The EU – Vietnam Free Trade Agreement (EVFTA) is an important instrument that could help Vietnam realize its ambition of eventually becoming a high-income country by 2045, a target set by the State President Nguyen Phu Trong, according to senior economist Pham Chi Lan.

Overview of the conference. Photo: Nguyen Tung.

“While there have been mixed feelings towards the implementation of previous free trade agreements (FTAs), the timing and all optimism around the deal make us believe this would be a different story,” Mrs. Lan said at a conference discussing the EVFTA on September 24.

Given the fact that the foreign-invested sector currently makes up nearly 70% of Vietnam’s exports, Mrs. Lan said these FTAs have not achieved the purpose of building up the country’s internal strength, the most important factor during the global integration process.

“There would be no sustainable growth by relying on others,” she added.

The EVFTA came at a time when Vietnam was coming up with the next long-term strategy, therefore it would give the country a boost in going forward amid the Covid-19 crisis.

“Both the EVFTA and the Covid-19 pandemic are pressurizing the Vietnamese government and enterprises to change for better,” Mrs. Lan noted.

Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said the EVFTA is what Vietnam needs most at the moment since it helps Vietnam form closer cooperation with the EU, one of Vietnam’s trusted partners in pursuing sustainable development strategies.

“In a world of escalating trade tensions and growing protectionism, the EVFTA is expected to create a new competitive edge for Vietnamese enterprises and make Vietnam more attractive in the eyes of investors looking to diversify their supply chains,” Mr. Loc said.

"27 in 1"

Nguyen Thi Thu Trang, director of VCCI’s WTO Center and Economic Integration, highlighted the complementarity between Vietnam and the EU’s economies is what sets the deal apart from others.

In Vietnam’s other FTAs, all partners have a similar economic structure or even directly compete with Vietnam. “A win-win situation is more likely in the EVFTA compared to others,” Mrs. Lan said.

More importantly, all 27 EU members have not had a bilateral trade deal with Vietnam, so it could be seen as a 27 in one FTA, she added.

Mrs. Lan also pointed out the fact that the EU is the world’s second largest buyer, making the deal more meaningful for an export-oriented country like Vietnam.

Additionally, while the EU has not been Vietnam’s largest investor, it is the world’s main source of foreign investment. As a result, the EVFTA and the EU – Vietnam Investment Protection Agreement (EVIPA) would make Vietnam more attractive to European investors, Mrs. Lan said.

To go into detail how the deal has performed after having been effective for over a month, Luong Hoang Thai, director general of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, said Vietnam’s exports to the EU in August stood at US$3.78 billion, of which, goods and products worth US$277 million, or 7.3% of the total export turnover, received preferential treatment from the deal. 

By mid-September, the figure has risen to nearly US$500 million, which is equal to the total amount of Vietnamese products subject to preferential treatment from the Comprehensive and Progressive Agreement for Trans – Pacific Partnership (CPTPP) for the whole year of 2019, Mr. Thai added.

Textile and garment, Vietnam’s major export items to EU, are still enjoying the EU’s Generalized Scheme of Preferences (GSP- a set of EU rules allowing exporters from developing countries to pay less or no duties on their exports to the European Union), so the actual figure of goods benefiting from EU’s preferential treatment would be much higher, Mr. Thai concluded.