VietNamNet Bridge – Vietnam and the European Union (EU) signed a Partnership and Cooperation Agreement (PCA) in Brussels on June 27, opening a new chapter in bilateral relations.

Relations between Vietnam and the EU have developed dynamically since the two sides established diplomatic ties in November 1990. The EU is one of Vietnam’s key partners in various areas, from politics-diplomacy and development cooperation through to trade-investment, and science-technology, as well as in addressing other global challenges.

The PCA, initialled in October 2010 and officially signed in June 2012, is expected to bring bilateral relations to new heights, with deeper and broader cooperation on a basis of equality and mutual benefit.

It’s worth remembering that over a decade ago the rapid development of Vietnam-EU relations required the two sides to formulate a new framework of cooperation to replace the 1995 Vietnam European Commission Framework Cooperation Agreement.

In June 2005 the Prime Minister approved a master plan on Vietnam-EU relations through to 2010 and orientations to 2015, aiming to build an equal partnership, long-term and comprehensive cooperation for peace and development.

By 2007, the EU proposed negotiating the PCA with each of the ASEAN member countries to develop a new cooperation framework with countries in Southeast Asia.

In October 2007, the EU proposed PCA negotiations with Vietnam to replace the 1995 Vietnam-EC Framework Cooperation Agreement.

During his first visit to Vietnam in November 2007, EC President Jose Manuel Barroso and Prime Minister Nguyen Tan Dung agreed to kick-start negotiations of the PCA.

In October 2010 both sides completed the content of the agreement after nine rounds of negotiations and initialled it in the presence of President Barroso and PM Dung.

The PCA and new prospects

The PCA creates a new, long-term and comprehensive framework for Vietnam-EU relations, compatible with both sides’ priorities for socio-economic development and foreign affairs, as well as the common trend of cooperation and development in the world.

Agreements within the PCA will be the prerequisite for both sides to establish specific mechanisms for cooperation to develop bilateral partnership in the coming years.

The PCA will help deepen the strong political relations between Vietnam and the EU. Agreements within the PCA, in terms of politics, peace and security, will lay a firm foundation for the two sides to strengthen dialogues and cooperation in addressing issues of mutual concern at bilateral and multilateral forums, especially the ASEAN-EU forum when Vietnam assumes the role of a coordinator of the two blocs as of July 2012.

As an active and responsible member of the international community, Vietnam will work closely with its partners, including the EU, to address regional and global issues, such as climate change, the fight against trans-national crime and terrorism, nuclear security, natural resources management, environmental protection, control of proliferation of weapons of mass destruction, and maritime security.

The PCA enables the two sides to fully tap their comparative advantages and supplement their economic structures. The EU has advanced technologies, especially in the mechanical, manufacturing, chemical, transport, aviation, pharmaceutical and service industries with high added value. These are products increasingly required by Vietnam whose production capacity remains limited.

Meanwhile, the EU has strong demand for a wide range of products, such as rubber latex, handicrafts, footwear, garments, seafood, coffee, tea, and pepper which are all Vietnam’s highly competitive commodities.

Vietnam holds great potential for expanding its export markets in the EU, as two-way trade value makes up just 0.6 percent of the EU’s total trade. A separate chapter on trade and investment of the PCA shows the two sides’ keen interest in the development potential of these areas.

The PCA allows Vietnam more convenient access to trade with the EU. Specifically, the EU pledges to boost consultancy in improving the effectiveness of using benefits that the Generalised System of Preferences can bring to Vietnam. The EU also vows to give the Southeast Asian nation special treatment and will soon recognise Vietnam as a market-based economy.

In fact, the PCA has created an important foundation for the two sides to enter bilateral negotiations for a Free Trade Agreement (FTA). Once the FTA is signed, it will present numerous opportunities, remove tariff and non-tariff barriers, and boost export and economic growth.

Currently, some 42 percent of Vietnam’s exports to the EU have enjoyed a zero tax rate compared to the 80-85 percent the EU has offered to Malaysia and the Philippines. If the FTA is enacted, the export rate will likely rise to 90 percent, helping increase Vietnam’s exports to the EU by an additional 35 percent.

Together with FTA negotiations, the EU will also enhance the recognition of Vietnam’s market economy status, helping the country cope with unhealthy modes of trade protectionism, including anti-dumping lawsuits.  

In a separate chapter, the EU will continue to provide development aid for Vietnam beyond 2013 in line with the country’s socio-economic development strategy. It will help the country meet internationally-recognised development goals, including the UN Millennium Development Goals (MDGs).   

Deputy Foreign Minister Bui Thanh Son says the signing of the PCA and the start of the FTA negotiations will usher in a new period of closer cooperation between Vietnam and the EU, and especially strengthen Vietnam’s Doi Moi (Renewal) and international integration.     

The EU is Vietnam’s leading economic and trade partner and second largest export market after the US. Two-way trade has increased significantly from US$1.5 billion in 1995 to US$24 billion in 2011.

Vietnam mainly exports footwear, garments, seafood, wood, electronics and other consumer goods, while it imports machinery, equipment, medicines and airplanes from the EU.

It has achieved a trade surplus in economic relations with the EU, fetching US$3-5 billion, equivalent to halt the total exports.
As of 2011, the EU invested in 1,687 projects in Vietnam with total registered capital amounting to US$32 billion, of which US$13 billion had been disbursed.

VietNamNet/VOV