Basically, trade agreements have positive impacts on production and trade. But along with opportunities, there are technical barriers, trademarks, copyrights, and social security and environmental regulations set by importing countries.

Challenges and opportunities

Signing of the Vietnam-EU Free Trade Agreement (EVFTA) is scheduled for the first half of this year. The agreement will cover a wide range of trade liberalization. Vietnamese exporters will benefit from the EU’s commitment to remove tariffs on 90 commodities. The most-benefited sectors will be garments and textiles, footwear, and food processing. According to the European Chamber of Commerce (EuroCham) when the Vietnam-EU Free Trade Agreement is signed, it will help Vietnam’s GDP grow 10 to 15% and increase Vietnam’s exports to the EU 30 to 40%. 

The Trans-Pacific Partnership (TPP) Agreement, comprising 12 member economies, is expected to complete negotiations this year. Once formed, the TPP will represent 40% of global GDP, making it the world’s largest free trade area. Vietnam is one of the countries that will benefit most from the TPP’s tariff reductions and trade barrier elimination.

Vietnamese enterprises will increase exports to 11 TPP members, including large, stable consumer markets like the US, Japan, and Canada.

When the ASEAN Economic Community (AEC) is formed, Vietnamese enterprises will work in a dynamic environment. The AEC’s central position on global trade and transportation routes is an advantage that will reduce Vietnam’s commodity prices. Deputy Minister of Industry and Trade Do Thang Hai says: “This will be a good opportunity for Vietnamese enterprises. We can increase exports of our staple products such as leather and footwear, garments and textiles, seafood, and fine art articles.”

In addition to its positive impacts, FTA membership will expose the domestic market to fierce competition and an import surplus. Mr. Hai again: “We can take advantage of the zero percent tax rate for FTA member countries and accept reduced taxes on import products. The Ministry of Industry and Trade is determined to strongly promote Vietnam’s strength and increase exports of Vietnamese staple products. All FTA members will have opportunities and difficulties. The key will be to make full use of the advantages.” 

Taking advantages, overcoming challenges

After signing the FTA, the government will need to create a healthy trading environment and enterprises will need to reform to increase their competitiveness.  Cao Sy Kiem, President of the Vietnam Association of Small and Medium-sized Enterprises, says: “If we don’t prepare and cannot meet the challenges, we’ll take risks and will lose at home. We have to improve our technology and the quality of our human resources, infrastructure, legal environment, and institutions.”

Minister Vu Huy Hoang said the government had already considered a roadmap to protect domestic production in line with international law when it decided to engage in FTA negotiations. Fierce competition cannot threaten domestic production if we strictly abide by the signed agreement. Mr. Hoang said: “The government has ordered a focus on communications once FTAs are signed in 2015 and subsequently. Government offices must work closely with enterprises and collect people’s opinions in order to make appropriate adjustments.”

FTA opportunities will provide momentum for Vietnam’s economic growth. So functional agencies, enterprises, and people need to actively respond to FTA requirements during the global integration process.