The Free Trade Agreement (FTA) between Vietnam and the European Union (EU) was officially started to negotiate in 2012. After finishing negotiations and conducting legal review to prepare for the signing The agreement, within the EU partner raises a number of issues related to the delimitation of the authority to ratify FTAs between the EU and each member country. Therefore, the EU proposes to separate the Free Trade Agreement between Vietnam and the EU into two separate Agreements, including: Free Trade Agreement (EVFTA) and Investment Protection Agreement (EVIPA).
On June 30, 2019, the Vietnamese Minister of Industry and Trade together with the Romanian Minister of Business, Trade and Business Environment (EU President representative); EU Trade Commissioner signed EVFTA Agreement in Hanoi.
Accordingly, the EVFTA Agreement consists of 17 Chapters, 8 Appendices, 2 Protocols, 2 Memorandum of Understanding and 4 Joint Declarations. With the level of commitment achieved, the EVFTA is considered to be a comprehensive, high quality and balanced agreement in the interests of Vietnam and the EU in accordance with the rules of the World Trade Organization.
In October 2010, the Prime Minister of Vietnam and the President of the EU agreed to start the EVFTA negotiation. In June 2012, Vietnam and the EU officially announced the start of the EVFTA negotiation. After completing 15 negotiation sessions, in December 2015, the two sides started the legal review process to prepare for the signing.
By June 2018, EVFTA was split into two agreements, the Free Trade Agreement (EVFTA) and the Investment Protection Agreement (EVIPA), at the same time ending the legal review process. In October 2018, the European Commission officially approved EVFTA and EVIPA.
On June 30, 2019, these two agreements were officially signed in the Hanoi, Vietnam. The most important final step, the European Parliament ratified the two agreements on February 12, 2020. On the morning of May 20, the National Assembly listened to the statement, the explanatory report and the inspection report on the request to the National Assembly to ratify the Free Trade Agreement between the Socialist Republic of Vietnam and the Europe Union (EVFTA).
EVFTA and EVIPA were approved, Vietnam is the only developing country in the world and the second country in ASEAN to have a free trade agreement with the world's leading economic community including 27 countries. In which, many countries are economic powers such as Germany, France, Italy, Spain, Denmark, etc with GDP of nearly 18.3 trillion USD, accounting for 40% of global foreign trade.
General Commitment to Vietnamese Products
According to EVFTA commitments, the EU will eliminate tariffs as soon as the Agreement comes into effective for Vietnamese products belonging to 85.6% of the tariff lines in the tariff, equivalent to 70.3% of Vietnam's export turnover to European Union. Within 7 years since EVFTA took effect, EU committed to eliminate 99.2% of tariff lines in the tariff, equivalent to 99.7% of Vietnam's export turnover to the EU.
For the remaining 0.3% of export turnover, including rice products, sweet corn, garlic, mushrooms, sugar and products containing high levels of sugar. The EU commits to open the door to Vietnam in quota tariff (TRQs) where the quota is set at 0%. And Vietnam committed to abolish most of export taxes on goods exported to the EU.
The EVFTA will certainly boost the EU-Vietnam trade relationship, further expanding markets for Vietnamese exports. With the commitment to abolish the import tax up to nearly 100% of the tariff and the trade value agreed by the two sides, the opportunity to increase exports for Vietnamese products with advantages such as textiles, footwear, agriculture seafood, furniture is high significant. At the same time, Vietnamese consumers have change to access the EU's supply of high quality products and services in sectors such as pharmaceuticals, healthcare, infrastructure construction and public transport. EVFTA is expected to increase Vietnam's export turnover to the EU by about 20% by 2020; 42.7% in 2025 and 44.37% in 2030.
These agreements were approved and put into practice that will mark a strategic breakthrough on the nearly 30 years of cooperation and development between Vietnam and the EU. It demonstrates Vietnam's determination to integrate deeply and widely into the world economy in the context of complicated and unpredictable developments in the world economic and political situation.
Commitment to Seafood Products of Vietnam
In 2019, the EU is Vietnam's fourth largest seafood export market, after the US, Japan, China - Hong Kong. This market always accounts for over 15.12% of the total seafood export value of Vietnam to other markets. In particular, the shrimp products accounts for about 20.5% of Vietnam's exports to EU, Cat fish accounts for 11.7%, tuna fish accounts for about 19.4%, others seafood products account for about 30 - 35%.
In 2019, Vietnam's seafood export value to the EU market reached nearly 1.3 billion USD. In particular, the export value of shrimp products reached 690 million USD (EU is the largest market for shrimp products in Vietnam), the export value of tuna products reached nearly 140 million USD (EU is the 2nd standing market for consumption of Vietnamese Cat fish products), the export value of Cat fish reached over 235 million USD (EU is the 4th market for consumption of Vietnamese Cat fish products), the rest are other products.
As soon as the EVFTA Agreement comes into effect, nearly 50% of the tariff lines will have the base tax rate of 0-22%, of which most of them are from 6 to 22%, and will be reduced to 0% (about 840 tariff lines). About 50% of the remaining tax lines with the base tax rate of 5.5-26% will be returned to 0% after 3 to 7 years. For canned tuna and fish balls, the EU gives Vietnam the tariff quotas of 11,500 tons and 500 tons, respectively.
In addition, most frozen squid and octopus’s products have a basic tax rate of 6-8% and will be reduced to 0%, other products such as surimi will be reduced from 14.2% to 0%, reduced from 7.5% to 0% for Swordfish.
For frozen shrimp and black tiger shrimp (HS 03061792), tax will be reduced from the basic rate of 20% to 0% as soon as the agreement comes into effect. Other shrimp products follow the 3-5-year roadmap, only for processed shrimp, the 7-year tax reduction schedule. For Cat fishs products, the roadmap for tax reduction is 3 years, and for smoked fish, the 7-year roadmap. Frozen tuna products are entitled to a tax reduction of 0% immediately, except for frozen tuna loin which needs a 7-year roadmap and canned tuna product has 0% tax quota of 11,500 tons.
Thus, Vietnamese seafood exporters are having a huge opportunity to export to the large EU market when the EU - Vietnam Free Trade Agreement takes effect. In addition, when the EVFTA Agreement is signed, it will create opportunities for Vietnamese seafood businesses to expand export markets, especially new markets such as the Netherlands, Spain, Italy, etc. At the same time, it will improve the competitiveness of Vietnamese seafood products compared with many competitors that have not joined FTAs yet.
Currently, shrimp, cat fish and tuna are one of the key export products of Vietnam to the EU market. For tuna products, Thailand and China are the two biggest competitors of Vietnam, holding the most export market shares, but both countries have not signed an FTA with the EU. This means that Vietnam's tuna exports have absolute tax advantages over the two above-mentioned countries in the main EU business regions.
Similar to tuna products, Vietnam is currently ranked 2nd in the world in exporting shrimp products with a 14% market share, and India with 15% market share. After the EVFTA comes into effect, Vietnam will be cut back on import tax on raw shrimp and also to export processed shrimp to the EU, while the FTA negotiations between India and the EU are also suspended. This is considered an opportunity for Vietnamese shrimp products to rise to compete for the top export position with India for market share in this market.
For seafood products, the current price competition is very large, while the export tax on seafood to some markets is very high. Specifically, Vietnam's shrimp exports to the EU region have an average tax rate of 6-20%, and tuna products also have a tax rate of 11-20%. Therefore, when the EVFTA comes into effect, the reduction of tariff lines will help Vietnam's seafood products lower prices significantly, improve the competitiveness and export turnover. On the other hand, Vietnam's seafood industry also has more opportunities to attract foreign investment, improve production technology and product quality.
In addition to the basic benefits of export tax, Vietnam's seafood industry also has a great opportunity to access procurement packages for public investment items from EU countries, such as importing machinery and equipment for seafood production and processing from EU countries at more reasonable prices; more convenient import and technology transfer; origin certification procedures, customs procedures; complaints procedures, handling problems with TBT (technical barriers to trade), SPS (sanitary and epidemiological measures) will be more convenient, faster and more transparent; access to better financial, insurance, logistics; access to more convenient distribution channels.
The Existing Challenges
However, CPTPP and EVFTA also pose significant challenges for Vietnamese seafood, especially in terms of traceability. Because in order to enjoy preferential tariffs, Vietnamese seafood exporters must comply with the rules of origin of products, which may not be easy to follow. In addition, commitments in EVFTA increase the environmental requirements related to fishing.
Commitment to comply with measures to conserve, manage and sustainably exploit aquatic resources as outlined in the conventions listed; committed to working closely in combating IUU fishing; commit to cooperate, exchange information on issues related to the control, supervision and implementation of fishing management measures.
Le Mai (theo tongcucthuysan)