how can european businesses benefit from the eu- vietnam free trade agreement?

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AGENDA:

• OVERVIEW OF VIETNAM IN 2016

• OVERVIEW OF THE EU- VIETNAM FREE TRADE

AGREEMENT (EVFTA): UPDATE ON THE PROGRESS

• MARKET ACCESS COMPARISON OF CERTAIN

COMMERCIAL SECTORS IN THE WTO, AEC AND

EVFTA

• CONCLUSION

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Vietnam 2016 Economy at a glance •GDP: US$200 billion

•GDP per capita: US$2,215

•GDP Growth: 6.21 % (compared to 6.68% in

2015 and 5.98% in 2014)

•Inflation: 1.83%

•Population: About 91.70 million

•Labor force aged 15 and above: 54.61 million

•Total export and import turnover: : US$349.2

billion (6.5% increase)

•Minimum wage (for Area I): VND 3,750,000 (US$

168) per month (from Jan 2017)

•Vietnam reached the 60th position in 2016 on the

Global Competitiveness Index (GCI) list.

•Vietnam tops 6 European Union (and 7 further

European) countries on the GCI list.

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Vietnam – From 1980s till now

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1980s – Rice Importer Now – 2nd Rice Exporter

Worldwide

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EU – Vietnam Free Trade Agreement

(EVFTA)

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EVFTA – Bilateral negotiations

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Launch of

negotiations

First

round in

Hanoi

15 rounds

alternately

in Vietnam

and

Brussels

Last

round in

Hanoi

Agreement

in

principle

06/2012 10/

2012

Conclusion

of

negotiation

FTA text

released

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What happens next?

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EVFTA should

be taken into

effect

Translation into all

European languages

EVFTA should be

signed

Legal review

Current Status Middle 2017 Early 2018

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EVFTA – Comprehensive agreement

• Trade in goods

Market access for goods – tariffs

Rules of Origin

Export duties

Technical Barriers to Trade (TBT)

Sanitary and Phytosanitary Measures

Customs and Trade Facilitation

Administrative Cooperation in Customs Matters

• Services and investment:

National treatment

Liberalisation commitments / market access

Investment to state dispute settlement

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Cross-cutting issues

Dispute Settlement and Investment

Dispute Settlement

Government Procurement

State Owned Enterprises & Subsidies

Intellectual Property Rights

Geographical Indications

Trade and Sustainable Development

Cooperation and Capacity building

Annexes (car; green tech and pharma)

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EVFTA – Main features

Symmetrical elimination of nearly all tariffs (over 99%)

Removal of almost all export duties and cap on remaining

ones

Services commitments going beyond GATS

Negotiations on Investment protection and disputes

settlement on-going

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EVFTA – Tariff Liberalization

• Tariff liberlization:

– 99% of tariffs both value and number of tariff lines

– After 7 years for EU

– Vietnam 10 years

• Coverage at entry into force:

– 71% of value of Vietnamese exports / 84% tariff lines

– 65% value of EU exports / 49% tariff lines

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EVFTA – Benefits for Vietnam

• Vietnam’s annual economic expansions rate may grow an additional 15%

every year (said Tomaso Andreatta, representative of the European Business

Association in Vietnam (EuroCham), at the Vietnam Business Forum 2014)

• Tariffs for most of Vietnamese export product to the EU will gradually

reduce to 0% and Vietnam’s export to EU is expected to grow about 35%

for next few years

• The real wages of skilled laborers may increase by up to 12% while real

salary of common workers may rise by 13%

• The EVFTA is the legal framework for a more stable relationship in bilateral

trade for Vietnam when competing in the international market

• The EVFTA will generate greater effects, e.g. increased quality of

investment flows from EU, acceleration of the process of sharing expertise

and transfer of green technology and the creation of more employment

activities

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EVFTA – Benefits for the European Union

• 23 of the 27 member states of the EU (UK not included)

are trade partners of Vietnam

• Investment protection for Vietnam’s third largest (2015)

investor

• Improvement of intellectual property rights

• Better access to EU’s third important trading partner -

ASEAN

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Government Procurement

• Average government procurement in the EU is about 16

percent

• Vietnam has one of the highest government procurement

rates of all countries worldwide (with about 39 percent)

• Vietnam is not a member of the Government Procurement

Agreement of the WTO

• Vietnam undertakes to transparency and procedural fairness

regulations

• Investors will get access to a huge market of government

procurement

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Conflict Resolution

• EVFTA secures a modern reformed investment dispute resolution

standard

• Independent International Tribunal will be competent to all

conflicts about investment protection provisions (5 year

transitional period for Vietnam)

• A court of Appeal will be established

• UNCITRAL rules on transparency in treaty-based investor-state

arbitration are implemented which guarantees a high standard of

juridical transparency

• The decisions of the tribunal are enforceable and cannot be

questioned by local jurisdiction

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Opportunities and challenges in some

specific sectors

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Automotive

• Almost fully liberalization of EU machinery and appliances exports

• EU exported car parts will be duty free after seven years

• Cars and motorcycles will be duty free after ten years

• 3 years after the FTA comes into effect, Vietnam will accept UNECE

(standards adopted from the EU, U.S., Russia and many other states

which settle e.g. Worldwide harmonized Light vehicle Test Procedures)

certification without any further testing requirements

• Demand for automobiles in Vietnam is at no other time set to surge like

this moment

• Vietnam is going to be the new production hub in Asia for the

machinery and especially automotive tier two manufacturing industry

where several German and European automotive companies already

experienced their own success story 16

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Pharmaceutical Products

• Already 8% of EU exports to Vietnam (2015)

• Improvement of intellectual property right

• Simplification of marketing authorization

• Centralized procurement system for pharmaceuticals

which will legally secure market access

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Alcoholic Beverages

• Geographical Indications will be better protected

• Tariffs for alcoholics will be reduced after 7 or 10

years

• Vietnam removed /decreased restrictions in

manufacturing of beverages

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Challenges

• As the market will be much more open, a high level of

competitiveness will reach Vietnam’s companies

• Especially the sellers of electrical products, cars,

motorcycles and machinery will get to know a new level

of business competition

• The challenge will be to maintain and improve the

standards of labor rights, environmental protection and

sustainability even though the price pressure will increase

• The income from tariffs will be reduced

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Impacts

• EVFTA will make trading more transparent and

competitive

• It will be much easier for investors to access new

markets in Vietnam

• A high quality standard is settled

• Intellectual property will be safer

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Sustainable Development

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Supervision on Sustainable Development

• A Committee on Trade and Sustainable Development

will monitor the realization of the FTA’s chapter

regarding economic growth, sustainable social

development and environmental protection

• Additionally the EU and Vietnam will set up Domestic

Advisory Groups, consisting of civil society

representatives, employers’ and workers’ organizations,

business groups, and environmental organizations

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MARKET ACCESS COMPARISON OF

CERTAIN COMMERCIAL SECTORS IN

THE WTO, AEC, EVFTA

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Notes regarding the market access

commitments

• The WTO, AEC and EVFTA take a positive approach,

meaning what is open to foreign investment is listed.

• In WTO Market Access Service Sector the principle applies:

Who does not ask and demand might not get the market

access for investment. There is NO Automatic Right for

Market Access for the WTO members in the WTO Services

Sectors in principle.

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Distribution sector

WTO / AFAS EVFTA

The establishment of outlets for

retail services (beyond the first one)

shall be allowed on the basis of an

Economic Needs Test (ENT)

Same as in the WTO / AFAS but

added the following:

In case of establishing an outlet

less than 500m2 within the area

planned for trading activities and

already completed construction of

infrastructure, ENT is not

required.

5 years from the date of entry into

force of the Agreement, the

requirement of the ENT will be

abolished. 25

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Power/ Energy Sector WTO / AFAS EVFTA

N/A Unbound (meaning no commitment) regarding:

- Production of electricity; transmission and distribution

of electricity on own account

- Manufacture of gas; distribution of gaseous fuels

through mains on own account

- Production of steam and hot water; distribution of

steam and hot water on own account

Other sub-sectors: not included (meaning no

commitment) in the service schedule.

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Transport Services

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Maritime Transport

WTO =

AFAS EVFTA

Internal Waterways Transport

WTO AFAS =

EVFTA

WTO =

EVFTA AFAS

Air Transport

Low High

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Transport

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* Mode 1: cross-border supply

Mode 3: commercial presence

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Insurance Services

EVFTA WTO / AFAS

No commitment regarding cross-

border supply of health insurance

services

Non-life branches of foreign

insurance enterprises shall be

permitted subject to prudential

regulations. No specific conditions

are specified, meaning the

Government can adopt conditions as

it wishes to.

No restriction regarding cross-

border supply of health insurance

service

Same as EVFTA

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Securities services WTO/ AFAS EVFTA

Commitments on 6 sub-sectors

Mode 3:

foreign securities service suppliers are

permitted to establish representative

offices and joint ventures with

maximum foreign ownership of 49%.

After 5 years from the date of

accession, securities service suppliers

with 100% foreign-invested capital shall

be permitted.

Same commitments in 6 sub-sectors

Commitments on 2 additional services:

Provision and transfer of financial data

processing; and credit reference and

analysis.

Mode 3: Same as the WTO/ AFAS

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Telecommunication Services

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Sub-sectors WTO/ AFAS EVFTA

Non facilities-based services

Other services - Virtual

Private Network (VPN)

Mode 3: Joint venture with

maximum 65% foreign

ownership

Mode 3: Joint venture with

maximum 70% foreign

ownership

Mode 3: Upon entry into force,

Joint venture with maximum

65% foreign ownership

5 years from the date of entry

into force of the Agreement,

this capital limitation will be

75%.

Mode 3: Upon entry into force,

Joint venture with maximum

70% foreign ownership

5 years from the date of entry

into force of the Agreement,

this capital limitation will be

75%.

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Government Procurement Criteria EVFTA

Monetary values that determine whether

procurement by central government is

covered under an agreement

130,000 Special Drawing Rights (SDRs) (US$191,000) from 15 years since

the entry into force of the agreement

Initial transitional threshold: 1.5 million SDRs

Procurement of construction services by

central government entities

Initial threshold: 65.2 million SDRs

After 15 years, 8.5 million SDRs

Entities covered 22 central government bodies (added the Ministry of Public Security)

42 other entities: added two state-owned enterprises (Vietnam Electricity

and Vietnam Railways) and two universities (Vietnam National University

– Hanoi and Vietnam National University – Ho Chi Minh City)

Sub-central government coverage: Adds 2 cities: Hanoi and Ho Chi Minh

– expansion of the list within 15 years since the entry into force of the

agreement

Exclusion of preferences for SMEs Broad exclusion

Application of offsets Based on value of a contract

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Conclusion

• EVFTA will open a more secure and transparent

investment and trading market supported by a new

dispute resolution system

• European investors get access to a group of 90 million

consumers and a young and dynamic workforce

• Vietnam will reduce many of its strict regulations and

opens up; it will get the chance to establish itself as a

worldwide trading partner and will get more

independent from China

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Questions & Answers

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DUANE MORRIS VIETNAM LLC

Thank you very much!

HANOI OFFICE HO CHI MINH CITY OFFICE

Pacific Place, Unit V1307/08, 13th Floor, Suite 1503/04, Saigon Tower

83B Ly Thuong Kiet, Hoan Kiem District 29 Le Duan Street, District 1

Hanoi, Vietnam Ho Chi Minh City, Vietnam

Tel.: +84 4 39462200 Tel.: +84 8 3824 0240

Fax: +84 4 3946 1311 Fax: +84 8 3824 0241

Contact email:

[email protected]

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mailto:[email protected]

mailto:[email protected]

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References (1)

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References (2)

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References (3)

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how can european businesses benefit from the eu- vietnam free trade agreement?

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