The EU-Viet Nam FTA (EVFTA), once in place, is expected to open great opportunities for both sides as it is considered a comprehensive agreement of high quality and with balanced benefits. — Photo baocongthuong

HA NOI (Biz Hub) — The European Union (EU) and Viet Nam yesterday reached an agreement in principle for a free-trade agreement (FTA) after nearly three years of intense negotiations.

The EU-Viet Nam FTA (EVFTA), once in place, is expected to open great opportunities for both sides as it is considered a comprehensive agreement of high quality and with balanced benefits.

EU Trade Commissioner Cecilia Malmstrom said in a press release by the European Commission the agreement would set a better and modern model for FTAs between the EU and developing countries and establish a good standard for trade relationship between the EU and South-East Asia. The agreement is the second FTA between the EU and a member of the Association of Southeast Asian Nations (ASEAN). In 2014, it concluded a deal with Singapore.

"The EVFTA will provide significant new opportunities for companies on both sides by increasing market access for goods and service," Malmstrom said. "Vietnamese exporters will now get much easier access to the EU for their products, providing an important boost to the Vietnamese economy."

Head of the EU Delegation to Viet Nam, Franz Jessen, said at yesterday's press conference that the agreement was beneficial for both sides and would help foster the long-stand ing relation between the EU and Viet Nam.

Minister of Industry and Trade, Vu Huy Hoang, said that trade and economic benefits would be significant as more than 99 per cent of tariff lines would be eliminated. For the few remaining tariff lines, tariff-rate quotas or partial tariff reductions will be applied.

Hoang said that the potential for Viet Nam to boost exports to the EU was great as export products on both sides did not compete. Viet Nam's main export products to the EU were coffee, footwear, garment and seafood products.

The agreement is expected to stimulate Vietnamese businesses and to enhance competitivenes. This is considered essential if they are to grasp opportunities and develop amid rapid global integration, Hoang said.

The agreement will help promote high-quality capital flow from the EU as the business and investment environment is bound to improve now that commitments have been made.

The EVFTA also included chapters on government procurement, intellectual property, sustainable development, co-operation and legal and institutional issues.

Hoang said the EVFTA also pushed Viet Nam to improve its policy framework and institutional reforms while accelerating economic restructuring and transforming growth model towards higher efficiency.

However, besides opportunities, there will also be challenges.

Jean-Jacques Bouflet, Minister-Counsellor of the European Union Delegation to Viet Nam, told the media afterwards that the EU's quality requirements, especially for food products, were high and Vietnamese firms should move to meet the requirements.

Hoang said the ministry would enhance business awareness about opportunities and challenges arising from the EVFTA in particular and other FTAs in general..

The two sides agreed to expedite the consolidation of technical issues so that they could conclude the agreement this year.

The EU is Viet Nam's second largest trading partner. Two-way trade reached US$36.8 billion last year, of which, Viet Nam's exports to the EU accounted for 76 per cent.

EU nations were also among the largest investors in Viet Nam. They had more than 2,000 projects in Viet Nam at the end of 2014 and total registered capital of more than $37 billion.

This year, Viet Nam signed free-trade agreements with the South Korea and the Eurasian Economic Union. — VNS