Opportunities and challenges for Vietnam's trade when the European Union - Vietnam Free

Trade Agreement (EVFTA) is implemented.

Opportunities
- Reduce Tariffs and Quotas and increase trade exchanges: The EVFTA is an ambitious
pact providing almost 99 percent of the elimination of custom duties between the EU and
Vietnam. As per the Ministry of Planning and Investment (MPI), the FTA is expected to help
increase Vietnam's GDP by 4.6 percent and its exports to the EU by 42.7 percent by 2025.
While the European Commission has forecast the EU's GDP to increase by US$29.5 billion
by 2035.
- Attract investment from EU member states: The EVFTA provides a more secure and
predictable investment environment for European businesses in Vietnam. This can attract
foreign direct investment (FDI) and lead to technology transfer, skills development, and the
creation of new jobs in Vietnam. As of August 2022, there are 25/27 EU countries investing
in Vietnam, with a total of 2,378 projects with a total registered capital of 27.59 billion USD.

Challenges
- Requirements on rules of origin can be difficult to meet: Normally, if goods want to enjoy
preferential tariffs under FTA, the raw materials must meet a certain internal content ratio
(originating materials). in the EU and/or Vietnam). This is a big challenge for Vietnamese
businesses because raw materials for export production are currently mainly imported from
China or ASEAN and other countries that are not part of the bloc or partners that have FTAs
with them. Vietnam. With the wood industry, Vietnam is importing raw wood mainly from
Laos and Cambodia (accounting for 39.38% of total wood import turnover), which are foreign
countries and often do not have legal origin certificates, so Vietnam Nam also has difficulty
meeting this commitment.
- Non-tariff measures: The EU's NTMs are generally applied to all imported goods (not just
goods from Vietnam) and are not related to the EVFTA. However, the EVFTA tariff reduction
can be a catalyst to promote the increase of EU's NTMs, causing Vietnamese exports to face
additional or stricter requirements.
The EU is one of the most common users of NTMs in the world. According to the World
Bank's 2018 survey data, the EU has the frequency ratio of using NTMs (the percentage of
imported products that are subject to at least one NTM) of 93.88%, significantly higher than
many other developed countries such as Australia (61.80%), USA (61.52%), Japan (61.20%),
and much higher than the average ratio of 43.04% of the 75 countries surveyed. The groups of
items with the highest frequency ratio of NTM application when imported into the EU are
textiles and clothing, animal, vegetables, hides and skins, chemicals, food products, footwear,
plastic products, etc. These are also popular export products of Vietnam.