EVFTA opens door for Vietnamese goods to enter EU market

Friday, 2019-07-05 17:21:15
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Pangasius enterprises are taking active preparation to receive incentives from EVFTA. (Photo: NDO/Bui Quoc Dung)
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NDO – The signing of the EU-Vietnam Free Trade Agreement (EVFTA) last June is expected to help completely eliminate import tariffs on Vietnam's goods and services to the EU after only a short period (seven years). This is the highest level of commitment that a partner has ever offered to Vietnam, which is expected to open the door for Vietnamese goods to enter the EU market.

>>> EVFTA enhances Vietnam's integration: Trade minister

>>> Vietnam, EU sign free trade, investment protection agreements

Trade and investment enjoy benefits

As one of the key export products of Vietnam to the EU, over the recent years, the pangasius export market has enjoyed spectacular growth. Statistics from the Vietnam Association of Seafood Exporters and Producers (VASEP) showed that, in the first five months this year, the export turnover of pangasius from Vietnam to the EU has had a spectacular breakthrough with a growth rate up to 31.5 %, reaching US$105.2 million in value. In particular, exports to the four largest single markets increased impressively, including the Netherlands up by 12.2%, the UK 59.4%, Germany 61.6% and Belgium up 63.8% over the same period last year.

Pangasius export prices to EU countries also increased on average from US$2-2.6 per kg during 2016-2017 to US$2.8-3.5 a kg in 2018, and the first three months of this year, pangasius prices reached US$2.93-3.55 per kg.

VASEP Secretary General Truong Dinh Hoe said that the exporting of pangasius to the EU market has grown again in the first few months of this year after a period of decline was due to the persistent efforts of enterprises in stabilising quality and solving communication issues, as well as their prompt preparations to receive tariff advantages when EVFTA is about to take effect.

Pangasius in particular and seafood in general is one of the items that has witnessed active preparations to have a firm step when EVFTA was signed and to be brought to life.

In October 2010, negotiations for EVFTA was agreed to start by the Prime Minister of Vietnam and the President of the European Commission. After a long time spent on negotiations, on June 25, 2016, the European Council adopted decisions to sign the (EVFTA) and the EU - Vietnam Investment Protection Agreement (EVIPA). Both of the documents were signed in Hanoi on June 30, 2019.

Industry and Trade Minister Tran Tuan Anh emphasised that, with the negotiated results, the strong commitment to the open market in the EVFTA would definitely promote Vietnam - EU bilateral trade relations in a comprehensive and deeper manner. In the field of goods trading, almost 100% of Vietnam's exports to the EU will be free from import tax after a short route (seven years). So far, this is the highest commitment that a partner has given to Vietnam in a FTA. “Therefore, when being put into practice, EVFTA will be a huge boost for Vietnam's exports, helping to diversify markets and export products, especially agricultural and aquatic products, as well as those that Vietnam already has competitive advantages in,” said Minister Anh.

Notably, at present, only more than 42% of Vietnam's exports to the EU are entitled to a zero tax rate under the Generalised System of Preferences (GSP). However, in the future, when Vietnam reaches a certain level of economic development, GSP will no longer exist. Therefore, EVFTA has come into effect at a very timely point to support Vietnamese enterprises to increase competition in the EU market as soon as GSP expires.

Regarding investment, Minister Anh said that commitments related to equal treatment and safe and adequate protection for each other's investments and investors in the EVIPA would also contribute actively to the building of a transparent legal and investment environment and facilitating businesses, helping Vietnam attract more investors from the EU and other countries.

With the size and potentials of the EU, Vietnam has the opportunity to become a strong attraction destination for EU investment, as well as a staging ground and a hub for connecting EU trade and investment activities in ASEAN. This impact will strongly resonate when the ASEAN Economic Community is realised, along with the implementation of important FTAs, such as the FTA with the Eurasian Economic Union and the Republic of Korea, as well as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Thoroughly preparations needed

In addition to the benefits, like in other FTAs, the EVFTA also creates certain challenges for the Vietnamese economy. Minister Anh pointed out that the first challenge Vietnam will have is to commit to open its goods and service markets to the EU, thus creating competitive pressure on the Vietnamese economy, businesses and goods and services. However, it is a pressure of healthy competition, with selective and appropriate routes. More importantly, as the economic structure of the EU and Vietnam is highly complementary, without direct confrontation, it is expected that competitive pressure will not be high.

Secondly, the EVFTA also includes strict regulations on investment procedures, technical standards, animal and plant quarantine measures, intellectual property, public procurement and sustainable development. Adequate implementation of these regulations requires reform from the domestic legal system. However, fundamentally, it is also consistent with administrative procedure reform and growth model renovation policies that Vietnam has been implementing.

Therefore, Minister Anh recommended that to make the most use of the benefits brought about by EVFTA, businesses, especially small and medium sized ones, need to enthusiastically research to be actively prepared. The preparations should be conducted comprehensively from studying the opportunities and challenges in the EU market to solutions to sold challenges, such as improving product quality and designs, promoting competitive advantages and increasing efficiency. It should be noted that in order to take advantage of the agreement, enterprises need to ensure that their products meet the requirements related to the EU’s rules of origin, technical standards and animal and plant safety and hygiene.

In response to EU market demands, Hoe revealed that VASEP has been continuing to carry out media campaigns to promote the image of pangasius in the EU to transfer information on Vietnamese product’s quality improvement and meeting the farming requirements given by consumers in this market, while carrying out trade promotion programmes to introduce quality pangasius products to EU consumers. In particular, pangasius enterprises and seafood companies in the association in general are aiming to develop a closed cycle, covering seeding, farming and processing processes, to offer high quality products that meet customers' requirements.

For the textile industry, Chairman of the Vietnam Textile and Apparel Association, Vu Duc Giang, said that rules of origin are the most important factor in the EVFTA. Accordingly, Vietnamese textile and garment products must ensure that their origin is completely from Vietnam or they must use materials with EU origin or from countries with bilateral agreements with the EU. To address this challenges, textile enterprises are strengthening linkages and improving proactive material supplies to reduce material imports, aimed at cutting input costs and taking advantage of tax incentives from the EVFTA.