As the last hopes of implementing the U.S.-led Trans-Pacific Partnership begin to fade, it is time for Vietnam to pivot towards a free trade agreement signed with the EU, the chairman of EuroCham in Vietnam has advised.
Vietnam and the European Union signed a free trade agreement, the EVFTA, in Brussels in December 2015, just two months after the Southeast Asian country joined 11 other nations in reaching an agreement on the then-much anticipated TPP deal in Georgia, U.S.A.
As politics have begun to shift since the signing of the deals, EuroCham in Vietnam chairman Michael Behrens said that even though Vietnam seemed to have paid less attention on the EVFTA than the TPP, things have changed since the U.S. presidential election in November last year.
After winning the election, President Donald Trump signed an executive order in January for the U.S. to withdraw from the TPP deal, a turning point in Vietnam’s trade relations and a sign that the Southeast Asian country should pay more attention to the EVFTA, Behrens underlined in an interview with Tuoi Tre (Youth) newspaper.
With the EVFTA effective date less than a year away, Behrens said Vietnam should begin taking necessary steps to prepare for the deal’s implementation, noting that the EVFTA will be a major contributor to bilateral trade growth between the country and the bloc.
Vietnam should consider EVFTA a major next-in-line goal, given that the EU is currently its third largest trading partner by total volume and second-largest importer, according to the EuroCham chief.
Under the EVFTA, the EU is committed to removing 84 percent of tariffs on goods traded between the two economies, which Behrens says is a huge opportunity for Vietnamese goods to penetrate deeper into the European market, particularly export staples such as pepper, coffee, textiles, and footwear products.
On the other hand, he noted, European merchandise, including wines, frozen pork, milk, and medicines will also have greater access to the Vietnamese market thanks to the corresponding tariff removal.
Asked to compare the benefits the EVFTA and the TPP may bring to Vietnam, Behrens said the EU agreement is expected to contribute seven to eight percent to Vietnam’s overall growth on an annual basis.
Citing results from recent research conducted in Hanoi, Behrens added that Vietnam is expected to rake in $2.2 billion worth of gains in welfare from the trade pact by 2020, and $4.1 billion by 2025.
The EVFTA will also help increase wages for unskilled Vietnamese workers by 3 percent due to changing market dynamics and enable a 50 percent spike in Vietnam’s exports to the EU by 2020. Vietnam’s imports from the EU are also projected to rise 43 percent by 2020, he noted.