|The EU is the second largest import market in the world and is currently the second largest export market of Vietnam after the US
Having recently been submitted to the National Assembly for approval, the EVFTA is widely expected to provide fresh impetus for the nation’s economic recovery after being hit by the impact of the novel coronavirus (COVID-19), in addition to speeding up various reforms.
According to a Government report, two-way trade and investment between the EU and the country following the trade deal’s implementation is expected to grow at a fairly strong level, positively contributing to the nation’s economic growth and creating jobs for local workers. Most notably, the state budget revenue may also be improved and may enjoy a boost over the medium to long term.
In addition to an impact on the economy, the agreement will have various different implications on sectors relating to the level of openness, competitive advantage, and capacity of each industry. Moreover, the indirect effect of the EVFTA through the pressure of institutional reform will also bring about positive effects for the national economy.
With regard to the EU's commitment to Vietnamese exports once the trade deal becomes effective, the EU has pledged to abolish import duties on approximately 85.6% of tariff lines, equivalent to 70.3% of the country's overall export turnover to the bloc. Furthermore, seven years after implementation, the EU will then move to eliminate import duties on 99.2% of tariff lines, equivalent to 99.7% of Vietnamese exports.
With regard to the remaining 0.3% of exports, the EU has committed to offering Vietnamese import’s duties of 0% within a certain quota. Tariffs placed on the nation’s key exports will be eliminated by the EU once the Agreement comes into effect or there has been a roadmap agreed of no more than seven years.
Simultaneously, the country will move to eliminate customs duties relating to 48.5% of tariff lines, equivalent to 64.5% of imports from the EU, once the Agreement comes into effect, followed by roughly 99% of tariff lines, equivalent to 99.8% of imports from the EU, after 10 years.
According to Minister of Industry and Trade Tran Tuan Anh, the COVID-19 has had a profound impact on the Vietnamese economy and that of other countries globally, this therefore represents the time to activate production and restart the economy whilst boosting market diversification without relying too much on certain markets.
Vu Tien Loc President of Vietnam Chamber of Commerce and Industry (VCCI) described the EVFTA as a "highway" which can link the nation to a GDP market of US$15,000 billion, whilst also offering the country the chance to enjoy breakthroughs during its economic recovery period following the COVID-19 epidemic.
Despite this, the VCCI Chairman also noted that participation in this "highway" is not free. "We have to pay fees by investing and upgrading the infrastructure and economic institutions and quality of human resources.
Enterprises must invest, upgrade their management, and business strategies to take full advantage of the opportunities from this agreement. The ratification of the agreement in the context that we have contained the pandemic and are in the period of redevelopment will be considered an important driving force for the Vietnamese economy,” said Loc.
Former CIEM Director Dr. Cung stated that the EVFTA will help boost the market and open up new demands for production, export, and investment through the reduction of tax lines, import, and export procedures that will make investment and business activities more open and transparent.