EuroCham Vice-Chair Jean-Jacques Bouflet told The Hanoi Times his views on the Vietnam-EU partnership, with the EU-Vietnam Free Trade Agreement (EVFTA) driving bilateral relations.
What are the implications of the EVFTA on sustainable development and green energy transition in Vietnam and the EU?
The trade deal was a novelty because it included a comprehensive agreement that exceeded the typical commitments on reducing tariffs and addressing technical trade barriers.
Specifically, the deal included a chapter [Chapter 13] focused on sustainable development, a priority for both sides.
We also have established a council meeting annually to discuss ways to improve and implement the agreement. This chapter, in particular, is the focus of many discussions, especially because Vietnam, as I would say, has taken the leadership position among developing countries in promoting its green policies and transitioning to clean energy.
How do you see Vietnam's performance under the EVFTA?
One of the key areas of focus under the EVFTA, in addition to Chapter 13, is the economy's transition towards clean energy, which poses a challenge for both developed and developing nations. This transition will inevitably involve costs and require technology transfer and financing. Another important aspect is to foster trade between the two entities, especially considering Vietnam's status as a developing economy. It's worth noting that the country's GDP per capita has recently reached US$4,000 and is on track to move toward the upper-middle income status.
As expected, the Vietnamese Government is working towards gradual adaptation and has become a significant partner of the European Union through the EVFTA. During the Covid-19 crisis, Vietnam proved to be one of the most resilient economies, successfully minimizing the effects of lockdowns and quickly responding to the situation. In contrast to many other significant partners in the region, Vietnam avoided defaulting on its obligations.
And for a European company, this is very important to have a reliable partner. When you divide your value chain around the world, having that type of resilient partner is very important. Additionally, the Vietnamese economy boasts two key strengths: the competitiveness and productivity of its workforce.
What issues should both sides focus on to realize the deal's potential?
There is always room for improvement in any situation. Regarding Vietnamese exports to Europe, I do not think that there are issues that can be solely attributed to the EVFTA. Rather, it is likely a result of certain structural challenges faced by the Vietnamese economy and its exporters.
Vietnam has a commendable number of small producers, contributing to its products' quality and diversity. However, scaling up is necessary for exporting to the vast EU market with over 400 million consumers. This can be challenging for Vietnamese small and medium enterprises (SMEs). Although we are working to support them as much as possible, the size issue has significant consequences.
One significant challenge is the lack of brand recognition for Vietnamese products. Despite being the second-largest producer of coffee globally and the largest producer of robusta, Vietnamese coffee is often sold under European importer brands in Europe, resulting in low visibility of the Vietnamese brand. This is just one example of the issue at hand.
To address this, Vietnam needs to improve its brand recognition and expand its distribution and networking capabilities to establish long-lasting recognition of its products.
Another challenge for Vietnam is to communicate its cost-effective approach to consumers effectively. This is particularly difficult when dealing with developed countries, as not every partner is as progressive as Vietnam, with some still having sweatshops that make consumers hesitant. In essence, the difficulty lies in adapting to the reality of the situation rather than in implementing the approach itself. Various other challenges could be highlighted, but the key issue is that effective communication is essential.
There are issues for the European side, but I expect they will be solved over time because Vietnam remains a developing country, so commitments are set to be implemented in phases.
We have agreed that Vietnam will gradually reduce duty over 10 years since the deal kicked off in 2020. So it would take some time for the full effects of the agreement to be felt.
In addition, there have been technical barriers to trade, which Vietnam has committed to addressing, but has requested time to implement. Recently, there has been progress in this area, with Vietnam's announcement that they will recognize the United Nations Economic Commission for Europe (UNECE) certification for cars and accept European cars that conform to these norms without further testing. Although there was a transition period of three years after the agreement entered into force, it is hoped that such measures will be implemented more quickly in the future.
Thank you for your time!
According to EuroCham's Whitebook launched on February 16, as a bilateral commitment with incentives and long-lasting value, the EVFTA has gained positive results since coming into effect. The import-export turnover with the EU in the first and second year after the effective date of EVFTA is US$ 54.9 billion and US$61.4 billion, respectively, with a yearly increase being 11.9%.
In 2021, Vietnam’s exports to the EU reached US$45.8 billion, increasing 14.2% year-over-year despite the impacts of Covid-19.
In the first eleven months of 2022, exports to the EU accounted for $43.5 billion, representing a rise of 21% over the same period from 2021. The exported products mainly attributed to mobile phones and accessories, computers, electronic products and components, garments and textiles, other machinery, equipment, tools and spare parts, footwear, handbags, wallets, wood and wooden products, and fishery products.
Vietnam imported accessories, automobile spare parts, completely built-up cars, and household appliances from the EU worth $7.87 billion, decreasing by 4.6% compared to 2021.
In the first eight months of 2022, the market share of Vietnam is 1.8%, the highest among ASEAN countries. In 2021, the exports from the EU to Vietnam reached $17.9 billion, increasing by 16.5%. In the first eleven months of 2022, this figure was $13.5 billion.
Exports are gradually being promoted to smaller and niche markets such as Eastern Europe, Southern Europe, and Northern Europe.
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