Talks on FTA with EU hit snags

The FTA with the EU could be a potential gold mine for Vietnamese exporters
Photo: Le Toan

Jeans-Jacques Bouflet, Minister Counsellor and head of the EU Delegation to Vietnam’s trade and economic section, said this negotiation round would kick off on Monday this week in Ho Chi Minh City, focusing on tariffs, technical issues, intellectual property rights (IPR), goods origins and World Trade Organization commitments. “IPR and goods origins are among the biggest obstructions for the negotiations because Vietnam is weak in solving these problems,” he said.   IPR concerns, for example, are complicating business plans of Swiss-backed Syngenta Vietnam Company.

Pham Huy Thang, Syngenta Vietnam’s mananger of research & development, said Syngenta was building a $1.5 million rice variety research centre in northern Ninh Binh province, and the firm also wanted to implement some other projects in Vietnam.

“But Vietnam’s IPR implementation remains weak and this will prevent foreign firms from transferring high technologies to Vietnam,” he said. 

  According to the US-based Business Software Alliance, the leading global advocate for the software industry, Vietnam recorded a personal computer software pirate rate of 81 per cent in 2011, with the commercial value of this piracy estimated at  $395 million. Vietnam in 2011 ranked 22th out of 116 national and regional economies in terms of software piracy. 

  “Foreign firms simply will not transfer or licence their proprietary rights or advanced technology and know-how to Vietnam, or engage in research and development activities here, unless they are confident these rights will be protected,” said Preben Hjortlund, chairman of EuroCham in Vietnam.

  Regarding goods origins which is a condition for tax preferences, Tran Thanh Hai, vice head of the Ministry of Industry and Trade’s export-import department, said: “A pair of made-in-Vietnam shoes, for instance, can contain many types of materials imported from different markets with different goods origins. Thus, it is difficult to determine origins of products and a big hurdle for negotiations of this free trade agreement (FTA).”

  Hai said Vietnam-based firms currently had to import over 70 per cent of needed materials from foreign markets for their production.

  “Besides, exporters will have to obey stringent regulations on labeling, environmental protection and corporate social responsibility when they export products to the EU,” he added.

  Under this FTA, Vietnam will have to reduce tariff rates of 90 per cent of imported goods to zero per cent within seven years. This will help Vietnam lure more foreign direct investment. “But the problem is foreign investors may use import tariff incentives for importing materials into Vietnam for assembling or processing, instead of expanding direct production in Vietnam. This will not create much added value for Vietnam’s production chain,” Bouflet said.

  Bouflet said after the FTA was clinched by late 2014, it would be ratified by each of the 27 European nations and this process would take three or five years.

  The EU is Vietnam’s second largest trading partner, with the two-way trade turnover of $29.1 billion last year. The EU is also Vietnam’s biggest foreign investor, with 1,781 projects by late October, 2012 representing total registered capital of over $33.4 billion.