Vietnam has successfully signed a trade deal with the European Union to establish one of the most promising bilateral business relationships that Vietnam has ever seen in recent years. The trade deal between Vietnam and European Union, namely EU-Vietnam trade deal, has become official last in June as both sides inked the deal’s contract in Hanoi. This trade deal underlines European Union agenda of trading freely and opening its market in the face of rising trade tensions and protectionism across the globe.
The trade deal seeks to eliminate the tariffs on services and goods between the Vietnamese and European market for 99 percent. The tariff cuts would be progressively implemented in the coming decade. The tariff cuts would also not be fully applicable to all goods and services as agricultural products would face some limitation through quotas.
Negotiations between Vietnam and European Union in creating this trade deal began in 2012 and only finalized last year. Tensions in 2016, where the newly elected President Trump broke down trade talks between European Union and the United States, helped to push the European Union to be more assertive in reaching emerging markets across the world and build free trade agreements with these markets. Vietnam that is highly export dependent is seen by the European Union as the potential emerging market to cooperate with.
Currently businesses from both sides will have to wait for the ratification of the trade deals by the Vietnam’s National Assembly, European Union’s 28 member states parliament, and the European Parliament itself. Swift ratification is highly awaited and businesses from both sides are looking up to reap benefits from this trade deals as soon as possible.
The EU-Vietnam trade deal is the first of its kind in the history of both markets. Government of Vietnam, represented by the Prime Minister Nguyen Xuan Phuc, hails this trade deal as the historical moment for the Vietnamese and hope that this bilateral relationship will be the new horizons for the development and acceleration of both parties’ economic growth. On the other side, the European Union sees this trade deal as an opportunity to further establish free trade agreements with the Association of Southeast Asia Nations, a regional economic block with a combined of more than USD 2.7 trillion market size and 650 million population.
Vietnam is considered by many as one of the fastest growing economies in Southeast Asia. Vietnam successfully delivers 7.08 percent GDP growth with exports as its main contributors in 2018, far surpassing market expectations. Vietnam exports to the European Union are worth for almost 50 billion Euro last year and is projected to grow over 40 percent in 2025 under the trade deal.
In the rising heat of the trade wars, Vietnam shows up as one of the major beneficiaries as it serves as the substitute product suppliers and the alternative destination for global manufacturers to move their manufacturing operations. The government’s initiative to arrange numerous free trade agreements with dominant markets, such as Mexico, Canada, and Japan, has also started to show results as it significantly boosts the exports of Vietnam.
Opportunities are wide open for business players to set up their business in Vietnam. Through initiatives that has been done by the government, Vietnam exhibits itself as one of the ideal countries to set up business in Southeast Asia. It offers ease of business, inexpensive labor, as well as friendly export tariffs to all businesses willing to invest and expand in the country.