Tuesday, 19 Dec 2017

FTAs: Motivations for reform

Updated at Tuesday, 05 Dec 2017, 07:49
The Hanoitimes - Experts expected that multilateral trade agreements such as EU – Vietnam Free Trade Agreement (EVFTA) and Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) will not only facilitate trade but also being the foundation and motivation for Vietnam to reform comprehensively.
EVFTA is expected to come into force in 2018. This will be the most comprehensive FTA, which is considered to have positive impact to the Vietnam’s economy through the facilitation of export and investment attraction. 
In addition to economic gains, FTAs are expected to facilitate reform in Vietnam.
In addition to economic gains, FTAs are expected to facilitate reform in Vietnam.
As such, Vietnam and EU will remove import tariffs for more than 99% of goods based on the principle of 7/10 (EU will remove import tariffs for Vietnamese goods for 7 years at the latest, which is implemented in phases of 3 years, 5 years and 7 years. Vietnam will have the same moves within 10 years, which will be implemented through phases in 3 years, 5 years, 7 years and 10 years).

For the remaining 1% goods, both two sides will allocate quota or reduce import tariffs. This can be seen as the highest commitment for Vietnam among FTA signed as of present. According to the Head of Central Institute for Economic Management (CIEM) Dr. Nguyen Dinh Cung, Vietnam has high expectation from positive impacts of EVFTA. This will be the necessary boost to increase exports of electronic products, textile & garment, leather products and fisheries; on the other hand, Vietnam will import more high quality equipment from EU. However, the more important issue would be the investment flow from EU into Vietnam, especially in fields EU have advantages such as medicine production. 

However, Mr. Cung also said, the approval of FTA between EU and Vietnam is at hands of the national assembly of each party. As such, for EVFTA to be fully implemented will take longer than in 2018. 

With this being said, in 2018, it is expected that Vietnam’s trade do not have significant changes. However, there will be more reforms in business environment, or the equitization process of state owned enterprises (SOEs). Only through reform then domestic enterprises can be improved, as there are no more barriers to prevent developing. Moreover, in addition to external factor, reform should be done to create substantial improvement. This will be the driving force for sustainable development, in the contrary, only foreign investors will gain benefits in Vietnam’s market. 

From the perspective of economic expert Nguyen Tri Hieu, EVFTA’s coming into force will remove some barriers and giving Vietnam advantages in trade activities. The agreement will contribute to the increasing trade value, however there will not be any breakthroughs. As Vietnamese goods exported to EU will be increasing, but the country is not the only export market into EU, which has to compete with many countries in South East Asia. 

Especially when EU is setting high requirements for imported goods, in reality, Vietnamese goods have not been considered as top fisheries products, but only at medium level. Even Vietnamese main export products in agriculture and fisheries products have sometimes not be cleared through custom and returned due to unqualified. As such, it is necessary to improve products quality, as well as to diversify export. 

With regard to CPTPP, Nguyen Tri Hieu said CPTPP can hardly make breakthrough for Vietnam in trade as the US has withdrawn from the pact. While Vietnam has already signed free trade agreements with other members such as Japan, Mexico, Canada or Singapore. 
Nguyen Tung
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