What is EVFTA?
First thing first, EVFTA (EU-Vietnam Free Trade Agreement) is a comprehensive, high-quality and balanced in benefit agreement (WTO) which aims at promoting the bilateral trade between Vietnam and 28 member countries of the European Union. The agreement has officially come into force on August 1st, 2020.
The most significant preferential treatment for Vietnam from the EVFTA is the elimination of more than 85% of the tariff lines, and after 7 years it would be up to 99,2% which is equivalent to 99,7% of the export turnover of Vietnam. This is the highest level of commitment that an FTA has ever brought to Vietnam, and it is especially meaningful as the EU is one of the largest export markets of Vietnam.
The agreement also comes with commitments about trade in investment services, government procurement, intellectual property, SOE, e-commerce, transparency, commerce and sustainable development,...
If the implementation of this agreement succeeded, it is expected to be a big impetus for Vietnam’s economy. It would help expand the export market, especially for the advantaged items. At the same time, Vietnam consumers will be able to buy high-quality products and services from the EU. According to the research of the Ministry of planning and investment, it is projected that the EVFTA would help the export turnover of Vietnam to the EU increase to approximately 20% in 2020; 42,7% in 2025 and 44,37% in 2030 ,comparing to the time without the agreement. The EVFTA would also considerably raise the GDP of Vietnam in the next 13 years up to more than 7%.
What are the effects of EVFTA on Vietnam’s economy amid and after COVID-19?
However, in the first half of 2020, the COVID-19 pandemic took a toll on the trading and overall economic situation of Vietnam, despite the controlled status achieved. Vietnam is projected to face the slowest growth rate of 2 decades with 2,4%. According to the General Statistics Office’s report on June 29th, the GDP in the second quarter of the year also increases only 0,36% from the same period last year. Also, as reported by the General Department of Customs after 7 months of 2020, the total import and export turnover of Vietnam reached 286,82 billion USD, 0,8% decreased comparing to the same period last year. The import and export turnover to Europe was 35,47 billion USD, 5,8% decreased.
On one hand, EVFTA brings a lot of promising prospects to Vietnam’s economy post COVID-19. According to Tran Quoc Khanh, Deputy minister of Industry and Trade, the trade agreement is expected to help motivate enterprises to recover and raise up their business activities, as they would have the opportunity to approach the massive market of 508 million people and GDP of $18 trillion with the cut of more than 85% of tariff lines. Beside, the conventional supply chain affected by COVID-19 could now be replaced by new ones. This could also help expand and diversify the export and import market which reduce reliance on a specific group of markets. Moreover, Mr. Khanh pointed out the enhancement in the business environment and investment attraction to be the most wanted outcome, as they would create a more sustainable GDP. He also urged to prepare the best conditions, especially for bottlenecks like infrastructure, human resource and mechanism, in order to receive the investment flow.
On the other hand, it was said that people should not expect much from EVFTA. As Europe is still heavily impacted by the COVID-19 pandemic, this could cause decline in the market’s demand and make it difficult for businesses to sell their products. As said by Vu Tien Loc, the VCCI chairman, enterprises would also encounter difficulties if not diversify their sources of goods and markets because many global supply chains had not come back into operation yet.
He also reminded about the high requirements of labor and environmental protection and strict rules of origin and raw materials that need to be met so as to gain from these markets.
In another viewpoint of Nguyen Thi Thu Trang, Director of the Vietnam Chamber of Commerce and Industry’s WTO and International Trade Center, she predicted that the demand in the EU market may decline in the post-pandemic period. Therefore, she advised businesses to keep track with the pandemic situation so as to regulate their plans for production and trade. They were also recommended to make use of online marketing channels to sustain and develop markets, preparing to come back into operation as soon as the pandemic eases.
References
Bộ Công Thương - Giới thiệu chung về hiệp định EVFTA và IPA
http://evfta.moit.gov.vn/default.aspx?page=overview&category_id=fb203c7b-54d6-4af7-85ca-c51f227881dd
Vietnambiz (08/2020) - WTO Center - Kinh tế bị ảnh hưởng vì COVID-19, Việt Nam vẫn thu hút đầu tư nước ngoài
Bộ Công Thương - EVFTA: Cơ hội cho doanh nghiệp Việt sau cú sốc COVID-19
Quynh Huong (06/2020) - VEN.vn - EVFTA implementation especially important in post covid-19 period
Bộ Công Thương Việt Nam - Hiệp định Thương mại tự do Việt Nam - EU (EVFTA) chính thức có hiệu lực và tiến trình thực thi trong thời gian tới.
Vietnam net (06/2020) - Covid-19 affects Vietnamese businesses in benefiting from EVFTA.
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