International Agreements in Progress: EU-Vietnam Free Trade Agreement

04-10-2018

The free trade agreement (FTA) negotiated in 2015 with Vietnam has been described as the most ambitious deal of its type ever between the EU and a developing country. Not only will it eliminate over 99 % of customs duties on goods, it will also open up Vietnamese services markets to EU companies and strengthen protection of EU investments in the country. According to European Commission figures, the FTA could boost Vietnam's booming economy by as much as 15 % of GDP, with Vietnamese exports to Europe growing by over one third. For the EU, the agreement is an important stepping stone to a wider trade deal with south-east Asia. However, Vietnamese manufacturing sectors may suffer from competition with the EU. NGOs and the European Parliament have also criticised the Commission for pursuing closer ties with a politically repressive regime, although the deal includes some safeguards against negative outcomes. Conclusion of the FTA was delayed by a 2017 opinion of the European Court of Justice. The Court ruled that the EU does not have the power to conclude agreements on certain investment-related issues on its own; therefore, the text as it then stood would also have to be ratified by the 28 Member States. To enable at least some parts of the FTA to be ratified more speedily at EU level, in August 2018 the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Both the FTA and IPA are currently in translation and are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019. Third edition. The ‘International Agreements in Progress’ briefings are updated at key stages throughout the process, from initial discussions through to ratification. To view earlier editions of this briefing, please see: PE 614.702, February 2018.

The free trade agreement (FTA) negotiated in 2015 with Vietnam has been described as the most ambitious deal of its type ever between the EU and a developing country. Not only will it eliminate over 99 % of customs duties on goods, it will also open up Vietnamese services markets to EU companies and strengthen protection of EU investments in the country. According to European Commission figures, the FTA could boost Vietnam's booming economy by as much as 15 % of GDP, with Vietnamese exports to Europe growing by over one third. For the EU, the agreement is an important stepping stone to a wider trade deal with south-east Asia. However, Vietnamese manufacturing sectors may suffer from competition with the EU. NGOs and the European Parliament have also criticised the Commission for pursuing closer ties with a politically repressive regime, although the deal includes some safeguards against negative outcomes. Conclusion of the FTA was delayed by a 2017 opinion of the European Court of Justice. The Court ruled that the EU does not have the power to conclude agreements on certain investment-related issues on its own; therefore, the text as it then stood would also have to be ratified by the 28 Member States. To enable at least some parts of the FTA to be ratified more speedily at EU level, in August 2018 the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Both the FTA and IPA are currently in translation and are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019. Third edition. The ‘International Agreements in Progress’ briefings are updated at key stages throughout the process, from initial discussions through to ratification. To view earlier editions of this briefing, please see: PE 614.702, February 2018.