EVFTA : 8 things EU companies should know before investing in Viet Nam
EU is one of the biggest partners with Viet Nam and 2-way-turnover in 2019 is 56.4 billion USD in which export from Viet Nam is 41.5 billion and import from EU is 14.9 billion USD. EVFTA is a comprehensive, high quality, balanced agreement for both Vietnam and the EU, at the same time compliant with the provisions of the World Trade Organization (WTO).
EVFTA is a big nudge for Vietnam’s export and help diversify markets,export goods etc. Commitments for fair, equal, safe and adequate protection of each other’s investments and investors in the IPA will also contribute positively to building a transparent legal and investment environment, from which Vietnam will attract more investors from the EU and other countries.
The Agreement consists of 17 Chapters, 2 Protocols and a number of memorandums: trade in goods,rules of origin, customs and trade facilitation, food safety and hygiene measures (SPS), technical barriers to trade (TBT), trade in services,investment, trade remedies, competition, state-owned enterprises, government procurement, intellectual property etc.
1.Trade in goods:
For Vietnamese exports, as soon as the Agreement comes into effect, the EU will eliminate import duties on about 85.6% of tariff lines, equivalent to 70.3% of Vietnam’s exports to the EU. After 07 years from the date of entry into force of the Agreement, the EU will eliminate import duties on 99.2% of tariff lines, equivalent to 99.7% of Vietnam’s exports. For the remaining 0.3% of exports,the EU commits to giving Vietnam a tariff quota with an import duty of zero percent.
Thus, it can be said that nearly 100% of Vietnam’s exports to the EU will be eliminated import tax after a short journey. So far, this is the highest level of commitment a partner gives Viet Nam in the signed FTAs.
For EU exports, Vietnam committed to eliminate tariffs as soon as the Agreement comes into effect with 48.5% of tariff lines (accounting for 64.5% of import turnover). Subsequently, after 7 years, 91.8% of tariff lines equivalent to 97.1% of EU exports will be removed from Vietnam by import taxes. After 10 years, the tariff elimination rate is about 98.3% of the tariff lines (accounting for 99.8% of import turnover). For the remaining 1.7% of EU tariff lines, Vietnam applies the roadmap to eliminate import duties longer than 10 years or apply tariff quotas in accordance with WTO commitments.
2. Trade in services and investment:
Vietnam’s and EU’s commitment to trade in investment services aims to create an open and favorable investment environment for businesses of the two sides. Vietnam’s commitments go beyond the commitments in the WTO. The EU commitment is higher than the WTO commitment and is equivalent to the highest EU commitment under the recent EU FTAs.
Some key points in the commitments of some service sectors are as follows:
– Banking services: Within 05 years from the date of entry into force of the Agreement, Vietnam has committed to consider giving favorable conditions for EU credit institutions to raise foreign ownership to 49% of their charter capital in 02 joint stock commercial banks of Vietnam. However, this commitment does not apply to 04 joint stock commercial banks where the state holds dominant shares, namely BIDV, Vietinbank, Vietcombank and Agribank.
– Telecommunications services: Vietnam accepts the same level of commitment in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Especially for value-added telecommunications services without network infrastructure, Vietnam allows the EU to set up a wholly foreign-owned enterprise after a transition period.
– Distribution services: Vietnam agrees to abolish the requirement of checking economic needs after 05 years from the date of entry into force of the Agreement. Vietnam also agrees not to discriminate in the production, import and distribution of alcohol, which allows EU businesses to retain their operating conditions under current licenses and only need one license to carry out their activities:import, distribution, wholesale and retail.
Vietnam and the EU have agreed on the contents similar to the Government’s Procurement Agreement (GPA) of the WTO. With some obligations such as online bidding, setting up an electronic portal to post bidding information, etc., Vietnam has a roadmap to perform. The EU also pledges to provide technical assistance to Vietnam to fulfill these obligations.
For example: to pharmaceutical products, Vietnam has committed to allowing EU businesses to participate in bidding for pharmaceutical procurement of the Ministry of Health and public hospitals under the Ministry of Health with certain conditions and roadmaps.
Commitments on intellectual property include commitments on copyright,inventions, commitments related to pharmaceuticals and geographical indications, etc. Basically, Vietnam’s commitments on intellectual property are in compliance with current law provisions. Some key features of the intellectual property commitment are as follows:
- Regarding geographical indications, when the Agreement comes into effect, Vietnam will protect over 160 EU geographical indications (including 28 members) and the EU will protect 39 geographical indications of Vietnam. Vietnam’s geographical indications are related to agricultural products and foods.
- Regarding trademarks: The two sides pledged to apply a convenient and transparent registration procedure, including having an electronic database on the published trademark application and the registered trademark to the public.
- Most-favored nation treatment (MFN) commitment: The most-favored nation principle in this Agreement ensures that EU organizations and individuals enjoy the benefits of high protection standards not only with intellectual property rights under the WTO Agreement but also other subjects of intellectual property rights in free trade agreements that Vietnam participates (such as the CPTPP Agreement).
To develop e-commerce between Vietnam and the EU, the two sides pledged not to impose import taxes on electronic transactions. The two sides also pledged to cooperate through the maintenance of a dialogue on the management issues posed in e-commerce, including:
- The responsibility of intermediary service providers for transmitting or storing information.
- Conducting with electronic communications in commerce without the permission of the recipient (such as electronic mailing offers, advertising …).
- Protect consumers when participating in electronic transactions.
The EVFTA Agreement sets a whole chapter on transparency with the most common requirements to ensure an effective and predictable legal environment for economic entities, especially small and medium enterprises.
7.Trade and sustainable development:
The two sides affirmed their commitment to pursuing sustainable development, including economic development, social development and environmental protection.
8.Other contents of EVFTA Agreement:
The EVFTA also includes chapters related to cooperation and capacity building, legal – institution, competition policy and subsidies .