The Vietnam-European Union Free Trade Agreement (EVFTA) was approved by the European Parliament on February 14, 2020 and approved by the Vietnamese National Assembly on June 8, 2020.
Congress approved EVFTA – Photo: VNA
With EVFTA expected to officially take effect on August 1, 2020, Vietnam will have the opportunity to access the market of 450 million people and have the second largest purchasing power globally.
This agreement will help clear the flow of high quality foreign direct investment (FDI) from the EU into Vietnam, as well as improve Vietnam’s position in the global supply chain in the direction of bringing more value. increase.
This is the opinion of Vietnam Trade Counselor in Italy Nguyen Duc Thanh in an interview with the Vietnam News Agency correspondent resident in Rome about the opportunities and challenges of Vietnam once EVFTA comes into effect.
* Opportunities from EVFTA
Commercial Counselor Nguyen Duc Thanh said EVFTA is expected to help Vietnam’s Gross Domestic Product (GDP) increase by 2-3% for the first 5-year implementation period, from 4.5-5.3%. for the next 5 years and 7.0-7.7% for the next 5-year period.
According to a study before the outbreak of COVID-19 by the Ministry of Planning and Investment, EVFTA will help Vietnam’s export turnover to the EU increase by about 20% by 2020; 42.7% in 2025 and 44.37% in 2030 compared to no Agreement, focusing on a number of items such as vehicles and transport equipment, machinery, equipment, spare parts, telephones and components electronics, pharmaceuticals, textiles and footwear.
The data of Vietnam Customs shows that Vietnam’s export turnover to the EU during the period from January to May 2020 decreased by 9.68% compared to the same period in 2019. Therefore, it is expected that Vietnam to the EU may only increase about 5% in 2020, and start increasing gradually from 2021.
The EU is the FTA partner for Vietnam committed to the highest tariff preferences ever. The EU will allow 85% of tariff lines from Vietnam to enjoy a 0% tariff right after the Agreement comes into effect and eliminate tariffs on nearly all remaining goods after only 7 years.
The EU is also the largest partner in opening its public procurement market to Vietnamese suppliers of goods and services.
In August, when the commitments of EVFTA come into effect, the EU economy in particular and the world economy in general are expected to enter a “new normal” status in the context of a pandemic. COVID-19 continues.
In the race to attract investment during the COVID-19 era, EVFTA became even more important. The purchasing power of the EU market after the pandemic will surely weaken for a long time. The demand for non-essential consumer products such as fashion goods, wooden furniture … is even more limited.
Meanwhile, the supply will be plentiful again, especially when other exporters like China and ASEAN countries restore production, plus the amount of goods stagnant from many months ago. Facing such a situation of “hundreds of sellers, few buyers”, EVFTA will create many great advantages, especially tariff advantages, for Vietnamese and EU businesses.
Capturing the new trend of the post-pandemic world, developing a business strategy and sustainable economic development will create a new added value for any party in a changing world. dynamic.
* Challenge ahead
According to Trade Counselor Nguyen Duc Thanh, although there are many opportunities, Vietnam’s upcoming businesses will have to comply with a lot of EU regulations, standards and technical barriers. Businesses need to meet European consumers’ tastes right from taste, packaging to food safety.
Goods exported to the EU will have to comply with very high standards of labor, environment … In addition, Vietnamese businesses also need to increase production scale, strengthen synergies with each other and ensure the transparent.
Mr. Nguyen Duc Thanh cited that a honey manufacturing business in Vietnam is always proud of having a standard product to be able to export to Europe, but it is not clear about this market.
Europe, especially Italy and France, is home to a long tradition of honey production. They impose strict standards in the production process, such as banning the killing of bees when raising honey. Or as in the processing coffee business, Vietnamese businesses often offer instant coffee with many flavors.
Meanwhile, Europeans prefer coffee with a gentle, natural flavor.
Currently, Vietnam has its own strengths related to EVFTA. However, the EU will soon conclude FTA negotiations with Thailand and Indonesia. At that time, Vietnam’s EVFTA advantage will decrease. Therefore, Vietnam needs to go faster to take advantage of the opportunity.
During the COVID-19 pandemic, large countries in Western Europe such as Germany, France and Italy were aware that they should not be too dependent on the supply of medical equipment from China as well as Vietnam.
They will become hesitant to import essential goods from Asian countries. Besides, they are and will continue to restore the domestic supply chain. The post-COVID-19 game is expected to have many changes.
Opportunities for Vietnam are many, but the challenges are not small. It is important for Vietnam to find a separate path, such as reducing the processing of low-value-added goods, to take full advantage of the advantage.
* Specific requirements of the Italian market
Assessing the specific requirements of the Italian market, Mr. Nguyen Duc Thanh said that the difficulties that Vietnamese businesses encounter when exporting to the EU market are similar to the problems when cooperating with Italian enterprises.
These are issues related to technical standards, regulations on certification, packaging … Besides, in trade cooperation with Italian enterprises, Vietnamese enterprises also face a number of other difficulties such as environmental issues. Italy’s legal school is quite complex; Products related to health, safety or the environment are often applied by high technical regulations and standards, sometimes even higher than the basic requirements of the EU.
In addition, Italians have a tradition of doing business with partners in Europe, South America and Africa (where many Europeans or Italians are doing business and living), and they often use use Italian language in transactions.
Currently, large Vietnamese companies or FDI enterprises having business relations with multinational enterprises or Italy have a relatively stable market. But for Vietnamese small and medium enterprises, prices and models of goods have not yet competed with goods of some other countries.
Mr. Nguyen Duc Thanh said that Vietnamese enterprises need to understand the market of the product that they intend to export, and understand the market share of competitors for that product.
* These categories can be promoted in the Italian market
Assessing specific areas that Vietnam can take advantage of EVFTA to promote further development in the Italian market, Mr. Nguyen Duc Thanh said the promising products include: Electric motors (with 100% of current). tax will be eliminated as soon as EVFTA takes effect); Phones and components (with 98% of tariff lines will be abolished right after the Agreement comes into effect); honey (the EU will eliminate tariffs as soon as the Agreement comes into effect and no tariff quotas will apply); Footwear (with 43% of tariff lines to be eliminated upon entry into force of the Agreement); textiles, medical products (masks, gloves, protective equipment, ventilators …), pharmaceuticals, machinery, equipment and spare parts, woodwork; Fishery products (with 51.8% of tariff lines in Chapter 3 in the HS code of Vietnamese goods exported to the EU will be eliminated import duties in the EU as soon as EVFTA takes effect, 25.4% of tariff lines are descending within 4 years, 18.3% of tariff lines decreasing within 6 years and 4.5% of tariff lines decreasing within 8 years); Agricultural products (tea, coffee with 100% of tax lines removed to 0%; cinnamon, star anise, pepper, cashew nuts, fruits with 86.3% of tax lines going to 0%; vegetables … etc. ).
For rice, the EU provides Vietnam with an export quota of 80,000 tons of rice per year (including 30,000 tons of milled rice, 20,000 tons of unmilled rice and 30,000 tons of fragrant rice).
In particular, the EU will completely liberalize broken rice, without quotas. Italy is a major rice importing and exporting country in the EU. In 2019, Italy exported about 675,000 tons of rice (equivalent to US $ 624 million) to countries around the world and imported about 221,000 tons of rice (equivalent to US $ 174 million).
In particular, Italy imported from Vietnam only about 7,000 tons of rice (equivalent to US $ 5 million), which means Vietnam only accounts for 3.1% of Italy’s rice import market. Meanwhile, Italy imported from Pakistan (Pakistan) 70,000 tons of rice (equivalent to 64 million USD), from Thailand 19,000 tons of rice (21 million USD), from India 16,000 tons of rice (18 million USD).
Currently Vietnamese rice has a great potential to export to Italy to serve the Asian community here. The reason is that rice produced in Italy is only suitable for the processing of Italian food, while Vietnamese rice is suitable for Asians and does not compete directly with rice produced in the country. ”.
* Functional bridge of the Vietnam Embassy in Italy
Mr. Nguyen Duc Thanh affirmed that the Embassy of Vietnam in Italy was always ready to be a bridge to trade between the two countries, so that the businesses of both sides could grasp the situation of the host country, devise strategic strategies. Suitable business in the new context.
The Trade Department specializes in researching and commenting on current trade trends, potential areas for Vietnam’s exports, verifying the capacity of local enterprises to connect businesses of both sides and promoting promote trade and investment development between the two countries. /.
Ngu Binh (P / V VNA in Rome)
Source: Vietnam + / TTXVN
