The European Union just signed a free trade agreement with Vietnam over the weekend. The landmark deal is the first of its kind to have ever been signed by the EU with a developing Asian country. The deal includes the reduction of tariffs for almost all of the goods that will be traded between both nations.
The free trade deal is a massively important step for the EU in enhancing its trade relationships with other Southeast Asian countries. The signing ceremony for the official EU-Vietnam Free Trade Agreement was held Sunday in Hanoi, Vietnam.
The event was attended by the EU's Commissioner for Trade Cecilia Malmstrom, Romania's Business, Trade and Entrepreneurship Minister Stefan Radu Oprea, and Vietnam's Industry and Trade Minister Tran Tuan Anh.
While the agreement has already been signed by both parties, it will still need the full approval of the European Parliament. There have been some concerns raised by the EU parliament pertaining to Vietnam's previous human rights records.
It is still not yet clear if the agreement would get Parliament approval, but given its progress, it may only be a matter time before it is fully implemented.
The EU currently has a standing free trade agreement with South Korea, Singapore, and Japan. The economic union is also currently in talks to set up a similar agreement with other developing Asian nations, including the Philippines, Malaysia, Indonesia, and Thailand.
According to the EU, the agreement is an ambitious undertaking for the trading bloc.
The signing of the deal in Hanoi is the culmination of three-and-half years of negotiations. When it is officially implemented, it would eliminate 99 percent of the tariffs on Vietnamese imports. Some items, such as agricultural products will be limited by quotas.
The agreement with the EU is expected to trickle down into other procurement and services markets within the country. This could include markets such as baking and maritime industries. The EU is Vietnam's second largest export market, right behind the United States. Last year, Vietnam exported over $42.5 billion worth of goods and services to the EU. Meanwhile, the EU exported around $13.8 billion worth of goods to Vietnam.
Vietnam is currently one of the fastest growing economies in Southeast Asia, with a number of free trade agreements in place. The country currently has a free trade pact with 11 other countries across the Asia-Pacific, under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Vietnam expects the EU-Vietnam Free Trade Agreement to drastically boost EU exports by as much as 15 percent. It is also expected to boost the country's gross domestic product (GDP) by as much as 2 or 3 percent by 2023.
