EVFTA and EVIPA: 'Two large-scale, modern highways connecting the EU and Vietnam even closer'

The EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) are expected to not only enhance the economic and political relations between Vietnam and the EU but also demonstrate Vietnam’s position in the global economy. The success in negotiating these agreements also shows that “win-win” cooperation is an inevitable and important trend to maintain economic and trade relations.

From left, Ms. Cecilia Malstrom, Mr. Stefan Radu Oprea and Minister Tran Tuan Anh signed the EVFTA. Photo: VGP.

EVFTA VIETNAM - EU: FOR THE GOAL OF WIN-WIN

After many years of negotiations and legal review, on June 30, Vietnam and the European Union (EU) officially signed the bilateral Free Trade Agreement (EVFTA) and the Investment Protection Agreement (EVIPA). This is a "new generation" free trade agreement with extensive and comprehensive commitments, including commitments on free trade in goods; strict enforcement mechanisms and even areas considered "non-traditional" such as: Labor, environment, state-owned enterprises, government procurement, transparency, investment dispute resolution mechanisms, etc.

This is a “new generation” free trade agreement with extensive and comprehensive commitments, including commitments on free trade in goods; strict enforcement mechanisms and even areas considered “non-traditional”.

The signing of the EVFTA by the two countries is a new milestone in elevating the bilateral relationship between Vietnam and the EU after nearly 30 years since the establishment of diplomatic relations in November 1990. Like other FTAs, the EVFTA will bring advantages to both Vietnam and the EU in many aspects. Although the real values ​​of the EVFTA will only be seen when the Agreement officially comes into effect, meaning it has been ratified by the Vietnamese National Assembly, the parliaments of EU member states and the European Parliament, the expectation of benefits for both sides has been specifically taken into account. Economically, according to many studies, the EVFTA will help Vietnam's GDP increase by 4.6% and Vietnam's exports to the EU increase by 42.7% by 2025; The EU's GDP is estimated to increase by 29.5 billion USD and exports by 29% by 2035. Thus, EVFTA and EVIPA bring very specific and practical economic benefits to the economies, businesses and people of both sides.

EU "LAWS THE ROOTS" FOR PRESENCE IN ASEAN

The signing of the EVFTA with Vietnam is considered by the European side as a message to the world in the context of rising trade protectionism. As French Prime Minister Édouard Philippe said during his visit to Hanoi in late 2018, “this is an era in which there are few reliable partners. Some partners are even destroying the foundations that have created the political and economic environment, so Vietnam and France, together with the European Union, have a common interest in nurturing the trust of the relationship between the two sides, while promoting the stability of the economic environment”.

EVFTA brings many opportunities for Vietnam's footwear and textile industry. Photo: VNA

After the consequences of the public debt crisis in the "Old Continent" 10 years ago and the rise of trade protectionism in the world, EU countries are facing difficult challenges in connecting economies and traditional partners. The trend of finding emerging markets and new partners is a priority for this bloc. In addition to promoting market expansion activities in Africa and the Middle East, the ideal address for the EU to move towards is Asia, more specifically Southeast Asia - the most dynamic and potential economic region in the world. The official negotiation of the EVFTA between the EU and Vietnam 7 years ago was considered an effort to "journey to the East" by EU businesses. And now, this initial success is likened to "laying brick by brick" in the effort to bring the EU more presence in the ASEAN region.

Vietnam is now the second ASEAN country to sign a free trade agreement with the EU, after Singapore, while negotiations between the EU and Thailand, Malaysia, Indonesia and the Philippines are still ongoing. The EU highly appreciates the two agreements signed with Vietnam and considers this an important step for them to move towards a common agreement with the entire ASEAN bloc.

ENHANCE VIETNAM'S POSITION

For Vietnam, the “gains” after 7 years of EVFTA negotiations have been shown in many aspects. Minister of Industry and Trade Tran Tuan Anh called the way Vietnam overcame the challenges in negotiating with the EU like “jumping over the dragon gate”.

Prime Minister Nguyen Xuan Phuc met with President of the European Parliament Antonio Tajani during his visit to the EU in October 2018. Photo: VGP

Because Vietnam has gone from being a country receiving EU support for development, hunger eradication, poverty reduction and economic transformation to now standing in the position of “equal and mutually beneficial partnership” with the EU in a “new generation” FTA. That not only shows the maturity of Vietnam’s integrated economy but also that we have progressed to the world’s high standards in trade and investment activities for sustainable development.

Economically, of course, when this Agreement comes into effect, it will bring great opportunities for Vietnamese businesses and consumers. Specifically, trade tariffs will quickly decrease to very low levels, from 0 - 2% depending on the product group, including some product groups that will decrease immediately when the Agreement comes into effect. This increases the competitiveness of Vietnamese goods in the EU market, which is currently Vietnam's second largest export market in 2018 (after the US, on par with China). Vietnam's main export items such as electronics, computers, footwear, coffee, cashew nuts, and seafood will have the opportunity to expand their markets.

A corner of Ho Chi Minh City

The removal of tariffs also makes it easier for EU goods to enter Vietnam. Vietnamese consumers have more opportunities to choose quality products with clear origins. From a macro perspective, these agreements help Vietnam integrate more deeply into the world economy, take advantage of EU technology and creativity to diversify the economy and improve its competitiveness.

Prime Minister Nguyen Xuan Phuc affirmed: EVFTA and EVIPA will truly become two "large-scale, modern highways connecting the EU and Vietnam more closely".

Looking more broadly, Vietnam becoming the first developing country in Asia to sign an FTA with the EU also affirms Vietnam's position in the global economy. Not only is it a dynamic economy, Vietnam has also shown an active role in participating in international economic integration with a policy of supporting the trend of globalization, in the direction of freedom, beneficial to trade. Vietnam's participation in the process of building the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), bilateral and multilateral trade agreements and now the signing of the EVFTA is the clearest evidence of Vietnam's strong commitment to innovation and comprehensive international integration, contributing to promoting a multilateral, open, rules-based international trade system. From here, the attractiveness of the Vietnamese market will increase day by day, opening up opportunities to move towards other free trade agreements.

Of course, opportunities always come with challenges. Domestic manufacturers will have to compete more with imported products from the EU. Vietnam will have to make legal changes to implement its commitments in the fields of services, intellectual property, origin of goods, workers’ rights, and environmental protection. It will be a great disadvantage if Vietnam fails to implement these commitments. Therefore, EVFTA and EVIPA should be seen as a new beginning that requires continuous efforts from both sides to achieve the goal of “win-win”.