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EU-Vietnam Free Trade Agreement (EVFTA)

In “A balanced and progressive trade policy to harness globalisation”

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Background and state of play

The EU hopes that its free trade agreement (FTA) and investment protection agreement (IPA) with Vietnam will boost trade and investment; the agreements are also an important stepping stone to the EU’s longer-term goal of a region-to-region EU-Southeast Asia trade deal. Vietnam, a fast-growing and competitive economy whose bilateral trade with the EU has quintupled over the past ten years, is equally keen on the deal, which could potentially bring €15 billion a year of additional exports to the EU by 2035.

Negotiations lasted from 2012 to December 2015. Following multiple delays, the FTA is expected to finally come into effect in 2020.

Content of the agreement

The European Commission has described the FTA as the most ambitious free trade deal ever concluded with a developing country:

  • near complete removal of tariff barriers: elimination of over 99% of customs duties on exports in both directions;
  • reduction of non-tariff barriers: Vietnam will align more closely with international standards on motor vehicles and pharmaceuticals. As a result, EU products (which already comply with these standards) will not require additional Vietnamese testing and certification procedures. Vietnam will also simplify and standardise customs procedures;
  • EU access to Vietnamese public procurement: EU companies will be able to compete for Vietnamese government contracts (and vice-versa);
  • improved access to Vietnamese service markets: the FTA will make it easier for EU companies to operate in the Vietnamese postal, banking, insurance, environmental and other service sectors;
  • promoting sustainable development: the FTA includes commitments to implement International Labour Organization core standards (for instance, on freedom to join independent trade unions — potentially a momentous change as Vietnam does not at present have any such unions) and UN conventions (for instance, on combatting climate change and protecting biodiversity);
  • investment access: Vietnamese manufacturing sectors such as food, tyres, and construction materials will open up to EU investment;
  • investment protection: the IPA establishes an Investment Tribunal and Appeal Tribunal to resolve disputes between EU investors and Vietnamese authorities (and vice-versa).

Criticisms of the agreement

Vietnam is a politically repressive state. The Communist Party has a monopoly of power and there are no independent media. No dissent is tolerated and criticism of the government is punished by lengthy jail sentences. If anything, the situation has deteriorated recently: according to Amnesty International, in May 2019 there were nearly 130 prisoners of conscience - far more than in previous years. In view of this worrying development, in November 2019, 18 European and Vietnamese NGOs called for the Parliament to postpone its consent for the FTA/IPA; according to them, the EU will lose most of its leverage to secure meaningful improvements to the human rights situation once the agreements enter into force.

Status of the procedure to adopt the agreement

The FTA and IPA were initially negotiated as a single text, but in 2018 the EU and Vietnam decided to split them, following the approach chosen for the trade and investment agreements with Singapore. The FTA covers exclusive EU competences, and can therefore be ratified by the EU alone, without involving the Member States. The IPA covers non-direct ('portfolio') investment and investor-state dispute settlement mechanisms: these are shared competences, on which the EU shares decision-making powers with Member States, meaning that the agreement must also be ratified by them.

The two texts were signed by the EU and Vietnam in Hanoi on 30 June 2019. On 12 February 2020, the European Parliament gave its consent to both agreements. The FTA will come into force one month after Vietnam and the EU have notified each other that legal procedures have been completed. The IPA will still have to be ratified by all Member States; judging by the precedent of the EU-Vietnam Partnership and Cooperation Agreement, for which Member State ratification took over three years, this could be quite a lengthy process.

Position of the European Parliament

Members of the European Parliament supporting the agreements emphasised the economic benefits of the agreements, as well as Vietnam’s commitments under the FTA to ratifying fundamental ILO conventions and improving labour rights. Opponents pointed to the country's human rights situation, recommending that the Parliament only consent if Vietnam eases repression, for example by releasing political prisoners. In the end, members voted for the FTA by a majority of 401 to 192 with 40 abstentions, and for the IPA by 407 to 188 with 53 abstentions.

References:

Further reading:

 For further information: Martin Russell, legislative-train@europarl.europa.eu

Visit the European Parliament homepage on globalisation.

As of 26/04/2020.