VietNamNet Bridge – Potentially one of the most monumental and important free trade agreements that Vietnam has ever entered into is poised to be signed. The Vietnam-Russia trade deal could create billions of dollars in new markets for Vietnam exporters.
In many respects, this free trade pact will open up economic opportunities that not even the EU, US or RoK can match and will benefit Vietnamese working in a wide range of sectors.
As just one example, Vietnamese farmers will receive tariff-free access to sell their goods and services in the Customs Union (Russia, Belarus, Kazakhstan) food markets— and right now it is just pending a few technical issues and will be ready for signature in early 2015.
The Vietnam- the Customs Union FTA comes about given the dynamic economic backdrop of Vietnam’s transition to a socialist-oriented market economy and its ‘open door’ policy.
In line with its World Trade Organization (WTO) commitments the country is now preparing to sign a number of other important trade deals with nations around the globe.
A few of the more significant agreements include the ASEAN Free Trade Area (AFTA), the ASEAN-China Free Trade Area (ACFTA), the ASEAN-Korea Free Trade Area (AKFTA) and this list goes on at some length.
Huge opportunity and challenge
However, Head of the Party Central Committee's Economic Commission Vuong Dinh Hue says not so fast and cautions that FTAs bring about both opportunities and challenges.
Hue suggests that the country slow down and thoroughly re-evaluate the ‘open door’ policy as it relates to each individual agreement and not just assume in the context of the policy that more FTAs are better.
Sometimes less is more Hue says. In other words, Hue is saying that less but more profitable sales may be a better alternative to more less profitable sales. But it goes much further and deeper beyond this simple analogy.
To overcome challenges, Hue says Vietnam needs to thoroughly study its ‘open door’ policy as it relates to each agreement providing an impetus to create opportunities in attracting foreign investment, accelerating exports, promoting economic growth and generating more jobs.
There is no doubt that FTAs are beneficial Hue says, but where there are opportunities for benefits there are disadvantages as well. Hand in hand with the opportunity to succeed always goes the chance to fail.
Deputy Minister of Industry and Trade Tran Quoc Khanh shares Hue’s concerns adding that Vietnam will experience more difficulties if it doesn’t make full use of FTAs to benefit the competitive advantage of the nation as a whole.
Khanh suggests that FTAs should be restricted to those that will develop the competitive edge through learning technology, management skills and scale connectivity.
After nearly 30 years of renewal process, Vietnam has deeply and widely integrated into the world economy in line with global market standards and its World Trade Organization (WTO) commitments and has established strategic economic partnerships with many countries.
Fundamental factors of the open market economy have gradually taken shape for which the country has received many accolades from other countries and international organizations. Nearly 50 countries have so far acknowledged Vietnam’s market economy, including many major trade partners.
Vietnam has established diplomatic ties with more than 170 countries and has signed more than 90 bilateral trade agreements, nearly 60 of which aim at investment protection and encouragement, and 54 aims at avoidance of double taxation.
The country has also set up ties with many international financial organisations, such as Asian Development Bank (ADB), the International Monetary Fund (IMF) and the World Bank (WB).
There is no doubt that signing and taking part in negotiations of FTAs positively affects the country’s socio-economic development as well as completion of the socialist-oriented full market economy.
However, that does not mean that the country should throw caution to the wind and sign any FTA that comes along without evaluating the negative risks. FTAs should be restricted to those that benefit the national competitiveness, generate jobs and raise wages and income for the benefit of the people.