Trade-off: Rice and seafood the big winners for Vietnam under EU free trade deal

By Pearly Neo contact

- Last updated on GMT

The recently-ratified EU-Vietnam Free Trade Agreement (EVFTA) has seen major gains in food trade for both sides, particularly in rice and seafood for Vietnam as well as alcohol and meat for the EU. ©Getty Images
The recently-ratified EU-Vietnam Free Trade Agreement (EVFTA) has seen major gains in food trade for both sides, particularly in rice and seafood for Vietnam as well as alcohol and meat for the EU. ©Getty Images

Related tags: Rice, Seafood, Vietnam, Eu

The recently-ratified EU-Vietnam Free Trade Agreement (EVFTA) has seen major gains in food trade for both sides, particularly in rice and seafood for Vietnam as well as alcohol and meat for the EU.

The EVFTA will see the EU eliminate 71% of duties on imports from Vietnam from day one of enforcement, and 99% overall will enter duty-free after seven years. It is only the second deal that the EU has ever made with an ASEAN country (the first being Singapore), and is expected to take effect in July.

“The EU-Vietnam trade and investment agreements are the most ambitious and comprehensive ones that the EU has ever concluded with a middle-income country,”​ said EU Commissioner for Trade Cecilia Malmstrom in a formal report on the EVFTA.

“Trade-wise, Vietnam has climbed to become the EU’s second biggest trading partner in ASEAN after Singapore and ahead of Malaysia, with trade in goods between the EU and Vietnam worth EUR48bn (US$54.3bn).”

According to EU numbers, total agri-food exports to Vietnam were valued at EUR1.135bn (US$1.28bn) in 2019, and imports from Vietnam were valued at EUR2.161bn (US$2.44bn) the same year.

For rice trade in particular, the EVFTA covers all the rice variants most commonly exported from Vietnam to the EU: Milled rice, husked rice, broken rice and fragrant rice. These will see mostly duty-free tariff quotas as soon as the FTA is implemented, except for broken rice which will see a 50% tariff cut when the FTA comes into force, followed a linear reduction over five years.

Vietnamese seafood that will see improved market access via duty-free tariff rates or full liberalisation include surimi (seafood paste, most commonly fake crabmeat), canned, fresh and chilled tuna, non-processed shrimps and catfish.

“Other [agricultural and food] products will see improved market access too: Sweet corn, garlic, mushrooms, manioc starch and ​sugar and high-sugar-containing products will have duty-free tariffs, whereas baby corn imports will be fully liberalised,”​ stated the official Guide To The EU-Vietnam Trade And Investment Agreements​ report.

Conversely, alcohol and meat imports from the EU will benefit greatly from the deal, with alcohol especially set to see not only eventual full liberalisation but also protected by Geographical Indications (GIs)​.

“Wine and spirit [imports to Vietnam] will be liberalised after seven years and beer after 10 years,” ​said the report.

“Many EU GIs will be protected automatically upon entry into force of the trade agreement, [including] France’s Cognac, Spain’s Rioja, Italy’s Grappa, Germany’s Bayerisches Bier and many more.

“Champagne will be also fully protected after a transition period of 10 years, during which all uses incompatible with the GI protection, including translations and transliterations in Vietnamese script will be phased out.”

As for meat, EU frozen pork meat will be duty free to export to Vietnam after seven years, and chicken fully liberalised after 10 years. Other beneficiaries include dairy products (duty free after five years) and fishery-sourced seafood such as salmon, halibut, trout and rock lobster which will see immediate liberalisation.

New generation agreement

The EVFTA has also been deemed a ‘new generation’ agreement by analysts, as it contains provisions that are more modern than most.

“[It] is considered a new generation bilateral agreement – it contains important provisions for intellectual property (IP) rights, investment liberalization, and sustainable development,”​ said investment consultancy firm Dezan Shira & Associates in a Vietnam-specific briefing report.

“This includes a commitment to implement the International Labor Organization (ILO) standards and the UN Convention on  Climate Change.”

One of the main sections of the EVFTA has been dedicated to IP rights, where Vietnam has been required to accede to the World Intellectual Property Organisation (WIPO) Internet Treaties.

“[These treaties] require Vietnam to ensure that right holders can effectively use technology to protect their rights and to license their works online,”​ said the EVFTA guide.

For food and agricultural products in particular, GIs are considered a major form of IP rights that need to be adhered to under the agreement.

Including alcoholic beverages as mentioned above, a total of 169 European items, most of these expected to be food items such as Feta, Parmigiano Reggiano or Roquefort cheeses, and will be reserved in Vietnam.

“This protection will apply once the trade agreement enters into force and will be enforced on the Vietnamese market through appropriate administrative sanctions, including upon request of an interested party,”​ it stated.

In return, Vietnam will receive GI protection in the EU for 39 products, including Phú Quốc fish sauce, Mộc Châu tea and Buôn Ma Thuột coffee.

India in fear

Even though the EVFTA has not yet come into force, fears are already rife that this bold deal will cause major loss of business for some other Asian countries, such as India.

“If production shifts out of China, it makes imminent sense for [EU] businesses to go into Vietnam because though Vietnam they can re-export back to China, access the European market, access the rest of the Regional Comprehansive Economic Partnership FTA territory and also exclusively the ASEAN market”​ Institute of South Asian Studies research fellow Amitendu Palit told CNBC-18.

“India won’t be able to match Vietnam on the level of ground efficiency as far as cost of production is concerned as well as in terms of the network that it has in terms of giving access to demand markets across the region and for the world.”

Earlier this year, we reported on how India chose to prioritise its ‘Make In India’ food strategy and basically walked out of the Regional Comprehensive Economic Partnership (RCEP)​ last year – a move Palit described as a ‘huge mistake’​.

“[The] countries with whom India is trying to build a friendship alliance looking to relocate supply chains out of China, all these nations like Japan, Korea, Vietnam, Australia, New Zealand are part of the RCEP – [had it stayed,] it would have had the same set of rules with respect to standards, investments and non-tariff barriers,”​ he said.

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