SUMMARY

VIETNAM - EU
FREE TRADE AGREEMENT
(EVFTA)

WTO AND INTERNATIONAL TRADE CENTER

VIETNAM CHAMBER OF COMMERCE AND INDUSTRY (VCCI)
ADD: 9 ĐAO DUY ANH – ĐONG ĐA - HA NOI
TEL: 024-35771458 FAX: 024-35771459
EMAIL: [email protected]
WEBSITE: WWW.TRUNGTAMWTO.VN
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

I. OVERVIEW

1. Progress
 Before October 2012: The two Parties carried out technical activities
(feasible study…) to prepare for the negotiation
 June 2012: The two Parties announced the initiation of negotiation
 From October 2012 to August 2015: The two Parties conducted 14 official
negotiation rounds and many midterm negotiation sessions.
 August 4, 2015: The two Parties announced to have reached an agreement
in principle
 December 1, 2015: The two Parties officially announced the conclusion of
the EVFTA negotiation
 February 1, 2016: The two Parties announced the official document of
EVFTA
 June 2017: The two Parties completed the legal review at technical level
 June 26, 2018: The two Parties agreed to separate EVFTA into two
Agreements, one is the Free Trade Agreement (EVFTA), and the other is the
Investment Protection Agreement (EVIPA); officially concludes the legal
review process for the EVFTA.
 August 2018: The two Parties officially announced the completion of the
legal review of the EVIPA.
 October 17, 2018: The European Commission officially approved EVFTA
and EVIPA
 June 30, 2019: The two Parties officially signed EVFTA and EVIPA.
 February 12, 2020: The European Parliament officially approved EVFTA
and EVIPA.
 June 8, 2020: The National Assembly of Vietnam officially ratified
EVFTA and EVIPA.
 As for EVFTA, this Agreement has officially come into effect from 1st
August 2020. For EVIPA, on the EU side, the Agreement will still have

1
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

to be further ratified by the Parliament of all 27 EU member countries

(after the UK completes Brexit) to take effect.

2. Partners
- The EU is a coalition of 27 countries in Europe (after the UK completed
Brexit) and is one of the largest trading partners of Vietnam. Up to now,
Vietnam has not had any FTA with the countries in this region.
- The EUstarted FTA negotiation with the ASEAN in 2007, however, the
negotiation stopped in 2009.
Regarding bilateral relations with each ASEAN country, the EU has
currently signed FTAs and IPAs with Singapore and Vietnam, and is
negotiating an FTA with Thailand, Malaysia, the Philippines and
Indonesia.
- In 2019, the EU is the 5th largest trading partner and the second largest
export market of Vietnam, only after the United States. The outstanding
feature in the import-export structure between Vietnam and the EU is the
significant complementarity and little direct competition.

2
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

II. SUMMARY OF MAIN CONTENTS IN EVFTA

EVFTA is a new-generation FTA, with a wide range and high degree of

commitments. The Agreement consists of 17 Chapters, 2 Protocols and some
understandings. Key areas of commitment in EVFTA include:
 Trade in goods, including:
+ general provisions (called written commitments); and
+ specific tariff schedules (called market access commitments)
 Rules of origin, including:
+ common rules of origin determination
+ specific rules of origin for certain goods
 Customs and trade facilitation
 The Sanitary and Phytosanitary Measures (SPS)
 The Technical Barriers to Trade (TBT)
 Trade Remedies (TR)
 Trade in services (text on general regulations and commitments to open
markets)
+ General provisions (called written commitments); and
+ Specific tariff schedules on opening service market (called market
access commitments)
 Investment
+ General principles of investor treatment
+ Dispute settlement mechanism between the State and foreign
investors
 Competition
 State-owned enterprises
 Government Procurement
 Intellectual Property
 Trade and Sustainable Development (including environment, labor),
 Legal - Institutional issues
 Collaboration and capacity development

3
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

Below is a summary of the key issues in EVFTA:

1. Trade in Goods
1.1. Commitment to open the EU commodity market

- EU commits to eliminate tariffs as soon as EVFTA comes into effect for

Vietnamese goods contained in 85.6% of tariff lines, equivalent to 70.3%
of Vietnamese export turnover to the EU;
- Within 7 years since EVFTA takes effect, the EU commits to eliminate
99.2% of tariff lines, equivalent to 99.7% of Vietnamese export turnover
to the EU.
For the remaining 0.3% of export turnover (including: some rice products,
sweet corn, garlic, mushrooms, sugar and products containing high content
of sugar, tapioca starch, canned tuna), the EU commits to open to Vietnam
under the tariff rate quotas (TRQs) with the import tarrif within the quota
of 0%.
Table 1 - Summary of EU open-door commitments for some important
commodity groups of Vietnam

Commitment The tariff commitment of EU to Vietnam

Group of Agricultural - Aquatic products

Immediately eliminate about 50% of tariff lines as soon as

Aquatic the Agreement comes into force.
products
The remaining 50% of tariff lines will be eliminated
(except for
according to a schedule of 3 to 7 years.
canned tuna
and fish balls) Particularly for canned tuna and fish balls, the tariff quotas
are 11,500 tons and 500 tons, respectively.

Applying the tariff rate quota mechanism, imports within

the quotas enjoy a tarriff rate of 0%.
The total quota is 80,000 tons, specifically:
Rice
- Unmilled rice: the quota is 20,000 tons
- Milled rice: the quota is 30,000 tons
- Fragrant rice: the quota is 30,000 tons

4
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

Import duties will be completely eliminated after 5 years

for broken rice and 3-5 years for rice products.

Import duties will be completely eliminated as soon as the

Coffee
Agreement comes into force

The tariff rate quota is applied for 10,000 tons of white

Sugar sugar and 10,000 tons of products containing more than
80% sugar

Import duties will be completely eliminated as soon as the

Natural honey
Agreement comes into force

Fresh and
processed
fruit and
Import duties will be completely eliminated as soon as the
vegetable
Agreement comes into force
products,
fruit juices,
fresh flowers

Some products are eligible for the EU's tariff quota

commitments for Vietnam:
- Processed poultry eggs: 500 tons
Garlic: 400 tons
Other Sweet corn: 5,000 tons
agricultural
products Tapioca: 30,000 tons
Mushrooms: 350 tons
Ethyl alcohol: 1,000 tons
Other chemical products (manitol, sorbitol, dextrins, ...):
2,000 tons

Group of Industrial goods

Import duties of 42.5% of tariff lines will be eliminated as

soon as the Agreement comes into force
Textile
Import duties of the remainder will be eliminated according
to a schedule of 3-7 years.

5
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

Import duties of 37% of tariff lines will be eliminated as

soon as the Agreement comes into force
Footwear
Import duties of the remainder will be eliminated according
to a schedule of 3-7 years.

Import duties of about 83% of tariff lines will be eliminated

Wood and as soon as the Agreement comes into force.
wood Import duties of the remaining 17% (including particle
products boards, fiber boards and plywood ...) will be eliminated
according to a schedule of 3-5 years.

Computers, Import duties of 74% of tariff lines will be eliminated as

electronic soon as the Agreement comes into force.
products and Import duties of the remaining products will be eliminated
components according to a schedule of 3-5 years.

For some items, import tariff will be eliminated as soon as

Some other the Agreement comes into effect, such as plastic products,
products phones of all kinds and components, bags, wallets,
suitcases, hats, umbrellas…

Source: Ministry of Industry and Trade

1.2. Commitment to opening the goods market of Vietnam

- Vietnam commits to eliminating tariffs as soon as EVFTA comes into

effect for EU goods belonging to 48.5% of tariff lines, equivalent to 64.5%
of EU export turnover to Vietnam;
- Within 7 years since EVFTA takes effect, Vietnam commits to eliminate
91.8% of tariff lines, equivalent to 97.1% of EU export turnover to
Vietnam;
- Within 10 years since EVFTA comes into effect, Vietnam commits to
eliminate about 98.3% of tariff lines, accounting for 99.8% of EU's export
turnover to Vietnam.

6
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

- For about 1.7% of the remaining EU tariff lines, Vietnam commits to set
tariff quotas as WTO commitments, or apply a special elimination roadmap
(such as cigarettes, gasoline, beer, components for cars and motorcycles).

Table 2 - Summary of Vietnam's market access commitments to some

important EU commodity groups

Commitment Vietnam's tariff commitments to the EU

61% of tariff lines will be eliminated import duties as
soon as the Agreement comes into force
Devices The remaining import tariff will be reduced to 0%
after a maximum 10-year schedule
Large displacement engine cars (over 2500 cm3 for
diesel cars, over 3000 cm3 for gasoline cars) will
have an import tariff of 0% after 9 years
Other types of cars are eligible for a 10-year tariff
Whole cars and
reduction commitment
components, spare
parts for cars and Import duties will be eliminated for all types of auto
motorcycles parts after 7 years
Motorbikes and motorcycles over 150 cm3 will have
0% import tariff after 10 years and 7 years
respectively
Import duties for wines and hard liquors will be
eliminated after 7 years
Alcoholic beverages The schedule for elimination of import tariff on beer
is 10 years
Import tariff on frozen pork will be 0% after 7 years;
Import tariff on other types of pork will be 0% after 9
years
Raw meats Chicken meat will be exempt from import tariff after
10 years
Beef will be exempt from import tariff after 3 years

7
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

About 71% of pharmaceutical products from the EU

will have 0% of import tariff as soon as the
Agreement comes into effect
Pharmaceuticals The remaining products will be exempt from import
duties according to a schedule of 5-7 years.
About 70% of these products will be exempt from
Chemical
import duties as soon as the Agreement comes into
substances and
force
products the
chemical substances The remaining products will have 0% of import tariff
after a maximum schedule of 7 years
About 80% of these products will be exempt from
import duties as soon as the Agreement comes into
Textile, leather and
force
footwear raw
materials The remaining products will be exempt from import
duties according to a schedule of 3-5 years.
About 44% of these products will have their tariffs
eliminated as soon as the Agreement comes into
Milk and dairy force or after 3 years
products The remaining products will be exempt from import
duties after 5 years

Petroleum Import duties will be eliminated after 10 years

Source: Ministry of Industry and Trade

1.3. Commitment on export tariff:

Vietnam and the EU commit to not applying any kind of export tariffs or fees
except for cases which are clearly reserved (according to the commitment results,
only Vietnam has reservations on this issue, the EU does not make any
reservations). According to this commitment, except for cases with reservations
(of Vietnam), Vietnam and the EU will not apply any tariffs or fees for only
exports but not for domestic goods, and no tariffs and fees will be imposed on
exports higher than those for domestic goods.

8
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

The reservation of Vietnam on export duties is set out in Annex 2d Chapter 2 of

EVFTA, applicable to goods exported from Vietnam to the EU with the following
main contents:
- Vietnam maintains export tariff for 57 tariff lines, including products such
as sand, shale, granite, some ores and concentrates, crude oil, coal, coke, gold ...
Among these products, the current tariff lines with high export tariff will be
brought back to 20% within 5 years (only manganese ore will be reduced to 10%);
the remaining products maintain current export duties;
- For all other products, Vietnam commits to eliminate export tariff
according to a maximum schedule of 15 years.
1.4. Commitment on non-tariff barriers
- Technical barriers to trade (TBT):
+ The two Parties agree to strengthen the implementation of the rules of The
Technical Barriers to Trade Agreement (TBT Agreement) of the WTO, in
which Vietnam commits to enhancing the use of international standards in
issuing TBT regulations.
+ The Agreement has a separate Annex on non-tariff barriers to the automotive
sector, in which Vietnam commits to recognize all technical conformity
certification for EU cars according to the principles of the 1958 UNECE
Agreement (United Nations standards system) five years after the EVFTA
entered into force;
+ Vietnam commits to accept the label "Made in EU" for non-agricultural
products (except for pharmaceuticals) while still accepting specific labels of
origin from a specific EU country.
- Sanitary and Phytosanitary Measures (SPS):
Vietnam and the EU reached agreement on a number of principles on SPS to
facilitate trade in animal and plant products.
In particular, for goods imported and exported to Vietnam, the EU's
management entity is the competent authority of each specific EU member
country (where Vietnamese goods are exported or imported), not a joint level
body of the EU. The European Commission is only responsible for the general
coordination, examination/inspection of the control systems and related legal

9
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

systems of the member countries to ensure the uniform application of technical

standards and regulations in the whole EU market
- Other non-tariff measures
The Agreement also includes commitments towards reducing other tariff
barriers (eg: commitments on export/import licensing, customs procedures ...)
to facilitate import and export activities between the two Parties.

10
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

1.5. Appendix on pharmaceuticals

The Agreement has a separate Annex on pharmaceuticals (important EU export
products, accounting for 9% of total imports from the EU and Vietnam) in which:
- The two Parties commit to a number of measures to facilitate
pharmaceutical trade between the EU and Vietnam;
- Vietnam commits to allow foreign-invested enterprises to import
pharmaceuticals but not participate in the wholesale or retail sale of
pharmaceuticals, and it shall only resell Vietnam’s pharmaceutical
products to licensed distributors (wholesalers).
- Vietnam has commitments to allow EU contractors to participate in
pharmaceutical bidding packages, with some separate reservations.

2. Trade in Service and Investment

Commitments of Vietnam and the EU in the EVFTA on service trading and
investment towards creating an open and favorable investment environment
for the operation of enterprises of the two Parties, in which:
- EU's commitment to Vietnam: Higher than EU's commitment in WTO and
equivalent to the highest level of EU in recent EU FTAs
- Vietnam's commitment to the EU: Higher than Vietnam's commitments
in the WTO and at least equal to the highest level of openness that Vietnam
offers to other partners in Vietnam's current FTA negotiations (including
CPTPP);
Box 1: A number of EVFTA commitments to open service trading and
investments from Vietnam to the EU
Service:
Open-door commitments: In EVFTA, Vietnam commits to open more
access to EU service suppliers than in WTO in the following areas:
- Business services
- Environmental services
- Postal and delivery services
- Bank
- Insurance
- Sea freight

11
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

Vietnam also commits to a series of binding rules related to financial,

telecommunications, sea freight and postal services.
Investment:
Vietnam commits to opening to more investment from the EU in a number
of manufacturing sectors such as:
- Food & Beverage
- Fertilizers and nitrogen compounds
- Tires
- Gloves and plastic products
- Pottery
- Building materials
For the machinery industry, Vietnam commits to remove restrictions on the
assembly of marine engines, agricultural machinery, home appliances, and
the bicycle manufacture.
Vietnam also makes several recycling commitments.
Source: European Commission

3. Government Procurement
- The EVFTA Agreement includes the principles of Government
procurement (public tendering) that are equivalent to the provisions of The
WTO Government Procurement Agreement (GPA).

- With a number of obligations such as online bidding, setting up a portal to

post bidding information ...: Vietnam will comply with the scheudule; The
EU also commits to provide technical assistance for Vietnam to fulfill these
obligations.

- Vietnam makes term reservation on the right to set aside a certain

percentage of the value of bidding packages for domestic contractors,
goods, services and employees.

12
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

Box 2: A number of EVFTA commitments to open Vietnam's public

procurement market
Vietnam commits to allow EU contractors to participate in bidding packages
of:

- Ministries, including procurement in the field of infrastructure such as

roads and seaports

- Important state-owned enterprises, for example those in the electricity

and railway sectors nationwide

- 34 public hospitals
- Hanoi and Ho Chi Minh City

Source: European Commission

4. Intellectual property
- Intellectual property in EVFTA includes commitments on copyrights,
inventions, patents, commitments related to pharmaceuticals and
geographical indications ... with a higher level of protection than WTO;
However, these levels are basically consistent with the current law
provisions of Vietnam.

- Regarding geographical indications, Vietnam commits to protect 169

geographical indications of the EU and the EU will protect 39 geographical
indications of Vietnam. The geographical indications of Vietnam are all
related to agricultural products and food. This is the condition for a number
of prominent agricultural products of Vietnam to access and affirm their
brands in the EU market.

- Regarding pharmaceuticals, Vietnam commits to increase the exclusive

data protection for EU pharmaceutical products, and in case the competent
authority delays the issuance of pharmaceutical product licenses, the patent
protection period may be extended for no more than 2 years.

13
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

5. State-owned Enterprises and Subsidies

- Regarding state-owned enterprises (SOEs):
The two Parties agree on the principles for SOEs; These principles,
together with those on subsidies, aim to ensure an environment of fair
competition between SOEs and private enterprises when SOEs engage in
commercial activities.
- For domestic subsidies: There will be transparency rules and consultation
procedures.

6. Trade and Sustainable Development

EVFTA covers a fairly comprehensive chapter on trade and sustainable
development, covering some important topics such as:
- Commitment to effectively enforce basic standards of the International
Labor Organization (ILO), ILO Conventions (not only Core Conventions),
Multilateral Environmental Agreements that each Party has signed/joined;
- Commitment to join/sign ILO fundamental conventions in which each
Party has not participated;
- Commitment not to reduce requirements or compromise the effective
enforcement of domestic labor and environmental laws for promoting trade
and attracting investment;
- Promote Corporate Social Responsibility (CSR), with reference to
international practices on this issue;
- A climate change related provision and commitments on conservation and
sustainable management of biodiversity (including wildlife), forests
(including illegal logging), and fishing.
- Mechanisms for enhancing civil society participation in the
implementation of this Chapter, both from a domestic perspective
(consultation with domestic advisory groups) and bilateral (bilateral
forums);
- Provisions enhance transparency and accountability.

14
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

7. Dispute Settlement Mechanism

- EVFTA establishes a mechanism to settle disputes that may arise between
Vietnam and the EU in the interpretation and implementation of the
commitments in the Agreement;

+ This mechanism is applied to most Chapters of the Agreement and

evaluated in some aspects to be faster and more effective than the WTO
dispute settlement mechanism;

+ This mechanism is designed as the final dispute settlement method, when

the Parties cannot settle the dispute by other means;

+ This mechanism includes procedures and time limit for dispute

settlement, under which the consultation shall be taken first by the two
Parties, if the consultation fails, either Party may request the establishment
of a Panel comprised of independent legal experts;

- EVFTA also envisages a more flexible mechanism: a mediation

mechanism, to deal with problems related to measures which have negative
impact on bilateral trade and investment.

15
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

III. OPPORTUNITIES AND CHALLENGES FROM

EVFTA FOR ENTERPRISES

1. Opportunities
- Regarding exports, although the EU is currently one of the largest export
markets of Vietnam, the market share of Vietnamese goods in this region
is still very modest, due to the limited competitiveness of Vietnamese
goods (especially price competitiveness). Therefore, if the tariffs are
eliminated up to 99% under EVFTA, businesses will have more
opportunities to increase their price competitiveness when importing into
this important market area.
Some industries expected to take the most advantages are the key export
sectors of Vietnam which the EU currently maintains high tariffs such as
textiles, footwear and agricultural products.
- Regarding imports, Vietnamese businesses will also benefit from good and
stable quality imported goods and raw materials with more reasonable
prices from the EU. In particular, businesses will have the opportunity to
access sources of machinery, equipment, high technology and technicality
from EU countries, thereby increase productivity and improve quality of
their products.
At the same time, goods and services imported from the EU into Vietnam
will create a competitive pressure for Vietnamese enterprises to strive to
improve their competitiveness.
- Regarding Investment: A more open and favorable investment
environment, a more attractive export potential will attract more FDI from
the EU to Vietnam.
- Regarding the business environment: With the implementation of EVFTA
commitments on institutional issues, behind-the-border legal policies,
business environment and policies, Vietnamese law will have changes and
improvements towards more transparency, convenience and consistency
with international practices.

16
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

2. Challenges:
With EVFTA, despite great opportunities, Vietnamese enterprises will also
face many challenges due to:
- The difficulty in meeting requirements of the rules of origin: Generally,
goods aiming at enjoying the preferential tariff treatment under the FTA
shall have its materials met a certain internal content ratio (materials
originating in EU and/or Vietnam). This is a big challenge for Vietnamese
enterprises because materials for export production are now mainly
imported from China or ASEAN.
- TBT, SPS barriers and customer requirements: The EU is a demanding
market. Customers have high demands on product quality. Compulsory
requirements on food safety, labeling, environment ... of the EU are very
strict and not easy to meet. Therefore, even if there are tariff benefits,
Vietnamese goods shall also have great quality improvements in order to
overcome these barriers.
- The risk of trade remedies: Normally when tariff barriers are no longer an
effective protection tool, enterprises in the import market tend to use more
anti-dumping, anti-subsidy or self-defense measures to protect domestic
manufacturing industry. And the EU is also one of the “traditional” markets
for using these tools.
- Competitive pressure from EU goods and services: Opening the
Vietnamese market for goods and services from the EU means that
Vietnamese businesses will have to experience more intense competition
in the domestic market. In fact, this is a huge challenge because EU
businesses have advantages over Vietnamese ones in terms of
competitiveness, market experience as well as the ability to take advantage
of FTAs. However, Vietnam's market access commitments have a
schedule, especially for sensitive product groups, therefore EVFTA is also
an opportunity and reasonable pressure for Vietnamese businesses to adjust
and change their business methods and improve competitiveness.

17
 WTO AND INTERNATIONAL TRADE CENTER VCCI – SUMMARY OF EVFTA

For more details

- The contents of EVFTA can be found on the WTO Center website:
http://www.trungtamwto.vn/fta/199-viet-nam---eu-evfta/1

References
- Ministry of Industry and Trade website: "Results of Free Trade Agreement
negotiation between Vietnam and EU", August 7, 2015

- European Commission website: “Memo: EU and Vietnam reach agreement

on free trade deal”, August 4, 2015

- Website of WTO and International Trade Center, Vietnam Chamber of

Commerce and Industry (VCCI).

18