Vietnam is continuing to feel the economic impact of Covid-19 – as is every country around the world. Since August, however, the country has been boosted by the signing of a free trade deal with the European Union (EU). For the Vietnamese government, the new agreement comes into effect at a critical time, with public health concerns given precedence over economic growth.

For EU nations too, the new agreement is a positive step for the trading bloc. With the ongoing Brexit saga showing no signs of immediate resolution, the future for the EU is surely to develop new relationships? And should come as no surprise that Vietnam should be courted. After all, it is one of the few countries in the world not expected to enter recession even despite Covid-19.

The EU-Vietnam agreement in summary

The European Union-Vietnam Free Trade Agreement (EUVFTA) aims to remove nearly all (99%) tariffs within the first seven years of operation. As a result, this should achieve an uplift of €15 billion worth of extra exports a year from Vietnam to the EU. It is a lucrative deal for Vietnam – exporting telecoms equipment, food and clothing to the EU.

For EU exports to Vietnam, 65% of import duties will be liberalised to start. The remainder will be eliminated over the next 10 years. Other components of the EUVFTA include a commitment by Vietnam to increase the use of international standards in its regulations. European products of specific geographic origin will also receive greater protection in the Vietnamese market.

Benefits of the agreement on both sides

The positive impact of the EUVFTA is already starting to show in data released from Vietnam’s Ministry of Industry and Trade. It is reported that exports to the EU in August and September 2020 grew by 4.2% compared with the same period last year. For the month of September in isolation, that growth in exports from Vietnam stood at more than 14%.

For EU nations, the uplift in exports might not be as significant as those from Vietnam. This is, however, an agreement that offers many tangible benefits already. EU companies can now bid for internal public contracts, while there is a commitment in place for more vigilant protection of Intellectual Property Rights. In a fast-growing economy like Vietnam, such access is critical.

Existing challenges and future prospects

EUVFTA is not without its challenges, however. There are, for example, concerns that only 2% of 8,600 local businesses knew what the deal means for them. As such, the fear is that there’s a large number of potential beneficiaries who have been slow to respond and prepare. There’s also a concern that China’s presence as a neighbouring country will dwarf Vietnam’s appeal.

Such challenges can be overcome, however. For Vietnam, the EUFVTA is recognition that it’s a growing force on the world economic stage. With the UK expected to follow with its own, post-Brexit free trade agreement later in 2020, the Vietnamese economy is well-placed. Not only is it helping underpin gains made pre-Covid-19 – but its shaping post-pandemic prospects too. 

Source: MENAFN

• EU to ban products made with forced labour - a progressive tool against modern slavery
• VN needs drastic reforms to create firm ground for economic growth: experts
• Enterprises want clearer regulations on seafood production
• Foreign businesses increasingly seek export sources in Vietnam
• Sailing through storms: The fallout of Red Sea disruptions for global trade and inflation