The European Parliament voted on February 12 to accept a free trade agreement (FTA) with Vietnam, a monumental deal that will cut almost all tariffs on exports from one of Southeast Asia’s fastest growing economies.
The trade deal, eight years in the making, has simultaneously been criticized for rewarding a one-party state that is among Asia’s serial human rights abusers while making virtually no demands on Hanoi to improve its record.
By an overwhelming vote of 401 in favor to 192 against with 40 abstentions, the European Parliament pushed the pending trade agreement over its final hurdle in Brussels. It now must be approved by Vietnam’s National Assembly in Hanoi, which is all but a certainty, according to observers.
The free trade agreement, known by the acronym EVFTA, will see 99% of all tariffs on Europe-bound Vietnamese exports dropped by 2035, though the majority of those taxes will be phased out in the next few years.
Europe is already one of Vietnam’s largest export markets, with bilateral trade in goods worth around US$52 billion in 2018.
Vietnam’s Ministry of Planning and Investment predicts the new deal will boost gross domestic product (GDP) by 3.25% by 2023, and then by 5.3% until 2028. The ministry also estimated last year that revenue from exports to the EU will surge 20% in 2020.
The FTA will also be a boon for European investors looking to capitalize on Vietnam’s impressive economic growth and favorable position as an alternative to China for their supply chains. According to European Union (EU) figures, the bloc’s exports to Vietnam will expand by almost $9 billion per year by 2035.