The FTA between Vietnam and the EU will have a strong impact on Vietnamese enterprises.

Currently, Vietnam is promoting negotiations to sign a Free Trade Agreement (FTA) with the EU. The negotiation roadmap will have a significant impact on the Vietnamese economy in general and FDI enterprises in Vietnam in particular.

Import and export benefit from the agreement

In recent years, the EU has been Vietnam's leading export market. Vietnam's export turnover to Europe (mainly the EU) has tripled from 5.621 billion USD in 2005 to 15.446 billion USD in 2010. The average tax rate applied by the EU on exports from Vietnam is about 4.1% and the average weighted tariff is 7%. Some export products from Vietnam are subject to higher taxes than the average rate such as: garments (11.17%), seafood (10.8%), footwear (12.4%)...

Vietnamese businesses need to prepare carefully when Vietnam and the EU sign the FTA.

However, after the FTA between Vietnam and the EU is signed, Vietnam will enjoy tariff incentives when the EU commits to reducing import tariffs on a number of Vietnamese goods. The removal of tariffs on most trade activities within the FTA framework will bring Vietnam many important advantages compared to other competitors exporting to the EU. These incentives will reduce tax disadvantages compared to other countries (European-Mediterranean countries, less developed countries) while maintaining a competitive position with other FTA partners of the EU.

At the workshop "Opportunities and challenges for foreign-invested enterprises in Vietnam when Vietnam joins the Free Trade Agreement with the EU" held yesterday (April 7), former Minister of Trade Truong Dinh Tuyen commented: In fact, tax reduction only changes the trade flow, imports from the EU increase, other markets may decrease if prices are competitive. Changing the trade flow will help Vietnam import source technology, reducing distortions in the structure of Vietnam's import-export market. In other words, Vietnam will benefit from importing high-quality technology and raw materials at cheaper prices from Europe. In addition, the EU will export high-quality services to Vietnam and Vietnamese enterprises will become more competitive in the long term.

Increasing competitive pressure on Vietnamese enterprises

Along with the opportunities that the FTA with the EU brings, Vietnam will also have to face significant challenges. The EU market is a rather demanding market with very high requirements on the quality of goods, environmental standards, origin of goods, intellectual property, etc. Technical measures and barriers are always challenges for Vietnamese export enterprises. Meanwhile, the psychology of using foreign goods of the majority of consumers is still quite common and the quality of domestic goods as well as prices are still lacking competitiveness. Therefore, right in the domestic market, we can be under competitive pressure from electronic goods, cars, motorbikes, machinery and equipment, etc. imported from the EU.

In addition, services will be a sensitive sector and will be subject to a lot of competitive pressure. This is a sector in which the EU is very strong. According to WTO commitments, many sectors of Vietnam have opened up quite widely, accepting foreign enterprises to set up branches and 100% capital companies in Vietnam (financial services, distribution, etc.). Regarding services not yet committed to in the WTO, Mr. Truong Dinh Tuyen also said that the issue is what the EU requires and to what extent Vietnam accepts.

According to Mr. Truong Dinh Tuyen, businesses need to be fully involved from the preparation stage, the negotiation process and the implementation of the FTA. First of all, businesses should have a detailed investigation and survey of the partner market to understand consumer tastes. Thereby, businesses will determine for themselves the appropriate steps in the negotiation process as well as data for planning. An effective, complete, accurate and timely information system is essential for businesses today. At the same time, the Government also needs to support Vietnamese businesses in building tools with higher added value such as: distribution channels in the EU, creating a national brand...

The roadmap for negotiating and signing the FTA will be an important milestone in expanding economic and trade relations between Vietnam and the EU. Therefore, Vietnamese enterprises need to prepare carefully and comprehensively to be ready to join.

According to Industry and Trade