Free trade agreements bring golden opportunity for Vietnam

The Free Trade Agreement (EVFTA) and the Investment Protection Agreement (EVIPA) that were just signed between Vietnam and Europe are a golden opportunity for Vietnamese enterprises. The government and authorities are completing the initiation phase which will require us to improve our capability and competitiveness to utilize the myriad advantages.

Illustrative photo.

Illustrative photo.

New lucrative trade route

EVFTA and EVIPA are modern types of free trade agreements which are focused on deeper and wider commitments, not just in international trade or investments, but also in untraditional areas of legislative improvement, resolving issues of labor and society, and national budget management.

The new trade route requires us to follow the norms of a civilized society and modern economy. Hence, we have to transform the working mechanism, change the technology, improve the quality of products and services, and make economic activities more transparent.

It will be hard to overcome the challenges if we are not well prepared. Vietnamese enterprises and products will face tough competition. The domestic sectors, such as agricultural products like meat, milk, seafood, vegetables and fruits, which are our strength, will face the risk of losing competitiveness when we have to meet strict standards of quality, origin and safety of products. This fierce competition will also affect our domestic market as well.

The other areas like car manufacturing, electronics, telecommunication which are just at a beginning phase, now have to face tougher competition from big brands from Europe.

Vietnamese enterprises and products will find it hard to play in both home market of Vietnam and international markets such as Europe. It will require the government, law makers, and authorities, to build the standards, legal framework, working mechanism to meet the demand of EVFTA and EVIPA, and work jointly towards this process.

EVFTA does not only need the transformation of economic sectors like commerce and investment but also of related enterprises. Enterprises and their products will play a key role in completing the preparatory phase that will initiate the process.

Although EVFTA and EVIPA will open new trade routes that will connect Vietnam and Europe, before we enter this new journey of prosperity, we have to put in much effort to complete the initiation and preparatory phase.

Speaking at the signing ceremony, the Prime Minister said that Vietnam will issue the national action plan with detailed responsibilities and solutions at the earliest to implement these two agreements.

The new and modern FTAs will create new markets for Vietnam but what we receive from this market is dependent on the way we play, rather than the advantages we will receive from the big market. Hence, it does not only need the transformation of economic sectors like commerce and investment but also of related enterprises. Enterprises and their products will play a key role in completing the preparatory phase that will initiate the process.

Need to understand regulations

We need a national strategy to create national competitiveness, rather than the present fragmented competitiveness style of each province and locals that we are seeing now. The growth of Vietnamese products will be dependent on the mindset, perception and the working method of enterprises. Our delicious cake today could be the delicious cake of others tomorrow. Opening the market for foreign investors and companies means we have to prepare to integrate deeply with the global market and we have to determine when we will finish the first stage of being the employee, and when we should run the economy by ourselves.

Currently, the domestic companies only offer general encouragement, lack long term investment plans, are developing fragmentally, and do not have ways to integrate. Almost 90% of our domestic enterprises look at short term, hence, they fail to compete with imported products, which is not surprising.

It needs innovation and creation in management by government, authorities, law and policy makers. EVFTA has many criteria to protect copyrights, intellectual rights, national brands and civil rights.

The employees and employers have right to freely establish and operate the organization of employees as well as the organization of employers; have right to decide on internal issues of the organizations, protect the organizations when authorities ban operation of the organizations; and employees and employers have right to establish or participate in unit labor union, general labor union, and also integrate with other local and international unions.

The National Assembly of Vietnam has approved Convention 98 of the International Labor Organization on the right to organize and collectively bargain, and is going to approve the Revised Labor Law in the next meeting in 2019. This is the first step.

For the second step, we have to approve Convention 105 and 87 of the International Labor Organization on the operational system. The authorities cannot be slow in processing administrative procedures, or display lack of integration, or make everything complicated. The authorities have to transform the legislation strongly to meet the requirements of FTAs.

It should be worrying as many issues related to origin of products, standards of quality, regulations on labor still remain. Vietnam has to build a legal framework to resolve these problems.

The new trade route requires us to follow the norms of a civilized society and modern economy. Hence, we have to transform the working mechanism, change the technology, improve the quality of products and services, and make economic activities more transparent.
While Vietnamese consumers are surprised that Asanzo products where 70% made from Chinese imported components and labeled ‘Made in Vietnam’, the Ministry of Industry and Commerce admits that it lacks the authority to regulate the origin and quality of Vietnamese products. So, how many other products have the same status as Asanzo?

Currently, many sectors are dependent on imported materials and components, such as car manufacturing, electronics, telecommunication, textiles and garments, footwear, shrimp and pangasius exports.

If we lack detailed regulations on determining the origin and quality of products, international trade disputes may arise as the legal system of EU is very complete, thorough and strict.

As in the case of the Ministry of Commerce just announcing a tax of 456% on some steel products of Vietnam, the problem in identifying the origin of products will alert the implementation of forthcoming EVFTA. It is not sure that the EU will not treat us like US in the future.

To conclude, the new trade route will only help to connect Vietnam with EU, and give us the chance to participate in the big market. Strength and prosperity only flow into a country that runs strongly and sustainably; and understands and respects the law and regulations.

Dr. Tran Huu Hiep

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