EU-Vietnam FTA: opportunities and challenges
This view was shared at a recent seminar held in HCM City by the Ministry of Industry and Trade (MoIT) and the “EU-Vietnam Multilateral Trade Assistance Project III” (MUTRAP III).
Participants in the seminar emphasized the need for a closer cooperation between craft associations and businesses to bring Free Trade Agreement (FTA) negotiations to success.
According to Dang Phuong Dung, General Secretary of the Vietnam Textile and Apparel Association (VITAS), it is essential to adopt trade policies by promoting negotiations of FTAs. With regional links taking shape in the world, Vietnam needs to sign FTAs to create a favourable business environment.
After joining the World Trade Organization (WTO) in 2007, Vietnam has actively and fully implemented its commitments to the organization.
On regional and bilateral relations, Vietnam joined ASEAN in 1995 and APEC in 1998. Along with other ASEAN members, the country has signed and carried out FTAs with partners, including China, Japan, the Republic of Korea, India, Australia and New Zealand. It has also signed bilateral FTAs with Japan and Chile.
Vietnam is currently in the process of negotiation for the Trans-Pacific Partnership Agreement (TPP) and joining other ASEAN members in implementing the ASEAN Framework for the Regional Comprehensive Economic Partnership FTA ASEAN+1. It is also preparing for official negotiations of the Vietnam- EU Free Trade Agreement (VN-EU FTA).
At the 20 th ASEAN Summit held in Phnom Penh, Minister of Industry and Trade Vu Huy Hoang met with EU Trade Commissioner Karel De Gucht to discuss issues related to reference documents before the VN-EU FTA negotiations get underway.
Vietnam is moving towards the target of expanding export markets through FTA negotiations as preferences from FTAs will help improve the competitiveness of Vietnamese consumer goods.
For the leather & footwear industry, under the VN-EU FTA, Vietnam can increase exports to the EU from 11.9 percent to 13.3 percent thanks to tax cut to boost domestic production.
Le Trieu Dung, Deputy Head of the Multilateral Trade Policy Department under the MoIT, said the proportion of enjoying preferences from FTAs is around 30 percent and Vietnam’s level is 90 percent after utilizing preferences from FTAs with ASEAN and the Republic of Korea. As a result, Vietnam’s garment and textile exports to the Republic of Korea have achieved a 240 percent growth rate in recent times
VN-EU FTA negotiations show that preferences will be significantly improved. At present, 42 percent of tax lines of Vietnamese exports enjoy a tax rate of 0 percent. Meanwhile, the total tax lines of ASEAN countries which enjoy preferences from FTAs with the EU at a tax rate of 0 percent amount to 90 percent. Consequently, if negotiations of the VN-EU FTA are successful, Vietnam will be able to increase the total tax lines enjoying a tax rate of 0 percent from 42 percent to 80-90 percent.
Currently, Vietnam’s key exports to the EU- leather & footwear are given a tax rate of 15 percent. It is supposed to be lowered to 0 percent after the VN-EU FTA is signed.
To the make the best of FTAs, Vietnamese businesses need to meet requirements for rules of origin. The proportion of rules of origin required in the region is 40 percent while the level for the US and EU markets may be higher.
Mr Dung said State agencies are keen to provide necessary information for businesses to help them renew production methods to better enjoy tax preferences.
In the near future, bilateral and regional FTAs will offer good opportunities for domestic businesses to access foreign markets and boost exports. Nguyen Thi Tong, General Secretary of the Vietnam Leather and Footwear Association (Lefaso) said that businesses are directly affected by the results of FTA negotiations. For that reason, they need to grasp new policies to speed up international integration and avoid risks when dealing with foreign partners, Tong added.