Read about EVFTA benefits, then Join our exclusive webinar on Monday 13 July 2020
UPDATE 6 July 2020
Download 17 Page DG TAXUD Guidance on the EVFTA Rules of Origin"
The European Union and Vietnam signed a "Trade Agreement", dubbed EVFTA - and an "Investment Protection Agreement" on 30 June 2019. After all, parties agreed, in August 2020, the agreement will enter (provisionally) into force. Ahead of our exclusive webinar, we look at why it matters to EU businesses.
The EU-Vietnam free trade agreement will gradually eliminate almost all tariffs between the two parties in ten years.
It will protect emblematic European products, and allow Europe to access the Vietnamese public procurement market.
The deal includes binding rules on climate, labour and human rights
Relevance for the EU
Vietnam is the EU’s second largest trading partner in the Association of Southeast Asian Nations (ASEAN) after Singapore, with trade in goods worth €47.6 billion a year and €3.6 billion when it comes to services. EU exports to the country grow by 5-7 percent annually, yet the EU’s trade deficit with Vietnam was €27 billion in 2018.
The main EU imports from Vietnam include telecommunications equipment, clothing and food products. The EU mainly exports goods such as machinery and transport equipment, chemicals and agricultural products to Vietnam.
Vietnam Briefing reports that "At the regional level, Vietnam is now the EU’s second most important trading partner among all ASEAN members – surpassing regional rivals Indonesia and Thailand, in recent years. The growing trade between the EU and Vietnam also helps to solidify ASEAN’s position as the EU’s third largest trading partner".
Vietnam Briefing (see link below) says that for Vietnam, the tariff elimination will benefit key export industries, including the manufacturing of smartphones and electronic products, textiles, footwear and agricultural products, such as coffee. These industries are also very labor-intensive. Increasing Vietnam’s export volume to the EU, the FTA will facilitate the expansion of these industries, both in terms of capital and increasing employment.
EU investors are active in 18 economic sectors and in 52 out of the 63 provinces in Vietnam. Investment has been the most prominent in manufacturing, electricity and real estate. Bulk of the EU investment has been concentrated in areas with good infrastructures, such as Hanoi, Quang Ninh, Ho Chi Minh City, Ba Ria-Vung Tau and Dong Nai.
Eliminating 99% of all tariffs - textile to go in 7 years
Both parties set a timeframe by which they have committed to liberalizing all tariffs.
65% of EU exports to Vietnam will be immediately duty-free,
The rest - including motorcycles, cars, pharmaceuticals, chemicals, wines, chicken and pork - gradually liberalized over ten years.
71% of Vietnamese exports to the EU will be duty-free on day one, with the rest catching up in seven years.
Textiles: The EU agreed to phase out duties within a seven-year timeline for Vietnam’s textile and footwear products. Exports of the sector reached around US$9 billion in 2018. As a large proportion of Vietnam’s exports to the EU are consumer goods such as clothing, textile, and footwear, the FTA could significantly increase their trade volume.
Electronics: The EVFTA provides Vietnam with a chance to take a lead in electronic products.
Pharmaceutical: EU pharmaceutical imports will be duty-free immediately with the rest exempted from duty after seven years. EU pharmaceutical companies will be allowed to establish a company to import pharmaceuticals that have been authorized to be sold in the Vietnamese market. Such entities can sell pharmaceuticals imported by them to Vietnamese distributors or wholesalers. The entities can also build their own warehouses.
Investment: The new FTA will bring a fair and equal access to the market enabling EU investors to further expand their business.
Duty-free Vietnamese exports of sensitive agricultural products, such as rice, garlic or eggs, will be limited
Reducing Non-trade regulatory barriers and overlapping red tape
Non-tariff barriers will be eliminated in the automotive sector, export and import licensing, and customs procedures. Vietnam accepted the “Made in EU” marking, beyond national markings of origin, for non-agricultural products.
Ensuring protection of geographical indications
169 emblematic EU products such as Parmigiano Reggiano cheese, Champagne, or Rioja wine, will enjoy protection in Vietnam, as will 39 Vietnamese products in the EU
Services: EU companies will have improved access to business, environmental, postal and courier, banking, insurance and maritime transport services in Vietnam
Public procurement: EU firms will be able to bid for contracts with Vietnamese ministries, state-owned enterprises, as well as with Hanoi and Ho Chi Minh City;
Sustainable development: there are legally-binding rules on climate, labour and human rights. The agreement commits Vietnam to apply the Paris Agreement. Vietnam scheduled the ratification of two remaining bills on the abolition of forced labour and on freedom of association by 2020 and 2023, respectively. If there are human rights breaches, the trade deal can be suspended.
Making sure the agreed rules are enforceable: Dispute settlement between companies and state
Separately, the trade committee also agreed by 26 votes for, seven against and six abstentions to an investment protection agreement providing an investment court system with independent judges to settle disputes between investors and state. The accompanying resolution passed by 27 votes for, seven against and five abstentions.
The following is from Vietnam Briefing (see below)
Previously, remanufactured goods were considered ‘used’ by Vietnam and typically not allowed for import. However, the text of the agreement allows remanufactured goods to be imported and will open up trade for high-value products such as medical devices and car parts to serve the after sales market. Vietnam can still continue to restrict specific used goods under the most favored nation (MFN) conditions.
The temporary import and export of repaired goods will be duty free. This will ensure fair and competition conditions particularly for specialized maintenance services such as aircraft.
Made in EU
Vietnam will accept ‘Made in EU’ products for non-agricultural items for the first time reflecting the integration of the EU market. With the exception of pharmaceuticals which are subject to national approvals, this will allow manufacturers to use the EU’s broader internal market.
Fees and formalities
Consular transactions are no longer needed under the FTA while consular authentication will not be required three years the FTA is in effect.
Register for our webinar to learn how to SAVE MONEY with EU-Vietnam FTA
Vietnam Briefing: https://www.vietnam-briefing.com/news/evfta-eu-vietnam-trade-relations.html/ Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Hanoi and Ho Chi Minh City. Readers may write to firstname.lastname@example.org for more support on doing business in Vietnam.
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