|Illustrative photo (Source: VOV)
The EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) were both signed by Vietnam and the EU in Hanoi on June 30.
A string of business and investment opportunities are expected to be on offer to businesses from both sides immediately after the two pacts take effect.
The EU has pledged to remove 85.6 per cent of tariffs on goods imported from Vietnam as soon as the EVFTA comes into force, representing 70.3 per cent of the country’s total value of exports to the bloc. The EU has also made strong commitments to eliminating 99.2 per cent of the total tariff lines for Vietnamese commodities, equivalent to 99.7 per cent of the country’s total export turnover.
As for the remaining 0.3 per cent of the export turnover, the bloc has promised to impose import quotas on Vietnamese goods at zero per cent import tariffs.
Many commentators noted that the commitments made by the EU to Vietnam represent the highest levels the bloc has offered to an FTA partner country.
In turn, Vietnam will lift 48.5 per cent of tariff lines for goods purchased from the EU, equal to 64.5 per cent of the bloc’s total value of exports to the Southeast Asian country. Ratios are expected to soar to 91.8 per cent and 97.1 per cent, respectively within seven years after the EVFTA takes effect.
10 years following the implementation of the trade pact, up to 98.3 per cent of total tariff lines levied on EU commodities will be removed, accounting for 99.8 per cent of Vietnam’s total import turnover. The Southeast Asian country will implement a road map to eliminate the remaining 1.7 per cent of tariff lines or apply tariff quotas as committed to the WTO.
Both sides have made firm commitments to creating an open and favorable business climate for their respective domestic firms. Most notably, the country will leverage EU investors to launch and expand their operations across a range of fields, including finance, telecommunications, transport, and distribution.
They have agreed on national treatment for investments and discussions relating to the settlement of disputes between foreign investors and contracting countries.
For government spending, both sides have agreed on the same content as the Agreement on Government Procurement as stipulated by the WTO. Vietnam is therefore entitled to put forth a roadmap for implementing items relating to online bidding and the establishment of portals for online bidding. The EU has also pledged to offer technical support to carry out such items.
Once the trade pact comes into effect, there will be over 160 geographical indications (GIs) of 28 EU member states to be protected in Vietnam while the block will take responsibility for protecting 39 GIs registered by the country, mainly for farm produce and food stuffs.
As a replacement for 21 agreements for the encouragement and protection of foreign investment which Vietnam had previously signed with EU member states, the EVIPA covers commitments that ensure capital adequacy and assets for foreign investors. The commitments aim to provide them with fair treatment and full protection while enabling them to flexibly send their capital and profits abroad.
Regulations related to the rights of contracting countries to make policy adjustments have been added to the EVIPA. In particular, contracting countries are entitled to make administrations within their sovereignty in order to implement development goals on public health, safety, and the protection of the environment and consumer rights.
The investment pact looks to set up a permanent investment tribunal to deal with settlements rather than an arbitration based mechanism as prescribed in the agreements for investment encouragement and protection which Vietnam and EU member countries had signed.
This regulation inclines towards improving the justice and coherence of dispute settlements as well as minimizing any risks and shortcomings.