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EU-Vietnam FTA

EU-Vietnam FTA approved by EP

13 February 2020

On 11 February the European Parliament approved the EU-Vietnam trade and investment agreements by large majorities which will allow the FTA to enter into force later this year.

Following the FTA with Singapore, the deal with Vietnam will eliminate virtually all tariffs on goods and provides guarantees on sustainable development, labour rights, environmental protection and the Paris climate accords.

Vietnam is the EU's second largest trading partner in SE Asia after Singapore, with trade in goods worth €49.3 billion a year and trade in services of €4.1 billion. The EU's main exports to Vietnam are high tech products, including electrical machinery and equipment, aircraft, vehicles, and pharmaceutical products. Vietnam's main exports to the EU are electronic products, footwear, textiles and clothing, coffee, rice, seafood, and furniture.

With a total foreign direct investment stock of €6.1 billion (2017), the EU is one of the largest foreign investors in Vietnam. Most EU investments are in industrial processing and manufacturing.

Commissioner for Trade, Phil Hogan, said that the FTA had huge economic potential and was a win for consumers, workers, farmers and businesses.’ He added that it showed trade policy could be a force for good, a reference to Vietnam moving to ratify a number of ILO conventions.

Hogan also noted that this is the most comprehensive trade agreement between the EU and a developing country which means that it will have a ten year grace period to eliminate duties.

But many important EU export sectors including pharmaceuticals, chemicals and machinery will enjoy duty free imports on entry into force. The trade agreement also contains specific provisions to address non-tariff barriers in the automotive sector, and will provide protection for 169 traditional European food and drink products, known as Geographical Indications, like Rioja wine or Roquefort cheese.

Through the trade agreement, EU companies will also be able to participate on an equal footing with domestic Vietnamese companies in bids for procurement tenders by authorities and state-owned enterprises in Vietnam.

Besides offering significant economic opportunities, the agreement also ensures that trade, investment and sustainable development go hand in hand, by setting high standards of labour, environmental and consumer protection and ensuring that there is no 'race to the bottom' to attract trade and investment.

The agreement commits the two parties to:

  • ratifying the eight fundamental Conventions of International Labour Organization (ILO), and respect, promote and effectively implement the principles of the ILO concerning fundamental rights at work;
  • implement the Paris Agreement, as well as other international environmental agreements, and act in favour of the conservation and sustainable management of wildlife, biodiversity, forestry and fisheries; and
  • involve independent civil society in monitoring the implementation of these commitments by both sides.

Vietnam has already made progress on some of these commitments:

  • It ratified in June 2019 the ILO Convention 98 on collective bargaining
  • It adopted a revised Labour Code in November 2019
  • It confirmed a timeline for the ratification of the remaining two fundamental ILO Conventions on freedom of association and on forced labour.

The trade agreement also includes an institutional and legal link to the EU-Vietnam Partnership and Cooperation Agreement, allowing appropriate action in the case of serious breaches of human rights.

With the Parliament's adoption, the Council can now conclude the trade agreement. Once the Vietnamese National Assembly also ratifies the trade agreement, it can enter into force, most likely in early summer 2020. The investment protection agreement with Vietnam will still need to be ratified by all Member States according to their respective internal procedures. Once ratified, it will replace the bilateral investment agreements that 21 EU Members States currently have in place with Vietnam.