HANOI – Trade representatives of Vietnam and the European Union (EU) said on August 4 the two sides had agreed in principle on a free trade agreement (FTA) after two and a half years of intense negotiations.
This agreement is expected to pave the way for stronger trade and investment ties between Vietnam and the EU.
Speaking at a press conference in Hanoi on August 4, Minister of Industry and Trade Vu Huy Hoang described the FTA with the EU as one of the best trade accords between Vietnam and its partners.
The press conference was organized after a telephone conversation in the morning between Hoang and EU Trade Commissioner Cecilia Malmström. According to a statement released by the EU, all issues of substance have been agreed and both sides have reached a mutually beneficial and balanced package.
Hoang said during negotiations, both sides were flexible and stuck to constructive principles for the sake of mutual benefits. The EU created favorable conditions for Vietnam in many sectors to improve its competitiveness and facilitate the implementation of the FTA.
The signing of the FTA will help Vietnam integrate into the world economy as a market economy. This agreement will remove nearly all tariffs on goods traded between the two economies, Hoang said.
According to Malmström, the “finely balanced agreement” will bolster the EU’s trade with one of the most dynamic economies in Asia. “We have a deal,” Malmström said.
“It sets a new, better and modern model for Free Trade Agreements between the EU and developing countries, and establishes a good standard for the trade relationship between the EU and South East Asia as a whole.
“Vietnam is a growing economy and once this agreement is in place, it will provide significant new opportunities for companies from both sides, by increasing market access for goods and services.”
Over 31 million jobs in Europe depend on exports, so having easier access to a growing and fast developing market of 90 million consumers like Vietnam is great news.
Vietnam’s exporters will see wider doors to the EU for their products, giving an important boost to the Vietnamese economy. Both sides have worked extremely hard in the past few months to achieve this breakthrough, she said.
“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 said.
According to the EU, the agreement is the first of its kind that it 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. It shows the shared conviction of the EU and Vietnam that trade is essential to growth, the creation of jobs and sustainable development,” the EU statement said.
On the basis of on August 4’s agreement, the negotiating teams will continue the process, settle some remaining technical issues and finalize the legal text. Once completed, the agreement will need to be approved by the Council and the European Parliament.
According to the Ministry of Industry and Trade, the FTA will help strengthen Vietnam-EU trade relations. It will support Vietnam’s exports of apparel, footwear, seafood, farm produce and furniture and the EU’s exports of equipment, autos and beverages.
Both sides will remove over 99% of import taxes and reduce tariffs on the remainder. This is regarded as the highest preferential treatment Vietnam has obtained with FTAs signed so far.
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’ time, just before the year-end.
The EU is the second largest trading partner of Vietnam. In 2014, bilateral trade was over US$36.8 billion, up 9% against the previous year. Vietnam’s exports accounted for nearly US$28 billion and included footwear, apparel, coffee, furniture and seafood.
Companies in the EU have invested in more than 2,000 projects with combined registered capital of over US$37 billion in manufacturing, construction, services and other sectors.