Trade for the UK and Vietnam and charting the next 50 years

October 31, 2023 | 09:00

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As we commemorate 50 years of diplomatic relations between the United Kingdom and Vietnam, we are celebrating five decades of deepening friendship between our nations. But we are also looking to the coming decades, and focusing on how we continue to build for the future together.

With this in mind, UK-Vietnam trade is very positive. Our bilateral trade has doubled over the last decade, and there is considerable potential for continued growth across a range of sectors. Clean growth, health, education, financial and professional services, and technology are among the areas where British companies are keenly eyeing opportunities in the Vietnamese market.

Trade for the UK and Vietnam and charting the next 50 years

Emily Hamblin, British Consul General in Ho Chi Minh City

To unleash the full potential of our trade relationship, stability, predictability, and transparency will be key to creating an environment conducive to business growth and to enabling investment. Facilitating the movement of talent and capital is equally paramount.

At the heart of our trade cooperation is the UK-Vietnam Free Trade Agreement, which will remove 99 per cent of tariffs by full implementation, but also goes beyond the reduction of tariffs. Vietnamese businesses are already benefiting from the agreement, with significant increases in exports of products from phones to textiles to agricultural products.

And British businesses in sectors from pharmaceuticals to whisky have also seen significant boosts, underpinned by this agreement, which is fostering an enhanced two-way economic flow that benefits both nations. The agreement importantly also serves as a framework for promoting sustainable development, creating a structure for promoting green and fair trade – a response to the global call for environmentally conscious business practices.

Adding another layer of optimism for our trade relationship is the recent agreement on the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Boasting a combined population of half a billion people and expected to reach 15 per cent of global GDP once the UK joins, membership includes some of the world’s most dynamic economies and stands as a hallmark of progressive trade. We were grateful for the support Vietnam, a founding member, provided to the UK throughout our accession negotiations.

Joining the CPTPP complements the existing free trade agreement, offering additional preferential tariffs and setting high standards for trade. The provisions for digital trade, e-commerce, and trade in services align with the needs of modern economies, providing substantial opportunities for British businesses and facilitating broader consumer choices.

Our shared commitment to global trade allows the UK and Vietnam to join with other CPTPP members to shape the international trade rules of the future, promoting a free and rules-based trading system on a global scale.

Environmental and climate concerns are increasingly on the agenda for foreign investors, including those from the UK. Vietnam’s net-zero target and involvement in the Just Energy Transition Partnership has the potential to position it as a regional leader in sustainability. Investing in clean infrastructure and high-tech climate solutions will not only draw in more British investors, but also support Vietnamese products to meet the stringent environmental and quality standards of markets like the UK.

As we stand at the crossroads of 50 years of our diplomatic ties, the future of UK-Vietnam trade and investment cooperation appears vibrant and promising. Let us continue to foster this relationship, embracing sustainability, innovation, and shared prosperity in the decades to come.

Various commitments under the UK-Vietnam free trade agreement

Tariff elimination

The deal locks in the 65 per cent of all tariffs that have been eliminated since the EU-Vietnam FTA entered into force. This will increase to 99 per cent of tariffs after a schedule between 6-9 years. This secures import tariff elimination for products such as clothing, fabric and footwear – meaning customers and businesses may benefit from lower prices on these products. Tariffs will be reduced per a schedule that stipulates equal annual reductions from entry into force of the agreement.

With such commitments, the UK exporters to Vietnam and the UK importers from Vietnam stand to benefit. Specifically:

• For goods exported by UK exporters to Vietnam:

- 48.5 per cent of tariff were eliminated in January 2021;

- 91.8 per cent of tariffs will be eliminated by January 2027;

- 98.3 per cent of tariffs will be eliminated by January 2029;

- 1.7 per cent of tariff lines are partially liberalised through tariff rate quotas (the quota volumes are consistent with Vietnam’s World Trade Organization commitments and duties within quotas will be removed by 2031) or not entitled to preferential treatment.

• For goods imported by the UK importers from Vietnam:

- 85.6 per cent of tariffs were eliminated in January 2021;

- 99.2 per cent of tariffs will be eliminated by January 2027;

- 0.8 per cent of tariffs are partially liberalised through tariff rate quotas (with preferential tariffs for in quota products of zero).

Non-tariff barriers

To facilitate trade, the UKVFTA contains commitments to reduce non-tariff barriers that unreasonably hinder the flow of trade, increasing transparency, and furthering the parties’ ability to quickly and effectively handle non-tariff barriers to trade.

Public procurement

In the UKVFTA, Vietnam commits to opening its public procurement market to the UK, allowing UK suppliers access to procurement at the central level and in Vietnam’s two largest cities, Hanoi and Ho Chi Minh City.

UK suppliers are covered by the UKVFTA’s rules when bidding for tenders above the threshold values laid out in the agreement, and where those tenders are advertised by covered procuring entities. The UKVFTA will gradually increase access to Vietnam’s procurement market for UK suppliers.

Vietnam commits to allowing UK suppliers a wide range of goods procurements (with exceptions for sensitive goods) and a selection of services procurements, including accounting, market research, and taxation services.

Source: UK Department for International Trade

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By Emily Hamblin

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