Impact assessment

EU Free Trade Agreements - Trade Remedies and other Negotiating Issues

Prof Claudio Dordi - Professor of International Law at Bocconi University (Milan), and MUTRAP III Team Leader

Mr Federico Lupo Pasini - Lawyer and consultant specialized in international economic law and policy. Based in Hanoi. 

The negotiation of an FTA with the EU is expected, besides reducing and eliminating EU tariffs, to restrict the application of non-tariff barriers, too. The biggest non-tariff challenges affecting Vietnamese exports to the EU are connected to the EU’s use of trade defense instruments, notably anti-dumping, and the EU’s SPS and TBT measures.

As far as trade defense instruments are concerned, it is unclear whether the EU’s negotiating proposal, in the context of the ongoing FTA negotiations, on anti-dumping and countervailing action will include provisions on enhanced co-operation and a set of WTO-plus obligations or will simply provide for a mandatory notification requirement and re-state the Parties’ rights and obligations under the WTO agreements. The EU is unlikely to make concessions on anti-dumping and countervailing duties to Vietnam and the FTA will probably not have any significant positive impact on the EU’s resorting to anti-dumping and countervailing action against it – on the contrary, it might pose stricter requirements to Vietnam in the area of dumping, subsidization and the use of trade defense instruments – unless the EU agrees, within the FTA negotiations, to recognize Vietnam as a market economy ahead of the WTO deadline. In the same way, an immediate recognition of its market economy status must stand as a negotiating priority for Vietnam in the context of the FTA with the EU. Should Vietnam not obtain from the EU its immediate recognition as a market economy, it should, nevertheless, negotiate with the latter an appropriate timeframe for such recognition and make sure that it is at least aligned with the WTO-mandate recognition of China as a market economy.

As far as SPS and TBT measures are concerned, it seems improbable that a reduction of SPS and TBT barriers will take place. Even after the launching of the “Global Europe” the policy of the EU has remained unaltered: it aims at tackling non-tariff barriers, but primarily for the benefit of the EU exporters. What is more probable is that the EU-Vietnam FTA will provide a framework for technical assistance, discussion and further co-operation on SPS and TBT issues. The importance of negotiating comprehensive co-operation provisions must be stressed. In this respect, the agreements concluded by the EU with ACP Countries may provide a useful benchmark on the extent of co-operation that Vietnam may wish to achieve with the EU on SPS and TBT matters. In these agreements, co-operation includes also technical support and training, and measures to promote knowledge transfer and strengthen public services. Vietnam may consider aligning its positions to what achieved by ACP Countries and request targeted technical assistance from to the EU in the context of its FTA negotiations.

Finally, Vietnam in order to reduce the costs of compliance with the EU SPS and TBT requirements Vietnam should actively seek the conclusion of mutual recognition and ad hoc equivalency agreements with the EU. Independently of the complexity to achieve these instruments of trade facilitation, it is clear that their pursuit, especially within the confines of an FTA, should be prioritized. Their conclusion, particularly in those sectors where Vietnam’s exports have actual or potential market access opportunities on the EU market, stands to offer Vietnamese producers, exporters and traders considerable comparative advantages and “preferential” market access conditions which are comparable to or greater than the tariff concessions that will shape the EU-Vietnam FTA.  These tools of trade facilitation will also allow for Vietnam to become an important processing center (for example, as it already happens, to import third countries’ fisheries, such as Bangladeshi products, for processing in Vietnam under strict application of EU standards, and re-export to the EU) and take advantage of its ability to comply with relevant EU standards and its future FTA preferences vis-à-vis the EU.

As Vietnamese exports to the EU are frequently hampered by the imposition of NTBs by the EU, Vietnam could also consider advancing the introduction in the FTA with the EU of a dispute settlement mechanism specifically dedicated to counter NTBs, such as the “Mediation Mechanism for Non-Tariff Measures” envisaged under Chapter 14A of the EU-Korea FTA.

Committee on International Trade Policies

 

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