Free Trade Agreements in Viet Nam
Viet Nam is the member of a number of FTAs having a remarkable effect
In the context of international trade as current, Viet Nam has been trying to access, negotiate and sign Free Trade Agreements with the states all over the world.
Vietnam’s effort must be mentioned from 1992 when Viet Nam joined in Treaty of Amity and Cooperation in Southeast Asia (TAC) and became Observer. After that, Viet Nam attended to annual ASEAN Foreign Minister’s Meeting. And in 1995, Viet Nam officially acceded to ASEAN and became the 7th member of the organization.
Continue with the objective to strengthen the cooperation with other countries, in 1995, Viet Nam applied to join World Trade Organization (WTO). After 11 years of conducting the bilateral, multilateral negotiations and consultations, in 2006, WTO officially admitted Viet Nam to the organization. In 2007, National Assembly of Social Republic of Viet Nam ratified the participation of Viet Nam to WTO. Viet Nam became an official member of WTO from January 1st 2007 and started to embark on the intensification, further promoting of international economic integration.
Beside Regional Trade Agreements, Free trade agreements (FTAs) are also becoming the trend in globle in the future.Throughout the world, many governments have signed, are negotiating, or contemplating new bilateral, multilateral free trade agreements and investment agreements. And Viet Nam is not the exception of this trend. As of 2018, Vietnam has signed, implemented, and is negotiating total of 16 Free Trade Agreements (FTAs) both as ASEAN member and as independent party.
Up to now, Viet Nam signed and implemented 10 FTAs, signed and now is waiting for ratification of 2 FTA, has just finished negotiating 1 FTA and is negotiating 3 other FTAs.
- Of the 10 FTAs that have been signed and implemented, 6 FTAs have been signed as ASEAN members (including AFTA, 5 FTAs between ASEAN and its partners China, South Korea, India, Japan, Australia and New Zealand), 4 FTAs signed as an independent party (Chile, Japan, Korea, Eurasia Economic Coalition).
- The two FTAs that have finished the negotiations are the FTA ASEAN with Hong Kong, and theComprehensive and progressive agreement for Trans- Pacific Partnership(CPTPP).
- Three FTAs being negotiated include the Comprehensive Economic Partnership Agreement (RCEP), the FTA with Israel and the FTA with the European Free Trade Association (EFTA including 4 states: Iceland, Liechtenstein, Norway and Switzerland).
- With respect to EU-Vietnam Free trade agreement (EVFTA), on December 1st, 2015, the negotiation of the agreement has been concluded. On February, 1st, 2016 the Parties released a written agreement. A new move of EVFTA has been unanimous. Accordingly EVFTA is separated into two agreements, one on trade and the other on investment. In the same day, the two Parties announced that the legal review of Trade Agreement finished. Although, with the Investment Protection agreement, both parties have just concluded the initial discussion.
The most notable among FTAs in Viet Nam has to be mentioned are the Comprehensive and progressive agreement for Trans- Pacific Partnership(CPTPP) and EU-Vietnam Free trade agreement (EVFTA) because of the wide scope of commitment and the high preferential treatment. These two Agreements taking effect in the coming time are forecasted to strongly promote the economic development of Viet Nam especially in the field of import and export of goods and trade with foreign countries.
- Comprehensive and progressive agreement for Trans-Pacific Partnership (CPTPP)
CPTPP was officially signed in March, 2018 by 11 states including: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Viet Nam.
The CPTPP is seen as a strong message against the current protectionist trend in the world. This agreement will create one of the world’s largest free trade association with a market of 499 million people and the gross domestic product (GDP) of $ 10,100 billion, accounting for 13.5% of world’s GDP.
Under the CPTPP, Viet Nam committed to eliminate almost 100% of tariff lines, accordingly:
- 65.8% of tariff lines will have the tax rate of 0% right after the agreement comes into force.
- 86.5% of tariff lines will have the tax rate of 0% in the fourth year from the year that the agreement comes into force.
- 97.8% of tariff lines will have the tax rate of 0% in the eleventh year from the year that the agreement comes into force.
- The remained goods were committed to eliminating import duties with the schedule of maximum elimination of tariff duties in the sixteenth year or following the tariff rate quotas.
The CPTPP will come into force if at least 6 member states or half of CPTPP’s members have approved the Agreement. As of August 2018, 3 member states have approved CPTPP being Japan, Mexico and Singapore. Viet Nam is scheduled to approve CPTPP in October 2018.
- EU-Viet Nam Free Trade Agreement
The main field of commitment under EVFTA includes: Trade of goods, Rules of Origin, Customs administration and trade facilitation; Sanitary and phytosanitary measures (SPS); Technical barriers to trade (TBT); Trade remedies (TR); Cross-border trade in services; Investment; Competition; State-owned enterprises; Government procurement; Intellectual Property; Sustainable development (comprising environment and labor); Legal issues; Cooperation and capacity building.
Under EU-Viet Nam Free Trade agreement, EU committed to giving preferential treatment on the tariff for goods from Viet Nam following the schedule as below:
- Eliminate the tariff right after the Agreement comes into force with 85.6% of tariff lines equivalent to about 70.3% of Vietnam’s current export turnover to EU;
- After 07 year, EU will eliminate tariff with total 99.2% of the tariff lines, equivalent to 99.7% Vietnam’s current export turnover to EU;
- For about 0.8% remained tariff lines, EU will give Viet Nam with the import duties in tariff rate quotas of 0%
Recently, Prime Minister Nguyen Xuan Phuc has had a meeting with Bernd Lange, Chairman of Committee of International Trade of European Parliament (INTA) visiting Viet Nam. The two Parties said the documents of the Trade agreement are being completed by the authorities of Vietnam and the EU in order to soon sign the agreement by the end of this year.
The impact of Free Trade Agreements to Viet Nam
The Free Trade Agreements that Viet Nam has joined and implemented helped raise import, export turn over, attracting more foreign direct investment (FDI). Lots of foreign investors have had the plan to invest in Vietnam’s market with the total value of registered FDI capital is $307.86 billion with 23,737 projects (Statistical data as of July - 2017 published by the Ministry of Planning and Investment).
By the end of 2017, the implemented capital of foreign direct investment is estimated $17.5 billion, increasing by 10% over the same period of 2016 and hitting the record in the past 10 years. In 2017, there had 05 projects granted for investment certificate with the worth of billion dollars.
After joining ASEAN and WTO and after signing and implementing the FTAs with other countries, Vietnam's export and import activities have seen a lot of changes in the structure of commodities and in particular the trade balance has shifted from a heavy deficit to a relatively small deficit and surplus in recent years. The economic growth of Viet Nam in 2017 is remarkable with the total turnover of export and import goods exceeded 400 billion USD.
Chart: Exports, imports, trade balance of goods in Vietnam period 2005-2017
Source: General Department of Customs
Foreign transactions of Viet Nam are also recognized through the ranking of trade in goods of Viet Nam over the year. If export and import of goods of Viet Nam respectively ranked 50th and 44th in 2006 all over the world, in 2015, export increased by 23 levels, ranking at 27th while import also increased by 16 levels in the total number of countries and territories around the world.
Moreover, with the great growth of Viet Nam’s economy in 2017, World Trade Forum ranked competing capability of Viet Nam at 55/137 increasing by 5 levels; World Bank ranked the business environment of Viet Nam at 68/190 countries and territories, increasing by 14 levels.
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The information about FTAs that Viet Nam signed and has come into force, signed but hasn’t come into force and the unsignedare presented in the following boards.
1. FTAs were signed and came into effect
| No | Agreement | Date of signing | Place of signing | Country members | Effective date |
| 1 | ASEAN Free Trade Area (AFTA) | January 28th, 1992 | Singapore | 10 members of ASEAN: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore, Thailand, Vietnam. | January 1, 1993 |
| 2 | ASEAN- China Free Trade Area (ACFTA) | Framework agreement on comprehensive economic co-operation was signed on November 4th, 2002 | Phnom Penh, Cambodia | ACFTA includes 11 members: 10 members of ASEAN and China | January 1st, 2010 |
| Agreement on Trade in goods (29/11/2004) | Laos | July, 2005 | |||
| Agreement on Trade in services (12/01/2007) | Cebu, The Philippines | July 1st, 2007 | |||
| Agreement on Investment (15/08/2009) | Bangkok, Thailand | February, 2010 | |||
| 3 | ASEAN - India Free Trade Area | Framework agreement was signed on October 8th, 2003 | Bali, Indonesia | 11 members: 10 members of ASEAN and India | January 1st, 2010 |
| Agreement on Trade in goods ( 13/08/2009 and 24/10/2009) | Bangkok, Thailand and Hanoi, Viet Nam | January 1st, 2010 | |||
|
Agreement on Investment (12/11/2014) |
Nay Pyi Taw, Myanmar | July 1st. 2015 | |||
| Agreement on service (13/11/2014) | Nay Pyi Taw, Myanmar | July 1st. 2015 | |||
| 4 | ASEAN- Japan Comprehensive Economic Partnership (AJCEP) | April, 2008 | At all member states | AJCEP includes 11 members: 10 members of ASEAN and Japan | December 1st, 2008, particularly Malaysia on February 1st, 2009 |
| 5 | ASEAN- Korea Free Trade Area (AKFTA) | Framework agreement on comprehensive economic co-operation was signed on December 13th, 2005 | Kuala Lumpur, Malaysia | AKFTA includes 11 members: 10 members of ASEAN and Korea | July 1st 2006 |
| Agreement on Trade in goods between ASEAN and Korea (24/08/2006) | Kuala Lumpur, Malaysia |
July 1st 2006 |
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| Agreement on Trade in services between ASEAN and Korea (21/11/2007) | Singapore | ||||
| Agreement on Investment between ASEAN and Korea (02/06/2009) | Jeju island, Korea | ||||
| 6 | Vietnam- Japan Economic Partnership Agreement (VJEPA) | December 25th, 2008 | Vietnam, Japan | October 1st, 2009 | |
| 7 |
ASEAN- Australia/ New Zealand Free Trade Area (AANZFTA) |
February 27th, 2009 | Thailand | AANZFTA includes 12 members: 10 members of ASEAN , Australia and New Zealand | January 1st, 2010 |
| 8 | Vietnam- Chile Free Trade Agreement | November 11th, 2011 | Honolulu, Hawaii, The United States | Vietnam, Chile | January 01st, 2014 |
| 9 | Vietnam- Korea Free Trade Area (VKFTA) | May 5th, 2015 | Ha Noi, Viet Nam | Vietnam, Korea | December 20th, 2015 |
| 10 | Vietnam- Eurasian Ecconomic Union | May 29th, 2015 | Kazakhstan | 6 members: Vietnam, Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan | October 5th, 2016 |
2. FTAs were signed but have not come into effect yet
| No | Agreement | Date of signing | Place of signing | Country members | Status | |
| 11 | Comprehensive and progressive agreement for Trans- Pacific Partnership (CPTPP) | March 8th, 2018 |
Santiago Chile |
CPTPP includes11 members: Canada, Mexico, Peru, Chile, New Zealand, Australia, Japan, Singapore, Brunei, Malaysia and Vietnam | Each Party is following its appropriate domestic procedures to ratify the Agreement | |
| 12 | ASEAN- Hong Kong Free Trade Agreement (AHKIA) | November 12th, 2017 |
Manila Philippines |
AHKIA includes 11 members: 10 members of ASEAN and Hong Kong | Expected to take effect from January 01st 2019 | |
3. FTAs not signed:
| No | Agreement | Date of signing | Place of signing | Country members | Status |
| 13 |
- Vietnam- EU Free Trade Agreement (EVFTA) - Invesment Protection agreement |
The negotiations was finished on December 2nd, 2015 | Brussels, Belgium | Vietnam and the EU | This FTA has concluded the negotiation but not signed. |
| 14 | Vietnam- EFTA Free Trade Agreement | The negotiations were launched from May 2012 | 5 members includes Vietnam, Switzerland, Norway, Iceland and Liechtenstein | still under negotiation | |
| 15 | Regional Comprehensive Economic Partnership (RCEP) | The negotiations were launched from May 9th, 2013 | RCEP includes 16 members: 10 members of ASEAN and China, Korean, Japan, India, Australia, New Zealand | still under negotiation | |
| 16 | Vietnam- Israel Free Trade Agreement | The negotiations were launched from December 2nd, 2015 | Vietnam , Israel | still under negotiation |
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