The agreements are set to be signed in Hanoi on June 30, 2019.
The European Council on Wednesday approved two agreements that are expected to expand trade and investment with Vietnam to unprecedented levels. The free trade agreement (FTA) will eliminate 99% of existing customs duties on goods between the EU and Vietnam, and the investment protection agreement (IPA) aims to increase European investment in Vietnam by ensuring efficiency and transparency.
Both agreements are expected to be ratified by the European Parliament and the Vietnamese government by June 30, 2019. The FTA will be effective immediately afterwards, while the IPA needs to be ratified by the EU’s member states.
President of the European Commission Jean-Claude Juncker said the agreements signify “a political statement by two partners and friends standing together for open, fair and rules-based trade.”
The FTA will eliminate 99% of tariffs on goods between the EU and Vietnam over ten years. Upon the signing of the agreement on June 30, tariffs on 65% of EU exports and 71% of Vietnam’s exports will be removed immediately; the rest will be phased out over ten years. This is very good news for Vietnamese consumers, who are currently paying up to 78% in import tariffs for European cars, 50% for wine and 20% for dairy products. Import tariffs on all of these items are expected to be eliminated within the next seven years.
“The FTA between the EU and Vietnam is the most ambitious free trade deal ever concluded with a developing country,” the Council’s official press release said.
The FTA also provides for increased coordination between the two partners on standards and regulations, guarantees more access for EU companies in VN’s services and public procurement markets, and reaffirms both partners’ commitment to International Labor Organization (ILO) standards and environmental protection.
The second agreement, the IPA, introduces new rules to protect European companies’ investments in Vietnam. Most notably, disputes will be settled in the newly created Investment Court System to ensure efficiency, transparency and independence.
The agreements represent a significant effort by the EU to expand its trade connections and engagement in the rapidly developing region of Southeast Asia. With almost €50 billion trade in goods and almost €4 billion in services a year, Vietnam is the EU’s second largest trading partner in the Association of Southeast Asian Nations (ASEAN) after Singapore. While EU investment stocks in Vietnam remain modest, standing at €8.3 billion in 2016, an increasing number of European companies are establishing there to set up a hub to serve the Mekong region.