Unlocking Potential to Elevate Vietnam - EU Trade Ties

Currently, Vietnam is the only Southeast Asian country with a full cooperation framework with Europe. Despite nearly four years of implementing the Vietnam-EU Free Trade Agreement (EVFTA) and over two years of disruptions from the COVID-19 pandemic, the EVFTA has contributed to sustaining Vietnam’s economic growth. It has also provided a boost to bilateral trade and spurred a rise in European investment in Vietnam.

According to VCCI Vice President Vo Tan Thanh, as a developing country in Southeast Asia and a close partner of Europe, Vietnam recognizes the value of cooperation with Europe across various sectors. Europe stands as Vietnam’s largest development partner, the fifth largest trading partner, and the sixth largest foreign investor. Conversely, Vietnam is Europe's largest trading partner in ASEAN and ranks as the 14th largest trading partner globally.

Thanh said that the EVFTA has significantly benefited Vietnamese consumers by expanding their access to a diverse range of high-quality European products at more competitive prices. This is attributed to the roadmap for reducing import taxes on many European goods to 0% as stipulated by the EVFTA.

Consumers have been able to purchase European agricultural products at more affordable prices. Additionally, the cost of imported European machinery and equipment has begun to decrease according to the agreed roadmap. This reduction is assisting domestic enterprises in enhancing their production processes and developing products with higher added value.

Conversely, industries with strong export potential to Europe, such as textiles, footwear, wood products, agricultural products, seafood, and transportation, have generated many new job opportunities for Vietnamese workers. This growth also provides workers with the chance to enhance their professional skills and meet the new standards set by the EVFTA.

According to VCCI Vice President Vo Tan Thanh, bilateral trade between Vietnam and Europe had a strong start in 2024, showing positive recovery and growth despite ongoing regional economic challenges. The General Department of Vietnam Customs reported that two-way trade between Vietnam and Europe reached nearly US$32.39 billion in the first half of 2024, up 13.5% from the same period in 2023. Exports to Europe rose by 15.4%, reaching over US$24.69 billion, while imports grew by 7.7%, totaling over US$7.69 billion. Consequently, Vietnam recorded a trade surplus with Europe of nearly US$17 billion in the first six months of 2024, a 19.2% increase from the first half of 2023.

"Currently, the total two-way trade turnover between Europe and Vietnam is very positive, but there remains significant potential for stronger growth, reflecting the ambitions and capabilities of businesses and governments on both sides. In the coming time, the market will continue to undergo significant changes; globalization and regionalization will deepen and become more practical. This will require that businesses on both sides become more proactive and adaptable to keep pace with emerging trends," said VCCI Vice President Vo Tan Thanh.

He said that the EVFTA has granted Vietnamese goods and services the most favorable access to European markets compared to other countries in the region. However, Europe remains a demanding market with stringent regulations and technical standards for imports. Notably, this market places a strong emphasis on green standards and sustainable development.

In 2024, Europe introduced several new regulations, such as the Carbon Border Adjustment Mechanism (CBAM) and the EU Deforestation-free Regulation (EUDR). These laws, along with the European Green Deal, will have a direct impact on Vietnamese enterprises in key sectors, including agriculture, textiles, footwear, wood, and rubber.

Mr. Thanh believed that to boost Vietnam's export turnover further, meeting "sustainability criteria" is important. He emphasized that enterprises must adopt environmentally friendly and sustainable production models. This presents both a challenge and an opportunity for Vietnamese companies to enhance their production capabilities, increase competitiveness, develop exports sustainably, and integrate more deeply into the global value chain.

"As a national trade promotion organization, VCCI is consistently proactive and supportive of businesses. Each year, we organize a range of activities including business forums, trade exhibitions, partner matchmaking, and host many business delegations from around the world. VCCI also leads efforts to encourage the Vietnamese business community to adopt sustainable business practices," shared Vo Tan Thanh.

He also mentioned that in 2024, VCCI released the Provincial Competitiveness Index (PCI) and Provincial Green Index (PGI) reports for 2023. This initiative is designed to encourage and highlight the efforts of provincial governments in advancing private sector development, in alignment with the National Green Growth Strategy and the National Strategy to Respond to Climate Change.

"I believe that, following the recent COVID-19 pandemic, we all clearly recognize the role, inevitable trend, and positive impact of adopting a sustainable development model for production and business. It serves not only as a 'compass' for enterprises to navigate stable growth but also as a beacon for adapting and recovering in the face of global crises," added VCCI Vice President Vo Tan Thanh.

He also expressed hope that Europe will enhance the sharing of information and experiences, support Vietnam in developing green, modern, and effective policies and models, and assist in capacity building. This includes support for infrastructure development, human resources, technical assistance, and technology transfer, to help Vietnam align with international standards.

He specifically recommended that European investors focus on increasing cooperation with Vietnam's cities and provinces. Many of these localities feature dynamic governments, favorable investment environments, well-developed transportation systems, industrial zones, and a skilled labor force. These areas are well-suited for investment, production, and export of high-quality products to Europe and other global markets.