Vietnam – EU Trade Relations

09/06/2011

EU – the huge market with 27 members is one of the most important trade partners of Vietnam.  In recent years, Vietnam – EU trade relations have developed significantly. In 1995, the two sides signed a Framework Cooperation Agreement. Vietnam and EU relation are further strengthened through signing off Partnership and Cooperation Agreement (PCA). Vietnam and EU intend to launch a free trade negotiation with large and deep market access commitments.

Vietnam is an export-driven economy, with 69% of GDP exported in 2008 (64% in 2009 and 61% in 2005); 16% of the GDP value is exported to the EU, for a value of 14.9 bn. USD (14% in 2009 for 12.6 bn.) and it represents the 17% of all Vietnamese exports (constant from 2005).

The five first products exported into the EU (footwear – 4.5 bn., apparel and clothing 2.3 bn., coffee 1.4 b. , seafood – 1.1 bn. and furniture - 1 bn.) represent the 70% of total export to EU in 2008 (68% in 2009), with a the index of concentration (Herfindahl–Hirschman Index) equal to 0.12 (moderate level): therefore the exports to the EU are exposed to industry shocks as showed by the decrease of 15% of the export to EU in 2009 (-20% footwear, -26% coffee, -20% furniture while apparel and clothing limited the decrease to 10%).

Simple average tariffs applied by the EU on import of Vietnam are, in 2009, around 4.1% (decreased from 4.5% in 2005). Weighted average tariff, however, (tariff weighted with the level of trade) amount to 7%, meaning that higher tariffs are applied to relevant products exported from Vietnam (e.g. apparel and clothing: 11.7%, seafood: 10.8% and footwear: 12.4%) and very high tariff peaks (more than 57%). This means that the elimination of tariffs expected on substantially all the trade with the FTA will provide important advantages for Vietnam in comparison to other competitors in the EU markets. With regard to the tariff on import, Vietnam applied substantially reductions after WTO accession and now the simple average tariff is 9.3% (from 13.7% in 2005); the tariffs applied to the most exported products from the EU into Vietnam are quite low, with the exception of automotive (24.2%, electronics: 8.9%, mechanical: 3.4%, pharmaceuticals: 2%, Iron: 2%, optical and medical apparatus: 1.3%, aircraft: 0%). In all the mentioned categories excepted aircraft, however, there are quite high tariff peaks (from 10% of pharmaceuticals to 90% for automotive).

Committee on International Trade Policies - VCCI
Vietnam - EU Trade Figures