Textiles and clothing will be among the sectors most likely to benefit from the EU-Vietnam Free Trade Agreement. Photo: VOV
Vietnam would be the main beneficiary of the EU-Vietnam Free Trade Agreement with its exports and wages increasing and its business climate improving, experts said at a seminar in Ho Chi Minh City Wednesday.
Vietnam and its largest importer and investor, the European Union, began negotiations for a comprehensive free trade agreement in June 2012, and the deal is expected to be concluded in September.
Truong Dinh Tuyen, former trade minister and now the key EU-MUTRAP [European Trade Policy and Investment Support Project] expert, said that under the FTA, WTO commitments on trade in goods and services would be strengthened.
Areas not touched by WTO commitments, like investments, government procurement, state-owned enterprises and competition policy, sustainable development, and renewable energy would be affected by the FTA.
Claudio Dordi, technical assistance team leader of EU-MUTRAP, said when the agreement takes effect, tariff reductions alone would increase Vietnam’s exports to the EU by 30 to 40 percent.
Textiles and clothing, footwear, and processed foods will be the sectors most likely to benefit from the agreement, a report released by the EU-MUTRAP said, adding that the extent of expansion of production capacity would determine whether the increase in exports would be significant.
Pham Thi Lan Huong, another EU-MUTRAP expert, said Vietnam should increase imports of machinery and equipment from the EU since they would become cheaper thanks to the imminent tariff cuts and offer high technology.
The agreement would help services expand significantly while other trade related areas currently under negotiation, such as procurement, customs, and trade facilitation are expected to yield substantial welfare gains and lead to an improved business climate, according to EU-MUTRAP experts.
They claimed that around 95,700 people are expected to get out of poverty by 2020 due to the FTA, with the rural population benefiting the most, as exports of agricultural products to the EU rise and EU investments generate more jobs.
Tuyen said the report fails to fully analyze the impacts of the Trans Pacific Partnership (TPP) of which Vietnam is a member and the tremendous and multi-dimensional impacts of the EU-VN FTA on the TPP.
Around a quarter of Vietnam’s exports go to the EU, while 13 percent of Vietnam’s imports come from the bloc.
The major exports to the EU are footwear, furniture, frozen fish, and coffee, and the major import items are aircraft, cruise ships, motor vehicles, and manufactured goods.
Last year Vietnam’s exports increased by 20 percent to US$25.4 billion.
The EU has a growing trade deficit with Vietnam.
The seminar titled “Social, Economic and Environmental Assessment of an EU-Vietnam Free Trade Agreement (FTA)” was held by EU-MUTRAP and the WTO Affairs Consultation Center of Ho Chi Minh City.
- Vietnam’s merchandise exports to the EU face an average tariff of 4.6 percent. The highest tax is on garlic, 300 percent, but there are also heavy duties on beef and dairy products.
- EU exporters to Vietnam also face significant barriers against specific items, most notably alcohol and tobacco products, 100 percent, while motorcycles, animal products, and textiles also face significant tariffs.
- Despite relatively low duties, a number of measures are applied by the EU and Vietnam to restrict trade and investment. Behind-the-border restrictions, including non-tariff measures related to sanitary and phytosanitary measures or norms and standards to export restrictions, are significant.
RECENT FTA COMMITMENTS
- The EU has liberalized fully or more than 99 percent of its trade over 0-7 years.
- The EU has gone beyond the General Agreement on Trade in Services (GATS – a treaty under the WTO) and added other cooperation or commitments for government procurement, competition policy, investment, trade facilitation and customs, mutual recognition agreements, dispute settlement, labor rights, capacity building, and sustainable development.
- Vietnam has committed to liberalize around 90 percent of its trade and maintained full or partial restrictions on the other tariff lines.
- Vietnam has tended to stick to its WTO accession protocol for services and shied away from other trade related areas.