Trade Win No. 10
The EU-Vietnam trade agreement brings together people and businesses
The European Union and Vietnam free trade agreement (EVFTA) is a very ambitious deal, eliminating 99 percent of tariffs, opening up services and public procurement markets, and facilitating regulatory alignment and cooperation. Entering into force in August 2020, it shows Europe´s engagement in the Indo-Pacific region and it is one of the most important trade agreements the EU has done with a developing country. For Vietnam, it is an opportunity to reduce its dependence on China, further enabling its international trade integration and accelerating domestic economic reforms. The current American reciprocal tariffs are forcing countries to derisk from the US and diversify their supply chains, so the EVFTA could be developed to further facilitate EU-Vietnam trade.
A full evaluation of the agreement has not been done yet, but according to a report from the European Chamber of Commerce in Vietnam, Vietnam has established itself as a leading exporter to the EU within ASEAN. Vietnam´s exports to the EU increased from 35 billion euros in 2019 to 48 billion euros in 2023, mainly in areas such as agriculture, electronics and textiles. EU exports grew only moderately, from 11 billion euros in 2019 to 11.8 billion euros in 2023. European investments into Vietnam have also increased. The analysis also points to other benefits, such as smoother trade and a more predictable business environment in Vietnam.
So, trade has increased, but there is more to be done: estimations show that the EU enjoys a 25 billion of untapped export potential and Vietnam one of 47 billion.
There have been challenges, as always during the first years of implementation of an agreement. Vietnam has had some difficulties in complying with rules of origin, reforming the business environment, and increasing transparency in trade procedures. From the EU side, there are concerns about a crackdown on human rights defenders and formal complaints that Vietnam is violating the agreement in that regard. The human rights situation in Vietnam remains an ongoing concern.
More efforts are needed to encourage European and Vietnamese businesses to utilize the benefits that EVFTA provides. All EU countries need to ratify the deal as there are still eight member states that have not done so.
Vietnam is one of the 12 members of the Comprehensive and Progressive Transpacific Partnership (CPTPP). Recent initiatives of the EU deepening its cooperation with the members suggest an important further step to engage in the Indo-Pacific region and play an active part in one of the most exciting trade areas in the world currently.
In sum, the trade agreement between the EU and Vietnam is boosting trade between EU and Vietnamese businesses, and facilitating cooperation in an era of increasing trade tensions.
