Vietnam - EU FTA negotiations basically concluded

(Baonghean) - After 3 years of negotiations, on August 4, 2015, Minister of Industry and Trade Vu Huy Hoang and EU Trade Commissioner Cecilia Malmstrom announced that they had reached an agreement in principle on all the basic contents of the Free Trade Agreement (FTA) between Vietnam and the European Union (EU), abbreviated as the EVFTA. Accordingly, the basic conclusion of the EVFTA negotiations has brought about many commitments on import and export taxes and financial services for both sides.

Hot chili export model in Luc Da commune (Con Cuong). Photo: Huu Nghia

According to the Ministry of Finance, the benefits for Vietnam's key export products are huge, especially agricultural, forestry and seafood products. Director of the Department of International Cooperation (Ministry of Finance) Vu Nhu Thang said that the signing of the recent FTAs ​​is a concrete step to implement the proactive integration strategy, in which international economic integration is the focus, supporting economic restructuring, contributing to the country's economic development. Participating in these FTAs ​​will help Vietnamese enterprises expand their export markets and increase their competitiveness compared to other countries in the region.

Integration requirements and commitments are leverage

Assessing the opportunities and challenges when implementing FTA commitments, Director Vu Nhu Thang said that the requirements and commitments to integration are the levers for Vietnam to expand its export market, increasing the competitive advantage of Vietnam's exports compared to other countries in the region. Accordingly, FTAs ​​help improve the efficiency of importing raw materials that cannot be produced domestically, reduce dependence on imports from some traditional markets, contribute to diversifying the supply of raw materials; reduce import taxes on goods used as input materials for production, reducing production costs of domestic enterprises; create great opportunities in attracting foreign investment, and shift investment capital flows into Vietnam are basic opportunities.

Many enterprises have access to preferential investment capital, thereby accelerating reform, self-reorganization, proactively shifting investment direction, improving business skills, transferring technology to increase competitiveness, creating new business thinking and promoting economic restructuring and improving production and business efficiency. In addition, in terms of import and export turnover, even for markets that have signed FTAs ​​with Vietnam such as Japan, Australia, New Zealand, there are still many opportunities for Vietnam's exports. These are markets where Vietnam mainly has a trade surplus and has not yet reached the stage where both Vietnam and its partners have deeply cut import taxes - said Director Vu Nhu Thang.

Completely eliminate 85.6% of tariff lines into the EU

According to the Ministry of Finance, the main contents of the EVFTA include: trade in goods (text on general provisions and market opening commitments), export taxes, rules of origin, customs and trade facilitation, food safety and animal and plant quarantine measures (SPS), technical barriers to trade (TBT), trade in services (text on general provisions and market opening commitments), investment, trade defense, competition, state-owned enterprises, government procurement, intellectual property (including geographical indications), sustainable development, cooperation and capacity building, legal issues. The two sides will continue to complete technical work, legal review to prepare for the official signing, and on that basis will carry out internal procedures of each side before the agreement officially takes effect - said the Ministry of Finance.

When opening the commodity market, for Vietnam's exports, as soon as the Agreement comes into effect, the EU will eliminate import taxes on about 85.6% of tax lines, equivalent to 70.3% of Vietnam's export turnover to the EU. After 7 years from the date the Agreement comes into effect, the EU will eliminate import taxes on 99.2% of tax lines, equivalent to 99.7% of Vietnam's export turnover. For the remaining 0.3% of export turnover, the EU commits to providing Vietnam with a tariff quota with an import tax within the quota of 0% as soon as the Agreement comes into effect. Thus, many important export items of Vietnam will have their import taxes eliminated by the EU as soon as the Agreement comes into effect or with a roadmap of no more than 7 years. Typically, textiles, footwear and seafood (except canned tuna and fish balls). For rice, the EU grants Vietnam a significant quota for milled rice, unmilled rice and fragrant rice. Rice imported under this quota will be completely tax-free when the Agreement comes into effect. As for broken rice, import tax will be eliminated according to the roadmap. For rice products, the EU will reduce import tax to 0% within 7 years.

In addition, for honey, fruit and vegetable products, processed fruit and vegetable products, other fruit juices, handbags, suitcases, plastic products, glass and ceramic products... basically, tariffs will be eliminated. For imports, Vietnam commits to eliminating tariffs as soon as the Agreement comes into effect for 48.5% of tax lines, equivalent to 64.5% of import turnover from the EU, and after 10 years, about 99% of tax lines, equivalent to 99.8% of import turnover from the EU. For some important groups of goods such as large-engine cars, motorbikes, chemicals, alcoholic beverages, pork, chicken, beef; milk and dairy products; fish and fish products; cigarettes, cigars; machinery and equipment; wood products, paper... or groups applying the TRQ policy (including eggs, sugar, tobacco leaves, salt) there are also specific commitments.

Regarding export taxes, Vietnam commits to eliminating most export taxes on goods exported to the EU over a period of up to 15 years. The remaining important items will continue to have export taxes. Regarding financial services (insurance and securities), Vietnam's commitments are basically equal to Vietnam's general commitments in the WTO and the FTAs ​​that Vietnam has signed, except for some areas. Specifically: Vietnam commits to opening the door for EU reinsurance companies to establish reinsurance branches in Vietnam according to the roadmap; allowing EU insurance companies to provide cross-border reinsurance services.

Facing challenges from FTAs

EVFTA is a comprehensive, high-quality agreement that is expected to bring many benefits to both Vietnam and the EU. The Ministry of Finance said that there are some products that Vietnam does not commit to eliminating taxes on because in most FTA schedules, alcohol, beer, and tobacco are sensitive products that affect health, so if it commits to eliminating them, these products will flood the Vietnamese market and people may increase consumption. Therefore, to prevent unwanted impacts on people's health and the economy, Vietnam does not commit or has a very long tax elimination roadmap for these products.

For automobiles and auto parts, iron and steel, Vietnam does not commit to eliminating taxes on these items to protect domestic manufacturing industries, and to support these industries for a certain period of time so that they have more time to restructure and improve their competitiveness. For petroleum products, not committing to eliminating import taxes or eliminating them with a very long roadmap for petroleum products is to avoid unnecessary negative impacts on the economy and people. For national security and defense products, because these are products related to national security and defense, most countries have strict import regulations and policies, which are conditional or prohibited import items.

Obviously, the process of deep economic integration is also the cause of revealing more clearly the inherent weaknesses of our economy, most clearly shown in the decline in growth quality. Economic growth continues to be broad-based, relying mainly on increasing the amount of investment capital, exploitation and export of resources. Meanwhile, the efficiency of using resources such as capital, natural resources, land... and labor productivity remains low.

Regarding enterprises, the competitiveness of enterprises is still low, the private sector has developed, but the scale is still small and has many limitations in financial capacity and technology; not to mention the problem of domestic manufacturing industries facing the competitiveness in quality and price of imported goods. In addition, there are other internal challenges such as the land, labor, capital, and technology markets that have not developed synchronously. Supporting industries have not developed, and imports are still heavily dependent on one or a few markets. Up to now, some of Vietnam's strong industries such as electronics, textiles, footwear, and automobile and motorbike assembly in Vietnam still do not have a truly developed supporting industry. Ineffective industry development planning combined with weak competitiveness leads to a weak supporting industry.

For state management agencies, there is a need to improve and supplement mechanisms and policies on the development of domestic industries and livestock while competitiveness is still weak, dissemination of integration is limited, many enterprises do not understand the content of the agreements, and are not well prepared for the reduction steps. Therefore, there is a need for fundamental solutions so that enterprises, state management agencies and consumers can proactively and effectively enter the era of joining FTAs.

Red River