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Vietnam takes benefits from the EVFTA and EVIPA

Linh Pham

June 9, 2020

Obviously, the EU-Vietnam Free Trade Agreement has brought a lot of opportunities to Vietnam. The approval of the agreement is such a huge endeavor and evidence of our attempts in boosting economic development and joining in the integration. The EVFTA helps to diversify the market and leading export goods such as agriculture products.

This article introduces you about an overview of the EVFTA and EVIPA, then provides you with key points in these agreements regarding commercial and economy.


Overview of EVFTA and EVIPA

Vietnam EVFTA with European countries

What is EVFTA? 

European Union (EU) – Vietnam Free Trade Agreement, in other words, EVFTA is a new free trade between Vietnam and the member countries of European Union which was announced in 2016. Two years later, on June 26, 2018, a new direction of EVFTA was agreed upon. Accordingly, the EVFTA was separated into two agreements: an agreement on free trade (EVFTA) and an agreement on investment protection (EVIPA).

  – EVFTA includes all of the current content of the EVFTA; however, the investment section only includes the liberalization of foreign direct investment. With this agreement, EU has the right to approve and implement it temporarily.

 – IPA includes investment protection and the mechanism of investor-state dispute settlement (ISDS). IPA needs ratification from both the European Parliaments and parliaments of member countries of the EU in order to come into effect.

Why does Vietnam initiate FTA?

There are three main advantages that FTA brings to Vietnam. First, EVFTA will propel the export sectors in Vietnam. It will help diversify the market and goods that are exported abroad, especially agricultural products, seafood, and other goods of Vietnam that have comparative advantages.

Second, as EVFTA commits to protect all investment deals and investors in a fair, complete, and safe manner, it makes the investment environment and legal system in Vietnam more transparent, thus helping Vietnam attract investors from EU and other countries.

Last but not least, in terms of strategy, negotiating and implementing these agreements show Vietnam’s commitment to integrating itself into the global economy in the context of uncertain and complex geopolitics.

Timeline of the approval process between EVFTA 

– October 2010: Prime Minister of Vietnam and the President of the European Commission agreed to start negotiations on the EVFTA.

– June 2012: The Vietnamese Minister of Industry and Trade and the European Commissioner for Trade officially announced the negotiations on EVFTA.

– December 2015: Negotiations on the agreement concluded and legal review began to prepare for the signing of the agreement.

– June 2017: The legal review process for the EVFTA at the technical level completed.

– September 2017: The EU requested Vietnam to split the investment protection content and the mechanism of investor-state dispute settlement (ISDS) from the EVFTA to form a separate agreement due to the ascent of new issues related to the EU competence to ratify FTAs. Under this proposal, EVFTA will be split into two separate agreements, including the EVFTA and IPA.

– June 2018: Vietnam and EU officially agreed to separate EVFTA into two agreements including EVFTA and IPA, completed the entire legal review process of EVFTA and agreed on all contents of the IPA.

– August 2018: The legal review of the IPA completed.

– October 17, 2018: The European Commission officially adopted the EVFTA and IPA.

– June 25, 2019: The European Council approved the signing of the agreements.

– June 30, 2019: The EVFTA and IPA were officially signed by Vietnam and EU.

– January 21, 2020: The International Trade Committee (INTA) endorsed the EVFTA.

– March 30, 2020: The European Council passed the EVFTA.

– June 8, 2020: Vietnam’s National Assembly (NA) ratifies the EVFTA and IPA.


Latest news of the Free Trade Agreement between EU and Vietnam

At the 9th session of the 14th National Assembly, the National Assembly of the Socialist Republic of Vietnam officially approved the Free Trade Agreement (EVFTA) and the Investment Protection Agreement (IPA) between EU and Vietnam, with up to 100% positive votes.

After the National Assembly completes all the required procedures for the EVFTA and IPA approvals, the EU-VN Free Trade Agreement is expected to be valid in this summer.

As being valid, the EVFTA is expected to immediately bring positive effects to businesses in both Europe and Vietnam. Since the first effective date, the tariff reduction will be applied to 66% of exports from EU to Vietnam and 71% of EU imports from Vietnam.


Key points of EVFTA and EVIPA which are approved by the Vietnamese government

Key points of EVFTA and EVIPA which are approved by the Vietnamese government

This part’s reference comes from the EU – Vietnam Free Trade Agreement introduced by the Ministry of Industry and Trade.


Trade in goods

For Vietnamese exports, as soon as the Agreement comes into effect, the EU will eliminate import duties on about 85.6% of tariff lines, equivalent to 70.3% of Vietnam’s exports to the EU. After 07 years from the date of entry into force of the Agreement, the EU will eliminate import duties on 99.2% of tariff lines, equivalent to 99.7% of Vietnam’s exports. For the remaining 0.3% of exports, the EU commits to giving Vietnam a tariff quota with an import duty of 0%.

Thus, it can be said that nearly 100% of Vietnam’s exports to the EU will be eliminated import tax after a short journey. So far, this is the highest level of commitment a partner gives us in the signed FTAs. This benefit is especially meaningful when the EU is continuously one of the two largest export markets of our country today.


Trade in services and investment

Commitment of Vietnam and EU on trade in investment services to create an open and favorable investment environment for businesses of the two sides. Vietnam’s commitments go beyond the commitments in the WTO. The EU commitment is higher than the WTO commitment and is equivalent to the highest EU commitment under the recent EU FTAs.

The sectors that Vietnam committed to facilitate EU investors include a number of specialized services, financial services, telecommunications services, transport services, distribution services. The two sides also made commitments on national treatment in the field of investment, and discussed the content of dispute resolution between investors and the state.

Some service sectors are mentioned consisting of banking services, insurance services, telecommunications services, distribution services.  


Government Procurement

Vietnam and the EU have agreed on the contents similar to the Government’s Procurement Agreement (GPA) of the WTO. With some obligations such as online bidding, setting up an electronic portal to post bidding information, etc., Vietnam has a roadmap to perform. The EU also pledges to provide technical assistance to Vietnam to fulfill these obligations.

In terms of commitments, we commit to open the procurement of ministries, central branches and a number of units under the Ministry of Defense (for goods and services normally purchased for non-security purposes – national defense), Hanoi, Ho Chi Minh City, Vietnam Electricity, Vietnam Railway Corporation, 34 hospitals under the Ministry of Health, Hanoi National University, and Thanh National University.

Ho Chi Minh City and a number of central institutes. Regarding the threshold of market opening, we have a 15-year roadmap to gradually open up shopping activities.

Vietnam reserves the right to reserve a certain proportion of the value of bidding packages for domestic contractors, goods, services and labor within 18 years from the date of entry into force of the Agreement.

Regarding pharmaceutical products, Vietnam has committed to allowing EU businesses to participate in bidding for pharmaceutical procurement of the Ministry of Health and public hospitals under the Ministry of Health with certain conditions and roadmaps.


Intellectual Property

Commitments on intellectual property include commitments on copyright, inventions, inventions, commitments related to pharmaceuticals and geographical indications, etc. Basically, Vietnam’s commitments on intellectual property are in accordance with current law. Some key features of intellectual property commitment are mentioned as follow:

– Regarding geographical indications, when the Agreement comes into effect, Vietnam will protect over 160 EU geographical indications (including 28 members) and the EU will protect 39 geographical indications of Vietnam. Vietnam’s geographical indications are related to agricultural products and foodstuffs, creating conditions for a number of Vietnam’s agricultural products to build and assert their brands in the EU market.

– Regarding trademarks: The two sides pledged to apply a convenient and transparent registration procedure, including having an electronic database on the published trademark application and the registered trademark to the public. access to, and allow the invalidation of, registered trademarks but not actually used within 5 years.

– Regarding implementation: The agreement provides for border control measures for exports suspected of infringing upon intellectual property rights.

– Most-favored nation treatment (MFN): The most-favored nation principle in this Agreement ensures that EU organizations and individuals enjoy the benefits of high protection standards not only with intellectual property rights under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) but also other objects of intellectual property rights in trade agreements. Free Trade that Vietnam participates (such as CPTPP Agreement).


State-owned enterprises (SOEs) 

Provisions of SOEs in EVFTA Agreement to create an environment of fair competition between economic sectors. The commitment also takes into account the important role of SOEs in implementing public policy goals, macroeconomic stability and security – defense. Therefore, the EVFTA Agreement only governs commercial activities of state-owned or controlled enterprises and monopoly enterprises whose commercial activities are large enough to make sense in competition.

The main obligations of the SOE Chapter are: (i) operating under a market mechanism, which means that the enterprise has the right to make its own decisions in business activities and without any State administrative intervention, except in the case of achievement of public policy objectives; (ii) there is no discrimination in the sale and purchase of goods and services to the sectors and fields which have been opened; (iii) transparency of the basic information of the business in accordance with the law on enterprises.


Ecommerce

To develop e-commerce between Vietnam and the EU, the two sides pledged not to impose import taxes on electronic transactions. The two sides also pledged to cooperate through the maintenance of a dialogue on the management issues posed in e-commerce, including:

– The responsibility of intermediary service providers for transmitting or storing information;

– Conducting with electronic communications in commerce without the permission of the recipient (such as electronic mailing, advertising …);

– Protect consumers when participating in electronic transactions.

The two sides will also cooperate to exchange information on domestic laws and related enforcement issues.


Transparency

Originating from the practice of the domestic legal environment having a great influence on trade, EVFTA Agreement sets aside a chapter on transparency with the most common requirements to ensure an effective and predictable legal environment. predictable for economic entities, especially small and medium enterprises. 


Trade and sustainable development

The two sides affirmed their commitment to pursuing sustainable development, including economic development, social development and environmental protection. Regarding labor issues, as members of the International Labor Organization (ILO), the two sides pledged to respect, promote and implement the ILO 1998 Declaration on the basic principles and rights of TB. and action, including promoting the effective ratification and implementation of ILO Basic Conventions.

In addition, the two sides also agreed to enhance cooperation through information and experience sharing mechanisms to promote ratification and implementation of labor and environmental conventions in a number of areas such as gas change. climate, biodiversity, sustainable management of forests and trade in forest products.


To understand clearly about the EVFTA and IPA, you can visit the website of the Ministry of Industry and Trade.

In conclusion, EVFTA creates many great opportunities for Vietnamese import and export. The agreement has brought huge advantages for the Vietnamese economy as well as competitive advantages compared to other countries in Southeast Asia. The article helps you have profound knowledge about the EU-Vietnam Free Trade Agreement. Hope that you can gain some insights about the big achievement of the Vietnamese economy this year. In the meantime, you can read our other articles here.

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