With the European Union-Vietnam Free Trade Agreement (EVFTA) set to come into force on August 1, many tariff lines will be reduced to 0% as a means of boosting exports, however, local firms must strive to fully utilize its benefits from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) along with other FTAs.
Local firms need to fully understand how to make the most of the CPTPP along with a series of other FTAs to bolster exports. Photo: Saigon Giai Phong (Liberated Saigon) Newspaper
When the extensive commitments of the EVFTA officially come into effect, the trade deal is anticipated to promote bilateral trade and investment relations between both the country and the EU.
With the EU market opening through the implementation of the EVFTA, domestic businesses will gain access to a market of approximately 460 million people, with an average GDP per capita of over US$35,000, in addition to a tax rate of 0% being immediately implemented for over 85% of tariff lines.
Moreover, local enterprises will be able to join new supply chains as opposed to traditional ones or supply chains which have been disrupted by the impact of the novel coronavirus (COVID-19).
This can be done alongside expanding and diversifying import and export markets as a means of reducing their dependence on a specific market group.
Most notably, the global pandemic has greatly influenced the country’s economic and trade situation since the beginning of the year. According to figures released by the General Statistics Office, by late June 2020 the country's export turnover had suffered a fall of 1.1% on year to US$121.21 billion.
There is plenty of hope that the EVFTA will serve as a driving force behind business operations, thereby helping firms to recover production, receive additional orders, and become more involved in new supply chains.
Despite this optimistic outlook, Deputy Minister of Industry and Trade Tran Quoc Khanh believes it will be challenging to achieve positive growth in the EU this year as a result of the COVID-19 seriously affecting the EU and the global economy as a whole. Indeed, the past five months have seen Vietnamese exports to the EU suffer a drop of 12% to only US$12 billion over the same period from last year.
Ngo Chung Khanh, deputy director of the Multilateral Trade Policy Department, holds the view that local enterprises should be proactive in capturing market opportunities from trade agreements, a factor that will ultimately determine the success or failure of enterprises themselves.
Khanh also believes that businesses should refrain from expecting too much from the EVFTA as quick benefits will not be easy.
It is therefore necessary for firms to fully understand how to make the most of the CPTPP along with a series of other FTAs that have come into effect in order to boost exports. For example, the trade surplus from Mexico and Canada, two new markets that joined the CPTPP in 2019, amounted to US$5 billion, 50% of the nation’s overall trade surplus, he notes.
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