January 4, 2023
Trade -
Everything You Need to Know About Vietnam's Free Trade Agreements | OneLink Holdings
A comprehensive guide to Vietnam’s free trade agreements, their benefits and challenges, and a list of all the current agreements Vietnam is involved in.
Vietnam is one of the fastest-growing economies in the world. As such, it has become a major player in global business and trade, with dozens of free trade agreements (FTAs) signed between Vietnam and other countries. In this article, we’ll provide a comprehensive guide to these FTAs, their benefits and challenges, and a list of all the current agreements Vietnam is involved in.
What Are Free Trade Agreements?
Free trade agreements are international treaties that allow for the free movement of goods, services, capital, and labour between two or more countries. These agreements are designed to reduce costs related to tariffs and other restrictions on trade between partner countries and promote economic development by increasing competition and investment opportunities. They also aim to increase consumer access to goods from different nations at lower prices.
Vietnam became a member of the World Trade Organisation (WTO) in 2007; which was marked as a significant step towards world trade. After admission into WTO, Vietnam began to freely enter into Free Trade Agreements (FTA).
Benefits of FTAs for Vietnam
Vietnam has seen many benefits from its FTAs over the years. These include increased foreign direct investment (FDI), improved access to new markets for its exports, greater economic integration with its partners, reduced costs of imported inputs used in production, increased competition from foreign firms entering the market leading to better quality products at lower prices for consumers as well as improved press coverage leading to enhanced global brand recognition. By having access to multiple countries through FTA’s, Vietnam can shift away from exporting low-tech products, and move to more complex high tech good such as electronics, machinery and vehicles.
Additionally, Vietnam’s participation in FTAs has led to increased participation in global value chains (GVCs) which has allowed Vietnamese firms to benefit from technology transfers and gain access to new markets. Finally, FTAs have also helped create jobs by providing incentives for companies setting up operations or expanding existing ones within Vietnam’s borders.
Challenges of FTAs for Vietnam
However, there have been some challenges associated with Vietnams FTAs as well. For example, there have been concerns about unfair competition between local producers and foreign firms who may be using cheaper labour or less stringent environmental regulations than those required domestically. It also puts pressure on local manufacturers who won’t adapt and make use of new market opportunities; with locals failing to keep up with the market.
Additionally, there can be issues related to intellectual property rights violations if partner countries fail to protect Vietnamese companies’ patents or trademarks from being copied without permission or payment of royalties. Finally, there is a risk that certain industries may become overly reliant on imported inputs due to low tariff rates which could make them vulnerable if global prices suddenly spike or if certain partner countries impose unexpected restrictions on imports from Vietnam.
Future FTA’s for Vietnam
These agreements are in negotiations as future potential agreements:
Viet Nam-Israel Free Trade Agreement (VIFTA)
Status: Negotiations
Countries involved: Vietnam and Israel
Vietnam – European Free Trade Association (EFTA)
Status: Negotiations
Countries involved: European Free Trade Association comprised of Switzerland, Norway, Iceland, and Liechtenstein.
Future Growth from FTA’s
The Vietnamese Government is keen to promote Free Trade Agreements; outlining steps businesses can take to make use of the agreements. The added benefits from the government include the various tax incentives aimed at foreign investment, who ultimately can utilise free trade agreements on top of tax incentives to do business in Vietnam. The Ministry of Planning and Investment for Vietnam has suggested that by 2035, the CPTPP could increase the GDP by 1.3% and the EVFTA could increase GDP by up to 15%.
In conclusion, free trade agreements are an important tool for promoting economic growth and integration in today’s globalized economy. While they offer numerous benefits such as increased FDI inflows into the country they can also present some unique challenges such as unfair competition or intellectual property rights violations which must be addressed accordingly by both sides involved for these arrangements to succeed long term. Overall, the growth expected in future years with Free Trade Agreements in place puts Vietnam at a great advantage of becoming a world leader in trade and exports. With this information you should now have a better understanding of what these agreements entail and how they impact businesses operating within our country today!
Written By
OneLink Holdings team
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