Vietnam is the EUs second-largest trading partner in the Association of Southeast Asian Nations (ASEAN)

Vietnam is the EU's second-largest trading partner in the Association of Southeast Asian Nations (ASEAN)

Vietnam has approved the EU-Vietnam Free Trade Agreement (EVFTA), clearing the path for adoption of the pact this summer.

At a plenary sitting today (8 June), Vietnam's National Assembly ratified the trade deal unanimously. The law-makers gave consent to the agreement by 94.62% and the EU-Viet Nam Investment Protection Agreement (EVIPA) by 95.45%, according to a report published by VGP News, the online newspaper of the Government of the Socialist Republic of Vietnam. 

The move follows a decision by the European Union early last month to conclude the deal and represents progress in relations between the EU and Vietnam on the occasion of the 30th anniversary of diplomatic ties between the two sides.

Vietnam is the EU's second-largest trading partner in the Association of Southeast Asian Nations (ASEAN) after Singapore, with trade in goods worth EUR47.6bn (US$51.91bn) a year and EUR3.6bn when it comes to services. The main EU imports from Vietnam include telecommunications equipment, clothing, and food products.

At present, only 42% of Vietnamese exports to the EU currently enjoy zero tariffs under the Generalised System of Preferences (GSP).

The FTA provides for the almost complete (99%) elimination of customs duties between the two blocks: 65% of duties on EU exports to Vietnam will disappear as soon as the FTA enters into force, while the remainder will be phased out gradually over a period of up to ten years. The EU will do the same over seven years.

The trade deal is expected to forge "a solid foundation for investment and trade opportunities" between the two sides, while bringing "abundant chances" for Vietnam to become a production hub in the region as it would take advantage of seven to ten years to access the EU market, the National Assembly has said.

Speaking before the ratification, Vu Tien Loc, chairman of Vietnam Chamber of Commerce and Industry (VCCI), said Vietnam will have access to one of the top markets in the world.

"This is a rich economy with diverse and high-quality demands, so it will be an opportunity for Vietnam to open the market. We have conditions to clear the flow of high-quality investment capital from Europe. As we all know, Europe is the origin of many top-quality global value chains. When doing business with Europe, not only investment flows from Europe but investment flows from other countries will pour into Vietnam. So opening up large, high-value investment flows is an opportunity for Vietnam."

The chairman said it will also be an opportunity for the country to improve its business activities in relation to social responsibility, labour relations and the environment.

However, he said there will challenges as well as opportunities. "Businesses must ensure the requirements of origin. Enterprises cannot import raw materials from China and then produce goods and export them to Europe, which requires us to have raw materials and supplies from the Vietnamese economy or from Europe. That is a great challenge, but also a pressure to create opportunities for supporting industry development.

"When we open the market, we must accept competition from the leading companies in the world. In order to be competitive, we must improve our own capabilities. For institutions, there must be changes in labour relations and environmental standards. These are pressures and challenges but at the same time are opportunities for us to rise up."