Vietnam, EU Announce Free Trade Negotiations

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By Ian Bhullar

Jul. 3 – The announcement of negotiations on a Vietnam-European Union (EU) free trade agreement (FTA) this week is promising for business leaders with interests on the intersection of Europe and the whole of the Southeast Asian region.

EU Trade Commissioner Karel De Gucht and Vietnamese Minister for Industry and Trade Vu Huy Hoang launched negotiations covering tariffs, non-tariff barriers, procurement, regulatory issues, competition, and sustainable development on June 27.

This is important for businesses working in Vietnam given the dynamism of trade relations between the EU and Vietnam: the bloc is Vietnam’s third largest trading partner. Vietnamese exports to Europe totaled €12.8 billion in 2011, while imports from Europe were €5.2 billion.

Vietnam’s key exports include footwear, textiles and clothing, coffee, seafood and leather furniture. Meanwhile, EU exports are mainly high-tech products such as electrical machinery and pharmaceutical products.

The introduction of the FTA will give Vietnam a competitive advantage over countries that do not have agreements with the EU, such as China. This will assist Vietnam in its current drive to set itself up as an alternative investment destination to China, which has also led it to decrease tax rates and to put resources into infrastructure development. China currently has no free or preferential trade agreement with the EU.

The move is doubly important as an indication of the health of ongoing EU-Southeast Asian trade relations. Vietnam is the third Southeast Asian country with which the EU has launched FTA negotiations, after the beginning of discussions with Malaysia and Singapore in 2010.

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