA IN A GLANCE
Many Vietnamese products currently benefit from trade preferences offered unilaterally by the EU under the General Scheme of Preferences (GSP).
The agreement will allow Vietnam to maintain free access to the EU market for those products also in the future, even if its economic situation no longer justifies a preferential treatment reserved for developing countries. In addition, the agreement will lead to a gradual tariff elimination for the remaining products.
The agreement takes into account the more sensitive situation of some agricultural sectors in the EU (such as rice, sweet corn, garlic, mushrooms, or sugar). In these cases the access of Vietnamese products to the EU market will be limited by tariff rate quotas.
The EU-Vietnam Free Trade Agreement (EVFTA) will remove duties on almost all products, except for a few so-called “sensitive products” that will still remain subject to duty-free tariff rate quotas (mainly agricultural products such as rice, sweetcorn, sugar, surimi etc.).
Tariffs shall be eliminated per gradual stages. The reductions are classified in ten categories ranging from immediate effect, to 11 equal annual stages. Category “A” means tariffs will be entirely eliminated when the Agreement enters into force; Category “B3” means tariffs will be entirely eliminated in 4 equal annual stages beginning on the date the Agreement enters into force and so on.
Thanks to the agreement, trade in many products will be facilitated by (i) an increased use by Vietnam of international standards in its regulations; (ii) agreed rules on animal and plant health; (iii) the recognition by Vietnam of EU certificates of conformity for cars; and (iv) the recognition by Vietnam of the "Made in EU" origin marking for most non-agricultural products.
Protection and Geographical Indications
The FTA also provides ambitious disciplines on State-Owned Enterprises and state subsidies to avoid that an unfair advantage is given to local companies, as well as, better protection for EU innovations, artworks and brands from being unlawfully copied.
Moreover, 169 traditional European food and drinks products from a specific geographical origin will be protected against imitation on the Vietnamese market. This includes famous Portuguese delicacies like Queijo da Serra da Estrela, Pêra Rocha do Oeste and Azeites do Ribatejo, Trás-os-Montes and Norte do Alentejano.
Distinctive Vietnamese products, such as Mộc Châu tea or Buôn Ma Thuột coffee, will also be protected in the EU.
The agreement also makes it possible for new products to be added to the protected list in the future.
European companies will have better access to the Vietnamese public procurement markets than companies from any other trade partner. This means that they will be able to bid for public contracts involving entities such as:
The Vietnamese central administration, including as regards infrastructure projects.
The two biggest Vietnamese cities, Hanoi and Ho Chi Minh City.
Important state-owned enterprises.
Service sectors: postal and courier services; environmental services; banking and insurance; maritime transport.
At the same time, the agreement in no way curtails the right of each side to decide how they want their public services to be organised.
Finally, Vietnam has committed to open up to investments in manufacturing in a number of key sectors: food products and beverages; tyres and tubes; ceramics and construction materials.
Overall, the stage is now set for the EVFTA to enter into force on August 1st, 2020 (expected), allowing European businesses to access a better and more prosperous business environment.
Despite its great importance and future potential impact for both economic blocs, the EVFTA still presents some challenges. Mainly due to (i) the notoriously slow approval procedures in the EU, meaning it will take time for the benefits to be leveraged and materialised; (ii) the long transition phases for sensitive products of up to 10 years for certain Vietnamese goods; and (iii) the strict rules-of-origin scheme for textiles, meaning that current producers will not be able to immediately benefit, since the majority of primary materials for production in Vietnam are imported.
Finally, due to its comprehensive and somewhat complex structure, the EVFTA will require the close monitorization and support of Governments and institutions to help implement the agreement, enforce it and educate the markets on how to navigate such an agreement and best leverage the benefits it brings. This is where the role of European institutions and organizations in Vietnam, such as the Chambers of Commerce becomes crucial in disseminating such knowledge.
Note: The above depicture of the EVFTA is merely a brief of the subject. Due to its extensive and complex structure, we advise that for EVFTA matters you should contact ccipv to better comprehend the agreement and its nuances. Contact CCIPV for more information here.