The European Union and Vietnam have agreed in principle to a free trade agreement (FTA) after two-and-a half years of negotiations, marking the first time the EU has closed such a deal with a developing nation, according to the European Commission.
“Following a telephone conversation this morning between EU Trade Commissioner Cecilia Malmstrom and Vietnamese Minister of Industry and Trade Vu Huy Hoang, all issues of substance have been agreed, and both sides have reached a mutually beneficial and balanced package,” the commission said in a formal statement.
This agreement will remove nearly all tariffs on goods traded between the two economies.
“We have a deal. This finely balanced agreement will boost trade with one of Asia’s most dynamic economies. It sets a new, better and modern model for Free Trade Agreements between the EU and developing countries, and establishes a good standard for the trade relationship between the EU and South East Asia as a whole,” Commissioner Malmstrom said.
The agreement is seen to provide “significant new opportunities for companies on both sides” by increasing market access for goods and services.
Based on the agreement signed August 4, the negotiating teams will now continue the process, settle some remaining technical issues, and finalize the legal text. Once finalized, the agreement will then need to be approved by the Council and the European Parliament.
“This agreement is the first of its kind that the EU has concluded with a developing country. As such, the ambitious and symmetrical liberalization agreed upon—with a transition period to allow Vietnam to adapt—breaks new ground compared to other EU agreements with developing countries,” continued the statement.
What Vietnam promises to do
Besides eliminating tariffs, Vietnam has agreed to remove almost all of its export duties; liberalize trade in financial services, telecommunications, transport, and postal and courier services; and open its investment market to the EU, such as by removing or easing limitations on manufacturing in the food and non-food sectors.
On government procurement, the EU and Vietnam have agreed on disciplines largely in line with government procurement agreement rules of the WTO.
The agreement will also improve the protection in Vietnam of Geographical Indications (GIs) representing EU flagship agricultural products, such as Champagne, Parmigiano Reggiano cheese, Rioja wine, Roquefort cheese, and Scotch Whisky. In turn, Vietnamese GIs for products such as Moc Chau tea and Buon Ma Thuot coffee will be recognized in the EU.
“After the conclusion of the Singapore FTA in 2014, this will be the second FTA between the European Union and a country of the Association of South East Asian Nations (ASEAN). As such, it is a building block towards the EU’s ultimate objective of an ambitious and comprehensive region-to-region FTA with ASEAN as a whole,” said the commission.
Both countries expect negotiations to be finalized in a few months’ time and not to extend beyond this year.
Bilateral trade progress
In 2014, the EU was the second trading partner for Vietnam after China (not including trade within ASEAN), representing 10% of total Vietnamese trade. The EU was Vietnam’s second export destination (after the U.S.), with the EU purchasing as much as 18% of Vietnam’s global exports.
In 2014, EU-Vietnam trade in goods was worth over EUR28.2 billion (US$30.6 billion), with EUR22.1 billion of imports from Vietnam into the EU and EUR6.2 billion of exports from the EU to Vietnam.
Vietnam’s key export items to the EU include telephone sets, electronic products, footwear, textiles and clothing, coffee, rice, seafood, and furniture. EU exports to Vietnam, meanwhile, are dominated by high-tech products including electrical machinery and equipment, aircraft, vehicles, and pharmaceutical products.
Total bilateral trade in services amounted in 2013 to EUR2.9 billion, with a slight surplus for the EU.
The EU is one of the largest foreign investors in Vietnam. In 2013, EU investors committed a total of more than EUR500 million in foreign direct investment and thus remain Vietnam’s sixth largest foreign investor partner.
Since 2013, Vietnam has been the EU’s fourth most important trading partner among the 10 ASEAN member states, surpassing the EU’s bilateral trade with Indonesia.
Photo: kangotraveler
