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EVFTA: challenges for Vietnam lie in non-tariff barriers

 VietNamNet Bridge – Vietnam has been told not to be too worried about the competition with the EU sourced products in the home market once the EU-Vietnam Free Trade Agreement (EVFTA) is signed.

VietNamNet Bridge – Vietnam has been told not to be too worried about the competition with the EU sourced products in the home market once the EU-Vietnam Free Trade Agreement (EVFTA) is signed.

“The EU is one of the most important markets for Vietnam. The EU-Vietnam economic relationship is the mutual-supporting relationship. The EU is not Vietnam’s main competitor,” commented Truong Dinh Tuyen, former Minister of Trade, who was the head of the Vietnamese negotiation delegation for Vietnam’s admission to WTO.

Therefore, he said, there is no need for Vietnam to worry that Vietnamese products would be eliminated from the market once the trade liberalization is implemented.

The most important thing that Vietnam needs to focus on, according to Tuyen, is to stimulate the institutional improvements in Vietnam, especially in the government’s procurement programs, law enforcement mechanism and sanctions.

“We will have to amend and promulgate some new laws, including the enterprise law, investment law, bidding law, public procurement law, competition law and the intellectual property law as well,” Tuyen said.

The EU is one of the Vietnamese biggest partners in the two-way trade and the biggest foreign investor in Vietnam.

According to Tuyen, Vietnam’s export turnover to the EU has been increasing steadily by 15-20 percent per annum. The high growth rate was also obtained even in the global economic crisis period.

Regarding the EU’s direct investment, it has registered 1,300 projects in Vietnam with the total investment capital of $17 billion. Meanwhile, Vietnam has had 33 projects in the EU, totaling $110 million.

Nevertheless, economists still feel worried that the Vietnam’s national economy would have big influences once the EVFTA is signed.

In industries, Vietnam would have advantages in three sectors of garments, footwear and fine arts & handicrafts, while the investments would be drawn to four sectors, including textile & garment, footwear, high technologies and automobile.

In agriculture, Vietnam specially wants to attract the investments into the farm produce processing sector in order to help improve the Vietnam’s farm produce’s value.

Nevertheless, Vietnamese enterprises have been warned that they may not take full advantage of the FTA to boost the exports to the EU, because the challenges now do not lie in the tariffs, but non-tariffs barriers.

According to Nguyen Minh Thao from the Central Institute of Economic Management (CIEM), once the EVFTA takes effects, 90 percent of Vietnamese wooden furniture products would enjoy the zero tax rate when entering the EU.

However, if Vietnamese products cannot overcome the non-tariff barriers, they would not be able penetrate the market.

Thao has warned that it is very difficult for wooden furniture manufacturers to satisfy the strict requirements set by the EU, including the principles on product origin. It would be very costly for Vietnamese enterprises to pursue the standards FLEGT – the EU's Forest Law Enforcement, Governance and Trade, or obtain FSC (forestry stewardship council) certificate and satisfy REACH standards.

Similarly, fine arts and handicrafts manufacturers would have to satisfy a lot of strict requirements, from the product quality requirements, like REACH, to the voluntary ones, like BSCI, SA 8000…

Ngoc Ha

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