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Trade deal to widen access to EU

September 13, 2014

– HCM CITY – A bilateral Free Trade Agreement with the EU will yield tangible and intangible benefits for both Viet Nam and the bloc, the largest market for Vietnamese products and the country’s second most important trading partner, a top EU official said.

“The FTA currently under negotiation targets to reduce at least 90 per cent of tariff lines on Vietnamese exports,” Dr Franz Jessen, ambassador and head of the EU Delegation to Viet Nam, told a business lunch organised on Thursday by the EU-Viet Nam Business Network.

“This implies that greater opportunities lie ahead for Vietnamese business to penetrate deeper into the EU market.”

Viet Nam’s exports to EU account for around a fifth of all its exports, but only 40 per cent of them are tax free or subject to preferential lower rates while the remaining attract ordinary import duties.

For instance, Vietnamese producers could have saved 150 million euros (US$194.4 million) a year on footwear products and 180 million euros ($233 million) on textiles in each of the past three years if an FTA had been in place.

Footwear products attract 3.5-4 per cent import duty and textiles, 9.6 per cent.

In return, European drug producers pay import duties of 5 – 8 per cent on shipments to Viet Nam, or nearly 60 million euros ($77.76 million).

“Furthermore, the EU with advanced technologies, abundant capital, and management expertise can offer what Viet Nam is not yet able to produce at home,” Jessen added.

Viet Nam, with its cheap labour and strengths in agriculture, can offer European consumers good quality products at competitive prices, he said.

Viet Nam has opened up protected sectors such as telecom and retail to third countries (under FTAs and other bilateral trade and investment deals) and so there should not be any reason to restrict market access to EU members, he said.

“The FTA will create wider impacts on Viet Nam’s economy and not only with regard to trade.”

A study by the EU-Viet Nam Multilateral Trade Project in 2011 found that an FTA between the EU and Viet Nam would have a “largely positive impact on the country’s GDP” estimated at around 2.7 per cent a year in case of rapid dismantling; in case of progressive dismantling, there will be a gradual increase from the second year to 3.7 per cent in 15 years.

If the implementation is properly managed, the FTA can trigger necessary reforms in Viet Nam, contributing to a more stable and predictable environment, which can in return boost stronger FDI flows, technology transfer, and know-how sharing, it said.

During a recent visit to Viet Nam, the president of the European Commission, Manuel Barroso, said the EU, Viet Nam’s largest provider of grants, has decided to significantly increase its assistance in 2014-20 to 400 million euros ($518 million).

Leading businesspeople and representatives of EU member states and national business groups attended the luncheon meeting.

In June 2012 the EU and Viet Nam began negotiations for a comprehensive FTA.

The negotiations cover tariffs as well as non-tariff barriers to trade and other trade-related aspects such as public procurement, regulatory issues, competition, services, intellectual property rights, and sustainable development.

It is expected to be signed next month.

(VNS)