New free trade agreements (FTAs), which were signed and took effect in 2020, are expected to push Vietnam into becoming more competitive by reducing trading costs and improving its business environment.
The European Union-Vietnam Free Trade Agreement (EVFTA) took effect on August 1 2020. This agreement paves the way for increased trade between the EU and Vietnam.
The EVFTA is an ambitious pact eliminating almost 99% of the EU and Vietnam customs duties.
Forecasts of the FTA indicate an increase in Vietnam’s GDP by 4.6% and its exports to the EU by 42.7% by 2025. This forecast is according to the Vietnamese Ministry of Planning and Investment (MPI).
While the European Commission has forecasted, the EU’s GDP will increase by US$29.5 billion by 2035.
On June 8, 2020, Vietnam’s National Assembly ratified the EVFTA and the EU-Vietnam Investment Protection Agreement (EVIPA). This ratification is occurring, after almost ten years of negotiations.
Following this, 65% of duties on EU exports to Vietnam will be eliminated. The remaining will gradually phase out for over ten years. The agreement will eliminate 71% of duties on Vietnam exports to the EU. Following this, the elimination of the remaining duties will occur over seven years.
The Regional Comprehensive Economic Partnership (RCEP) Agreement was signed on November 15, 2020, after eight years of talks.
Firstly, the trade pact involves 10 ASEAN member nations – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Secondly, the trade bloc’s partners – Australia, China, Japan, the Republic of Korea (RoK) and New Zealand.
Together, they account for around 30% of the globe’s gross domestic product (GDP) and 30% of the world’s population.
Experts say the agreement will create the world’s largest free trade area and numerous new supply chains. The RCEP will make significant contributions to regional economic recovery post-COVID-19.
Soon after RCEP takes effect, members will begin to honour their commitments on tariffs. Vietnam and its partners will remove tariffs on at least 64% of tariff lines.
Estimates indicated that Vietnam would remove 89.6% of tariff lines for partner countries within 15 to 20 years. In return, RCEP partner countries will have removed up to 92% of tariff lines for Vietnam. Other ASEAN members will remove 85.9% of all tariffs for Vietnam.
Above all, telecommunications, information technology, machinery, spare parts, chemicals, and agricultural sectors will immediately benefit from the deal.
Aquatic products will be one of the sectors that can compete in the markets of RCEP partners.
China, Japan, New Zealand, Australia, and other ASEAN countries’ commitments to reduce tariffs to 0% as soon as the agreement takes effect will open up new opportunities for Vietnam to increase export to RCEP markets.
UK-Vietnam Free Trade Agreement
The United Kingdom (UK)-Vietnam Free Trade Agreement (UKVFTA) was officially inked in London, the UK on December 29 2020. The FTA took effect from 23.00 on December 31, 2020.
Earlier on December 11, Minister of Industry and Trade Tran Tuan Anh and UK Secretary of State for International Trade Elizabeth Truss signed the agreed minutes to conclude negotiations over the UKVFTA.
The UKVFTA was negotiated based on principles inherited from commitments in the EU-Vietnam Free Trade Agreement (EVFTA). The basis of the agreement is following the bilateral trade framework between Vietnam and the UK.
Thanks to the UKVFTA, interests in the bilateral trade ties within the EVFTA will be maintained. Above all, the agreement begins a new period in the two nations’ relationship, particularly in crucial trade sectors.
Vietnam and the UK will cut 99% of tariffs on goods traded by the end of the tariff elimination roadmap. This results in Vietnam saving about £114 million on exports to the UK. The figure for the UK will be £36 million.
In conclusion, goods like garments and textiles, leather and footwear, and seafood will see no interruption. Commercial services like those in finance and e-commerce will grow further.
Vietnam has signed and negotiated 17 bilateral and multilateral free trade agreements, 14 of which have come into force.