Experts have urged domestic enterprises to change the structure of products exported to the EU market to enjoy more benefits when the Viet Nam-EU Free Trade Agreement (FTA) goes into effect.
The two negotiating parties have completed preparations and begun formal negotiations on an FTA that was expected to bring benefits to both sides, said Tran Ngoc Quan, deputy director of the EU Market Department under the Ministry of Industry and Trade.
Quan spoke at the "Scaling up of Viet Nam-EU trade and investment" conference held by the Viet Nam Chamber of Commerce and Industry (VCCI) in HCM City and the Delegation of the European Commission to Viet Nam last Friday.
Both sides in the negotiation are discussing a wide range of issues, including the elimination of import tariffs, the acceleration of trade in service and the overcoming of non-tariff barriers, and source of goods origin. They will also reach a wider agreement on intellectual property rights.
Quan said the Viet Nam – EU FTA would bring both advantages and challenges for Viet Nam companies.
Most Vietnamese products exported to the EU market will have an import tariff of zero to 5 per cent under the FTA.
The lower import tariffs will help Vietnamese products become more competitive than goods from other countries that do not have an FTA with the EU, such as China.
In addition, once the Viet Nam-EU FTA comes into force, Viet Nam will become a full strategic trading partner with the EU.
Under the FTA, production costs on Vietnamese products will not be considered, and thus no anti-dumping tariffs will be imposed.
Speaking at the conference, EU Minister Counsellor Jean Jacques Bouflet, a representative from the EU delegation in Viet Nam, said Viet Nam's key areas such as textiles, fisheries and leather shoes would have more opportunities to boost exports, thanks to lower import tariffs that are expected to be imposed by the EU by that time.
In turn, the FTA will enable Viet Nam to benefit from high-quality imports and increase technological transfer.
Increased high-quality imports will in return help raise the quality of Viet Nam's exports, improving companies' competitiveness for the long-term.
Bouflet said that participating in the FTA would increase EU investment in Viet Nam and help diversify its trade partners.
However, a majority of Vietnamese products exported to the EU are raw material goods and preliminary processing goods.
These items already enjoy very low tariffs according to the EU's general system of preferences or most-favoured nation status, according to Quan.
"If the country continues to export these items, they will not enjoy many benefits under the FTA, and companies should increase exports of processed products to take advantage of lower tariffs," he said.
In addition, local companies should be aware of technical barriers when exporting to the market and further improve their product quality.
"The EU has many trade regulations, including REACH, the European Community Regulation on chemicals and their safe use, TRACY, the regulation on tracing consignments of goods to their origin, and IUU, the regulation against illegal fishing. There are also requirements on food hygiene, technique and product quality," he said.
Major trade partner
Vo Tan Thanh, director of the Viet Nam Chamber of Commerce and Industry in HCM City said that the EU was one of the most important economic partners of Viet Nam, with annual bilateral trade increasing by 15-20 per cent on average.
Last year, the Viet Nam-EU two-way trade reached US$24 billion, a year-on-year increase of 37 per cent, of which Viet Nam's exports accounted for $16.5 billion, up 33. 5 per cent.
Bouflet said that despite the Eurozone crisis, exports of Vietnamese goods to the EU had continued to rise in the first four months of the year, with the EU now the largest overseas market for Viet Nam.
Viet Nam mainly exports apparel, footwear, coffee, furniture and seafood to the EU, while the latter imports machinery, medicine, aircraft, equipment and vehicles.