EU inflows to ride out EVFTA delays

Though EVFTA liberalisations may be pushed back, EU investment is still on the rise

Bernd Lange, a member of the European Parliament and Chair of the Committee for International Trade – which has a key role in the EU ratification of free trade agreements with non-EU partners - told VIR that “the EU ratification of the EU-Vietnam Free Trade Agreement (EVFTA) is expected to happen in summer 2018 at the earliest”.

The trade pact, over which negotiations concluded in late 2015, was expected to be officially adopted by late 2017 and take effect in early 2018.

“The EVFTA’s delayed ratification is not due to any political pressure, but to technical issues, such as legal reviews and translations. We want to see a perfect deal for both sides,” Lange said.

He also noted that the slow ratification “will not affect European investment flows into Vietnam”.

“I don’t think that the delayed ratification will slow down European investment into Vietnam, because although many European investors and firms are worried about the slow ratification, they are still seeing lots of opportunities for doing business in the country,” Lange said.

According to Vietnam’s Ministry of Planning and Investment, as of August 20, European firms have nearly 2,500 investment projects registered at nearly $44 billion in Vietnam, respectively accounting for 10.43 and 14.23 per cent of the country’s total number of foreign direct investment (FDI) projects and total attracted FDI capital.

“The EU is a big investor and the number of EU investors interested in investing in Vietnam is growing strongly,” Lange said. “After EVFTA takes effect within 2018 or a bit later, EU investors will be able to greatly benefit from the EVFTA’s tariff cuts and provisions in investment incentives and protection.”

For example, the EVFTA will create a framework to resolve any trade and investment disagreements that may occur between the EU and Vietnam about the interpretation and implementation of the agreement. The system is intended as a last resort, should the parties fail to find a solution by other means. It operates through a fixed set of procedures and timeframes. Should parties fail to reach an agreement through formal consultations, they can request the establishment of a panel, made up of independent legal experts.

EVFTA will eliminate more than 99 per cent of tariffs. The EU will eliminate duties for thousands of items sourced from Vietnam, while Vietnam will liberalise 65 per cent of import duties on EU exports to Vietnam at entry into force, with the remainder of duties being gradually eliminated over a 10-year period.

For example, Vietnam will apply liberalisation for almost all EU machinery and appliances at the EVFTA’s entry into force, as well as wines and spirits (after seven years), frozen pork meat (after seven years), beef (after three years), and dairy products (after a maximum of five years).

Bruno Angelet, Ambassador and Head of the EU Delegation to Vietnam, said that the EVFTA is expected to help trigger a new wave of high-quality investments in both directions, supported by an updated investment dispute resolution system.

Upon the EVFTA’s implementation, it is estimated that Vietnam’s GDP could rise by over 15 per cent and that the value of its exports to the EU could increase by almost 35 per cent.