Efficient EVFTA implementation contributes to economic recovery

About three months after it took effect, the EU-Vietnam Free Trade Agreement (EVFTA) has already helped Vietnam recover some economic growth in the context of the Covid-19 pandemic.

Efficient EVFTA implementation contributes to economic recovery

Positive signals

The European Union is the world’s second largest importer of goods with annual import value reaching almost US$2.34 trillion. Prior to August 1, 2020 when the EVFTA took effect, Vietnam accounted for only two percent of the EU’s import value, and only 42 percent of all Vietnamese exports to the EU enjoyed a zero percent tax in accordance with the Generalized System of Preferences (GSP). The EVFTA will gradually zero out most tax lines on Vietnamese exports and greatly help Vietnam increase exports to the EU.

Since the EVFTA took effect, more than 15,000 certificates of origin forms have been issued with a total turnover of US$700 million to 28 EU countries, according to the Ministry of Industry and Trade. The Ministry of Agriculture and Rural Development said that in August alone, Vietnam’s export value to the EU reached US$3.25 billion, up 4.65 percent against July and 4.2 percent against last year. The turnover in September also posted a 14.4 percent year-on-year surge.

Orders for seafood products in September grew 10 percent against July, with shrimp export turnover up 15.7 percent year-on-year, marking the highest growth in 2020. In September, Vietnam began exporting rice to the EU, benefiting from a tax rate of zero percent under the EVFTA.

According to Tran Dinh Luan, Director General of the Directorate of Fisheries under the Ministry of Agriculture and Rural Development, the EVFTA has created opportunities for Vietnamese goods to trade at lower prices in the EU market, helping improve competitiveness compared to goods without the benefits of an FTA with the EU.

Vietnam has advantages in production and export of agricultural, forestry and aquatic products while the EU has great demand for these items with import value accounting for 8.4 percent of the total annual import value. This promises to make further room for Vietnamese agricultural exports to the EU market.

In addition, many other products such as telephones and components, machinery, equipment and spare parts, textiles, footwear, seafood, furniture, and coffee are also expected to increase their export turnover to this market.

These initial results are said to be positive given the continuing difficulties posed by the Covid-19 pandemic and the novelty of the agreement for most enterprises.

According to the Ministry of Planning and Investment, the EVFTA will boost Vietnam’s export value to the EU about 20 percent in 2020, 42.7 percent in 2025 and 44.37 percent in 2030. Vietnamese businesses will enjoy certain incentives when importing high quality goods especially machinery, equipment and high technology from the EU at reasonable prices. The EVFTA is expected to increase Vietnam’s gross domestic product (GDP) by 2.18-3.25 percent in 2020-2023, 4.57-5.30 percent from 2024-2028, and 7.07-7.72 percent in 2029-2033. It is also expected to form a new Vietnam-EU value chain to attract more EU investment to Vietnam.

Efficient EVFTA implementation

The Ministry of Industry and Trade emphasized that from now until the end of the year, the ministry will continue to disseminate information on the trade in goods and services, investment, import tax elimination, and other commitments under the EVFTA to improve the understanding of the agreement.

The ministry has urged ministries and sectors to promptly prepare guiding documents for EVFTA implementation. The government issued Decree 111/2020/ND-CP on Vietnam’s special preferential import and export tariffs in accordance with the EVFTA, for application from 2020-2022; Decree 103/2020/ND-CP on certification of fragrant rice exports to the EU; and Decree 102/2020/ND-CP on ensuring legal timber in Vietnam. Meanwhile, Prime Minister Nguyen Xuan Phuc issued decisions approving EVFTA implementation plans and appointing organizations to chair EVFTA implementation. The Ministry of Industry and Trade issued Circular 11/2020/TT-BCT referring to the origin of goods associated with the EVFTA.

The Ministry of Industry and Trade is continuing to provide information related to EVFTA implementation through its website (http://evfta.moit.gov.vn/) while promoting market research to help businesses take advantage of EVFTA-based tariff incentives. The ministry will maintain its weekly agricultural-forestry-fisheries newsletter, build a market information channel to update businesses on market developments, and forecast and evaluate market supply, demand and prices to help businesses prepare appropriate production and trade development plans. It will also promote branding of exports to the EU.

Efficient EVFTA implementation will not only help Vietnam speed up development and increase GDP, but also recover economic growth following the Covid-19 pandemic that shrank GDP growth in the first three quarters of 2020 to the lowest first-three-quarter level (2.12 percent) in the past decade.

VietNam Economic News

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