EU-Vietnam Trade Deal

by Dechert LLP

The EU and Vietnam have concluded the substantive elements of a Free Trade Agreement (FTA), widely-hailed as one of the most ambitious and comprehensive such agreements that the EU has concluded with a developing country. With Vietnam’s growth rate averaging 6.4% per year for the last decade, the World Bank has described it as “one of the most dynamic emerging countries in East Asia.” The agreement will significantly strengthen the position of EU companies in accessing this market of over 90 million consumers.

Key features of the agreement

  • Eliminating customs duties
    The EU will remove 99% of its import tariffs over seven years, while Vietnam will abolish 65% of its tariffs when the FTA enters into force and the remainder over ten years. There will be strict provisions related to Rules of Origin to address a key concern that, once tariffs were eliminated, Chinese products (in particular textiles) would flood into Europe masquerading as Vietnamese.
  • Reducing non-tariff barriers to European exports
    Vietnam will adopt international standards for drafting regulations, including sanitary and phytosanitary measures to encourage trade in plant and animal products, and will accept a “Made in EU” origin-marking for non-agricultural goods except pharmaceuticals. Import and export licensing and customs procedures will also be aligned with international best practice.
  • Protecting European geographical designations of origin
    Over 160 food and drink products including Champagne, Parma Ham and Scotch Whisky will retain in Vietnam the same rights to their geographical designation as they currently have in the EU. Similar protection has been extended to certain Vietnamese products within the EU.
  • Allowing EU companies to bid for Vietnamese public contracts
    EU companies will be able to bid for contracts with public bodies in Vietnam including Vietnamese ministries responsible for infrastructure projects, state-owned enterprises responsible for power distribution and the national railways, 34 hospitals and the cities of Hanoi and Ho Chi Min City.
  • Creating a level playing field for EU companies and innovative products
    Vietnam has committed to ensuring that state-owned enterprises and private companies will compete on a level playing field, to providing transparency on domestic subsidies and to high levels of intellectual property protection. The pharmaceutical industry will benefit specifically, with a dedicated annex in the agreement committed to facilitating trade in this sector.
  • Opening the Vietnamese market for EU services
    For the banking, insurance, maritime transport and business services industries, the agreement includes commitments from Vietnam to improve market access. New regulatory provisions have been agreed in other key areas, such as financial services, telecommunications and postal services.
  • Promoting and protecting investment
    Vietnam will open up a number of key manufacturing industries to EU investment, together with provisions on investment protection.
  • Establishing an efficient mechanism to resolve future disagreements
    A dispute settlement mechanism will be established to provide faster resolution of disputes than the traditional WTO framework. Rules for mediation have also been established as an alternative.
  • Safeguarding social and environmental protection standards
    Both the EU and Vietnam will commit to measures promoting and complying with international obligations on labour standards, corporate social responsibility, climate change and environmental standards.

What does this mean for you?

The details of the agreement will be completed after the summer break. Once concluded, the FTA will create substantial immediate and longer-term opportunities for importers, exporters, contractors and investors. To identify and exploit those opportunities most effectively, it will be necessary to navigate the agreement’s detailed provisions, in particular on Rules of Origin, geographical designations, regulatory standards, public contract bidding requirements and investment protection.

Gaining an understanding and experience in working with these measures will not only open up the opportunities in Vietnam but will also give companies a competitive edge in the other ASEAN markets, since the EU is likely to use this FTA as a template for similar agreements with other countries in the region.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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