With the European Union-Vietnam Free Trade Agreement (EVFTA) poised to come into force, many believe that it will present more diversified market opportunities for local businesses, therefore helping them to regain growth momentum following the novel coronavirus (COVID-19) pandemic
The EVFTA is believed to bring a wealth of opportunities to businesses after the COVID-19 pandemic
Many economic experts believe that this year's economic growth will fail to achieve the previously set goals. Amid this context, the implementation of the EVFTA can be considered to be an important step in helping to offset the economic slowdown during the epidemic period.
Indeed, recent years have seen domestic enterprises struggle to survive in the European market due to fierce competition from other large-scale industries worldwide, particularly China, as Vietnamese products are usually being priced between 10% and 20% higher than those of its northern neighbour. As a result, the country’s market share of goods within the EU remains modest.
Meanwhile, the EU represents the second largest import market in the world. Each year the EU imports goods with a value of approximately US$2,338 billion, while the Vietnamese export market share in the EU currently standing at a mere 2%. Moreover, just over 42% of Vietnamese exports to the EU have enjoyed a 0% tax rate in line with the Generalized System of Preferences.
Tran Thanh Hai, deputy director of the Import and Export Department under the MoIT, said that, with a strong commitment to boost trade with the market, eliminating import taxes by close to 100% in line with the tariffs stated in the EVFTA will see the country enjoy plenty of opportunities to increase export growth in the near future.
This is especially true with the country already successfully containing the COVID-19 epidemic. Additionally, the Vietnamese business community will enjoy greater opportunities to stay active as they restart their operation, as opposed to many firms in other countries that are still facing complex developments from the disease.
“The EU is a big market and is creating very high values for Vietnamese imports and exports of traditional products with advantages such as garments and textiles, footwear, agricultural and fishery products, and wooden products. In recent times, we have also penetrated and increased the turnover in this highly lucrative market. With the EVFTA in effect, Vietnam will have more advantages in accessing the market when most of the goods exported to this bloc within the seven to ten-year roadmap, the tax rate will be 0%," Hai said.
In terms of imports, domestic enterprises will be able to enjoy many benefits from imported sources of goods and materials at a more reasonable price from the EU. Therefore, as we move into the post-epidemic phase, Vietnamese firms will have a great advantage once the trade deal comes into effect, largely from reduced or eliminated tariff barriers which will occur in order to exploit the vast market of US$18 trillion.
In response to specific and impactful assessments of the EVFTA and the epidemic, especially with regard to the growth of industries, employment, and social security, the MoIT stated that the COVID-19 epidemic remains very complicated.
This is especially true in European nations who are major trading partners of the country, therefore making it hugely difficult for firms to achieve trade and investment targets as expected.
Despite this, it is clear that with the strict commitments within the agreement, the EVFTA can be considered a huge opportunity for Vietnamese enterprises to change in a positive direction and take full advantage of the benefits brought about by the trade deal.
Moreover, this will give a chance to the country to review its legal system in accordance with international practices as well as other commitments outlined in the EVFTA.