11 July 2019
VIETNAM: Free Trade Agreement Signed with the European Union
Vietnam has now formally signed a Free Trade Agreement (FTA) and an Investment Protection Agreement (IPA) with the European Union (EU). The EU-Vietnam Free Trade Agreement (EVFTA) covers trade in goods, trade in services, reduction of non-tariff barriers, protection of intellectual property, public procurement, and e-commerce. It is expected to come into force in the coming months after it has been ratified by Vietnam’s National Assembly and the European Parliament. The IPA will also need to be ratified by the parliaments of each of the individual EU member states before it can come into effect. The European Commission, the EU’s executive arm, has described the trade pact as “the most ambitious free trade deal between the EU and an emerging economy to date.”
EVFTA will eliminate or reduce duties on 99% of goods traded between the EU and Vietnam, albeit over a 10-year period in the case of certain specific items. Although many Vietnamese products already enjoy duty-free access to the EU under its Generalised System of Preferences (GSP) programme, the new FTA will guarantee continued free access for those products even if Vietnam’s future economic development status no longer justifies preferential treatment under the GSP, which is reserved for developing economies. Vietnam is currently the EU’s second largest trading partner in the ASEAN Bloc after Singapore. The EU is Vietnam’s second largest export market after the US. In 2018, Vietnam’s exports to the EU amounted to US$42.5 billion (HK$331.4 billion), while its imports from the 28-nation trading bloc were valued at US$13.8 billion.
Vietnam’s main exports to the EU include mobile phone handsets, electronic goods, footwear, textiles and clothing, seafood, furniture, and agricultural products such as rice and coffee. The Vietnamese government expects the FTA to boost the country’s exports to the EU by 20% by 2020. From Hong Kong’s perspective, this is likely to open up new opportunities for Hong Kong companies with export-oriented business interests and investments in Vietnam. While both Hong Kong and Vietnam are FTA partners under the terms of the existing ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA), the latter’s new FTA with the EU might, in turn, offer additional opportunities for Hong Kong firms looking to service European companies wanting to use Hong Kong as a platform to expand into the Vietnamese market.