August 11, 2020 05:21

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As a "growth lever", EVFTA opens up huge export opportunities

10:52 | 06/07/2020

VCN - Effective from August 1, the Vietnam-EU Free Trade Agreement (EVFTA) is expected to create opportunities to boost Vietnam's exports to the EU and attract FDI from the EU.

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as a growth lever evfta opens up huge export opportunities
Guests attend the seminar. Photo: Thai Binh

Highest level of commitment

Speaking at the seminar "Tax policy and customs procedures in the implementation of EVFTA" jointly organized by Customs Newspaper and the European Chamber of Commerce in Vietnam (EuroCham) on July 2, in Ha Noi, Ha Duy Tung, Director of the Department of International Cooperation (Ministry of Finance) said that Vietnam has implemented a series of FTAs ​​and the openness of the economy has been very large since about the 1990s.

With the EVFTA, the EU is a huge market for Vietnam's key export products. The EU will eliminate up to 85% of tariff lines once the agreement comes into effect.

This is the highest-ever level of commitment. Most of Vietnam's key export items like leather and footwear, textiles, etc., have a roadmap of tariff elimination within seven years, with gradual elimination every year. This will motivate businesses to increase export value.

"This agreement will bring the added value of GDP to the economy and create many opportunities to boost exports for businesses," Tung said.

Sharing more specific figures, Ngo Chung Khanh, Deputy Director of Multilateral Trade Policy Department (Ministry of Industry and Trade), said that according to research by the Ministry of Planning and Investment, the EVFTA will help Vietnam's export turnover to the EU increase by 42.7% in 2025 and 44.37% in 2030 compared to not having the agreement.

At the same time, imports from the EU will increase but at a lower rate than exports, about 33.06% in 2025 and 36.7% in 2030.

In macro aspects, the EVFTA contributes to Vietnam's GDP increasing at an average of 2.18-3.25% (2019-2023); 4.57-5.30% (2024-2028) and 7.07-7.72% (2029-2033).

Analysing more clearly from an export perspective, Khanh said that even though the EU is currently one of the largest export markets of Vietnam, the country’s market share of goods in this region is still very modest because the competitiveness of Vietnamese goods (especially price competitiveness) is limited.

Therefore, strong commitments to open markets in the EVFTA will certainly increase the price competitiveness of Vietnamese goods in this market, helping boost Vietnam-EU trade relations and helping expand the market for Vietnam's exports.

With the commitment to eliminate import taxes up to nearly 100% of the tariff schedule and trade value agreed by both sides, the opportunity to increase exports for Vietnam's products such as textiles, footwear, agricultural and aquatic products (including rice, sugar, honey, vegetables and fruits), wooden products etc is significant.

"The level of commitment in the EVFTA can be considered as the highest level of commitment that Vietnam has achieved in signed FTAs. This is even more significant when at present, only more than 42% of Vietnam’s export turnover to the EU is entitled to a tax rate of 0% under the Generalized System of Preferences (GSP),"Khanh emphasised.

Further attract FDI from the EU

Particularly in terms of investment attraction, Khanh said the more open and more favourable investment environment and the more attractive export prospects will attract FDI investment from the EU into Vietnam more.

A series of EU’s advantageous fields such as services, finance, automobiles, manufacturing and processing, information technology, high technology and processed agricultural products will be fields that the EU invests in Vietnam and these are also fields that Vietnam needs to invest and develop.

as a growth lever evfta opens up huge export opportunities
Textile and garment is an industry that has a great potential to boost exports to the EU when the EVFTA takes effect. Photo: Nguyen Thanh

However, the leader of the Multilateral Trade Policy Department stressed there was a needed to be cautious when acknowledging this issue because in the past, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was assessed to increase FDI when it came into force, after one year of effective CPTPP, investment attraction was on the downside.

"Vietnam is in a status of welcoming an eagle to make a nest, but whether it can grasp or not and where will the investment spread, it is difficult to make a firm judgment. However, I think that the EVFTA will attract more investment, different from CPTPP,"said Khanh.

Regarding the issue of increasing FDI attraction from the EU, Nguyen Hai Minh, Vice President of EuroCham, also said that FDI investment will increase but there will be no trend of rapid movement, especially in the EU business sector.

"Through exchanging with the large business communities of the EU that are present and not yet present in Vietnam, it is recognized that they are studying and grasping the movement trend but the importance is where they will choose.  In ASEAN, they will consider Vietnam, Indonesia, and Thailand, or outside ASEAN, it is India. It can be said that Vietnam is the top choice target but investment shift will take time," said Minh.

Considered a growth lever, the EVFTA opens up great opportunities for Vietnamese businesses to enter a market of 508 million people and about US$ 18,000 billion of GDP.

The EU is one of Vietnam's most important trading partners, with import and export turnover in 2019 of US$56.39 billion (of which exports reached US$ 41.48 billion, imports reached US$14.91 billion). A prominent feature of the import-export structure between Vietnam and the EU is the very high complementarity nature rather than direct competition.

 

By Thanh Nguyen/ Huyen Trang