The European Union and Vietnam concluded negotiations on a free-trade agreement that will scrap tariffs on more than 28 billion euros ($31 billion) of annual commerce.
Vietnam will eliminate more than 99 percent of its import duties over 10 years and the EU will do the same over seven years under the deal, said Cecilia Malmstroem, the 28-nation bloc’s trade chief.
The accord, which seeks to encourage trade in goods ranging from cars and pharmaceuticals to wine and pork, is the first of its kind between the EU and a developing country and took almost three years to reach. Still requiring legal scrutiny by both sides and approval by EU governments and the European Parliament, the pact may enter into force in late 2017 or early 2018, Malmstroem said.
“We now have a finely balanced, comprehensive package,” Malmstroem told reporters on Tuesday in Brussels. “This agreement sets a new EU model for trade policy in developing countries.”
The EU is reacting to a stalled 2007 trade initiative involving the 10-member Association of Southeast Asian Nations by seeking commercial deals with individual ASEAN countries. The bloc, which reached an agreement with Singapore in late 2012, says bilateral accords serve as “building blocks” to an EU-ASEAN pact.
More generally, the EU is sidestepping stalled World Trade Organization efforts to open markets by pursuing commerce deals with nations around the globe including the U.S., Japan and India.
Vietnam is the EU’s fifth-most important trade partner of the 10 ASEAN members, according to the European Commission, the bloc’s executive arm. In 2014, the EU imported 22.1 billion euros of goods from Vietnam and had exports to the country valued at 6.2 billion euros, says the commission.
The main European imports from Vietnam, whose population of more than 90 million makes the country bigger than any EU nation, include electronics, shoes, textiles, coffee, rice, seafood and furniture, while the bloc’s main exports to the country are high-tech goods such as electrical machinery, aircraft, vehicles and pharmaceuticals, according to the commission.
European duties will remain on some “sensitive” goods such as rice, canned tuna and sugar, which will be subject to tariffs beyond certain quotas.
While European tariffs on Vietnamese textiles will end after seven years, the EU said it won “strict” rules of origin to prevent Chinese fabrics exported to Vietnam from making their way to Europe.
The rules, meant to meet the concerns of EU nations such as Italy, will require the use of fabrics produced in Vietnam -- with the only exception being fabrics made in South Korea, with which the bloc has a free-trade accord.
“If we allowed total free trade on this, it would give a free gate to China, which would put pressure on us,” Malmstroem said. “Italians have been worried about this and I think they seem to be satisfied.”
She said the EU and Vietnam need to establish a monitoring system for this provision of the pact.
The EU-Vietnam agreement also covers non-tariff barriers to trade, services, investment, intellectual property, sanitary and phytosanitary measures, government procurement, dispute settlement and sustainable development.