EU-Vietnam trade deal has potential to rescue European, Asian economies

The new EU-Vietnam free trade agreement (EVFTA), which came into effect on August 1, opens up opportunities to boost Vietnam's economy and also offers new prospects to European economies in a time of global financial unease.

The new EU-Vietnam free trade agreement (EVFTA), which came into effect on August 1, "opens up opportunities" to boost Vietnam's economy, Prime Minister Nguyen Xuan Phuc and prominent Vietnamese business leaders said on Thursday in Hanoi.

In an opening speech at a conference to optimize the deal, Phuc urged authorities to ensure international labour standards are met and measures are taken to protect the environment. He also expressed hope that the treaty will ensure Vietnam's products meet European standards and increase jobs.

"The EU is a market with strict requirements on quality ... Therefore, the free trade agreement opens up opportunities for Vietnam to innovate its growth model, encourage businesses to improve, accept new and stricter rules and to create new jobs," he said.

EVFTA has been described by Brussels as its most ambitious agreement with a developing country.

The agreement with Vietnam will eliminate 99 per cent of all tariffs on both sides, cut non-tariff barriers and open up Vietnamese services and public procurement markets to EU companies.

Phuc also said he hoped the trade deal would mitigate economic damage brought about by the pandemic: "Major economies and leading partners of Vietnam such as the United States, China and Japan have all suffered record declines in economic growth. Even the EU has suffered a decline in GDP in 2020."

Jean-Jacques Bouflet, vice chairman at the European Chamber of Commerce in Vietnam, claimed in a recent survey that 74 per cent of European business leaders said the EVFTA will have a positive impact.

"Currently, worldwide business activities are seriously affected by Covid-19," Bouflet said at a trade forum on July 31. "EVFTA will promote trade and investment, create long-term opportunities and shape the relationship between the EU and Vietnam over the next ten years."

He added that the EVFTA will provide EU enterprises with the chance to access one of the most vibrant consumer markets in South-East Asia and compete on equal terms with other countries that have signed free trade agreements with Vietnam like Japan and Korea.

Vietnam, a nation of 96 million, is currently going through a second wave of the virus and is facing severe economic impacts, with over 30,000 businesses having suspended operations since the beginning of the crisis.

The approval of the EVFTA, however, is expected to buoy up a country aiming to avoid recession and hit the 2.7-per-cent GDP prediction for 2020 set by the International Monetary Fund (IMF) in April.

Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), told dpa: "Today is a happy day for the VCCI and the Vietnamese business community. We are now in a very unstable situation ... with Covid-19 and the trade war. All of this affects our economy. I think the Vietnam-EU free trade agreement will provide a foundation for our economic development and integration."

"Now, Vietnam enters a new period of development. We would like to improve quality and increase the value of Vietnam in the world's supply chains and introduce progressive technologies and management," he added.

The EVFTA will eventually help Vietnam, which is regularly among the world's fastest-growing economies, to increase its export turnover to the EU by about 44 per cent by 2030.

Le Tien Truong, chief executive of Vietnam National Textile and Garment Group, said: "At this time in Vietnam, the textile industry is the second biggest for export. And for us, we have three major markets; the first one is the US, the second is the EU and the third is Japan."

"But in the total global textile supply chain," he said, "Vietnam is number three - we have a global market share of around 6 per cent. It means we still have a weak point in the EU. We hope the EVFTA will support a new dynamic for the business community and expand our share in the EU."

The deal is considered an economic boon for Vietnam, helping the country to gain access to a market of over 500 million people and potentially increase its annual GDP by between 2.18 and 3.25 per cent over the coming years.

Source: The Star