The General Department of Vietnam Customs on October 21, 2022 reported that in the first 10 months of this year, despite geopolitical tensions and declined demands in the EU which is home to a population of nearly 450 million people, total export-import turnover between Vietnam and the bloc hit 52.5 billion USD.
In which, Vietnam’s export turnover to the EU reached 39.76 billion USD – up 23.8% year-on-year and holding 12.7% of the country’s total export value, while the nation’s import turnover sat at 12.74 billion USD – down 8.1% year-on-year and accounting for 4.2% of its total import value.
Many export items have reaped big turnover as compared to those in the same period last year. Specifically, Vietnam’s exports of laptops, electronics products and their spare parts hit 5.99 billion USD - up 13.6%; industrial machinery, equipment, and spare parts 5.09 billion USD - up 44.7%; garments and textiles 3.73 billion - up 44.6%; footwear 4.99 billion USD – up 53.8%; and aquatic products 1.14 billion USD - up 32.5%.
The Ministry of Agriculture and Rural Development also reported that the agro-forestry-fishery trade turnover in the first seven months of this year between Vietnam and the EU increased strongly from 4.3 billion USD in 2015 to 4.5 billion USD in 2020, 5.2 billion USD last year. The figure stood at about 5 billion USD in the first 10 months of this year, with coffee, aquatic products, pepper, cashew, vegetables, and wood and wooden products being staple exports growing strongly.
The EU-Vietnam bilateral trade turnover was 56.45 billion USD in 2019 (including Vietnam’s exports and imports of 41.5 billion and 14.95 billion USD, respectively). However, in 2020, COVID-19 affected their trade ties, with trade reduced to 50 billion USD (including Vietnam’s exports and imports of 35.1 billion and 14.9 billion USD, respectively).
The situation got brighter in 2021, when the bilateral trade turnover reached 63.6 billion USD, with Vietnam’s exports worth 45.8 billion USD – up 14.2% year-on-year, and the country’s imports were valued at 17.9 billion USD, up 16.5% year-on-year.
Notably, according to the Ministry of Industry and Trade, in 2021, Vietnam’s exports to the EU using the certificate of origin under the EUR.1 form stood at 7.8 billion USD, meaning many businesses in Vietnam took advantage of tariff cuts and reductions within the EU-Vietnam Free Trade Agreement (EVFTA) which became valid on August 1, 2020.
According to the Centre for WTO and International Trade under the Vietnam Chamber of Commerce and Industry (VCCI), in the first two years of EVFTA implementation, Vietnam’s export turnover from the 27 EU member states averaged at 41.7 billion USD a year, which is 24% higher than the average figure of 33.5 billion USD in the 2016-2019 period. This means that many exporters in Vietnam have been capitalising on tariff reductions from the EVFTA.
Under a recent survey on EVFTA impacts on Vietnamese exporters, about 40% of surveyed businesses said they have well taken advantage of some benefits - including export benefits - given by the agreement. This means Vietnam has seen some improvements in exports to the EU market over the past more than two years.
Vo Tan Thanh, vice chairman of the VCCI in Ho Chi Minh City, said at a recent conference on the EVFTA impacts on Vietnam’s economy that the EVFTA “has become a big leverage for Vietnam and the EU to further increase their trade and investment cooperation.”
“The trade results have shown the positive contributions of the EVFTA to Vietnam’s economic development, especially in the context that Vietnam has been suffering from negative impacts from the COVID-19 pandemic and the Russia-Ukraine conflict,” Thanh said.
Peter Bernhardt, team leader of the ARISE+ Vietnam programme funded by the EU and aimed to support Vietnam to reap the benefits of new trade commitments, with a focus on the implementation of the EVFTA, said, “I agree that the overall picture of EVFTA performance in this starting period, where exporters and government authorities from both sides have to adapt to the new situation, looks definitely promising.”
The EVFTA is the most ambitious FTA that the EU has ever signed with a developing country. The deal will mutually lift about 99% of the tariffs within 10 years. Duty was lifted from 65% of EU exports to Vietnam and 71% of Vietnamese exports to the EU, immediately after the EVFTA took effect.
“By understanding that EU customers are more and more inclined to use products which comply with safety standards and manufactured in a responsible manner, Vietnam businesses will gain a competitive advantage over their competitors as they will be able to demonstrate their commitment to product safety, high product quality as well as environmental and social sustainability,” Bernhardt said.
In September 2022, Bernd Lange, chairman of the European Parliament’s Committee on International Trade (INTA), came to Vietnam for the fourth time over the past three years, with an aim to oversee the country’s implementation of the EVFTA, and assess the operations of domestic organisations in charge of supervising the deployment of FTAs and Vietnam’s policies.
“The EVFTA is a strong foundation for boosting the EU-Vietnam trade and investment relationship in the present and the future. It has had positive effects on both the EU and Vietnam, with larger trade and investment flows recorded,” Lange said, confirming that the European Parliament, including the INTA, will continue supporting Vietnam in EVFTA deployment, and amplifying sustainable development cooperation in the context that the EU is actively deploying a series of new policies and initiatives in Asia Pacific.
According to the Ministry of Planning and Investment, the EU is now one of the most important sources of foreign direct investment for Vietnam. As of October 20, 22, EU investors have registered more than 26 billion USD for nearly 2,250 projects. The most recent project is Danish’s LEGO Group which a few months ago got licensed to invest over 1 billion USD in the 44-hectare site in the southern province of Binh Duong for a carbon-neutral factory, which will be Lego’s sixth manufacturing site and second in Asia. This project will generate 4,000 jobs over the next 15 years.
Construction of this project was commenced early this month, and the factory is slated to start production in 2024, tapping solar power from panels on its roof and a neighbouring solar farm. It will supply Asia outside China, just as other factories in Europe, the US and Mexico sell to their respective regions.
However, the EU Delegation to Vietnam said that both intellectual property right protection and enforcement and sustainable development conditions are crucial elements for the attraction and retention of FDI from the EU.
“Increased EU investments will allow Vietnam to better integrate into global value chains, thereby diminishing the dependence of Vietnam on its current main investors,” the delegation said. “EU investors are bound by the highest standards for workers’ rights and environmental protection, thereby contributing to the wellbeing and further development of the Vietnamese society and economy.
To make it more favourable for EU investors and businesses to maximise the EVFTA benefits, the European Commission has established a new portal “Access2Markets” designed for EU exporters, in particular, small- and medium-sized enterprises. The portal provides useful and detailed information on applicable tariffs, rules of origin, product requirements, customs procedures and formalities, VAT/excise duties/sales taxes, trade barriers, and trade statistics. It is available in all 24 official EU languages.
It is expected that leaders of Vietnam and the EU will continue meeting with each other to beef up bilateral trade and investment relationship.
