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Thứ 3, Ngày 19/05/2020, 18:00
Opportunities and benefits of trade agreements for Vietnamese businesses
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19/05/2020 | Nguyen Lien

​BEGIC - Over the past years, Vietnam has achieved many important achievements in economic development thanks to the promotion of openness, international economic integration, and active participation in the network of multi-tiered free trade agreements  hiccup.

​​New generation free trade agreements

The term "next-generation free trade agreement (FTA)" is used to refer to FTAs with broad and comprehensive commitments, including commitments on free trade in goods and services such as "Traditional FTA"; the deepest level of commitment (tax reduction is almost to 0%, there may be a schedule); have strict enforcement mechanisms and moreover, it covers areas that are considered "non-traditional" such as: Labor, environment, state-owned enterprises, government procurement, transparency, mechanisms resolve investment disputes ...

Vietnam has now participated in a number of new generation FTAs, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Free Trade Agreement between Vietnam and the European Union (EU) - EVFTA.

Specifically, for the CPTPP Agreement, the countries committed to abolishing import duties on 65-95% of tariff lines and completely eliminating 97-100% of tariff lines as soon as the Agreement comes into effect. Remaining goods will have a roadmap to eliminate tariffs within 5-10 years.

In the CPTPP, Vietnam commits to eliminate high tariff lines, whereby: 65,8% of tariff lines will have a tax rate of 0% right after the Agreement comes into effect; 86,5% of tariff lines will have a tax rate of 0% in the 4th year when the Agreement takes effect; 97,8% of tariff lines will have a tax rate of 0% in the 11th year when the Agreement comes into effect. For export taxes, Vietnam commits to abolish the majority of goods currently subject to export tax according to the schedule from 5-15 years after the Agreement comes into effect.

EVFTA Agreement, the main contents of the Agreement, including: Trade in goods, trade in services, rules of origin, customs and trade facilitation; measures for food hygiene and safety, animal and plant quarantine, technical barriers to trade, investment, trade remedies, competition, intellectual property and sustainable development; legal issues, cooperation and capacity building.

In EVFTA, Vietnam and the EU committed to eliminate import duties on 99% of tariff lines over a period of 7 years for the EU and 10 years for Vietnam. Accordingly, Vietnam commits to eliminate tariffs right after the Agreement comes into force with 48,5% of tariff lines, after 3 years is 58,7% of tariff lines, after 5 years is 79,6% of lines tax, after 7 years is 91,8% of tax lines and after 10 years is 98,3% of tax lines.

With respect to export taxes, Vietnam has committed to eliminate most of its export duties to the EU with a schedule of up to 15 years.

Positive impact on Vietnam's economy

The signing and participation of new generation FTAs will have a great impact on Vietnam's economy through expanding export and import markets. Accordingly, import-export turnover to partner countries will increase, consolidate traditional markets, open up many potential markets on the basis of promoting relations with important economic strategic partners. Specifically:

Firstly, boosting export activities: Trade liberalization in general and new generation FTAs in particular have the effect of promoting export activities. The provisions of these FTAs compel member economies, including Vietnam, to restructure, open new markets and create attraction in goods. In the coming time, when the implementation of tariff reduction under FTAs enters a deep reduction phase, Vietnam's exports are expected to continue to grow strongly due to: (i) The efforts of the ministries, relevant branches in striving to achieve the export growth target of 7-8% set by the National Assembly; (ii) When the tax rate is reduced, especially for raw materials for production of exports, such as: Textile materials, plastics, corn, rubber ...; (iii) CPTPP and EVFTA Agreement will come into effect, which will be a driving force for Vietnam's exports in the near future.

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The signing and participation of new generation FTAs will have a great impact on Vietnam's economy through expanding import and export markets

In particular, with the commitment to open markets in EVFTA, it will help further expand export markets, especially products that both have advantages such as agricultural and aquatic products, wooden products, textiles, footwear ... of Vietnam, EU machinery, equipment, cars, motorcycles, and alcoholic beverages.

Secondly, for domestic production: Participation in new generation FTAs will make many products as input materials for domestic production lower prices, so the production costs of businesses Therefore, commodity prices will be more competitive than imported goods, thus boosting domestic production for export. The reduction of tariffs will make more imports from countries, especially EU countries into Vietnam, due to the low price, abundant and diversified designs, and a positive impact on domestic production.

Thirdly, for the business environment: Participation in new generation FTAs such as EVFTA, CPTPP on institutional issues, legal policies behind the borderline ... will create favorable conditions and opportunities for change. , improve policies and laws towards greater transparency, convenience and more in line with international practice. The new generation FTAs will help Vietnam to strengthen the state apparatus, in the direction of promoting administrative reform, increasing responsibility, discipline and discipline of cadres, thereby supporting the process of tissue renewal. growth model and economic restructuring of Vietnam.

Fourth, for attracting foreign investment (FDI): In the new generation FTAs, there are commitments to treat fairly between domestic and foreign investors in establishing, acquiring, expand, operate, deploy, operate, and trade. That will create opportunities for foreign investors to access Vietnam market faster. New generation FTAs also have regulations on sustainable development, which help to reduce backward technologies and promote the development of technologies using renewable and environmentally friendly energy sources. These trends bring a lot of benefits to Vietnam's economy and to Vietnamese businesses.

In the coming period, when the new generation FTAs come into effect, the removal of measures to restrict investment and services, opening the Government procurement market, financial services ... will open up great opportunities for with the investment sector of Vietnam.

With the provisions of the new generation FTAs, investors will invest deeply in Vietnam market, therefore, the quality of foreign investment will be improved, creating motivation for economic development. For example, EVFTA will motivate high quality EU and other partners to enter Vietnam. Up to now, EU investors have been present in almost all important economic sectors, focusing on industry, construction and some service industries.

Businesses take advantage of opportunities

In order to take advantage of opportunities and limit challenges in the implementation of commitments of new generation FTAs, businesses need to pay attention to a number of solutions in the coming time.

Continuing to implement activities of providing and advising businesses on business law, knowledge of international economic integration, as well as experience in dealing with international lawsuits, trade barriers of export markets; Organize many trade-investment promotion programs based on specific markets, industries and business sectors to improve access to domestic and foreign markets.

Continue to promote the role of a bridge between businesses and regulatory agencies, and facilitate connection and exchange between member businesses; enhance the dissemination of integration information about the laws of countries, intellectual property, industrial property, quality management, rules of origin ... for member businesses, support businesses to build businesses. effect.

Strengthening links with each other, creating investment opportunities to increase competitiveness; Proactively build production and business capacity, improve product quality and models to improve competitiveness and build brands; Increasing investment in developing supporting industries, investing in raw material growing areas to minimize dependence on raw materials of foreign suppliers.

Innovating corporate governance and information technology, improving product quality, promoting brand promotion; Along with that, proactively building business strategies, developing production to be able to compete with goods from regional countries even in domestic and export markets, researching to meet the criteria of rules of origin to enjoy tariff preferences. In addition, businesses need to closely monitor the information, schedule of commitments ... from there, give the right direction, build a reasonable business strategy. More importantly, the business community must have a roadmap to adapt and change accordingly. Because, if the tariff barrier is completely removed and brings major economic benefits, the rules of origin emerge as a new barrier.

It is necessary to have a mechanism for early investment in human resources, and appropriate remuneration for material and spiritual benefits, especially for highly skilled workers. This is the investment in human resources to create a competitive advantage in integration. In addition, businesses need to renovate the salary management mechanism associated with labor productivity and business efficiency, encouraging employees to automatically improve their occupational skills.​​

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