EU Vietnam concludes negotiation on bilateral FTA

A free trade agreement initialed between the European Union and Vietnam recently announced that they had concluded negotiations on a bilateral free trade agreement (FTA). Only legal clean-up and national ratification remain to be done on the EU Vietnam FTA (although ratification can take quite some time, as has happened with the EU-Singapore FTA).

This is the second EU FTA with an Asean country, after the one with Singapore, and serves as an example of what can be expected of other Asean countries (Indonesia, Malaysia, Philippines and Thailand) in their bilateral FTAs with the EU as well as all of Asean in a regional EU-Asean FTA:

Customs duties will be reduced to zero levels for virtually all products (except sensitive agricultural items, as is usually the case). Vietnam will liberalise duties for 65 per cent of imports upon entry into force, with the remainder liberalised over a 10-year period. The EU duties will be liberalised over a 7-year period, with the exception of agricultural products which would be subject to tariff rate quotas (including canned tuna, a major item for Thailand). EU duties on textiles would be lifted mostly at the back-end, and textiles would be subject to strict rules of origin (most Asean countries also have large textile industries). Vietnam will also eliminate almost all of its export duties, with the remainder subject to limitations (export duties would be a major issue for Indonesia).

Government procurement is included, with EU companies able to bid on Vietnamese public offers by national ministries, state owned enterprises and the Ho Chi Minh City and Hanoi municipal governments. The question is what thresholds will be set for those requirements (these and other aspects of government procurement will be difficult issues for the other Asean members, except for Singapore which signed the word trade organisation (WTO) government procurement agreement).

State-owned enterprises (SOEs) will be subject to competition and transparency requirements, with the EU claiming that “[t]hese are the most ambitious disciplines that Vietnam has ever agreed to” (we will have to see how these compare with the Trans Pacific Partnership SOE clauses).
Intellectual property protection would be increased, with a special annex on pharmaceuticals.
Dispute resolution is still under negotiation, but the EU notes that arbitration panels, the cornerstone of investor-state dispute resolution, is intended as a last resort for dispute settlement.

Labour, environment, climate change, human rights and corporate social responsibility will be covered by the FTA, although the full details were not released (all of these issues could be problematic for the other Asean members).

As noted above, the EU-Vietnam FTA will put pressure on other Asean members to conclude their own FTA talks with the EU, particularly for Indonesia, Malaysia and Thailand which have lost their tariff preferences under the EU’s Generalised System of Preferences. However, if Vietnam could overcome these not-insignificant obstacles to concluding its own agreement with the EU, so could these countries if they so chose. Even then, domestic politics in the EU could also affect the ratification process, especially with regard to the military regime in Thailand (although Thailand is now the coordinating country for Asean-EU relations) and any potential backtracking in the Myanmar political reform process.

In any event, the EU Vietnam FTA provides further impetus for both the Asean countries’ bilateral FTA talks with the EU, the potential resumption of the Asean-EU FTA talks on a bloc-to-bloc basis, and even the Trans Pacific Partnership and the Regional Comprehensive Economic Partnership agreement talks (as the agreement shows that there are other trading partners out there for Asean).