The revamped trade deal with Mexico, and the titanic agreement with the South American trading bloc Mercosur, are also part of this success story, but it’s significant to note the effort the EU is putting into developing ties with the Far East. It was only two years ago that the EU lamented the lack of a coherent policy for southeast Asia, with only a free trade agreement with South Korea already in place. Two years later, the EU has signed large-scale deals with Singapore, Vietnam, and Japan – with the latter deal already undergoing implementation. This undoubtedly strengthens the European position in the Far East.

The Terms of the Deal

For starters, the free trade agreement will eliminate 99% of the tariffs on both sides. ‘Sensible goods’, i.e. agricultural products, will be the exception, and will be limited by quotas. The volumes involved are important: currently, the EU is Vietnam’s second largest export market after the United States, accounting for around 19% of its total exports. The main Vietnamese products that make their way to Europe are textiles, electronics, and coffee. The EU also exports to Vietnam, mostly high tech products, pharmaceuticals, machinery, and aircraft. The volume of these exports is growing by 11% every year, and stood at €12 billion for 2018.

As usual, the agreement has provisions for the protection of food or drinks with a specific geographical origin. This protection includes both Vietnamese and European traditional products, like Mộc Châu tea or Calvados. It also contains provisions for public procurement. Under the framework of the agreement, companies will be able bid for public procurement contracts and access the services market both in Vietnam and in the EU. At the same time, the free trade agreement will not curtail the right of the two parties to decide how to organise their public services.

One the most important part of the FTA are the provisions for sustainable development: the FTA includes the implementation of the Conventions of the International Labour Organisation. These include the core standards on freedom of association, and prevention of child labour and slavery. The agreement also requires the implementation of international environmental deals, such as the Paris Agreement. In a classic exercise of EU soft power, the issues of fighting climate change and strengthening democracy go hand in hand with the economics of the trade deal.

The Road Ahead

The agreement has been discussed for a long time. It began as a negotiation between the EU and ASEAN, in 2007, but in 2009 the two parties decided to switch to bilateral negotiations. Future trade deals between the EU and ASEAN will start from the existing agreements and expand their scope. The free trade agreement with Vietnam would be the first of these ambitious trade deals, to be followed by the deal with Singapore, giving the EU a stable trading foothold in Southeast Asia.

The implementation of the free trade agreement will begin after the two parties ratify the agreement. For the European Union, this means that the European Parliament will have to vote in favour of the deal. One obstacle, however, remains: Vietnam’s human rights track record. This was one of the biggest concerns during the seven years of negotiations, and with good reason: Vietnam is a one-party State, known for the harsh treatment of dissidents. Reporters Without Borders classified Vietnam as the 176th country out of 180 for freedom of press.
Cecilia Malmström sees the free trade agreement as a way to engage with, and influence Vietnam on human rights. While she is adamant that the deal alone cannot remedy the lack of human rights in Vietnam, she also believes that increased contact and exposure will soften many of Vietnam’s positions.

Indeed, the final version of the agreement contains clauses that enable the parties to take action, should the human rights obligations contained in the text be breached. These actions include the suspension of the trade agreement itself. The European Parliament will have to decide if these provisions are enough.

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There is some understandable reticence in getting involved – after all, the Southeast Asian market is known for its exploitation of labor. Aside from the obvious humanitarian cost, this takes down prices artificially, creating unfair competition against EU businesses. However, this refusal to engage with the relevant countries curtails the European Union’s transformative power: wouldn’t it be better to effectively regulate the inflow of goods from that area, applying severe labor rights and production quality standards? This would protect workers against exploitation and allow native businesses to compete in European markets, thus bringing prosperity to these countries and still keeping prices low for customers, thanks to the abolition of tariffs. It appears that the EU now shares this view: the EVFTA (EU-Vietnam Free Trade Agreement) will be ratified in 2018.

European-Vietnamese relations haven’t always been very amicable. During the war years (1963-1975), no European country took arms against the Communist government in Hanoi, which would later win the war, but they were part of the American bloc of alliances, and therefore considered potential enemies. After the bloody conflict came to a close, the then-European Community was quick to restore diplomatic ties, opening its embassy in the Vietnamese capital in 1990, five years before the US did the same.

In 1996, a Framework Cooperation Agreement (FCA), covering a wide range of topics, from the economy to human rights, entered into force. It was followed in 2012 by a Framework Agreement on Comprehensive Partnership and Cooperation (PCA) and finally by the EVFTA, whose negotiations started in 2012 and were conducted by European Commissioner Cecilia Maelstrom and Chief Negotiator Mauro Petriccione.

The Agreement will eliminate 99% of trade barriers, both economic (tariffs) and technical (regulations), protect European geographical indications (e.g. Parmigiano Reggiano, Champagne, Scotch Whisky…), allow European companies to bid for Vietnamese public contracts, increase controls and transparency on Vietnamese State Owned Enterprises (SOEs), especially when competing against European companies, protect intellectual property rights and establish a mechanism to resolve disagreements between the two signatories.

The Agreement will also take into consideration two aspects of great importance to EU citizens: protection of the environment and respect of human rights, in compliance with the UN Charter of 1945, which both parties signed.

It is very important to notice that, through these agreements and future ones already being planned, the EU aims to establish a solid network of commercial relationships with ASEAN countries, much like what the US tried to do with the Trans-Pacific Partnership (TPP) before Trump became President.

Europe is finally stepping into the void left by Trump’s America in the international network of trade. This is a solid platform for the Union to play an important role in the future of this strategically important region: these countries are experiencing impressively high growth rates – they are the real “winners” of globalization- and thus their importance in the world economy is set to steadily grow.

Guest article by Federico Bindi. 

Sources:

http://ec.europa.eu/trade/policy/countries-and-regions/countries/vietnam/

http://ec.europa.eu/trade/policy/countries-and-regions/negotiations-and-agreements/#_in-place

http://evfta.com/info-center/evfta/

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