FTAs: boon or bane for businesses?

As 2018 brings newer and bigger free trade agreements (FTAs), Vietnamese enterprises are faced with tough choices. They can either adapt and move up the global supply chain, or stand by while imported goods flood the country’s market.

  • Hundreds of tasty dishes presented at 2017 International Food Festival
  • Vietnam, EU seek to accelerate FTA signing
  • Potential impact of EU-Vietnam FTA

Tran Thanh Hai, Deputy Director of the Ministry of Industry and Trade’s (MoIT) Import-Export Department, told Vietnam News Agency (VNA) that from 2018 onward, 85% of Vietnamese exports will be subject to significantly lowered tariff levels of zero to 5%.

As part of the Government’s policy to increase economic self-reliance and promote sustainable imports and exports, exports of Vietnamese goods to FTA markets grew strongly in 2017, contributing US$213.8 billion to the year’s turnover of US$408 billion, per the MoIT’s data.

Hai was optimistic that Vietnamese businesses will benefit more from bilateral and multilateral FTAs with partners such as China’s Hong Kong, Japan and the Republic of Korea (RoK).

Nonetheless, Hai admitted that the process of raising Vietnamese exports’ value might not be as easy as expected. Since each FTA is tailor-made to suit member countries’ needs, they have different levels of commitments and standards.

For example, he was greatly concerned by the fact that a Vietnamese automobile company would only be able to enjoy a zero percent tax rate when exporting to ASEAN countries if their products have at least 40 percent of components originating in Vietnam. 

Therefore, Hai suggested domestic enterprises focus on meeting standards set by the Vietnam-Korea FTA (VKFTA) and the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP), since they offer more special tariff treatments at fewer standard requirements than others.

The origin rules would encourage the country to produce locally, rather than importing materials and parts. But this could prove a long and difficult process for Vietnamese firms, he added.

Buy less, sell more?

Le Tien Truong, Vice Chairman of the Vietnam Textile and Apparel Association (Vitas), told VNA that textiles and garments exports growth rate to European market may not get an immediate boost from the Vietnam-EU Free Trade Agreement (EVFTA), due to preferential rules of origin.

Currently, the Vietnamese textile and apparel industry has to import 70 percent of its raw materials, 42% of which come from China and the rest from ASEAN and the RoK.  

On the other hand, starting in 2018, many preferential import tariffs to Vietnam will be progressively eliminated to 0%, provided the imported goods meet the MoIT’s provisions on origin of goods and Certificate of Origin (CO) and be listed in the 17 FTAs of which Vietnam is a member.

Pham Tuan Anh, Deputy Head of the International Relations Department under the Ministry of Finance, told the Ministry of Planning and Investment’s online portal last week, that import tariffs reduction and elimination must be carefully carried out, lest it harm the State budget and domestic production activities.

Imports eligible for zero tariffs mainly come from ASEAN-related trade agreements, though pacts signed with Japan, China, RoK and the Eurasian Economic Union also boast a significant amount, according to 2017 year-end reports from the General Department of Vietnam Customs (GDVC).

For example, the VKFTA requires Vietnam eliminate 704 import tariffs lines in 2018, while the AKFTA demands 477 tariff lines eliminated and 588 for the ASEAN-China Bilateral Trade Agreement (ACFTA).

Similarly, the Vietnam’s Special Preferential Tariff Schedule for the Implementation of the ASEAN Goods Trade Agreement between 2018 and 2022 indicates a drop of 0.9% in average tariff levels across all imports from 2017’s number, as calculated by the GDVC.

Since these reductions were made public once the FTAs were signed, the MoF and the Vietnamese business community had ample time to prepare, said Tuan Anh.

Despite fears that cutting import taxes will lead to a drop in State budget revenue, the GDVC reported overall income of VND293 trillion (US$13 billion) from import tax in 2017 alone, with a 2018 target of VND295 trillion (US$13.1 billion), he added.

Though Vietnam had a trade deficit with China, ASEAN and the RoK, the country’s annual export turnover to these markets was growing strongly, up 60.6%, 24.5% and 31% respectively in 2017, Tuan Anh said.

Therefore, Vietnam’s FTAs would help promote economic growth, attract foreign investment, increase State budget revenue, create jobs and solve social security issues, instead of harming import-export balance, he said.

A helping hand

Surrounded by immense opportunities and challenges requiring initiative and flexibility, domestic enterprises should improve product quality, increase competitiveness and develop business plans to meet these FTAs’ requirements.

Bui Kim Thuy, Deputy Head of Origin of goods Division, MoIT’s Import-Export Department, said in recent time, the ministry had made efforts to cut administrative procedures to help domestic enterprises take advantage of tariff preferences and rules of origin.

She listed a significant improvement in administrative procedures for issuing certificates of origin, which helps enterprises spend less time and costs via online registration.

Still, Thuy admitted that Vietnamese enterprises had not shown a desirable level of interest in the issue, due to lack of awareness. 

She hoped that if domestic businesses understand and follow these FTAs’ rules of origin, they will be able to take advantage of upcoming opportunities to enhance added value and ensure sustainable growth.

VNA

Other News

A view of a container port in Singapore. (File photo: Xinhua/VNA)

Vietnam-Singapore trade cooperation gains fresh momentum

Analysts noted that Vietnam-Singapore ties are increasingly moving beyond traditional goods trade towards green growth, innovation and high-quality supply chains, laying a stronger foundation for more substantive and sustainable cooperation in the years ahead.

Vietnamese products make strong impression at Foodservice Australia 2026

Vietnamese products make strong impression at Foodservice Australia 2026

International visitors expressed positive impressions of Vietnamese products displayed at the fair. Nelma Sanjines, senior supervisor at ESP Catering in Sydney, praised the flavour of Vietnamese chilli sauce and soy sauce as well as the attractive packaging of confectionery products.

Digital technology helps standardise supply chains, sustain export competitiveness

Digital technology helps standardise supply chains, sustain export competitiveness

Experts noted that supply chain optimisation and risk management are no longer isolated tasks for individual companies but a requirement for the entire export ecosystem. With guidance from regulators, support from industry experts and their own efforts, Vietnamese exporters are expected to enhance their competitiveness and turn technical barriers and market volatility into opportunities for sustainable growth in global markets.

Vietnam seen as attractive investment destination for 2026–2035

Vietnam seen as attractive investment destination for 2026–2035

The article described Vietnam as strategically positioned along major regional maritime routes, including the East – West corridor linking the Americas, the Middle East, India and Europe, and the North – South corridor connecting China and Southeast Asia, helping make the country a gateway for international trade.

Eco-industrial parks seen as catalyst for higher-quality FDI

Eco-industrial parks seen as catalyst for higher-quality FDI

The eco-industrial park model will help Vietnam meet international environmental standards while creating opportunities to improve growth quality and economic competitiveness. Many multinational corporations now view green standards, emissions reduction and energy efficiency as key conditions when selecting investment destinations.

Promoting Vietnamese Brands at an International Food Fair in Gwangju

Promoting Vietnamese Brands at an International Food Fair in Gwangju

Alongside exhibition activities, trade promotion, and business networking programs, the “Gwangju Global Food Fair 2026” also witnessed the signing ceremony of a Memorandum of Understanding (MOU) between the Vietnam–Korea Businessmen & Investment Association (VKBIA) and the Gwangju Tourism Organization of South Korea.

Hanoi proposes subsidies to accelerate shift to electric vehicles

Hanoi proposes subsidies to accelerate shift to electric vehicles

Under a draft resolution currently open for public feedback by the municipal People’s Committee, residents with permanent or temporary residence registration in Hanoi for at least two consecutive years, who own petrol-powered motorbikes registered before the resolution takes effect, will be eligible for support when purchasing electric motorbikes priced at 10 million VND or more.

Private economic sector poised for breakthrough growth

Private economic sector poised for breakthrough growth

More than a year after the Politburo's Resolution No. 68-NQ/TW on private sector development came into effect, expectations now extend beyond increasing the number of enterprises. The goal is to build a stronger business community with greater resilience, larger ambitions and the capacity to compete in global supply chains.

Vietnam remains ASEAN growth leader in 2026 despite global headwinds: WB

Vietnam remains ASEAN growth leader in 2026 despite global headwinds: WB

Vietnam is expected to remain one of ASEAN’s fastest-growing economies in 2026, supported by resilient exports, strong investment inflows and an ambitious reform agenda, despite mounting global uncertainties, according to the World Bank’s latest Vietnam Economic Update released on May 15.

Ministry establishes monitoring framework for carbon market

Ministry establishes monitoring framework for carbon market

Under a new circular, the exchange of greenhouse gas emission quotas and carbon credits is conducted on the domestic carbon credit exchange through the carbon trading system, which is interconnected with the national registration system.