EU-Vietnam landmark free-trade deal: What could it mean for industry?
The free-trade deal is the first of its kind between the EU and a developing country in Asia, and paves the way for tariff cuts
02 Jul 2019 --- Hailed as the “most ambitious free trade deal ever concluded with a developing country,” the trade agreement between the EU and Vietnam is being celebrated on both sides. The deal will eliminate nearly all customs duties on goods traded between the two economies and will ensure that 169 traditional European food and drink products recognized as Geographical Indications are protected in Vietnam. This includes well-known European delicacies such as Champagne, Parmigiano Reggiano cheese, Rioja wine and Feta cheese.
The agreement has finally been signed in Hanoi, three-and-a-half years after trade negotiations ended in December 2015. This promises “unprecedented benefits” for European and Vietnamese companies, consumers and workers, while promoting respect for labor rights, environmental protection and the fight against climate change under the Paris Agreement.
Vietnam is the EU’s second largest trading partner in the ASEAN region after Singapore, with trade worth €49.3 billion for goods and more than €3 billion for services. An increasing number of European companies are establishing themselves in the country, setting up a hub to serve the Mekong region. Main EU imports from Vietnam include agricultural products as well as telecommunications equipment, footwear, textiles and furniture, while the EU mainly exports food and beverages, machinery and transport equipment and chemicals.
Distinctive Vietnamese products, such as Mộc Châu tea or Buôn Ma Thuột coffee, will also be protected in the EU.
Distinctive Vietnamese products, such as Mộc Châu tea or Buôn Ma Thuột coffee, will also be protected in the EU and the agreement also makes it possible for new products to be added to the protected list in the future.
The agreements reached with Vietnam closely follow another recent trade deal with Singapore. It will help pave the way for a future region-to-region agreement with the entire Association of Southeast Asian Nations (ASEAN).
The EU and Singapore previously negotiated a Free Trade Agreement and an Investment Protection Agreement which aims to remove nearly all customs duties and get rid of overlapping bureaucracy, while improving trade for goods including food products.
The EU says the milestone deal with Vietnam underscores the bloc’s commitment to opening up its market and trading freely in the face of rising protectionism and trade tensions around the world.
Removing tariffs
Many Vietnamese products currently benefit from trade preferences offered unilaterally by the EU under the General Scheme of Preferences (GSP). The agreement will allow Vietnam to maintain free access to the EU market for those products also in the future, even if its economic situation no longer justifies preferential treatment reserved for developing countries.
The agreement will eliminate 99 percent of all tariffs on both sides. Current duty in Vietnam for dairy, for instance, is up to 20 percent, chocolate is 30 percent and wine is 50 percent.
The agreement takes into account the more sensitive situation of some agricultural sectors in the EU (such as rice, sweet corn, garlic, mushrooms or sugar). In these cases, the access of Vietnamese products to the EU market will be limited by tariff rate quotas, according to the EU.
“Vietnam is a vibrant and promising market of more than 95 million consumers and both sides have much to gain from stronger trade relations. Beyond the clear economic benefits, this deal also aims to strengthen respect for human rights as well as protecting the environment and workers’ rights,” says Commissioner for Trade Cecilia Malmström.
Well-known European delicacies such as Champagne, Pamigiano Reggiano cheese, Rioja wine and Feta cheese, will be protected in Vietnam.
Other trade agreements
In addition to Singapore, the EU also has a free trade agreement with South Korea and Japan.
In the past, European firms faced trade barriers when exporting to Japan, which made it hard for them to compete. EU firms already export over €58 billion in goods and €28 billion in services to Japan every year, however, February marked the start of the EU and Japan’s Economic Partnership Agreement entering into force, which is predicted to push up exports.
The EU says that trade agreements like these not only remove barriers to trade, but helps the bloc shape global trade rules in line with its high standards and shared values while sending a powerful signal that large world economies such as the EU and Japan reject protectionism.
Next steps?
Following the endorsement by the Council, the agreements will be signed by the EU and Vietnam and presented to the European Parliament for consent. Once the European Parliament has given its consent, the trade agreement can be officially concluded by the Council and enter into force.
By Gaynor Selby
