EVFTA promises an enhanced Vietnam

10:00 | 25/06/2020
The National Assembly has passed the EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement, ushering in a new economic, trade, and investment co-operation outlook for both Vietnam and the EU. Bui Thanh Son, First Deputy Minister of Foreign Affairs, writes about the deals as an important step to realising Vietnam’s Strategy for International Integration until 2020, with a vision to 2030.
1497p8 evfta promises an enhanced vietnam
Bui Thanh Son, First Deputy Minister of Foreign Affairs

On June 8, the Vietnamese National Assembly (NA) ratified the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA). This decision is of immense significance, formalising the EVFTA after Vietnam and the EU have completed all procedures. The EVIPA requires ratification by the parliaments of all EU member before it may take effect.

Together with the adoption of the two agreements in February by the European Parliament, the NA’s ratification of the agreements is a strong statement as to the aspirations, interest, and determination of both sides towards forging deeper bonds and creating new breakthroughs to elevate the relations between Vietnam and the EU after 30 years of bilateral diplomatic ties.

Three decades have passed, and numerous changes have taken place across the world. Throughout this period, the relationship between Vietnam and the EU has grown increasingly in strength, depth, and substance. The establishment of the Comprehensive Partnership and Co-operation in 2012 and ratification of the Framework Agreement on Comprehensive Partnership and Co-operation between the two in 2016, are two historic milestones.

Political co-operation between Vietnam and the EU has been increasingly cemented. High-level visits, exchanges of delegations at all levels, and bilateral co-operation mechanisms are regularly and effectively conducted. Both sides have strengthened bilateral ties in security and defense, notable of which is the signing of the Framework Participation Agreement on the participation of Vietnam in EU-led civilian and military crisis management operations in October 2019. This is a contribution to advancing mutual trust in the context of unpredictable changes in the regional and global landscape.

Economic co-operation is also a highlight. The EU has become Vietnam’s third-largest trade partner, largest grant donor, and one of its top foreign investors. Vietnam is the EU’s second-largest trade partner within the ASEAN. Two-way trade turnover was $56.45 billion in 2019, in which Vietnam’s exports to the EU have grown annually by an average of 16 per cent over the past two decades. Co-operation in education, law and justice, energy, climate action, and protection of water resources, has also seen robust growth, bringing about real benefits to the public.

In addition, Vietnam and the EU share a wide range of interests. The two sides are engaging at multilateral forums and mechanisms. Together, both sides are making positive contributions to advancing multilateral co-operation, a rules-based international order for peace, stability, and development, liberalisation of trade and investment, and response to global challenges.

It can be said that given such solid foundations of over 30 years of diplomatic ties, an early entry into force of the EVFTA – and the upcoming EVIPA – will set up a stable and long-term framework to maximise the potential for co-operation, and elevate the bilateral economic, trade, and investment ties to a level commensurate to the stature of the Vietnam-EU Comprehensive Partnership and Co-operation. The realisation of the EVFTA stands testimony to the strategic development of the bilateral relationship.

It demonstrates that each side attaches due importance to the place of the other in their respective diplomatic, development, and international integration strategies. It will contribute to the creation of deeper and more long-term intertwined interests, and to peace, stability, and development of the two sides, of Asia, Europe, and the world at large.

Expectations and challenges

The EVFTA is expected to bring about enormous and equitable benefits to both Vietnam and the EU. Firstly, the EVFTA will help Vietnam accelerate its diversification of economic, trade, and investment relations. This is important as the global economy is profoundly impacted by the COVID-19 pandemic.

Secondly, the agreement will bring about numerous benefits to Vietnam. In particular, it will promote exports to the EU market, attract investment, and create an engine for economic growth and employment. Vietnam’s export to the EU under the agreement is expected to grow by 42.7 per cent by 2025 and 44.37 per cent by 2030 compared to without it. The most promising sectors are textiles, footwear, and agricultural and aquacultural products.

Next, the EVFTA and its high standards will help advance domestic economic reforms, growth model transformation, and change the structure of our exports. This will particularly increase the technological content exports, with a view toward realising a more competitive and more innovative economy.

Fourthly, the EVFTA will also create greater competitive advantages in harnessing opportunities arising from the shift of supply chains. It will allow us to attract high-quality foreign direct investment in conjunction with technological transfer, research and development, and human resources training to meet the requirements of the ongoing, and very rapid, digital transformation process.

Fifthly, through its commitments to labour and sustainable development, it will help Vietnam effectively realise sustainable development goals, protect the environment, develop a clean and green economy, prevent illegal fishing, protect the legitimate interests of workers, and look after their welfare.

Besides advantages, the EVFTA also poses considerable challenges to Vietnam. Competitive pressure will mount against the economy and its businesses. Challenges in enforcement capacity will arise: the roadmap for the implementation of market-opening commitments is short, and the rules and procedures on new-generation areas – such as intellectual property, government procurement, sustainable development, and labour – are stringent. The enforcement of the EVFTA will require Vietnam to observe high-standard rules of engagement if it is to harness opportunities and minimise economic and trade disputes with its partners.

On the whole, adoption and implementation of the EVFTA are an important step taken at the right time in pursuing the Vietnamese foreign policy of independence, self-reliance, multilateralisation and diversification of foreign relations, and active international integration. The cohesive measures we have been taking to harness opportunities and address challenges will help Vietnam strengthen internal strength and economic self-reliance, and raise its profile in relations with the EU and other partners.

1497p8 evfta promises an enhanced vietnam
Manufacturing and human resources are just some of the areas that will improve thanks to the EVFTA, Photo: Le Toan

What needs to be done

This year marks the fifth of the country’s “Strategy for International Integration until 2020, with a vision to 2030”. Over the past five years, Vietnam has become an important link in the network of international economic groupings. It has taken the lead within the ASEAN in the openness and integration of its economy into that of the wider world. Vietnam has played an active role at global, inter-regional, and regional multilateral mechanisms, and is a proactive player in the shaping of new architecture.

The global landscape is undergoing major shifts due to the COVID-19 pandemic. The regional economic and trade panorama is changing rapidly. The global economy is entering recession. Major power competition is growing fiercer. In this context, conducting works on international integration and economic connectivity will require the resolve and cohesive efforts from all levels, all sectors, and the entire society. The following matters are of particular note.

Firstly, there needs to be a roadmap to actively capitalise on all benefits and opportunities arising from FTAs, especially the new-generation ones. It is also necessary to apply common rules, norms and mechanisms to defend national interests in the context of rising economic and trade disputes and mounting protectionism. The effective enforcement of FTAs needs to be coupled with enhancing inner power, building a self-reliant economy, and raising its productivity and competitiveness.

Secondly, we must grasp new trends in digital transformation and the digital economy in a timely way to find new engines for economic growth and innovation hand-in-hand with digital technologies and sustainable development. It is necessary to actively look into gradually joining international co-operation frameworks and links pertaining to the digital economy, and participate in multilateral and bilateral negotiations related to governance in the digital economy.

Thirdly, we need to wisely harness the existing shift in the global capital flow, production, and in value chains. We need to quickly engage in discussion with the EU members to finalise the ratification of the EVIPA and bring it into force as a way to attract high-quality investment from EU countries.

Fourthly, we need to increase participation in and contribution to the reinforcement and development of multilateral co-operation and the multilateral trading system, and the building and enforcement of international laws and norms. Such direct participation and contribution is an effective channel to help protect our national interests and enhance our national profile.

Given the determination and effort of the entire political system, we are fully confident that the process of economic integration and connectivity shall proceed in an active, innovative and effective manner. Doing so will contribute to the successful realisation of the national targets for development and international integration that the upcoming 13th National Party Congress will set.

By Bui Thanh Son

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