Business leaders hail EVFTA ratification, cite challenges26/06/2020
Domestic and foreign businesses are hailing the ratification of the EU-Vietnam Free Trade Agreement (EVFTA) by the Vietnamese National Assembly as a significant milestone in Vietnam-EU cooperation.
EuroCham welcomes the ratification of the EVFTA and EVIPA
EuroCham welcomes the positive vote on the EVFTA and EVIPA in the National Assembly. This historic milestone signals the start of a new relationship with the European Union.
The EVFTA will usher in an era of increased trade and investment, and begin the process of phasing out almost 99 percent of tariff lines and barriers to trade over the next decade. It will also open up new markets to European investment and innovation, and promote sustainable development in Vietnam.
This agreement represents a true ‘win-win’ not just for European and Vietnamese enterprises, but also for citizens on both sides. The chamber and its 17 industry sub-committees, which represent over 1,000 member enterprises, are ready to cooperate with Vietnam to ensure everyone can fully tap into the potential of the EVFTA now and in the future.
Intensifying service improvements to help Vietnamese businesses
The EVFTA marks a significant turning point in Vietnam’s process of becoming a trade power and is key to tapping the country’s great economic potential in coming years.
As a world-leading supplier of warehousing and forwarding services, we believe the agreement will create favorable conditions for our customers to increase the import of key products from both sides, help simplify procedures and encourage sustainable and long-term investment as well as establish strategic partnerships.
We have intensified service improvements in the network of our solutions to help Vietnamese businesses, especially those in the retail industry and high technology, sustain their competitive advantages. In 2019, for example, UPS shortened the transportation time for more than 2,300 trade roadmaps. This combined with other improvements has helped reduce the time for transportation to the EU by four days.
The EVFTA is not a “magic wand”
The EVFTA’s tariff cut commitments for Vietnamese goods aim at import duties but not domestic taxes applied by each country, such as the value added tax (VAT). In other words, the agreement will enable European countries to import Vietnamese goods at lower tax rates, but they could impose other taxes and fees on the imported goods.
Moreover, the EVFTA provides advantages but it is not a “magic wand”. Import tax cuts will reduce prices of Vietnamese goods in the EU market. To benefit from this trade pact, Vietnamese businesses should not only meet its strict requirements but also learn what the EU market needs and what will sell.
The EVFTA offers preferences for goods originating in Vietnam but does not say the goods must be manufactured by Vietnamese businesses. This means its preferences also apply to products made by Vietnam-based foreign-owned companies using Vietnamese workers and materials, leaving Vietnamese businesses at the lowest stage of a value chain. Foreign-invested Vietnamese companies, which have been manufacturing for decades garments, leather and footwear products for export to Europe as outsourced by foreign firms will be the biggest beneficiaries of the EVFTA.
A breakthrough for exports
The EVFTA is very important for the development of the Vietnamese leather and footwear sectors. The ratification of the agreement by the National Assembly creates impetus for leather and footwear businesses to restore production and promote exports to redeem losses caused by the Covid-19 pandemic.
Statistics show that in the first five months of this year, the export growth of the leather and footwear sectors decreased more than 10 percent, and about 50 percent in May. The EVFTA will help leather and footwear companies boost exports to the EU. This market accounts for nearly 30 percent of Vietnam’s export value. We hope that exports to the EU will help the leather and footwear sectors resume growth and maintain a growth rate of 10 percent in the months towards year’s end.
Vietnamese leather and footwear companies are aware of the EVFTA opportunities, but to increase exports to the EU, they need to join domestic and foreign linkages and trade promotion organizations in order to grasp updated information and train human resources to meet market demand.
Upgrading Vietnamese exports
The EVFTA offers Vietnamese businesses opportunities to attract investment from the EU and access high-grade material sources from this potential market, thus upgrading Vietnamese exports.
However, opportunities will come along with challenges. This requires domestic companies to improve product quality and apply modern trading methods in order to overcome EU trade and technical barriers.
The EVFTA is the result of almost a decade of negotiations with significant contributions by the Ministry of Industry and Trade. The agreement meets the expectations of the business community, giving it time to prepare to benefit from tariff cuts under a reasonable roadmap to enhance their competitiveness.
Source: Vietnam Economic News
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