Proactive approach needed to take advantage of EVFTA

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The European Council recently passed a decision to ratify the EVFTA and the EU-Vietnam Investment Protection Agreement (EVIPA). The EVFTA will need ratification from the Vietnamese National Assembly (scheduled for the next few months) to officially come into force. The new-generation FTA will eliminate more than 99% of the tariff lines according to the roadmap, thus facilitating the export of Vietnam’s goods of strength to the EU market, such as garments & textiles, leather & footwear, agro-fishery and wood products. Vietnam’s exports are expected to increase by 20% within the next two years.

EVFTA – a trade deal with the highest-ever level of commitment

Europe is one of the most important trading partners of Vietnam, with two-way trade reaching US$56.39 billion in 2019, including US$41.48 billion worth of exports and US$14.91 billion in import turnover. Given that fact, the EVFTA is considered to be a lever for growth, opening great opportunities for Vietnamese enterprises to penetrate into the potential market with a population of 508 million and a gross domestic product (GDP) of roughly US$ 18 trillion.

According to research by the Ministry of Planning and Investment, the EVFTA will help increase Vietnam’s export revenue to Europe by about 42.7% in 2025 and 44.37% in 2030 compared to a no-deal scenario. At the same time, the country’s imports from the EU are also expected to surge by about 33.06% and 36.7%, respectively. Experts also predicted that the EVFTA will contribute to hiking Vietnam’s GDP by 2.18-3.25% per year on average in the 2019-2023 period, 4.57-5.3% between 2024 and 2028, and 7.07-7.72% in the period from 2029-2033.

With its commitment to eliminating nearly 100% of import tariffs, the deal promises to strengthen export opportunities for Vietnam’s products of strength, such as garments & textiles, leather & footwear, rice, sugar, honey, fruit and vegetables, and wooden products. The level of commitment in the EVFTA is the highest level that Vietnam has reached among the signed FTAs so far.

A proactive access needed for enterprises

According to experts, to overcome technical barriers and maximise the benefits that the EVFTA can bring, domestic firms, especially small and medium-sized enterprises, need to proactively research information to make active preparations. The preparation should be carried out comprehensively from researching opportunities and challenges of the European market to developing solutions, such as improving the quality and design of products and promoting competitive advantages. In particular, businesses need to ensure their products meet the EU’s requirements concerning rules of origin, technical standards and plant & animal health safety and hygiene.

Phung Thi Lan Phuong, head of the FTA Department under the Centre for WTO and Economic Integration at the Vietnam Chamber of Commerce and Industry (VCCI), said that the biggest requirement for businesses is how to understand the complicated commitments in the EVFTA as well as their impacts on business activities, thus making appropriate preparations and adjustments to take advantage of opportunities and cope with challenges from the agreement.

More broadly, enterprises should be proactively involved in the process of state agencies internalising EVFTA commitments to achieve the most favourable regulations for them. It is difficult to do this for every single business, but it will be much more effective if many businesses connect together and join business associations to offer their voices to state agencies.

Minister of Industry and Trade Tran Tuan Anh said that in addition to providing information, explaining commitments as well as connecting with the people and businesses concerning the EVFTA, the ministry organised specialised seminars and training courses in almost all provinces, cities and regions, focusing on the localities with units authorised by the ministry to grant certificates of origin (C/O) and the places which accommodate large industrial parks and businesses operating in the fields of manufacturing, imports and exports.

On the other hand, the work of researching the market, supply-demand and prices has been constantly updated to enable enterprises to orientate their production and business activities and take advantage of tariff preferences when the deal formally comes into force. In addition, the ministry continues to accelerate the advertising of products and the building of trademarks for Vietnamese goods in EU member countries’ markets.

Confronting challenges

According to lawyer Nguyen Kieu Anh from the NSN lawyer office, the EVFTA also features strict regulations and rules on investment procedures, customs, trade facilitation, technical standards, animal and plant quarantine measures, intellectual property, government procurement and sustainable development. Fully complying with these regulations requires the legal system to be continuously perfected in line with the requirements of international integration and commitments in the new-generation FTAs in a comprehensive and synchronous manner, regarding both economics and politics, with special attention paid to contents such as government procurement, intellectual property, labour and the environment.

Not just enterprises, state management agencies must also adjust policies to fully tap into the advantages from the EVFTA, including promoting the grant of C/O towards simplification and modernisation, accelerating the C/O issuance via the Internet, and improving the investment and business environment with stable and transparent institutions. These solutions require the synchronous effort of both the State and businesses through long-term and methodical plans. Moreover, it is necessary to have a mechanism for early warning so that enterprises can proactively avoid trade remedy lawsuits.

At the same time, Vietnam should accelerate the development of national standards and brands, while developing and replicating the grant of production area codes and the traceability of origin to meet the competitiveness in international integration trends. Trade promotion policies for each market are also needed, both in the medium and the long term.

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