EU-VIETNAM Free Trade Agreement (EVFTA) and Investment Protect Agreement (IPA)

On June 30, 2019 the European Council (EC) and Vietnam signed the EVFTA and IPA. This is the largest free trade Agreement which Vietnam signed which reaches 28 economies European countries.

EVFTA is separated into two agreements, including Trade agreement and Investment agreement. In August, 2018, EU announced the official document of the Free Trade Agreement (EVFTA) and the Investment Protection Agreement (now called EVIPA). EVFTA is a comprehensive agreement, high-quality agreement, balancing the benefits for both Vietnam and EU, and in accordance with the provisions of the World Trade Organization (WTO).

The first, EVFTA includes 17 chapters, 2 Protocol and notes which are cover i.e. trade in goods (include general procedures and commitment to market opening), Rules of origin, custom and trade facilitation, the Safety and Health Protection (SPS), Technical Barriers to Trade (TBT), commercial services (include general procedures and commit to market opening), investment, trade defense, competition, national enterprises, Government procurement, Intellectual property, Commercial and Sustainable Development, cooperation and capacity building, legal-institutional issues.  Of which, the important parts are in the trade in goods, services fields which EU will abolish about 85,6% the import tax, equivalent to 70,3% the Vietnam’s export turnover after this Agreement is effective. Therefore, most of the products and services exported to Europe, taxes will be abolished. For products and services that are not eligible for incentives, within 7 years after this Agreement takes effect, the EU will abolish import duties on 99.2% of tariff lines equivalent to 99.7% of Vietnam’s export turnover. The remaining 0.3% of export turnover will be committed by the EU with tariff quotas with the import tax rate in the quota of 0%.

Goods which are exported from EU to Vietnam will enjoy preferential tariffs. Vietnam will abolish the tariffs bases on each specific timeline, after the Agreement has valid.  Vietnam will abolish the tariffs or 48,5% the tariffs (equivalent to 64,5% import’s turnover). After 7 years, Vietnam will abolish 91,8% the tariffs equivalent to 97,1% export turnover from Vietnam to EU. After 10 years, the level of abolished tariffs will be 98,3% tariffs (equivalent to 99,8% import’s turnover).

Further, Vietnam and EU agree with the contents related to custom procedure, SPS, TBT, trade defense, etc. and make a legal framework for the two parties to cooperate and facilitate export and import of the enterprises.

The fields which Vietnam has a favorable commitment to EU investors include a number of professional services, financial services, telecommunications services, transport services, distribution services. The two sides also made commitments on national treatment in the field of investment, and discuss about the the ways to handle the disputes between investors and the state.

The IPA includes the contents as follow:

The first, the parties commit to give the national treatment and most favored nation treatment with the investment of the other Party’s investor, with some exceptions, as well as fair, satisfactory treatment, safe and adequate protection, allowing the freedom to transfer capital and profits from overseas investments, commit to not expropriation, nationalization of assets by investors without adequate compensation, commit to compensate for damages to the investor of the other party similar to domestic or third party investors in case of losses due to war, riots, etc.

Second, in the case of dispute between a party and the Investor of the remaining party, the parties agree to handle the dispute based on the discussion and mediation, reconciliation. In the case the dispute can not be handled by discussion and mediation, reconciliation, the parties will use the specific ways regulated under this Agreement.