On June 7th 2020, Vietnam ratified a free trade agreement with the European Union - a welcome move expected to boost the country’s exports and manufacturing sector in the wake of the economic turmoil caused by the global pandemic.
The deputies in the National Assembly voted by over 94% in favor of the European Union Vietnam Free Trade Agreement (EVFTA). This is the European Union’s second trade deal with a member of the Association of Southeast Asian nations (ASEAN), after Singapore.
Vietnam is already part of the European Union’s preferential tariff scheme, but the trade deal will increase the country’s share of European customers - particularly in regard to apparel and footwear, which represent approximately 20% of Vietnam’s total exports. According to the World Bank, Vietnam’s gross domestic product (GDP) and exports should grow by 2.4% and 12% respectively by 2030. The European Union, on the other hand, will benefit from gaining greater access to Vietnam’s attractive consumer market and increase its exports, in particular automobiles and aircrafts. The deal also includes protecting certain European foods such as French champagne and Greek feta from imitations in Vietnam. Critics have pointed out, however, that the agreement does not include any commitments in the area of human and labor rights.
The trade deal has already been ratified by the European Union in February, and will come into effect this summer. From then on, 71% of exports from Vietnam and 65% of exports from Europe will become duty-free. Over the next ten years, up to 99% of the tariffs will be phased out.
Sources:
European Commission https://ec.europa.eu/trade/policy/countries-and-regions/countries/vietnam/.