EVFTA AND GREAT CHANCES FOR VIETNAM
After years of negotiations and legal revisions, the EU – Vietnam Free Trade Agreement (EVFTA) and the EU – Vietnam Investment Protection Agreement (EVIPA) will be signed on June 30, 2019.
The implementation of those agreements will create many great chances for Vietnam, promising to turn the country into one of the commerce and investment centre of the EU in Southeast Asia.
STRONG “PUSH” FOR EXPORT AND INVESTMENT
Currently Vietnam is the second largest trade partner of the EU in the ASEAN, with a value of nearly 50 billion EUR (about 56 billion USD). That is why the signing and implementation of the EVFTA will create a very strong “push” for Vietnam’s exports which helps diversify exports and markets, especially agro-aquatic products as well as those of Vietnam’s competitive advantages like textile, leather and footwear, agro-aquatic products (rice, sugar, honey, vegetables), wooden furniture, etc.
Right after the agreement takes effect, the EU will remove import tax for about 85.6 percent of all the tax lines, or 70.3 percent of Vietnam’s export revenue to the EU.
And seven years after the pact comes into force, the EU will remove import tax for 99.2 percent of the tax lines, or 99.7 percent of Vietnam’s export revenue.
As for the remaining 0.3 percent of the export revenue, the EU pledged to apply a tariff quota with import tax of zero percent. That is to say that nearly all the export revenue of Vietnam to the EU will be free from import tax after a short period of time.
So far, this is the highest pledge a partner has given to Vietnam in the FTAs signed. This special benefit is very significance now that only about 42 percent of Vietnam’s export revenue to the EU is subject to the zero percent tax under the Generalized System of Preferences (GSP), while the bloc is constantly one of the two biggest export markets of Vietnam.
For the other side, Vietnam also pledged to, right after the agreement takes effect, remove tariff for 48.5 percent of the tax lines, or 64.5 percent of the import revenue.
Seven years later, 91.8 percent of the tax lines or 97.1 percent of import revenue from the EU will be removed by Vietnam. After 10 years, 98.3 percent of the import lines or 99.8 percent of the import revenue will be removed.
As for the remaining 1.7 percent of the tax lines for the EU, Vietnam will apply a roadmap of erasing import tax for more than 10 years or a tariff quota after the WTO commitments. The commitments on tariff removal by Vietnam for the EU will help the customers of the country have an easy access to the supply of high-quality products and services from the EU like pharmaceuticals, health care, infrastructure building and public transport.
According to a research by the Ministry of Planning and Investment, the EVFTA will help Vietnam’s export revenue to the EU increase by 20 percent by 2020, 42.7 percent by 2025 and 44.37 percent by 2030.
At the same time, the import revenue from the EU will also increase, but the pace is slower than that of export, namely 15.28 percent by 2020; 33.06 percent by 2025; and 36.7 percent by 2030.
The EVFTA will help increase Vietnam’s GDP by an annual average of 2.18-3.25 percent (2019-2023); 4.57-5.30 percent (2024-2028); and 7.07-7.72 percent (2029-2033).
Besides, as the EVFTA is very comprehensive, spanning from goods, investment, government’s purchase, trade defence, intellectual property, etc., Vietnam will have favourable conditions to continue perfecting and improving the competitiveness of its economy, especially to form a new value chain.
Besides economic benefits, the pacts will also accelerate the strengthening of respect to the human right, the right of labourers and environmental protection.
As for the EVIPA, the agreement includes modern provisions on the protection of investment, enabling the implementation through the new juridical system on investment, while ensuring that the governments of both sides have the right to regulate the benefits of their citizens.
The EVIPA will replace bilateral investments agreements the 21 EU member countries have signed with Vietnam so as to implement a new legal framework that ensures the prevention of contradictions on the benefits as well as increases the transparency.
To be concrete, the EVIPA will help protect investors, thus increasing EU investment into Vietnam. The commitments of giving fair treatment, safe and full guarantee for investments and investors of the other side in the EVIPA will make active contributions to the building of a transparent legal and investment environment. As a result, Vietnam will be able to attract more investors from the EU and other countries. This promises to turn Vietnam into one of the cetres of trade and investment of the EU in Southeast Asia.
Vietnam and the EU started their negotiations in June 2012 and concluded them in late 2015, and actively conducted the legal revisions so as to sign the EVFTA at an early date.
However, in the EU, a legal issue emerged relating to the right to ratification of the FTAs and the European Court of Justice was referred to. After consideration, the court issued its ruling on the new definition for the FTAs between the EU and partners.
In September 2017, the EU officially issued a new definition for the agreements to be signed with Vietnam, under which the EVFTA will be separated into the EVFTA and the EVIPA.
In June 2018, Vietnam and the EU officially agreed on the separation and concluded the EVFTA legal revisions, reaching consensus on all the contents of the EVIPA.
In August 2018, the two sides completed the legal revisions of the EVIPA.
After years of negotiations and legal revisions, on October 17, 2018, the European Commission officially passed the EVFTA and the EVIPA and on June 25, 2019, the European Council approved the signing of the pacts.
The EVFTA has 17 chapters, two protocols and a number of MoU attached with main contents on the trade of goods, the trade of services, investment, trade defence, competition, state-owned enterprises, government’s purchases, intellectual property, trade and sustainable development, legal-institutional issues.
It is considered as a comprehensive and high-quality pact that ensures the balance of benefits for both Vietnam and the EU, suitable to the provisions by the WTO.
The EVFTA and the EVIPA are standard agreements and highest ambitions to have been sighed between the EU and a developing country on the basis of the legal provisions.
On June 25,2019, the EU announced that European Commissioner for Trade Cecilia Malmstrom and Romanian Minister of Business Environment, Trade and Entrepreneurship Stefan-Radu Oprea will represent the EU to sign the EVFTA in Hanoi on June 30,2019.
According to the schedule, after being signed, the two pacts will be submitted to the European Parliament (EP) and the legislatures of the 28 member countries for voting.
It is expected that the EVFTA will be passed by the EP by the end of this year or early next year. As for the EVIPA, it will take longer, at least two years, for the EP and the legislatures of the 20 member countries to pass./.