Vietnam-EU FTA opens new doors for German trade

Bui Huy Son, director general of the Vietnam Trade Promotion Agency under the Ministry of Industry and Trade, revealed that, “Vietnam and Germany are seeing huge opportunities to effectively exploit each other’s potential. The Vietnam-EU Free Trade Agreement (Vietnam-EU FTA), which is expected to be signed by the end of the year, would further facilitate cooperation between the business communities of both countries.”

Germany is now Vietnam’s biggest European trade partner, as the two-way trade turnover amounted to nearly US$8 billion in 2014, more than 20% of Vietnam’s overall trade with the EU.

Furthermore, Germany is also among the biggest official development assistance donors to Vietnam and serves as a gateway for Vietnamese products to penetrate and expand markets in other countries in the region.

In recent years, many of Vietnam’s goods have managed to gain a strong foothold in Germany, including seafood, garments, furniture, coffee, plastics, leather, footwear, and electronic products and components.

In the last three years, Germany has consistently seized the top position in the EU and second place globally, following just behind the US, in importing Vietnamese tuna, according to the Vietnam Association of Seafood Exporters and Producers (Vasep).

Vasep predicted that Germany’s demand for seafood products, particularly canned tuna, will be on the rise, along with Vietnamese fruit, like bananas, mangoes, oranges, grapes, apples and peaches.

Benno Bunse, chairman and CEO of German Trade & Invest, a state-run economic development agency, also predicted that, “If an FTA between Vietnam and the EU is concluded in the future, it will foster trade.”

The Vietnam-EU FTA will eliminate nearly all tariffs (over 99%), except for a small number, the partial liberalisation of which the EU and Vietnam have agreed to conduct through zero-duty Tariff Rare Quotas (TRQs).

Vietnam expects to liberalize 65% of its import duties on EU products arriving to Vietnam as soon as the agreement comes into force, with the remainder of duties being gradually eliminated over a 10-year period, according to the European Commission.

Moreover, Bunse added that the economic development of Vietnam would lead to an increased volume of trade, especially with Germany.

Vietnam has set the goal to finish industrialisation by 2020, which necessitates further substantial investment to modernise and purchase more machinery and equipment to reach this goal.

“As Germany is a leader in supplying world-class machinery and equipment for industrialisation and modernisation, I think many Vietnamese firms will choose to buy German-made machinery and equipment,” he said.

According to Vietnam’s General Department of Customs, in 2006, the total two-way trade turnover between Vietnam and Germany reached US$2.36 billion, of which US$1.45 billion came from Vietnamese exports.

By 2011, the total two-way trade turnover climbed to US$5.54 billion, a 2.3-fold rise over 2006, with Vietnam’s exports to Germany reaching US$3.37 billion, up 41.9% compared to the previous year.

Son added that to further strengthen trade links, Vietnam and Germany had signed a number of agreements on investment encouragement and protection, maritime and aviation cooperation, as well as the avoidance of double taxation, with a view to creating a firm legal foundation for broader economic ties.

According to Son, a series of workshops will also be organized in the framework of the Vietnam Goods Week, similar to the “Vietnam Goods Week in Metro Cash & Carry Germany” hosted in 2014 in Berlin’s Friedrichshain, which is considered a further step to penetrating the demanding European market.

However, Son stressed that strict German laws forced businesses to pay due attention to three export standards-quality, hygiene and safety, and social responsibility.

“If Vietnamese businesses are capable of meeting the stringent German regulations, then penetration into other European markets is within reach,” Son said.