The European Union and Vietnam reached an agreement in principle August 4 for a free trade agreement (FTA), that will remove nearly all tariffs on goods traded between the two economies.
After two and a half years of intense negotiations, the two sides announced they had reached agreement on all issues of substance following a telephone conversation between EU Trade Commissioner Cecilia Malmström and Vietnamese Minister of Industry and Trade Vu Huy Hoang.
Vietnam's exporters will now get much easier access to the EU for their products, giving an important boost to the Vietnamese economy,” Malmström said. “Both sides have worked extremely hard in the past few months to achieve this breakthrough.”
The agreement allows negotiating teams to continue the process, settle some remaining technical issues and finalize the legal text. Once finalized, the agreement will then need to be approved by the Council and the European Parliament.
“Our deal will also make sure that trade does not happen at the cost of the environment or of people’s rights. The EU and Vietnam have committed to ensure the respect of workers' rights and to support a sustainable management of natural resources,” Malmström added.
This agreement is the first of its kind that the EU has concluded with a developing country. As such, the ambitious and symmetrical liberalization agreed upon with a transition period to allow Vietnam to adapt breaks new ground compared to other EU agreements with developing countries.
Besides eliminating tariffs, Vietnam will also remove almost all of its export duties. The agreement will also create new market access opportunities in services and investment. Vietnam has agreed to liberalize trade in financial services, telecommunications, transport, postal and courier services. On investment, Vietnam will open its market to the EU, for instance, by removing or easing limitations on the manufacturing of food products and beverages, as well as in the non-food sectors.
Robust labor and environmental standards
The FTA includes a robust and comprehensive chapter on Trade and Sustainable Development, covering labour and environmental matters of relevance in trade relations between the EU and Vietnam. Commitments to the core labor standards and Conventions of the International Labour Organization (ILO) ensure the respect of fundamental workers' rights by both parties. In addition, the chapter includes commitments which will support the conservation and sustainable management of natural resources (including wildlife, forestry and fisheries). Special attention is devoted to areas such as Corporate Social Responsibility and fair and ethical trading schemes.
The FTA will set up dedicated structures to ensure the full implementation of the chapter, including mechanisms to ensure the involvement of independent economic, social and environmental stakeholders both in the EU and in Vietnam.
After this breakthrough, technical discussions will have to be completed so as to finalize the legal text of the agreement. Given the cooperation established with Vietnam over many years and strengthened by this negotiating process, it is expected that this process could be finalized in a few months, and certainly before the end of the year.
EU- Vietnam Trade in facts and figures
In 2014, the EU was the second trading partner for Vietnam after China (not including trade within ASEAN), representing 10 percent of total Vietnamese trade. The EU was Vietnam’s second export destination (after the U.S.), with the EU purchasing as much as 18 percent of Vietnam's global exports.
In 2014, EU-Vietnam trade in goods was worth over €28.2 billion, with €22.1 billion of imports from Vietnam into the EU and €6.2 billion of exports from the EU to Vietnam.
Vietnam's key export items to the EU include telephone sets, electronic products, footwear, textiles, clothing, coffee, rice, seafood and furniture. EU exports to Vietnam, meanwhile, are dominated by high-tech products including electrical machinery and equipment, aircraft, vehicles and pharmaceutical products.
Since 2013, Vietnam has been the EU's fourth most important trading partner among the ten ASEAN Member States, surpassing the EU’s bilateral trade with Indonesia.
