As free trade agreements (FTAs), including the EU–Vietnam Free Trade Agreement (EVFTA) that is about to be ratified by the Vietnam National Assembly, tend to be asymmetric in nature,
there will be both winners and losers once the EVFTA comes into force.
According to Dr John Walsh, International Business Program manager at RMIT University Vietnam, even though the EVFTA offers a win-win situation overall, that does not mean the benefits will be equally divided at each stage. Similarly, there will be a great deal of change, and there may not be an easy transition for all parties involved.
“If we look at famous FTAs such as the North American Free Trade Agreement, this is commonly considered a loss for the United States because the government seemingly took insufficient care to provide alternative job opportunities to people whose manufacturing jobs were lost, especially those who lived in communities that were dependent on manufacturing and were remote from other possible job markets,” Dr Walsh remarked.
With the EVFTA, people who cannot change their work lifestyle for reasons such as age, work circumstances and the ability to acquire new skills will need support. The government will play an important role in offering retraining, relocation and new opportunities to those able to utilize these advantages.
At the same time, a number of companies are expected to go out of business because of the turbulence from the changes and their own inability to adapt.
However, overall, the EVFTA promises to bring tremendous opportunities for businesses and consumers.
For Vietnamese firms looking to export to Europe, it would be helpful to start with a European partner with expertise in local distribution markets, just as foreign firms do when coming to Vietnam.
For Vietnamese companies looking at competing in the domestic market, some will continue to try to compete purely on a low-cost basis and that will be successful in some cases. Others can look to benefit from the side effects of foreign direct investment in Vietnam and the possibility of technology transfers.
A wide range of products will enjoy reduced tariffs and subsequently become cheaper for consumers. The quality of life will improve as a result, especially for urban middle-class people living in areas where retail outlets will sell these products.
Moreover, signing the agreement will increase not just Vietnam’s economic situation but also its political status.
Unique opportunities will be presented to Vietnam as the country undergoes its process of rapid economic development, now with an EVFTA boost. “We have seen Japan move from poverty to wealth, then South Korea, Taiwan, Singapore and Hong Kong, followed by later waves of development involving Malaysia, Thailand and China. Vietnam is undergoing development after all of these predecessors,” Dr Walsh remarked.
“This has many implications and one of the positive ones is that the country and its people can benefit from having observed what other countries have tried before,” he added.
EVFTA and EVIPA make important progress in Vietnam-EU relations
The EVFTA and the EU-Vietnam Investment Protection Agreement (EVIPA) not only bring significant benefits to the economies, businesses and people of both Vietnam and the EU but also further promote the comprehensive partnership between the two sides, vice spokesperson of the Ministry of Foreign Affairs Doan Khac Viet said at a press conference on May 28.
According to Viet, the EVFTA and EVIPA were approved by the European Parliament on February 12 after effective negotiations and dialogues between the EU and Vietnam’s ministries, government departments and agencies. The EVFTA was later approved by the European Council on March 30.
The EVIPA will still need to be ratified by national parliaments of all EU member states.
“The EVFTA and EVIPA make important progress in both the strategic and economic relations between Vietnam and the EU,” Viet said.
The National Assembly of Vietnam expects to review and ratify the EVFTA and EVIPA at its ninth session. SGT
The upcoming bilateral free trade between Vietnam and the EU may be a tough nut to crack unless the country can make thorough preparations for fulfilling commitments in the deal to further its trade and investment with the bloc.
European investors are expected to stir mergers and acquisitions activities in the coming time as the landmark free trade agreement between the European Union and Vietnam nears ratification.