European Parliament Votes for the Approval of the EVFTA and the EVIPA

On February 12^th, the European Parliament ratified the EVFTA (EU Vietnam Free Trade Agreement) and the EVIPA (EU Vietnam Investment Protection Agreement). The two documents went through a negotiation period of eight years and were signed last June in Hanoi. They include commitments and provisions covering the fields of economy, trade, investment and sustainable development issues.

The trade agreement is expected to be ratified in the upcoming session of the Vietnam’s National Assembly in May and is set to be effective one month after both parties notify each other and have completed all legal procedures. Regarding the investment protection agreement entering into force, the process is not over yet as the Parliaments of each EU member State must first ratify it, they are both likely to come into effect in July.

The EVIPA includes rules on investment protection enforceable through the newly established Investment Court System (Tribunal and Appeal Tribunal) to resolve disputes between EU investors and Vietnamese authorities. This will ensure the right of both sides to regulate in the interest of their own citizens.

The EVFTA will remove nearly 100% of customs duties between the two parties over the next ten years. It sets favorable conditions to improve the trade of textile, seafood, agricultural and timber products but also for Europe’s main exported products to Vietnam such as machinery, cars and chemicals. Vietnamese exports will hopefully see an expected increase of 20% in the next two years by such incentives.

The EVFTA also has extensive commitments to services, government procurement, as well as labor and intellectual property. The pact will open up Vietnam’s services, including banking, maritime transport and postal, areas in which EU companies will now have better access. Companies will also be able to bid on public procurement put out by the National Government and several major cities, including Hanoi. The deal also aligns with international standards and protects over 160 EU geographical indications (including 28 members) and 39 EU protected geographical indications of Vietnam.

According to the research by the Ministry of Planning and Investment, the EVFTA and EVIPA are expected to increase Vietnam’s GDP by 4.6% and exports to the EU by 42.7% by 2025. The European Commission estimates that the GDP of the EU will increase by $29,5 billion, and exports to Vietnam by 29% by 2035.

It is an opportunity for both the EU and Vietnam to infiltrate a market with expected growth for the next few decades. The EU is Vietnam’s second largest export market while Vietnam is the EU’s second largest trading partner in ASEAN after Singapore, with trade in goods worth €47.6 billion a year and EU exports to the country grow by 5-7% annually.

The investment commitments will replace bilateral investment agreements between Vietnam and EU members and as the country is on the path of reforming its economic structure, there will be also be commitments to implement International Labor Organization core standards, to further improve the business environment and attract EU investors.