“The most ambitious free trade deal ever conducted with a developing country” – The European Union.
After three and a half years of negotiation, on Sunday 30th of June, 2019, The European Union and Vietnam signed a landmark free trade deal – The EU-Vietnam Free Trade Agreement (EVFTA) – in Hanoi, Vietnam. The deal was signed between Ms. Cecilia Malmstrom – European Trade Commissioner, and Mr. Tran Tuan Anh – Vietnam’s Minister of Industry and Trade.
The deal is a comprehensive and high-quality agreement between Vietnam and 28 European Union member states which ensures mutual benefits for both Vietnam and the EU. Vietnam has one of the region’s fastest-growing economies, backed by robust exports and foreign investment. The country has signed around a dozen free trade pacts, including the 11-country deal that will reduce the tariffs across a large part of the Asia-Pacific, known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Why the EVFTA is so important
The EVFTA is considered as a landmark deal because it is the first time The European Union signs with a developing country in Asia. The level of commitment in the EVFTA is the highest level that Vietnam has reached among signed Free Trade Agreements so far, which paving the way for tariff reductions on 99% of goods between the trading bloc and Southeast Asian country.
Although several tariffs will be cut over a period of 10-year and other goods like agriculture products will be limited by quotas, the deal will eliminate 99% of tariffs. Upon entering into force, the EVFTA is expected to be a huge boost to Vietnam’s exports, helping to diversify markets and exports, particularly agricultural and aquatic products as well as Vietnamese products with competitive advantages.
The agreement includes 17 chapters, two protocols and several attached memorandums, with main contents covering the following aspects.
- Trade in goods
- Services, investment liberalisation and e-commerce
- Government procurement
- Intellectual property rights
The EVFTA also covers other aspects including rules of origin, customs and trade facilitation, sanitary and phytosanitary measures, technical barriers to trade, sustainable development, cooperation and capacity building, and legal-institutional issues.
Benefits for the economy
According to the Ministry of Planning and Investment of Vietnam, Vietnam’s GDP is expected to raise by average of 2.18% to 3.25% per year during the period from 2019 to 2023; and 4.57% to 5.30% in the period from 2024 to 2028 and 7.07% to 7.72% in the period from 2029 to 2033.
On the 12 of February 2020, The European Parliament ratified the EVFTA and the EVIPA (EU-Vietnam Investment Protection Agreement) agreements between Vietnam and the EU. For the final step, the EVFTA and EVIPA need to be ratified by the Vietnam National Assembly which is expected to be organised in May 2020 before the agreements can come into force.