VINACHEM

After six rounds of negotiations, Vietnam and the European Union are now close to signing the EU-Vietnam Free Trade Agreement (EVFTA) which is expected to benefit the Vietnamese economy, especially in the export sector, said weekly Vietnam Business Forum magazine.

However, experts at the seminar “Social, Economic and Environmental Assessments of the EU-Vietnam Free Trade Agreement” have raised concern about how the Vietnam’s economy will be impacted once the agreement is signed, Vietnam Business Forum reported on March 17.

The seminar was organised by the EU-Vietnam Multilateral Trade Project (EU-MUTRAP) in collaboration with the WTO Centre in the Ho Chi Minh City.

Claudio Dordi, Chief Advisor of the European Trade Policy and Investment Support Project (EU-MUTRAP), was quoted as saying that in the recent agreements, the EU has almost liberalised commodity entirely for partners or maintained the protection under one percent of the trade turnover (as with the Republic of Korea). The removal of tariffs tends to focus on the first year and not longer than 10 years for the EU. Particularly for Vietnam, the EU expects that the FTA between the EU and Vietnam the tariff lines at 95 percent will be liberalised within 7 years. Based on the typical economic model of the Vietnam’s economy, if the EVFTA is signed, Vietnam will benefit from the agreement, particularly related to the increase of actual salary and national income.

“Even if EVFTA has not been signed, the trade between Vietnam and the EU basically has also increased; however, when the rules of the Agreement is executed, only the negotiated tariff reduction is expected to increase the Vietnam’s exports to the EU by about 30 percent to 40 percent, higher than the rate increased in the imports. The sectors which most likely benefit from the EVFTA include textiles, footwear, and processed food (including seafood),” Claudio Dordi stressed.

“However, the expansion of the production capacity of Vietnam to meet the increasing demands of the EU on a number of items will determine whether the overall increase in exports will be significant or not. Also thanks to the FTA, the service sector is also expected to expand significantly and probably contribute to the improvement of the performance of the entire economy of Vietnam,” he added.

According to Paul Baker, Specialist of the EU-MUTRAP project, the impacts of the EVFTA on environment are unremarkable. The FTA has a neutral impact on the national carbon emissions if the emission per unit of output in each sector is stable. But basically, whether the FTA is signed or not, the carbon emission of Vietnam will increase in correspondence to the growth of the economy today.

Former Minister of Trade Truong Dinh Tuyen, who is also a senior expert of the EU-MUTRAP project, said Vietnam is now negotiating many trade agreements, of which the EVFTA is seen as a comprehensive and high-quality agreement based on the WTO’s standard. Accordingly, some fields in the WTO agreement in goods, services, and technical barriers will be committed more intensively by Vietnam.

Other fields in investment, government procurement, the state-owned enterprises and competition policies, sustainable development, and renewable energy will have to be committed and adjusted by the EVFTA. Former Minister Tuyen recommended that Vietnam should also set out the inquiries associated with the negotiation process, which require EU to recognise Vietnam as a country with market economy to help the country’s benefits be guaranteed.

In terms of legal and business environments, the EVFTA and other agreements in negotiations will inevitably impact the institutional and business environments of Vietnam. Specifically, in terms of institution, Vietnam is forced to amend and enact many laws such as corporate law, investment law, and land law. In addition, the agreements also make impacts on the business environment through the commitments on customs, border measures and transparency of the legal framework.
Tuyen emphasised that Vietnam can only take advantage of opportunities and gain power and strength to overcome challenges after the EVFTA as well as other free trade agreements are signed to bring more transparent investment environment, ventilation and reduce business costs.

On the other hand, Le Trieu Dung, Deputy Director of the Multilateral Trade Policy under the Ministry of Industry and Trade, said the signing of the EVFTA will bring great benefits to many industries and economic sectors of Vietnam as well as contribute to the increase of the bilateral trade.

However, the top concern of Vietnam relates to the non-tariff measures (SPS and TBT) that are applied by the EU. Accordingly, Vietnam needs more consultation when making decisions related to these rules and starts build up capacity to help the businesses meet the new standards.

Vietnam’s institutional framework needed to support the introduction of EU procedures to the enterprises and create favourable conditions for them to export to the EU. In addition, Vietnam should also pay attention to the negotiations of the EVFTA in terms of quality and standards at the same time.

Besides, Vietnam should focus on the impacts on the key areas such as attraction of FDI, improvement of competitiveness, job creation and improvement of quality of life for workers, to effectively tap into every opportunity and overcome challenges.