Monday, August 21, 2017 - 19:20:10

Free trade brings benefits and challenges

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The Free Trade Agreement (FTA) is a double-edged sword as it brings both opportunities and challenges to Vietnamese exports, said economic experts.

Dr. Nguyen Minh Phong from the Hanoi Institute of Socio-economic Development said that the FTA signing has provided Vietnam with an equal position on all aspects with member countries in the agreement and as a result, the country’s exports have seen remarkable improvements in turnover, products and markets year by year, except 2009 when the world suffered an economic crisis.

According to the Ministry of Industry and Trade (MoIT), Vietnam ’s total export turnover reached nearly 63 billion USD in 2008, doubling the figure of 2005, and increased to over 71.6 billion USD in 2010.

The FTA has not only affected Vietnam ’s export turnovers but also helped create impressive developments in economic cooperation between Vietnam and other countries.

The impacts of the Vietnam-US Bilateral Trade Agreement (BTA), an agreement similar to the FTA, on the two countries’ economic relations were cited as an example.

In 1995, two-way trade between Vietnam and the US reached only 450 million USD but rose to 18 billion USD 15 years later. Vietnam ’s exports to the US earned over 12 billion USD in 2009, ten times higher than the figure of 2002 when the BTA took effect. At present, the US is Vietnam ’s largest export market and investor.

After the US , Vietnam ’s export to ASEAN has also remarkably increased with 11 billion USD in 2010, up 19 percent over the previous year. The result was attributable to a tax reduction to 0-5 percent for almost all commodities exported to the ASEAN market as committed in the ASEAN-China Free Trade Agreement, which became effective in early 2010.

Similarly, commitments on tariff preferences in the Vietnam-Japan Economic Partnership Agreement, which come into effect in October 2009, helped Vietnam earn 1.2 billion USD from garment exports to Japan for the first time in 2010, an increase of 20 percent against the previous year.

Regarding challenges for Vietnam , Phong noted that the first challenge Vietnam is facing is the risk of an increasing trade deficit due to weak competitiveness and restrictions on price, technology and product structure.

In 2008, Vietnam ’s trade deficit was 17.5 billion USD, quadrupling the figure of 2005, and mainly from China , which accounts for over 90 percent of Vietnam ’s total annual trade deficit since 2005.

In the coming time, Phong said that FTAs will have greater influence on Vietnam’s export activities as the agreements’ deep tax reduction roadmaps are approaching deadlines, trade liberalisation will be clearer and technical barriers will become more diversified and complex.

To overcome this challenge, Vietnam should speed up its economic restructuring, develop supporting industries, areas and products where it has a competitive edge, and improve its import-export structure and position in the global value chain, he stressed.

According to MoIT, Vietnam hasn’t yet signed a FTA with any single country but joined ASEAN to sign and implement a series of FTAs with six partners in East Asia, including the ASEAN-China FTA (ACFTA), the ASEAN-Korea FTA (AKFTA), the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP), the ASEAN-India FTA (AIFTA), and the ASEAN-Australia-New Zealand FTA (AANZFTA).

At present, Vietnam is joining in negotiations on several other FTAs, including the Trans-Pacific Partnership Agreement (TPP), the ASEAN-EU Free Trade Agreement, the Comprehensive Economic Partnership Agreement with Japan, the Vietnam-Chile Bilateral FTA and the Vietnam-EU Bilateral FTA./.
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