21 Feb KPMG_Trade and Customs Update
EVFTA and EVIPA ratified
The European Parliament (EP) ratified the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) on 12 February in Strasbourg, France.
The most ambitious and comprehensive EVFTA is a new generation FTA for the EU to conclude with an Asian country, after the ones with Japan and Singapore, and is expected to create substantial opportunities for Vietnam’s economy to diversify its export market. The EVFTA will eliminate almost 99% of tariff lines and barriers to trade. Vietnam will cut 65% of import tax on EU’s commodities after the FTA takes effect while the rest will be phased out over ten years of implementation. Meanwhile, the EU will slash 71% of import tariffs on Vietnam’s commodities after the deal comes into force and the remainder will be abolished over a period of up to seven years.
The ratification is a significant milestone of Vietnam-EU partnership and is the pinnacle of a decade of working among parties, trade associations, organisations and experts. The FTA will come into force at least one month after Vietnam and the EU have notified each other that legal procedures have been completed. It is the next and final step for Vietnam to cast a vote in the 43rd session of the National Assembly Standing Committee in March 2020.
Vietnam is predicted to benefit from these two pacts by increasing its export revenues to the EU by 20% by 2020; 42.7% by 2025; 44.37% by 2030. Vietnam’s GDP is also expected to raise by an average of 2.18% – 3.25% per annum during the 2019-2023 period; 4.27%-5.30% during the 2024-2028 period and 7.07% – 7.72% during the period 2029-2033. This is very important for Vietnam as only 42% of Vietnam’s exports to the EU enjoy the 0% tax rate under the Generalised Scheme of Preference (GSP).