The European Union Vietnam Free Trade Agreement (EVFTA) took effect on August 1 paving the way for increased trade between the EU and Vietnam.
WHAT IS EVFTA?
The EVFTA is an ambitious pact providing almost 99 percent of the elimination of custom duties between the EU and Vietnam. As per the Ministry of Planning and Investment (MPI), the FTA is expected to help increase Vietnam’s GDP by 4.6 percent and its exports to the EU by 42.7 percent by 2025. While the European Commission has forecast the EU’s GDP to increase by US$29.5 billion by 2035.
It is being considered as a great opportunity for the Vietnamese textile and apparel industry. According to the commitments outlined in the EVFTA, among the key export items of the nation to the trading bloc, the EU will eliminate tariffs on 77.3 per cent of all textile and apparel exports from the country. While removing the remaining 22.7 per cent over the following seven years.
DIFFICULTIES IN REACHING THE GOAL
Only 2 per cent of 8,600 local enterprises know the details of this FTA and about 20 per cent of them know about the agreement at all. The important thing is that they must really understand the content of this agreement and its conditions.
Some textile enterprises are choosing whether or not to meet the rules of origin to enjoy preferential tariffs in this FTA.
At present, the main import material of Vietnamese textile enterprises is still from China, so if they do not change suppliers their products cannot satisfy the origin requirements in the EVFTA.
Another problem is the material region. When the EU businesses required information about material region for producing the packaging, Vietnamese enterprises could not identify eligible material regions.
Vietnam could not promote textile and garment exports if the country does not create favourable conditions to develop the auxiliary industry for the textile and garment sector as well as call on investment to this industry.
Nguyen Van Cam, vice chairman of Vietnam Textile and Apparel Association (VITAS), said that the rules of origin remain the most difficult issue for the textile and apparel industry when it comes to capitalising on the EVFTA.
The State also needs institutional reforms, complete the legal framework, and improve investment and business environment to meet the EVFTA requirements.
