UNCTAD, Will COVID-19 reverse the decline in trade in ICT goods before the pandemic? Recent changes in the EU, in particular Brexit, could have an impact on the outcome and importance of the EVFTA. For now, the UK`s free trade agreement will enter into force by the end of the year and could be extended for another 24 months as part of the UK`s deal with the EU. It also shows that EU trade with Vietnam has developed better than with other Southeast Asian countries, with the exception of a slight lead in Malaysia`s exports (Figure 4). Trade between the EU and Vietnam has also increased steadily in recent years, indicating a deepening of bilateral economic relations (Figure 3). In 2020, Vietnam overtook Singapore and became the EU`s largest trading partner in Southeast Asia. 1 In 2017, the Court of Justice of the European Union held that certain provisions of the EU-Singapore Free Trade Agreement on foreign investment without direct investment and investor-state dispute settlement (ISDS) do not fall within the exclusive competence of the European Union and must be ratified by the national parliaments of the Eu Member States. In order to remove opposition to the trade agreement, the EU and Singapore have therefore agreed to split the agreement into two separate agreements. Negotiations between the EU and Vietnam followed the same process. In 2018, the part of the agreement that covers investments was split into a separate investment protection agreement, EUVIPA. The ratification process of the EU-Singapore IPA at national level is still ongoing and is expected to take at least two years. 2 Details can be found in Appendix 9-B here. 3 Vietnam became an observer to the WTO GPA on 5 December 2012.

Get inspired by some of the small businesses looking forward to the EU-Vietnam trade deal EUVFTA also broadly supports sustainable infrastructure development, including a preference for the use of renewable energy and energy-efficient goods and services. A separate chapter on non-tariff barriers and investments in renewable energy production contains specific rules on authorisation and authorisation procedures, compliance with existing international standards and local share requirements. The EVFTA is considered a new generation bilateral agreement – it contains important provisions on intellectual property rights, investment liberalization and sustainable development. This includes the obligation to implement international labour organization (ILO) and United Nations Climate Change Convention standards. EUVFTA covers a wide range of service sectors, including financial services, professional business services, communication services, postal services, construction and related engineering services, health and social services, environmental services and transport services. Many of the concessions offered by each party go beyond concessions granted under the WTO Agreement on Trade in Services, including packaging services, building cleaning services, interdisciplinary R&D services and maintenance services. In some service sectors, such as telecommunications, the ceilings on foreign participation by EU investors in Vietnam will be increased. The agreement also obliges Vietnam and the EU to include in the EUSFTA all new service obligations that one of the parties will conclude in the future with third countries. At the heart of the EUVFTA is an almost complete abolition of tariffs between the EU and Vietnam, including the removal of more than 99% of tariffs within 10 years. Immediately after entry into force, 65% of EU exports (by product type) to Vietnam and 71% of Vietnamese exports to the EU will be duty-free.

Tariffs on other EU products will be gradually liberalised over the next 10 years, and tariffs on some Vietnamese products will be reduced within 7 years. TUEFTA also provides for the application of tariff quotas for certain remaining agricultural products for which import duties will not be phased out. After signatures, the agreements will be submitted to the National Assembly for ratification on the Vietnamese side and to the European Parliament for approval on the EU side and, in the case of the investment protection agreement, to the respective national parliaments of the EU Member States. The free trade agreement with the UK contains the same provisions as the evFTA, the ministry said. The EvFTA came into force in August and was supposed to reduce or eliminate 99% of tariffs on goods traded between Vietnam and the EU. The temporary import and export of repaired goods is duty-free. This will ensure a level playing field and competitive conditions, especially for specialised maintenance services such as aircraft. The great potential of trade between the EU and Vietnam also means growing investment opportunities in the Vietnamese logistics sector, which is in line with Vietnam`s ambition to become a regional logistics hub by 2025. The EU-Vietnam Free Trade Agreement and the ongoing Investment Protection Agreement allow the EU to participate in the provision of various maritime transport services, including agent services, cargo/container handling, storage and storage, etc. A historic new free trade agreement between Vietnam and the European Union entered into force on August 1, 2020. Since leaving the EU in January, Britain has broken up on its own, negotiating new trade deals with countries to replace those negotiated by the bloc. However, given that the UK is one of the largest markets for Vietnamese exports and one of Vietnam`s largest investors, trade and investment from the UK is likely to remain in limbo as long as markets deal with the post-Brexit impact.

However, Vietnam sees opportunities if Brexit comes into play. Previously, remanufactured products were considered “used” by Vietnam and were generally not allowed to be imported. However, the text of the agreement allows the import of remanufactured products and will open up trade in high-quality products such as medical devices and auto parts to serve the aftermarket. Vietnam can continue to restrict certain used goods under most-favoured-nation (MFN) conditions. The legal text of CEFTA contains a number of declarations and common arrangements as annexes to the Agreement, which form an integral part of the Agreement in accordance with Article 17.21. The banking participation agreement requires the Vietnamese authorities to “favourably evaluate” the investments of EU financial institutions, which must hold up to 49% of the interest rate capital in two Vietnamese commercial banks within five years of the entry into force of THE TEUFTA. There is a specific split to exclude four commercial banks from this agreement, namely the Vietnam Investment and Development Bank (BIDV), Vietinbank, Vietcombank and Agribank, in which the Vietnamese government currently holds a majority stake. Given the continued interest of foreign investors in Vietnamese banks, we expect EU financial institutions to try to use this exemption for foreign direct investment in due course. In addition, it could indeed be a deliberate attempt by the Vietnamese government to introduce a more diversified investor base into its banking sector – the existing foreign minority investors in this sector are mainly Asian banks.

However, the fact that this has been limited to just two Vietnamese banks is an indication that this may not be a precursor to broader foreign-invested reforms by Vietnamese banks – this, as well as how the Vietnamese government interprets this obligation in the context of its broader regulatory framework, remains to be seen. In addition, the positive outlook for trade between the EU and Vietnam is expected to lead to new demand in multimodal maritime transport (rail-ocean freight). The previously primarily conceptual multimodal solution Southeast Asia-Europe via China now seems more than likely to become a real offering in the market. DHL already offers a multimodal shipping link from Hanoi via China (Chengdu/Shenzhen) to Poland and Germany…