VietNamNet Bridge – 97 percent of businesses believe that Vietnam should negotiate for the free trade agreement FTA with the EU soon, a survey conducted by the Vietnam Chamber of Commerce and Industry (VCCI) found.
A lot of opportunities foreseen
If an FTA is signed between Vietnam and the EU with the tariff cut to zero percent to be applied to at least 90 percent of the export items to the market, this would serve as the key to boost the exports from Vietnam to the big market of 27 member EU countries, where there are 500 million consumers.
The EU is now considered a relatively opened market, which imposes relatively low tariffs on imports. Vietnamese goods on the market now bear the average tax of 4.1 percent. However, according to VCCI, though applying low tariffs, Vietnamese key export items are still bearing relatively high tariffs.
For example, the tax rate of 11.7 percent is being applied to garment products, while seafood and footwear are being imposed 10.8 and 12.4 percent. This is really a big obstacle that hinders Vietnamese goods to enter the EU, especially when EU has FTAs with a lot of countries which are the rivals of Vietnam.
Therefore, businesses believe that an FTA with the EU would serve as a good tool to deal with the barrier.
According to Professor Claudio Dordi from the EU’s Multrap project, if an FTA is signed between Vietnam and the EU, Vietnam’s exports to the market would increase by four percent every year. Especially, the higher growth rate of six percent may occur with the industries which are now bearing high tariff, and the growth rate has been projected for other industries and sectors.
As for the footwear industry, which is a key industry of Vietnam, for example, the export revenue is expected to increase by 7-21 percent per annum, if the tax rate is lowered to zero percent from the current level of 12.4 percent.
Meanwhile, the tax rate on Vietnamese garment products is also expected to reduce to zero percent from the current 12 percent, which would help improve the competitiveness for Vietnam’s exports, thus allowing to obtain the export growth rate of 20 percent per annum.
Experts have pointed out that Vietnam’s garment industry still cannot get benefits from the FTA signed with Japan or South Korea, due to the too strict rules of origin, but things would be quite different with an FTA with the EU.
Le Van Dao from the Vietnam Textile and Apparel Association Vinatas said that the EU tends to accept flexible rules of origin, which can be applied specifically to every partner.
In fact, worries have been raised that the EU would maintain high tariffs on farm produce, which would be the barrier to prevent farm produce from penetrating the market. However, experts have reassured the public that tropical farm produce area always the big advantage of Vietnam, while these are not strictly protected by the EU.
Worries still exist
Though the majority of polled businesses say they advocate the FTA between Vietnam and the EU, they believe that FTA would only benefit three main industries – garment, footwear and farm produce. They think that Vietnamese businesses are not competitive enough; therefore, they would be put at a disadvantage when the imports from the EU flow to Vietnam.
With the too ambitious areas to be covered, the Vietnam-EU FTA is believed to have a very high trade liberalization level with the high number of tariffs to but cut and the sharp tax reductions. Once Vietnam has to open its doors more widely to foreigners, this means bigger difficulties for domestic manufacturers.
Especially, service would be a “sensitive sector”, because this is the field that the EU has big advantages
The fields that businesses have suggested to be opened immediately include the ones where Vietnam does not have big advantages (seaport, maritime, logistics services) or “sensitive” ones (communication, information, education). Meanwhile, they have suggested a cautious market opening plan for farm produce.