Vietnam urged to ready for EU pact

Experts have urged Vietnamese enterprises to change the structure of products exported to the EU market to enjoy more benefits when the Viet Nam-EU Free Trade Agreement (FTA) goes into effect.

The two parties have completed preparations and begun formal negotiations on an FTA expected to bring benefits to both sides, said Tran Ngoc Quan, deputy director of the EU Market Department under the Ministry of Industry and Trade.

Quan was speaking at the “Scaling Up of Vietnam-EU Trade and Investment” conference held in Ho Chi Minh City by the Vietnam Chamber of Commerce and Industry and the Delegation of the European Commission last Friday.

Both sides are discussing a wide range of issues, including the elimination of import tariffs, the acceleration of trade in service and the overcoming of non-tariff barriers, and source of goods origin. They will also reach a wider agreement on intellectual property rights.

Quan said the Vietnam-EU FTA would bring both advantages and challenges for Vietnam companies.

Most Vietnamese products exported to the EU will have the advantage of a lower import tariff of zero to 5 per cent under the FTA. This will give Vietnam exports a competitive edge over those from countries without an EU FTA, such as China. In addition, once the FTA comes into force, Vietnam will become a full strategic trading partner with the EU.

Under the FTA, production costs on Vietnamese products will not be considered, and thus no anti-dumping tariffs will be imposed.

Speaking at the conference, EU Minister Counsellor Jean Jacques Bouflet, said Vietnam’s key export areas such as textiles, fisheries and leather shoes would be boosted by lower import tariffs that are expected to be imposed by the EU.

In turn, the FTA will enable Vietnam to benefit from high-quality imports and increase technological transfer.

Increased high-quality imports will in return help raise the quality of Vietnam’s exports, improving companies’ competitiveness for the long-term.

Bouflet said that participating in the FTA would increase EU investment in Vietnam and help diversify its trade partners.

However, a majority of Vietnamese products exported to the EU are raw material goods and preliminary processing goods. These items already enjoy very low tariffs.

“If we continue to export these items, we will not enjoy many benefits under the FTA, so companies should increase exports of processed products to take advantage of lower tariffs,” said Quan.

In addition, Vietnam’s exporters to the EU face technical and product-quality barriers.

“The EU has many trade regulations, including REACH, the European Community Regulation on chemicals and their safe use, TRACY, the regulation on tracing consignments of goods to their origin, and IUU, the regulation against illegal fishing. There are also requirements on food hygiene, technique and product quality,” he said.

Vo Tan Thanh, director of the Vietnam Chamber of Commerce and Industry in HCM City, said that the EU was one of the most important economic partners of Vietnam, with annual bilateral trade increasing by 15-20 per cent on average.

Last year, the Vietnam-EU two-way trade reached US$24 billion (about Bt753 billion), a year-on-year increase of 37 per cent, of which Vietnam’s exports accounted for $16.5 billion, up 33.5 per cent.

Vietnam mainly exports apparel, footwear, coffee, furniture and seafood to the EU, while the latter imports machinery, medicine, aircraft, equipment and vehicles.