The EVFTA, seen as a highway for Vietnamese goods to penetrate the world’s largest market, would help local firms navigate through the Covid-19 crisis if they can grasp opportunities from the deal.
EVFTA behind improvements in Vietnam-EU trade relations
Experts stressed the view at a conference discussing the EVFTA one year since its effective date (August 1, 2020-August 1, 2021) jointly held by the European Chamber of Commerce in Vietnam (EuroCham) and the Vietnam Chamber of Commerce and Industry (VCCI).
|Electronics production for exports at Channel Well Technology Vietnam in Quang Minh Industrial Pảk, Me Linh District, Hanoi. Photo: Pham Hung|
“Nearly 400 days since the deal became effective, it has made a significant contribution to economic development for two sides, evidenced by the improvements in bilateral trade relations,” VCCI Chairman Vu Tien Loc said.
According to Loc, while EU’s imports from countries around the world plunged by 20% during the last five months of 2020, the bloc saw a 3.8% increase in its import growth from Vietnam.
“Such trend continued to the first half of 2021 with Vietnam’s exports to the EU rose by 18.3% year-on-year, with the highlight being farm produce,” Loc added.
Loc also noted preferential treatments from the EU-Vietnam Free Trade Agreement (EVFTA) have been best utilized by Vietnamese enterprises among trade deals of which the country is a party.
During the last five months of 2020, EVFTA utilization rate was 14.8%, more than double that of the ASEAN Trade in Goods Agreement (ATIGA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and 7 times higher than the ASEAN-India Free Trade Agreement (AIFTA).
“The EVFTA’s utilization rate rose to 29% during the first half of 2021,” Loc noted.
Another key aspect of the EVFTA, as Loc pointed out, is the high-quality foreign direct investment (FDI) inflows from European businesses and the modern technologies that they bring along.
In the January-June period, the EU registered 2,221 projects in Vietnam with a combined capital of US$22.2 billion, an increase of 142 in quantity and $449 million in value year-on-year.
Loc said the current Covid-19 outbreak in Vietnam and subsequent restriction measures are impacting the movement of goods, in turn leading to a surge in logistics costs.
“Among solutions available to enterprises, EVFTA could be seen as a viable option at a time when firms are struggling to distribute their goods and services to local customers,” Loc stated.
Huge potential remains for both sides
Sharing Loc’s view, head of the Trade Promotion Agency under the Ministry of Industry and Trade Vu Ba Phu said trading activities have proved to be the driving force for the economy during the pandemic.
Phu, however, acknowledged that it is not easy for local companies to meet strict requirements of the European markets. “It is estimated that half of the European market remains untapped, of which around 35-60% of industrial products market and 35-90% of farm produce trade,” Phu added.
As firms are looking to recovery measures in the post-pandemic period, Phuc called for a focus on sectors that contribute the most to Vietnam’s exports to the EU market so as to take advantage of the deal, especially textile, garment, phones, computers, or agricultural products.
“Vietnam’s high growth of agricultural exports to the EU during the pandemic is a positive sign, which demonstrates the quality of Vietnam’s products which meet EU requirements and market expectation,” Phu stated.
Phu added other products that local firms can press on to penetrate the European markets are those rooms for growth in the future and of high-added value, such as renewables, electric vehicles, organic farm products, or furniture.
Looking back into the 12-month implementation of the EVFTA, Eurocham President Alain Cany stressed it has been a success for both parties, but suggested this is just the beginning and he expected higher results once the EU-Vietnam Investment Protection Agreement becomes effective.
Cany referred to the latest Business Climate Index (BCI) which shows two-thirds of Eurocham’s members are enjoying benefits from the EVFTA while calling for close cooperation from both Vietnamese and their European peers to realize the deal’s full potential.
As Vietnam is facing the fourth Covid-19 outbreak, seen as the most complicated yet, Cany warned both sides should not let long-term opportunities from the EVFTA slip away due to short-term challenges.
In this regard, he said there would be no success without greater efforts and linkage between Vietnamese and European companies.
Vice President of Eurocham Jean-Jacques Bouflet, meanwhile, highlighted the significance of the EVFTA in creating a fair playground for European companies in Vietnam and make their products more competitive.
For Vietnam, Bouflet said the high level of commitments stipulated in the EVFTA means local firms need to improve their operation and efficiency.
The long-term goal for Vietnam is to further meet international standards under the EVFTA to better integrate into the global value chains, Bouflet added.
Vietnam-EU trade turnover in the first six months of this year rose by 18.4% year-on-year to $27.67 billion, of which Vietnam’s exports rose by 18.3% to $19.4 billion, and imports of U$8.2 billion, or an increase of 19.1%.
Vietnam’s key export products to the EU include phones, computers, electronics, footwear, garment, vegetables, and imported the majority of cars, household appliances, cosmetics.