EU-Vietnam trade deal: what are the benefits?

Source: European Parliament (EP) i, published on Thursday, June 11 2020.

The EU-Vietnam trade deal is set to eliminate virtually all tariffs over the course of a decade. MEP Geert Bourgeois explains the benefits in our interview.

The European Parliament gave its consent to the EU-Vietnam free trade agreement and investment protection agreement on 12 February 2020. The Council gave its green light to the free trade agreement on 30 March. Following Vietnam’s ratification of the trade deal on 8 June, it will take effect by the end of summer 2020.

For the investment protection agreement to enter into force, EU national parliaments first need to ratify it.

Ahead of Parliament's votes in February, we talked to Belgian ECR member Geert Bourgeois, the MEP in charge of steering the agreements through Parliament, about the economic, social and environmental benefits.

Find out what trade agreements the EU is currently working on.

Can you give us an overview of what changes the EU-Vietnam trade deal would bring about?

The aim is to eliminate 99% of tariffs within seven years. This should result in €15 billion a year in additional exports from Vietnam to the EU by 2035, while EU exports to Vietnam would expand by €8.3 billion annually. Of course, every €1 billion of EU exports results in around 14,000 new, well-paid jobs here in the EU. The agreement is also totally in line with our ambition of the EU as a global player.

How do our economic relations with Vietnam currently stand?

There is trade and investment but not enough. It’s a vibrant market with a young population. With economic growth of 6-7% every year, Vietnam is very interesting for European investors.

In 2018, the country exported goods worth about €42.5 billion to the EU. In the other direction, we exported around €13.8 billion worth of goods. With this rules-based, free-trade agreement, there will be an increase in exports both ways.

Main exports

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    Vietnam mainly exports telecommunications equipment, clothing and food products to the EU.
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    The EU mainly exports goods such as machinery and transport equipment, chemicals and agricultural products to Vietnam.

How important is this free trade agreement for the EU in geopolitical terms?

China is a neighbour of Vietnam. There are also close relations with the US. It is very important that we strengthen our ties with the country. We’ve been negotiating for eight years and it’s important that we come to an agreement now. If not, I’m sure Sino-Vietnamese relations will become more important.

Additionally, as the first trade deal of the new European Parliament, we must show we want to set standards worldwide, all while creating prosperity and new jobs.

Parliament also votes on an investment protection agreement with Vietnam: can you tell us more about that?

The agreement aims to ensure predictability and rule-of-law for investors. In case of litigation, there will be a framework. Vietnam has accepted a modern [investment court system], similar to the one the EU agreed with Canada, with independent judges, a code of conduct and easy access for SMEs. This creates stability and trust for our small businesses.

What provisions are in the trade deal regarding the environment and labour standards?

I am well aware of the concerns, but trade agreements like this are a lever to improve standards outside the EU. On labour conditions, Vietnam is obliged to implement all the ILO conventions, and integrate them into its labour code. Moreover, until now, there has been no freedom of association for unions, but Vietnam has adapted its penal code.

On the environment, Vietnam is bound to the Paris agreement. The EU is working towards carbon neutrality and we must create a level playing field with other countries. If we are doing our best, we should expect the same of others, so the trade deal has a climate aspect.

Many in the Parliament are concerned about human rights in Vietnam: how will these agreements improve matters?

We are very concerned about political prisoners and have stressed to the Vietnamese authorities the importance of human rights. Vietnam is responding in a positive manner and from this month a European Parliament delegation will monitor the situation. We have also agreed the establishment of an inter-parliamentary delegation between Parliament and Vietnam’s national assembly.

Of course, I am completely aware that the glass is not full, but I call on my fellow MEPs to give their consent, as this agreement is a lever to improve the situation. There are obligations Vietnam will need to fulfil on labour, the environment and human rights, and we will monitor this.

Read more about the EU’s trade policy and human rights

Should Parliament approve the agreements on 12 February, what are the next steps?

For the free trade agreement, the approval of EU national parliaments is not required. The Commission will have a mandate to implement it straightaway. Getting towards zero tariffs and the reduction of non-tariff barriers will be gradual until 2035.

With the investment protection agreement, however, as justice is a competence of the member states, it will need the approval of all EU parliaments, and this will take some time.

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