Official ratification of the EU-Vietnam Free Trade Agreement: An important milestone

Minister of Industry and Trade Tran Tuan Anh assessed that the market opening level in EVFTA is the highest commitment that Vietnam has achieved among the signed FTAs. Photo: VGP.

With 401 votes in favor (63.3%), the European Parliament officially voted to ratify the Free Trade Agreement (EVFTA) and the Investment Protection Agreement (EVIPA) between Vietnam and the European Union (EU) at around 6:00 p.m. on February 12 (Vietnam time).

Amid the joy of those who directly negotiated over the past 8 years, as the head of the direct negotiating agency, Minister of Industry and Trade Tran Tuan Anh shared about this memorable moment.

Growth Lever

Could the Minister please elaborate on the impact of EVFTA on the current Vietnamese economy, especially in the context of the world economy facing many fluctuations?

Minister Tran Tuan Anh:Considered a lever for growth, EVFTA opens up great opportunities for Vietnamese businesses to penetrate a potential market with 508 million people and a gross domestic product (GDP) of about 18,000 billion USD.

Up to now, the EU is the largest import market for Vietnamese goods with which we have a free trade agreement. However, the market share of imported goods from Vietnam compared to the total imports of this region is still modest compared to the potential, partly due to the barriers to Vietnamese goods, and partly due to our limited competitiveness.

Therefore, the strong market opening commitment from the EVFTA will certainly increase the price competitiveness of Vietnamese goods when imported into this important market, helping to promote Vietnam - EU trade relations and further expand the market for Vietnamese exports.

The opportunity to increase exports of Vietnamese products with advantages such as textiles, footwear, agricultural and aquatic products, including rice, sugar, honey, vegetables, fruits, wooden products... is very significant.

It can be said that the market opening level in EVFTA can be considered the highest level of commitment that Vietnam has achieved in the FTAs ​​that have been signed so far. This is even more meaningful when currently, only over 42% of Vietnam's export turnover to the EU enjoys a 0% tax rate under the Generalized System of Preferences (GSP).

In addition, the GSP program is expected to be unable to be extended because many Vietnamese product lines are considered by the EU to be more competitive than other preferential countries. Therefore, the industries that are expected to benefit the most from this Agreement are those that Vietnam has a high competitive advantage in, such as footwear, hats, textiles, and agricultural and aquatic products. The industries expected to be under competitive pressure include: chemicals, means and transport equipment, processed foods, and basic metal products.

Similarly, in terms of imports, Vietnamese enterprises will also benefit from the source of imported goods and raw materials with good and stable quality at more reasonable prices from the EU. Especially the source of machinery, equipment, high technology/engineering from EU countries, thereby increasing productivity and improving the quality of their products. When goods and services from the EU are imported into Vietnam, it will create competitive pressure for Vietnamese enterprises to strive to improve their competitiveness.

Notably, with EVFTA, Vietnam's new value chain with an important partner in the world will be formed. A more open and favorable investment environment, with more attractive export prospects, will attract more FDI from the EU to Vietnam, especially in areas such as services, finance, automobiles, manufacturing, information technology, high technology, processed agricultural products and food...

Although the sectors are expected to benefit the most, there are still challenges. How does the Minister assess the challenges we will face when implementing this Agreement?

Minister Tran Tuan Anh: Technical barriers to imported goods from the EU are very strict. Typically, with agricultural products, although EVFTA has incentives with flexible SPS regulations, most of our country's agricultural products such as tea, vegetables, fruits... still face limitations due to pesticide residues, lack of uniformity in each shipment, poor harvesting and preservation, so quality is still limited.

In addition, regulations on rules of origin will also be a challenge for the textile and garment industry if it wants to take advantage of tariff incentives because the raw materials for Vietnam's current export production are mainly imported from China or ASEAN.

To receive the above incentives, Vietnam will also have to commit to opening its market to goods and services for the EU, creating competitive pressure for our economy, businesses, goods and services.

However, this is healthy, selective and appropriate competitive pressure. More importantly, because the economic structures of the EU and Vietnam are highly complementary and do not directly confront each other, it is expected that the competitive pressure will not be large.

In addition, because Vietnam's commitment to opening up has a roadmap, especially for sensitive product groups, EVFTA is also an opportunity and reasonable pressure for Vietnamese enterprises to adjust, change their business methods and improve their competitiveness.

Minister Tran Tuan Anh announced information about the results of the European Parliament's vote to officially approve the EVFTA on the evening of February 12. Photo: VGP/Phan Trang.

Prepare an Action Plan to implement the Agreement

What are the remaining steps to put the EVFTA into effect, Minister?

Minister Tran Tuan Anh:In our opinion, we have overcome the most difficult stages to reach the expected goal.

The EU’s ratification of the EVFTA is an important milestone in the process of putting the Agreement into effect. For the EU, the Agreement will still need the approval of the European Council to enter into force.

On the Vietnamese side, the Ministry of Industry and Trade has submitted a set of documents to the Government for consideration, to the President, and then the President will decide to submit to the National Assembly for consideration of ratification of the EVFTA. I believe that, with this positive result from the EU, the ratification of the EVFTA by Vietnam in the coming time will be accelerated so that the Agreement will soon take effect, bringing practical benefits to businesses and people of both sides.

As the focal agency in implementing FTAs, the Ministry of Industry and Trade has made certain preparations to take advantage of the advantages brought by the EVFTA.

Similar to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which has been put into effect since early 2019, the Ministry of Industry and Trade has drafted the main contents of the Action Plan to prepare for the implementation of the EVFTA. The Action Plan for the implementation of the EVFTA clearly defines the objectives, main tasks and units coordinating the implementation of the plan.

The main tasks include 5 main groups: Propaganda and dissemination of information about the EVFTA Agreement and the markets of EU countries; law and institution building; improving competitiveness and developing human resources; policies for trade unions and workers' organizations at enterprises; and social security policies, environmental protection and sustainable development.

Market research is also being stepped up to support businesses to be ready to take advantage of tariff incentives when the Agreement is officially put into effect.

The Ministry of Industry and Trade continues to maintain the weekly Agricultural, Forestry and Fishery Newsletter, build an information channel to update market developments, forecast and evaluate the supply and demand situation, and prices so that businesses have information to guide their production and business activities. At the same time, the Ministry also continues to promote image promotion, product promotion, and brand building of export industries and products in the markets of countries in the European Union.

Thank you, Minister!

According to research by the Ministry of Planning and Investment, the EVFTA will help Vietnam's export turnover to the EU increase by about 20% in 2020; 42.7% in 2025 and 44.37% in 2030 compared to without the Agreement.

At the same time, import turnover from the EU also increased but at a lower rate than exports, specifically about 15.28% in 2020; 33.06% in 2025 and 36.7% in 2030.

On the macro side, EVFTA contributes to increasing Vietnam's GDP by an average of 2.18-3.25% (2019-2023); 4.57-5.30% (2024-2028) and 7.07-7.72% (2029-2033).