It took 8 years to complete the entire process of negotiation, signing and approval. The Vietnam-EU Free Trade Agreement (hereinafter referred to as the “Agreement”) finally came into effect on August 1, 2020.
Vietnam has thus become the first emerging market country among Asia-Pacific countries to establish free trade relations with the EU , and it is also the second ASEAN country to establish free trade relations with the EU after Singapore. Vietnamese companies will have the opportunity to enter the EU market with a population of 500 million, and Vietnamese consumers will also have the opportunity to obtain cheaper EU products and services.
Nearly 2,000 Chinese enterprises are affected
After August 1 , Vietnam’s tariffs on 71% of products exported to the EU, and the EU’s tariffs on 65% of products exported to Vietnam, are immediately exempted. According to the agreement, about 99% of tariffs in bilateral trade in goods will be gradually reduced until eliminated.
Vietnamese economists have compared this free trade agreement to “a highway connecting Vietnam and the European Union.” Thanks in part to its free trade agreement with the EU, Vietnam has set an economic growth target of around 5% for 2020.
After the agreement comes into effect, both Chinese products and Chinese-funded enterprises in Vietnam will face major challenges. For example, in the EU market, Chinese products, especially labor-intensive products such as textiles and clothing, will face competition from Vietnamese products. In the Vietnamese market, Chinese mechanical and electrical products may face competition from EU products.
However, not all goods manufactured in Vietnam can enjoy zero tariffs. According to the EU principle of origin, the raw materials of exported products must originate in Vietnam, the EU or have been approved by the EU. other countries that have signed free trade agreements.
According to the person in charge of a Vietnamese garment enterprise, the fabric used in the production of enterprises is mainly imported from China and other countries, and Vietnam is very dependent on the supply of textile raw materials from China. According to Vietnamese statistics, last year, Chinese fabrics and fibers accounted for 60% and 55% of Vietnam’s imports respectively. To enjoy zero tariffs from the EU, companies cannot use imported fabrics, but there are only a handful of existing weaving, printing and dyeing companies in Vietnam.
In addition to the principle of origin, Vietnamese goods exported to the EU may also face sustainable development, social responsibility, environment friendly and other non-tariff trade barriers. However, Nguyen Van Sin, chairman of the Vietnam Small and Medium Enterprises Association, said that these difficulties and challenges are also opportunities for Vietnamese enterprises to innovate and improve their management capabilities.
Huang Xingqiu, a professor at the Vietnam Institute of Guangxi Normal University, said that there are at least 2,000 Chinese-funded companies in Vietnam. These companies need to carefully study the terms of the agreement and benchmark the quality requirements and technology of EU products. Requirements, take advantage of this opportunity to continue to expand export business to the EU.
At the same time, he also said that improving product quality will also help compete with EU products that enter Vietnam duty-free. He reminded Chinese enterprises, “We must clearly realize mentally that Chinese enterprises have the possibility of being defeated by EU products in the Vietnamese market. Only by taking precautions and making more proactive moves can we remain invincible.”
Vietnam’s textile and clothing exports experienced explosive growth in June
Vietnam in June 2020 The value of textile and clothing exports was US$2.602 billion, a month-on-month increase of 39.37%, a month-on-month decrease of 9.66%; the exported yarn was 127,200 tons, a year-on-year increase of 0.24%, a month-on-month increase of 27.95%.
Although the COVID-19 epidemic has had an impact on Vietnam’s textile and clothing exports in the short term, Vietnam’s textile and clothing industry has recovered rapidly It is obviously faster. First, the Vietnam-EU Free Trade Agreement (EVFTA) has been signed and approved at the end of June. After the agreement takes effect, the EU will immediately cancel about 85.6% of Vietnam’s import taxes, of which 77% of the textile tariffs will be canceled on EU exports to Vietnam will also have 48.5% of its tariffs eliminated; 99% of tariffs on goods from both sides will be eliminated within 10 years.
Although EVFTA also imposes restrictions on raw materials shortages for textiles and clothing and EVFTA’s rules of origin, it is still a “major benefit” to Vietnam. Second, competitors such as India have seen a severe spread of the domestic epidemic and low operating rates, making the overall industry recovery relatively slow. </p
