Vietnam, EU Continue FTA Negotiations

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Mar. 20 – A proposed free trade agreement (FTA) between the European Union (EU) and Vietnam hopes to bolster bilateral trade between the regions. Negotiations for the FTA, which began last June, are expected to be finalized by the end of 2015.

The FTA negotiations focus mainly on removing tariff and non-tariff barriers to trade between the regions, in addition to discussing regulatory issues, local market competition and intellectual property rights (which are more prioritized by the EU).

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Vietnam  is pushing for more efficient compliance mechanisms in order to meet the EU’s import regulations regarding food hygiene, chemical residues, illegal fishing and legally cut timber. Last year, Vietnamese exports were found to have violated the EU’s import requirements on at least two separate occasions in regard to food hygiene. The EU can ban the import of a certain country’s products if that country is found to have violated the EU’s import requirements more than five times in any given year.

The EU is one of Vietnam’s largest trade and investment partners. It was the largest importer of Vietnamese products in 2012 as it imported products ranging from footwear, textiles, coffee, rice and seafood, which accounted for a year-on-year growth rate of 22.5 percent. Vietnamese exports to the EU totaled US$20.3 billion, or 17.7 percent of Vietnam’s total exports.

The current average tariff rate on goods that are made in Vietnam exported to the EU is just over 4 percent, yet garments, seafood and footwear are subject to tariffs of 11.7 percent, 10.8 percent and 12.5 percent respectively. Conversely, tariffs on EU exports to Vietnam have been gradually reduced ever since Vietnam was accepted into the World Trade Organisation (WTO), falling from an average of 13.7 percent in 2005 to 9.3 percent today.

The EU’s FTA negotiations with Vietnam come hot off the tails of the EU concluding an FTA with Singapore last year, while similar negotiations are currently underway with Malaysia and Thailand.

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