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IE Group Assignment
IE Group Assignment
Class : 47K01.4
Group : 7
Hồ Ngọc Vĩ
TABLE OF CONTENT
A. CONTENT................................................................................................................. 1
I. Introduction................................................................................................................1
III. Summary of content, commitments in the agreement, and incentives that Vietnam
receives...................................................................................................................... 2
1. Trade in Goods:..................................................................................................2
3. Government procurement:..................................................................................4
4. Intellectual property:..........................................................................................4
IV. The impacts of EVFTA on trade flows between Vietnam and the EU:......................5
3. Impacts of the EVFTA from Vietnam to the EU before signing the agreement: 6
4. Impacts of the EVFTA from Vietnam to the EU after signing the agreement:...8
V. The impacts of EVFTA on the capital and labor flow between Vietnam the EU:....10
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1. EU FDI attraction to Vietnam before EVFTA and EVIPA take effect:............10
3. Vietnam’s FDI attraction to the EU after EVFTA and EVIPA take effect.......13
VI. Opportunities and challenges for Vietnam at the time of signing the EVFTA:........14
2. Challenges for Vietnam at the time of signing the EVFTA and solutions:.......15
B. CONCLUSION........................................................................................................16
TABLE OF FIGURE
1. CONTENT
2. Introduction
October 2010: Vietnam’s Prime Minister and the EU President agreed to launch
EVFTA negotiations.
From October 2012 to August 2015: The two Parties conducted 14 official
negotiation rounds and many midterm negotiation sessions.
December 1, 2015: The two Parties officially announced the conclusion of the
EVFTA negotiation.
June 26, 2018: Vietnam and the EU officially agreed to separate the EVFTA into
two Agreements: the Vietnam-European Union Free Trade Agreement (EVFTA)
and the Investment Protection Agreement (EVIPA).
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October 17, 2018: The European Commission officially approved the EVFTA
and EVIPA
June 30, 2019: Signing ceremony of the EVFTA and EVIPA in Hanoi.
February 12, 2020: The European Parliament ratified the EVFTA and the
EVIPA.
June 8, 2020: The National Assembly of Vietnam officially ratified EVFTA and
EVIPA.
The EVFTA has officially come into effect from 1st August, 2020.
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commodities between the EU and Vietnam, leading to increased trade and economic
growth for both parties.
7. Commitment on export tariff:
Vietnam and the EU commit to not apply any kinds of tariffs or fees for only exports
but not for domestic goods, and no tariffs and fees will be imposed on exports higher than
those for domestic goods, except for cases which are clearly reserved (according to the
commitment results, only Vietnam has reservations on this issue, the EU does not make
any reservations). This means that many Vietnamese products, such as textiles, footwear,
agricultural products, automobile industry... can be exported to the EU market at lower or
zero tariffs, making them more competitive in the European market.
8. Commitment on non-tariff barriers:
The EVFTA contains an Annex on pharmaceuticals which covers topics such as the
classification of pharmaceutical products, the determination of their origin, and the
elimination of tariffs on these products. As the pharmaceutical industry is a significant
export sector for both the EU and Vietnam, this cooperation includes the exchange of
information on regulations and standards, promoting good regulatory practices, and
collaboration on innovations and intellectual property rights.
10. Trade in service and investment:
The two Parties agree on the principles for SOEs together with those on subsidies,
aim to ensure an environment of fair competition between SOEs and private enterprises
when SOEs engage in commercial activities. There will be transparency rules and
consultation procedures for domestic subsidies.
14. Trade and sustainable development:
The EU and Vietnam commit to promote and enforce international labor and
environmental standards, including those set out by the International Labour Organization
and the United Nations Framework Convention on Climate Change. It also includes
provisions on sustainable development that aim to promote economic growth while
protecting the environment, ensuring social and economic benefits for all, including
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disadvantaged groups, which can improve the overall business environment in Vietnam
and attract more responsible investment from the EU.
15. Dispute settlement mechanism:
EVFTA establishes a mechanism to settle disputes that may arise between Vietnam
and the EU in the interpretation and implementation of the commitments in the
Agreement. It also envisages a more flexible mechanism: a mediation mechanism, to deal
with problems related to measures which have negative impact on bilateral trade and
investment. This provides a stable and predictable legal framework for businesses and
investors, reducing uncertainties and risks associated with international trade and
investment.
16. The impacts of EVFTA on trade flows between Vietnam and the EU:
1. Impacts of the EVFTA from EU to VietNam before signing the agreement:
Based on the statistics, the EU's imports from Vietnam experienced steady growth
from 2007 to 2018. Specifically, there was a rise from 7.9 billion USD in 2007 to 42.5
billion USD in 2018, representing an 81.4% increase compared to 2007.
On the other hand, the EU's exports to Vietnam increased but not consistently. In
2007, the EU's exports to Vietnam were valued at 3.56 billion USD, which decreased
slightly to 3.39 billion USD in 2008. Although EU exports to Vietnam increased over the
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period from 2007 to 2018, the growth was not significant. The trade balance between the
EU and Vietnam was negative from 2007 to 2018, indicating that the EU's trade deficit
with Vietnam persisted during this time.
2. Impacts of the EVFTA from EU to VietNam after signing the agreement:
According to the statistics above, the EU's total import-export turnover in 2020 was
approximately 43.3 billion USD, with imports accounting for 34.5 billion USD and
exports totaling 8.8 billion USD. This represented a decline of 5.3% compared to the
previous year, leading to a trade balance deficit of -25.8 billion USD. The EU primarily
exports high-tech products to Vietnam, including electrical machinery and equipment,
aircraft, vehicles, and pharmaceutical products.
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3. Impacts of the EVFTA from Vietnam to the EU before signing the agreement:
The EU is the region making up a large proportion of the trade relation between
Vietnam and Europe. Vietnam - EU trade relation has developed very rapidly and
effectively.
In 2019, the import-export turnover between Vietnam and the EU amounted to over
$56.45 billion, marking a 1.11% increase from the same period in 2018, of which exports
accounted for over $41.54 billion, representing a decrease of 0.81%, while imports
reached $14.90 billion, an increase of 6.84%. Among the markets, the Netherlands,
Germany, England, France, Italy, Austria, Spain, Belgium, Poland, and Sweden were the
top ten with export values exceeding $1 billion in 2019.
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Chart 4. Some primary export goods from Vietnam to the EU (2017-2019)
Regarding exports, during the first five months of the EVFTA implementation,
Vietnam's export turnover to the EU amounted to $15.62 billion, marking a 3.8% increase
over the same period in 2019. The total export turnover from Vietnam to the EU between
August 2020 and July 2022 reached $83.4 billion, equivalent to an average of $41.7
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billion per year, which is 24% higher than the average export value during the 2016-2019
period ($33.5 billion per year).
In 2020, despite the total export turnover from Vietnam to the EU decreasing by
1.82% for the entire year, this result was considered much better than the 5.9% decrease
observed during the first seven months of the year. In fact, only in the last 5 months of the
year when the EVFTA took effect, exports to this region turned back to increase at 3.8%,
helping to narrow the year-on-year decline. In the context that EU imports from the world
in 2020 will decrease by 11.52%, this decrease of Vietnam is considered a positive signal.
In 2021, which marks the first full year of the EVFTA's implementation, exports
from Vietnam to Europe have experienced a growth rate of 14.1%, surpassing the average
growth rate of exports to the market during the 2016-2019 period (8.2% per year) by a
significant margin. In the first seven months of 2022, exports to the EU increased by
21.4%, exceeding the 16.6% increase observed in the general export turnover to other
markets.
The proportion of exports taking advantage of EVFTA tariff incentives rose from
14.8% in 2020 to 20.2% in 2021 and 24.5% in the first six months of 2022. Notably, the
EVFTA has had a widespread impact across many sectors, with products such as rice
(100%), footwear (74-98%), seafood (70-76%), plastic and plastic products (53-70%)
making the most of the tariff preferences. However, the increase in export turnover from
Vietnam to the EU in 2021 was only 14.1%, lower than the average growth rate of
Vietnam's exports to other FTA markets (18.2%) and from Vietnam to the world (19%).
This growth rate is also lower than the growth of EU imports from all countries
worldwide in 2021 (23%).
About import: Since the EVFTA came into effect, imports from the EU into
Vietnam have continuously increased until mid-2022 when the EU faced production
difficulties due to the Russia-Ukraine war and climate change. Notably, in the last 5
months of 2020, import turnover reached 6.55 billion USD, reflecting an increase of 4.2%
compared to the same period the previous year. In 2021, import turnover into Vietnam
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from the EU reached 16.9 billion USD, indicating a growth rate of 15.3%. However, this
trend reversed in the first 7 months of 2022, with a decrease of 5.52% in imported
products. Textile and garment materials, footwear, computers, electronic products and
components, machinery and equipment, fertilizers, animal feed, solids, and glass products
were among the products that recorded strong growth.
The EVFTA has enabled Vietnam to increase its imports of high-quality input
production factors from the EU at favorable prices, as the EU is a major supplier of such
factors. It has been implemented when many of the top products with a sharp increase in
import turnover from the EU in the past 2 years are the main input sources for some
industries (such as chemical products, animal feed and raw materials). , auto parts and
components, pesticides and raw materials, raw materials for textiles, footwear, glass,...
Imports from the EU have not caused excessive pressure on domestic competition.
In the past two years, the growth rate of import turnover from the EU has been
consistently lower than the average import growth rate from all countries in Vietnam
(except for 2020, which is slightly higher). This outcome was anticipated, given
Vietnam's cautious approach to opening its market for certain sensitive products (such as
meat and some agricultural products) under the EVFTA, with a long roadmap.
Nevertheless, some products in the main consumer group, such as complete cars and food
preparations, have experienced a significant increase in imports from the EU, despite not
being primarily used for production. If this trend persists, it could create significant
competition pressure on the domestic market, particularly as more products from the EU
are opened up.
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5. The impacts of EVFTA on the capital and labor flow between Vietnam the EU:
1. EU FDI attraction to Vietnam before EVFTA and EVIPA take effect:
Since the implementation of Vietnam's Foreign Investment Law in 1988, FDI from
the EU has grown significantly, increasing 12-fold from $186.96 million to $2.24 billion
in 1997 (accounting for 13.8% of total registered FDI capital into Vietnam in 1997).
Following Vietnam's accession to the WTO, registered FDI from the EU surged from
$5.41 billion in 2007 to $10.49 billion in 2008. As of December 31, 2019, the EU was the
fourth largest investment partner in Vietnam, with 2,317 valid projects and total registered
capital of $25.36 billion, equivalent to 7.6% of the total FDI capital into Vietnam (GSO,
2019).
Despite the increase in investment capital, the share of EU FDI in Vietnam remains
modest in comparison to the total EU FDI abroad, as well as EU FDI in ASEAN as a
whole. According to data from GSO, as of December 31, 2019, 19/28 EU countries
engaged in direct investment activities in Vietnam. The Netherlands, France,
Luxembourg, and Germany were the top investors and they mainly focused on investing
in the manufacturing and processing industry.
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Since the EVFTA has significant potential to increase free trade between Vietnam
and the EU, it could lead to higher capital flows between the two economies. The
agreement eliminates tariffs on 99% of goods traded between Vietnam and the EU,
creating a more favorable environment for businesses to import and export goods. This
can enhance the trade flows, which results in a more balanced capital flow between
Vietnam and the EU.
Another main impact of EVFTA on the capital flow between Vietnam and the EU is
the increase in foreign direct investment (FDI) flows from the EU into Vietnam.
However, the actual impact of the EVFTA in attracting investment from the EU in the
past year has not been apparent, particularly given the strong influence of the COVID-19
pandemic on global trade and investment.
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In terms of investment partners, there has been little change compared to before the
EVFTA came into effect. The main EU members with high levels of investment and
robust trade relations with Vietnam are still the Netherlands, France, and Germany, while
other EU members contribute only a small amount of capital and projects in Vietnam. As
of August 2022, there are 25 EU 27 countries investing in Vietnam, with a total of 2,378
projects and registered capital of $27.59 billion. Among them, the Netherlands ranked
first with 381 projects and total registered capital of nearly $10.47 billion, accounting for
nearly 46.6% of EU investment capital into Vietnam. France ranked second with $3.61
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billion, followed by Germany with $2.29 billion. EU investment projects in Vietnam
belong to most economic sectors (18/21 sectors according to the national economic sector
classification system), with a focus on processing and manufacturing industry, electricity
and gas production and distribution, real estate, petroleum, etc. Recently, EU companies
have shown interest in service sectors such as logistics, postal and telecommunications,
finance, office leasing, retail, clean energy, high-tech agriculture, etc. EU investors have
been present in 54 provinces and cities nationwide, mainly in large cities with developed
infrastructure and seaports and airports, such as Ho Chi Minh City, Ba Ria - Vung Tau,
Hanoi, Quang Ninh, Dong Nai, Binh Duong. Large EU companies operating effectively
in Vietnam include Shell Group (Netherlands), Daimler Chrysler (Germany), Siemens
and Alcatel Comvik (Sweden).
3. Vietnam’s FDI attraction to the EU after EVFTA and EVIPA take effect
The EVFTA provides for the elimination of tariffs on many goods traded between
the two regions and includes commitments to protect intellectual property rights, ensure
transparency and promote sustainable development. Therefore, it can enhance trade flows
and help increase Foreign Direct Investment (FDI) from Vietnam to the EU as well as
make it easier for Vietnamese companies to invest in the EU, which can lead to a rise in
capital flow.
Vietnam's FDI in the European Union (EU) has been increasing in recent years.
According to data from the European Statistical Office, Eurostat, Vietnam's FDI in the
EU reached €1.6 billion in 2020, up from €250 million in 2019. The majority of
Vietnam's FDI in the EU has been focused on the manufacturing sector, particularly in the
areas of textiles and garments, footwear, and electronics. The countries that have received
the most FDI from Vietnam in the EU are Poland, the Czech Republic, and Slovakia.
Vietnam's FDI in the EU is still relatively small compared to other countries, but it has
been increasing steadily in recent years and is expected to continue to grow in the future
thanks to the EVFTA’s incentives.
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4. Opportunities and challenges for Vietnam at the time of signing the EVFTA:
1. Opportunities for Vietnam at the time of signing the EVFTA:
Firstly, the EVFTA contributes to diversifying Vietnam's export markets and reduce
dependence on a single market, thereby enhancing the country's economic security. The
benefits are evident from the fact that the EU has committed to removing tariffs on 85.6%
of tariff lines, thereby increasing the competitiveness of 70.3% of the trade turnover. This
translates into significant opportunities for Vietnam's exports to the EU, which accounts
for 48.5% of the tariff lines removed, or 64.5% of the country's total import turnover. This
will lead to reduced input costs for manufacturing industries, lower commodity prices,
and the opening of new trade flows.
Secondly, the EVFTA can contribute to restoring Vietnam's economy, which has
been heavily impacted by the Covid-19 pandemic since the end of 2019. Economic
growth in 2020 did not meet the set target due to the pandemic's effects. The
implementation of the EVFTA is of great significance in offsetting this decline. The
agreement offers opportunities for businesses to diversify and expand their markets,
regaining momentum after the pandemic. Vietnamese enterprises can benefit from the
source of imported goods and materials with good and stable quality at a more reasonable
price from the EU.
Thirdly, the EVFTA has brought a huge impact on employment and social security.
According to the Ministry of Planning and Investment, the EVFTA is expected to add
about 146,000 jobs per year, focusing on labor-intensive industries with high export rates
to the EU market. EVFTA will not only bring benefits in terms of the number of jobs but
also potentially increase wages through efficient market operations, and spillover effects
on wages from FDI enterprises.
Finally, the EVFTA strengthens the position of Vietnamese enterprises in the global
market. As soon as the agreement comes into effect, the EU will eliminate import taxes on
around 85.6% of tariff lines, equivalent to 70.3% of Vietnam's export turnover to the EU.
Within 7 years of the agreement's entry into force, the EU will eliminate import taxes on
99.2% of tariff lines, equivalent to 99.7% of Vietnam's export turnover. For the remaining
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0.3% of export turnover, the EU has committed to giving Vietnam a tariff quota with a
0% import tax rate within the quota. As the EU is consistently one of Vietnam's two
largest export markets, this benefit is particularly meaningful. It will help many
Vietnamese products and goods gain a foothold and assert their position, enhancing their
competitiveness globally.
2. Challenges for Vietnam at the time of signing the EVFTA and solutions:
Firstly, Vietnam is committed to opening markets with goods and services for the
EU, creating certain competitive pressures on our economy, businesses and goods and
services. However, this is a healthy, selective and competitive pressure. More
importantly, because the economic structure of the EU and Vietnam is very
complementary, without direct confrontation, the expected competition pressure will not
be large. In addition, Vietnam's open-door commitment is on a roadmap, especially for
sensitive product groups, so EVFTA is also a reasonable opportunity and pressure for
Vietnamese businesses to adjust and change their business method and improve its
competitiveness. In response to competitive pressures, supporting businesses, especially
small and medium-sized enterprises, to take full advantage of opportunities as well as
minimize challenges encountered during the implementation of the Agreement, the
Government has been direct the ministries and branches to continue promoting
information, propagation and guidance activities in order to raise enterprises' awareness
and understanding of the provisions and commitments of the Agreement. In addition, the
Government also instructs ministries and sectors to proactively study and apply the
measures allowed to be applied in accordance with Vietnam's international commitments
in general and EVFTA in particular to support and protect interests. legitimate interests of
domestic industries in the face of foreign goods competition.
3. CONCLUSION
In conclusion, the EVFTA is a comprehensive and ambitious trade deal that has the
potential to bring significant benefits to both the EU and Vietnam. By removing almost
all tariffs on goods traded between the two sides, the agreement will boost bilateral trade
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and create new opportunities for businesses. The EVFTA also includes provisions on
services, investment, and intellectual property rights that will provide new opportunities
for EU businesses in Vietnam. Moreover, the agreement includes commitments on
sustainable development that will ensure that trade and investment are carried out in a
responsible and environmentally-friendly manner. The agreement has marked a
significant milestone in the economic relationship between the EU and Vietnam and
reflects the growing importance of the Southeast Asian region for the EU. As the
agreement is implemented, it is expected to deepen economic ties between the two sides
and contribute to the prosperity of both regions.
4. REFERENCES
[1] "Free Trade Agreement Between The Socialist Republic of Vietnam and European
Union".
[2] "Vietnam after 2 years of implementing the EVFTA - From a business perspective.,"
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