The EU and Vietnam are slated to sign two agreements, a free trade agreement (FTA) and an investment protection agreement (IPA), next week, the Council of the European Union said on Tuesday.
The Council, which represents the EU member states' governments, adopted decisions on the signature of the two agreements, both to be inked on June 30 in Hanoi, the same day.
The FTA between the EU and Vietnam is the "most ambitious free trade deal" the 28-state bloc has ever concluded with a developing country, as it provides for the almost complete (99 percent) elimination of customs duties between the two sides.
According to the EU Council, 65 percent of duties on EU exports to Vietnam will disappear as soon as the FTA enters into force, while the remainder will be phased out gradually over a period of up to ten years.
As for Vietnamese exports to the EU, 71 percent of duties will be cut upon the pact's entry into force, the remainder being phased out over a period of up to seven years.
The FTA will also reduce many of the existing non-tariff barriers to trade with Vietnam and open up Vietnamese services and public procurement markets to EU companies, while the IPA will strengthen the protection of EU investments in the Southeast Asian country.
As one of the "new generation" bilateral agreements, the EU-Vietnam trade deal also contains important provisions on intellectual property protection, investment liberalization and sustainable development.
Vietnam is the EU's second-largest trading partner in the Association of Southeast Asian Nations (ASEAN) after Singapore, with trade in goods worth almost €50 billion (US$57 billion) a year and almost €4 billion ($4.5 billion) when it comes to services.
While EU investment stocks in Vietnam remain modest, standing at €8.3 billion ($9.4 billion) in 2016, an increasing number of European companies are working to set up a hub to serve the Mekong Delta region.
The main EU imports from Vietnam include telecommunications equipment, clothing and food products.
The EU chiefly exports to Vietnam goods such as machinery and transport equipment, chemicals and agricultural products.
Negotiations between the EU and Vietnam started in June 2012 and were concluded on December 2, 2015.
However, the formal conclusion of the agreement was delayed by a pending opinion of the European Court of Justice on the division of competencies between the EU and its member states relating to the conclusion of the EU-Singapore FTA.
Following the opinion of the European Court of Justice delivered in May 2017, the European Commission decided to propose two separate agreements - a free trade agreement and an investment protection agreement.
The former agreement contains areas of exclusive EU competence and thus only requires the EU Council's approval and the European Parliament's consent before it can enter into force.
In the meantime, the investment protection agreement, due to its shared competence nature, will have to go through the relevant national ratification procedures in all member states before it can enter into force. The time horizon for the implementation of this act is therefore expected to be much longer.