Expanding Bilateral Trade between the EAEU and Vietnam
Signed more than one and a half years ago, the Vietnam-Eurasian Economic Union Free Trade Agreement (VN-EAEU FTA) has led to a rapid growth in bilateral trade between Vietnam and the EAEU. The FTA has opened up a market of 183 million people, with a combined GDP of US$2.2 trillion for the Vietnamese firms.
In 2017, bilateral trade between Vietnam and EAEU grew by 31 percent compared to 2016, to US$3.9 billion. In addition, Vietnam also had a trade surplus of almost US$1 billion with the union.
From January to April 2018, bilateral trade reached US$1.53 billion, growing by 35 percent. Russia continues to remain the major trading partner in the bloc, accounting for almost 90 percent of the trade with Vietnam.
Imports and Exports
Key imports from EAEU are petrol, oil, steel, fertilizers, and machinery. Major Vietnamese exports include phone components, electronic devices, computers, apparel, and footwear. Food exports include fruits, vegetables, coffee, cashew nut, and seafood.
VN EAEU FTA
Vietnam was the first nation that entered into a free trade agreement with the EAEU. According to the tariff schedule, average Vietnamese duties on EAEU products will drop from 10 percent to one percent, while EAEU’s average will reduce from 9.7 percent to 2 percent by 2025.
The free trade agreement which covers more than 90 percent of all traded goods has greatly benefited EAEU’s exports of agricultural and industrial products, and Vietnamese exports of garments, textile products, farm products, and electrical devices.
In 2018, 5,535 tariff lines are going to be reduced to zero percent. Reductions will focus on items that are input materials for the textiles, footwear, electronics, plastic, fertilizers, and farming sector. Another 3,270 tariff lines will be reduced to zero percent for goods such as milk and dairy products, chemicals, automobiles, and spare parts, steel products, rubber products, and electrical appliances in 2018.
According to Article 2.1 in the FTA, EAEU may apply a trigger safeguard measure for Vietnamese goods in case the import volumes during a calendar year exceeds the trigger level as established in Annex 2 of the agreement. Currently, under this measure, certain products in the textile and garment sector in Vietnam face safeguard duties from the EAEU, which aims to limit the increasing volume of imports to the EAEU. Since March 14, 2018, duties were imposed on Vietnamese underwear and children’s wear products for nine and six months respectively.
Traders have to make sure that they do not exceed the trigger levels as defined under the agreement; else, they may face most favored nation rates and not the preferential tax rates as prescribed under the free trade agreement. To reduce trade violations, the Vietnamese government has to ensure that traders are well informed and aware of such measures. In addition, individual governments have to promote the FTA and investments to increase the participation of private firms.
In the last few years, EAEU has also started to work with other ASEAN member states on trade and investment, and this puts Vietnam in a unique position, as it can act as a supply chain gateway for EAEU companies in the region. Going forward, to achieve their target of US$10-12 billion bilateral trade by 2020, and US$30 billion by 2030, trade between Vietnam and EAEU has to grow exponentially.