VietNamNet Bridge – Vietnam and the European Union (EU) have reached an agreement in principle for a free trade agreement (FTA) after two and a half years of intense negotiations. Jean-Jacques Bouflet, Minister Counselor and head of Trade & Economic Affairs of the EU Delegation to Vietnam, talked about specific details of the FTA at a press meeting on Wednesday. Excerpts:

Why is there the difference between tariff elimination periods of the two sides?

The EU has a tax elimination period of seven years and that of Vietnam is 10 years. Right after the FTA is signed, Vietnam will lift 65% of import duties on EU exports to Vietnam and each sector and product will have a different tax removal schedule. This is a rather ambitious figure for Vietnam. Meanwhile, 71% of EU duties will be eliminated.

Jean-Jacques Bouflet

The main cause of the difference is economic backgrounds of Vietnam and the EU. Vietnam needs a longer time to adapt to higher technical requirements of the EU. For enterprises, the FTA is negotiated following international standards, so the pressure is huge. Vietnam is deepening integration, so it should be well-prepared to export products meeting high requirements and build strong brands.

Can you explain the remaining 1% of tariffs that could not be cut? Are they sensitive products?

The FTA will eliminate nearly all tariffs, except for a small number of tariff lines for sensitive agricultural products for which the EU and Vietnam agreed on partial liberalization through zero-duty tariff rate quotas (TRQs). Milk products will have 10 years while pork, chicken and beef will be subject to TRQs. Both sides will have to meet international standards. We also demand transparency and a dispute settlement mechanism. Again, I’d like to affirm that technical barriers are aligned to international standards.

No special roadmaps have been set up yet. Frozen pork meat from the EU to Vietnam will be duty free after seven years, beef after three years, dairy products after five years and processed foods after a maximum of seven years. Chicken will be fully liberalized after 10 years.

From the EU to Vietnam, motorcycles with engines larger than 150 cc will be liberalized after seven years and cars after 10 years, except those with large engines which will be liberalized one year earlier. The EU will also eliminate duties after seven years for the apparel and footwear sectors.

From Vietnam to the EU, seafood will be liberalized gradually and some products will be subject to quotas.

How about origin rules for Vietnamese apparel products?

To benefit from the preferential access, the strict rules of origins for garments will require the use of fabrics produced in Vietnam, with the only exception being of fabrics produced in South Korea, another FTA partner of the EU.

At present, just a few Vietnamese products have geographical indication protection. Will the EU loosen requirements to protect more Vietnamese products after the FTA?

Currently, Vietnamese has 37 products with geographical indication protection in the EU and the EU has 169 in Vietnam. Before the FTA, Vietnam has only one product – Phu Quoc fish sauce.

Can you say about other technical barriers?

Non-tariff technical barriers actually are international standards EU enterprises have to comply with. We have made adjustments so that Vietnamese can gradually meet the standards.

How about finance, banking and telecom sectors?

For the banking industry, Vietnam has opened the door for 100% foreign-invested banks. What we care about is the increase of share ownership at local banks. As Vietnam has rejected to remove the foreign ownership cap, we have no chances to raise holdings at joint stock banks.

For the telecom sector, we only approach non-terrestrial telecom infrastructures and there will be improvements that are better than committed. EU low-cost air carriers will not be allowed to enter Vietnam’s market, but shipping firms will enter the country.