In this episode (MMC.005): What is the EU – Vietnam Free Trade Agreement (EVFTA)? How does it affect your business?
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Below is a transcript of the episode, edited for readability.
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Granger: Today on Monday Morning Coffee, we’re going to talk about the EU – Vietnam Free Trade Agreement and try to sort out what it’s all about and how it affects your business. Mr. Cameron is out of town today, so you just get me. Perhaps it’s not so entertaining, but hopefully I can help while going through some of this with you.
Overview of EU – Vietnam Trade Relations
Granger: The EU – Vietnam Free Trade Agreement (EVFTA), we’ve all heard about it. I’m not sure if you’ve had any personal experience, if you’ve been reading about it in the news or not, but I’d love to hear your thoughts now or anytime. Just give me a call or write me at info@thevietnamgroup.com.
Granger: Vietnam and the EU are longstanding trading partners, as we all know. At the end of 2018, EU investors have invested more than $24 billion in 2,133 projects in Vietnam. Those numbers are only growing and it’s just getting more and more exciting, especially with what’s going on with China right now. Even more companies are coming to Vietnam. EU investors are active in 18 economic sectors and in 52 of 63 provinces in Vietnam, most prominent in manufacturing, electricity and real estate. EU investment is concentrated in areas with good infrastructure such as Ha Noi, Quang Ninh, Ho Chi Minh City, Vung Tau, and Dong Nai. Many of you have offices there and many of you work in those areas. So you know how much the infrastructure is improving and what needs to happen to improve it even more.
Granger: 24 EU member states are investing in Vietnam. Number one is the Netherlands. Number two is France. Number three is the UK. Vietnam is now the EU’s second most important trading partner among all ASEAN members. Boy, isn’t that a statement? I mean, if you think about this country and how it has grown in the last 25 years, from one major building with four stories to the second most important trading partner for the European Union in all of ASEAN. What a statement that is! Such an exciting time here!
What is the history of the EVFTA?
Granger: The negotiations happened between 2012 and 2015. Many of you probably remember that.
Granger: It was signed in June of 2019 in Ha Noi. So, we are now in business with a new FTA. It’s about to be ratified anytime now, maybe in the fourth quarter of 2019 or early 2020.
What is the content of the EVFTA?
Granger: It’s near complete removal of tariff barriers, eliminating over 99% of custom duties on exports. There will be reduction of non tariff barriers so that Vietnam aligns more closely with international standards on motor vehicles and pharmaceuticals. No additional Vietnam testing and certification procedures required. Vietnam simplifies and standardizes customs procedures. What a major difference that is too. I mean really it’s so much cross border here. It’s so much import and export. Eliminating these barriers, limiting all of these issues makes it more seamless, saves money and gives us the ability to grow even faster.
Granger: EU will have access to Vietnamese public procurement and vice versa. The companies will be able to complete for Vietnamese government contracts. That’s a new thing. EU companies will be able to compete for Vietnamese government contracts.
Granger: There will be investment access and protection. Vietnamese manufacturing sectors such as food, tyres and construction materials will open up to EU investment. That’s a major change. That means that the FTA establishes an investor’s state tribunal to resolve disputes between EU investors in Vietnamese authorities and vice versa. But it also opens up the ability to clarify the investment for those companies in these sectors of Vietnam, and a platform for what to discuss and deliberate.
Granger: Promoting sustainable development is another major step they’re doing. The FTA includes commitments to implement International Labor Organization’s core standards, for example, the freedom to join independent trade unions; and EU conventions such as combating climate change and protecting biodiversity. These are huge steps that you’re not only making changes to the laws, opening up the ability to invest here for free trade and growth, but you’re also looking at how to combat issues like climate control. Vietnam is certainly trying to sort that out right now because with massive growth, of course you have more construction, more pollution, and you want to be able to address both of those things at the same time.
Are there any challenges?
Granger: There’s some challenges. Changes in the EU, in particular. Brexit, which we haven’t discussed here, but everyday breakfast in the news is a major issue for England. It is coming to a head on October 31st. It will be interesting to see what happens with Brexit because it can have a major impact on all of this. It can impact the outcome and importance of the EVFTA. So we’ll have to keep a close look at that.
Granger: The EU is increasingly stringent under standards and quality controls. That’s a very important thing as we’re discussing. As you’re looking at building and the massive growth, quality control and standards have to be adhered to.
Granger: And of course there’s always a China-US trade conflict. How is that going to affect all of this? So much going on It’s hard to keep up with all this. We’re just trying to help you go through all these things and have the information.
Thought of the week
Granger: I’ll send you off with the Thought of The Week: Which industries will benefit from EVFTA the most? What are your thoughts? How does your industry get impacted by this? I love to hear your thoughts, your questions, your ideas. It’s a really important change coming to Vietnam. It’s a really important change for EU and all the countries and companies within it, and the ones that are already here. It’s exciting! I’ll talk to you on Friday. I’m going to look more into this. We’ll get back to you.
The Lotus Talks is produced by The Vietnam Group. This episode was produced by Granger Whitelaw, Cameron Lynch and Toan Tang.
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