Foreign expert: EVFTA could be a momentum for Vietnam's economic recovery

Update: 13:44 | 18/06/2020
TGVN. Country Director of Friedrich Naumann Foundation for Freedom (FNF), Prof. Dr. Andreas Stoffers affirmed that the EVFTA could be a new power for Vietnam's economic recovery in the post-COVID-19 world.
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evfta suc manh moi thoi phuc hoi kinh te
Prof. Dr. Andreas Stoffers - Friedrich Naumann Foundation for Freedom Country Director.

What does the EU-Vietnam Free Trade Agreement (EVFTA) mean for both sides in the context of increasing trade conflict in the world?

The EVFTA is a lighthouse signal of free trade and liberalism in the stormy sea of growing neo-protectionism. It stands for partnership between North and South, East and West for mutual benefit; and the change in the global value chain towards Vietnam.

Since Western countries are struggling to diversify their resources and investments, partly out of China, Vietnam is filling the gap as a rising star in globalization by CPTPP, RCEP.

It is to a certain extent, lifting Vietnam up to take part in China’s role in the value chain, however with much better standards regarding the environment and the labor law.

From the European side, EVFTA can be a kick to restart FTA negotiations between the EU and ASEAN.

It is expected that this EVFTA will take effect from August 1. How the position of Vietnam change after the agreement takes effect?

The EVFTA implies that Vietnam is emerging as one of the most promising key players for the EU within international trade. As of now, Vietnam is playing a crucial role in the supply chain via all of its FTAs like EVFTA and CPTPP.

Vietnam is more than ever a bridgehead between Europe and the Asia-Pacific region.

EVFTA is definitely strengthening Vietnam’s position, especially because in this year Vietnam has taken over the Chairmanship of ASEAN. I am sure that Vietnam is leaving a remarkable footprint this year in all aspects, from handling COVID-19 pandemic to its ASEAN Chairmanship, as well as the start of EVFTA.

Besides the advantages of tariffs, what do you think Vietnam's economy can take benefits from EVFTA?

The benefit from tariffs will lead to high turnovers in Vietnamese export to the EU, for example, phones and components dominating for over one-third of total turnovers (12.36 billion USD), computer, electronic products and its components (5.06 billion USD) as well as textile, garment, footwear and so on.

Firstly, To satisfy EU customers, Vietnam has to increase its technology level gradually to be fit for Industry 4.0. This increase in competitiveness will prove to be a huge benefit.

Secondly, Vietnamese commodities have to be lifted to a new level of standardization, and eco-friendly production, avoiding the high amount of pesticides and preservatives. This will not only improve Vietnamese product quality but also avoid protectionism from other countries, not only in the EU.

As a new-generation FTA, EVFTA forces Vietnam to improve the eco-friendly production and the working condition,... Vietnam can make it better than China as the factory of the world.

But I would like to give you a very concrete example, how VIETNAM can benefit:

EVFTA could turn Vietnam into new destination for manufacturers: Nikkei

EVFTA could turn Vietnam into new destination for manufacturers: Nikkei

German companies’ revenue expectations dropped due to coronavirus significantly. According to AHK Report, 82% report adjusting revenue targets downward due to the coronavirus pandemic; 9% have serious problems and expected a significant decline of more than 50%; 63% of them calculated with loss of 10% to 50%.

Due to the survey result, almost all the German companies in Vietnam have already experienced how the epidemic affected their business activities since the coronavirus expanded.

Well, but we have to look ahead. Based on the AHK research report (March 24 to April 2), the companies are optimistic: 2/3 of the companies (69%) expect a better business situation for themselves in 2021. Again a decrease, but still very good figures. This is mainly due to 2 factors: Vietnam’s handling of the COVID-19 crisis and Vietnam’s open market policy, where EVFTA plays an important part.

Vietnam performed itself as a safe destination especially in the light of great Vietnam and German relations and EVFTA.

Our Foundation, Friedrich Naumann Foundation for Freedom, which is dedicated to supporting the economic development of Vietnam, was also facing difficulties but prepared well for the weeks to come.

What are the challenges Vietnam may face from EVFTA?

Removing technology barriers is not easy for both sides. Vietnam needs time to catch up with EU standards now and the EU also needs to careful in importing commodities from Vietnam due to the Vietnamese use of herbicides and preservatives.

To reduce tariffs and have a plan for it, Vietnam needs to try hard to review their laws and their implementation of regulations of this FTA

Another challenge is that Vietnam needs to improve its competitiveness of domestic industries before tariffs are removed.

What are your expectations about the removal of the yellow card of the fishery industry in the future, thereby creating favorable conditions for seafood to enter the EU?

The purpose of the yellow card is very good as it should stop Vietnam from catching an overly high amount of fishery products, which is a threat to the environment.

In the end, this can turn out as good for Vietnam in the long run, because it is preventing over-harvesting. For the EU, this is an essential part and – in my opinion - is not expected to be removed.

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Vietnam ready for EVFTA, EVIPA enforcement: Spokeswoman Vietnam ready for EVFTA, EVIPA enforcement: Spokeswoman

But it is important to see the FTA as a package: Fishery is only one part. There will be much more parts, where Vietnam is benefitting:

The remarkable point might happen in Vietnamese commodities such as rice, tea, coffee, fishery, and so on because the tariffs in these sectors are still high and exist technical barriers.

For example, the import tax on dried salted salmon is from 9.5 to 13%, roasted coffee is from 2.6 to 8%. Vietnam understands that exporting raw foods to the EU does not benefit them much-added value, while processed commodities like roasted coffee, frozen, fillet fish and so on witnessed high taxes. So EVFTA might help these sectors to export better.

What should the business and enterprises prepare for now to take full advantage of EVFTA?

During this period, first of all, the Vietnamese business community needs to become familiar with the partners' laws and preferences in EVFTA, regularly updating the tariff elimination plan.

Our Foundation is cooperating with Vietnamese authorities and partners not only to promote the FTA but also to increase the knowledge on the provincial and grassroots level.

Secondly, Vietnamese companies need to improve their product standards to EU standards, which will raise Vietnam’s competitive advantage.

Thirdly, the companies have to improve both their environmental standards and their working conditions. In the end this is useful for the Vietnamese citizens.

Fourthly, the companies have to register their property rights and geography indicators to protect their brand names in the globe.

Next, they also have to secure their position in the market by branding, CRS, high quality and so on.

And lastly, Vietnamese companies should be ready to cooperate at eye level with high technology products from the EU in order to create chances for improved and highly sophisticated products.

In my opinion, Vietnamese agricultural products are great, especially after the standards are lifted. But don’t forget that Vietnam should also become a technology hub in the future, following the example of South Korea.

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