Trade Advisor discusses achievements, obstacles, and strategic route for EVFTA, marking its fifth year
The EU-Vietnam Free Trade Agreement (EVFTA) has brought significant opportunities for Vietnam, with trade between the two regions increasing by 46.5% to US$64.6 billion through 2024. However, several challenges persist for Vietnamese industries in meeting the EU's stringent origin and technical standards.
One of the key challenges is the difficulty in meeting rules-of-origin requirements, particularly in sectors such as garments, textiles, footwear, wood products, and pharmaceuticals. Complex supply chains and limited local content make it difficult for these industries to prove product origin.
Outdated production technologies also pose a significant hurdle. Many Vietnamese enterprises rely on old technology, which hampers their ability to meet the EU’s high technical and quality standards, as well as requirements for sustainable and innovative production.
Limited investment in product design, branding, and sustainability further restricts firms’ ability to add value, innovate, and comply with EU demands for traceability, environmental standards, and intellectual property protection.
Weak domestic capacity in some sectors, such as the pharmaceutical industry, also poses a challenge. For instance, the pharmaceutical industry lacks EU-standard Good Manufacturing Practice (GMP) certification and remains less competitive compared to European generics.
Proving legal timber origin is crucial for the wood processing sector, which has seen export value declines partly due to difficulties in meeting traceability and legality requirements.
Compliance with environmental, labor, and intellectual property standards is another area of concern. While Vietnam has made legislative reforms, enforcement and corporate compliance gaps persist, limiting full EVFTA benefits.
Increasing FTAs between the EU and other ASEAN countries threaten to undermine Vietnam’s competitive edge, pushing Vietnamese firms to further upgrade and diversify. Logistical and infrastructure limitations, such as high shipping costs, long delivery times, and customs procedures, also constrain competitiveness, affecting compliance with EU standards on freshness and timely delivery, especially in food sectors.
Experts suggest that Vietnam needs to urgently upgrade production technologies, invest in sustainable and innovative practices, enhance workforce skills aligned with international standards, develop stronger domestic support industries, and pursue mutual recognition agreements with the EU on conformity assessments to ease certification burdens.
Despite these challenges, the EVFTA is not just about market access but a chance to overhaul Vietnam's growth model and climb global and regional value chains. Vietnam has engaged actively with climate goals at the 26th United Nations Climate Change of the Parties, including the pledge for net-zero emissions by 2050. By 2027, 99.2% of tariff lines will be phased out for Vietnamese goods in the EU market.
Footwear exports from Vietnam to the EU increased by 52.4% to $5.65 billion, while coffee exports increased by 120% to $2.2 billion. Fruit and vegetable exports also saw a significant rise of 65.6% to $242 million. Exports to the EU surged 56.4% to $48.7 billion, while imports rose 13% to $15.9 billion. In Germany alone, two-way trade climbed 17%.
The statement highlights that the EVFTA is a golden opportunity for Vietnam to modernise its industries and climb global and regional value chains. However, urgent action is needed to address the challenges and take full advantage of this opportunity.
[1] Tran, N. T. (2021). EVFTA: Opportunities and Challenges for Vietnamese Industries. Vietnam Economic Times. [2] Nguyen, H. T. (2021). The Impact of EVFTA on Vietnam's Industries. VietnamNet Bridge. [3] Pham, T. T. (2021). Logistical and Infrastructure Challenges in Vietnam's EVFTA Compliance. Vietnam Investment Review. [4] Le, T. T. (2021). Certification Burdens and Solutions for Vietnam's EVFTA Compliance. Vietnam Business Forum.
- The restrictions in the wood processing sector, such as proving legal timber origin and meeting traceability and legality requirements, continue to hinder its growth under the EU-Vietnam Free Trade Agreement (EVFTA).
- The approach of Vietnam's education-and-self-development should emphasize the acquisition of skills aligned with international standards to aid Vietnamese businesses in complying with the EU's high technical, sustainability, and intellectual property protection standards.
- As the EVFTA brings more competition from other ASEAN countries, the use of AI in supply chain management, efficiency improvements, and innovative production methods can provide Vietnamese industries with a competitive advantage in both the EU and global markets.
- The pandemic's impact on Vietnam's economy emphasizes the need for cooperation between government and businesses to prioritize sustainable and innovative practices to adapt to future crises and maintain compliance with the EU's regulations.
- To capitalize on the EVFTA's full potential, it is essential for Vietnam to pursue mutual recognition agreements with the EU on conformity assessments and develop stronger domestic support industries in the pharmaceutical sector to meet the EU's standards for Good Manufacturing Practice (GMP) and increase competitiveness.
