Mr. Chris Humphrey, Executive Director of the EU-ASEAN Business Council, spoke with VET about what may lie ahead with the EU-Vietnam Free Trade Agreement (EVFTA).
How will the EVFTA benefit the trade relationship between the EU and ASEAN in general and the EU and Vietnam in particular?
This FTA represents the second the EU has negotiated with an ASEAN member state and, in the words of the European Commission, is the most ambitious FTA Europe has put in place with an emerging economy. It marks a very significant development between the EU and ASEAN in terms of economic diplomacy and trade and we hope it is the precursor to more FTAs with the region and eventually to an ASEAN-wide FTA for Europe.
The trade and investment relationship between the EU and ASEAN is already very strong, with Europe being ASEAN’s second-largest trading partner and largest source of foreign direct investment (FDI), so I would expect this FTA to further boost that relationship and also to help accelerate the trade and investment relationship with Vietnam.
It has been said that the EVFTA will provide mutual support to the two economies rather than competitiveness. What do you think about this?
I believe that will be true. The whole point of an FTA is to boost the bilateral relationship and bring mutual benefits. It should help bring the economies closer together while also boosting competitiveness to the benefit of consumers and businesses on both sides.
This FTA appears to include provisions to help protect investments from both sides, which will certainly lead to more European investment in Vietnam, which is something that can only help boost the Vietnamese economy, as well as provisions to help companies on both sides export more to each other.
The EU is currently the third-largest investor in Vietnam. What do you predict for investment from the EU to Vietnam after the agreement officially takes effect?
The investment protection provisions of the new agreement will help to advance confidence among investors from Europe in Vietnam. It should therefore lead to an uptick in the amount of investment from Europe to the country, especially when coupled with the general economic policies that Vietnam has been putting in place in recent years.
Vietnam looks increasingly like a good place to invest in from a European perspective, especially with it pursuing an increasingly internationalist trade policy through agreements such as the TPP and, of course, it embracing the ASEAN Economic Community.
There is a significant difference in the level of economic development between the EU and Vietnam. How will this affect the implementation of the FTA? Will there be many challenges for Vietnam?
My understanding of the FTA is that it encourages Vietnamese companies to develop and modernize in order to gain more access to the European market. These are not challenges but opportunities for them, as it will help make Vietnamese products more attractive to European consumers and will help make Vietnam are more attractive place to trade with. Once fully implemented, the FTA will help boost economic development in Vietnam.
What sectors will EU investors be interested in in Vietnam?
The most obvious sectors from my perspective would be general manufacturing, with an increasing interest in electronics and agri-food as well as more traditional sectors such as textiles. I think the FTA will, over time, lead to a broadening of the sectors that EU investors will consider, especially as Vietnam’s economy continues to develop rapidly.
What do you predict for the trade relationship between the EU and Vietnam over the next five years?
It is hard to make firm predictions, but I would be very surprised indeed if trade volumes between Vietnam and Europe and the amount of FDI from Europe to Vietnam have not increased significantly in five year’s time.