Vietnam’s Free Trade Agreements
Vietnam’s accession to the World Trade Organization (WTO) in 2007 marked a pivotal moment in its history, positioning the country as a committed and robust trade partner on the global stage. Since then, Vietnam has entered into a variety of Free Trade Agreements (FTAs) and Double Tax Avoidance Agreements that have significantly shaped its economic landscape.
What are Free Trade Agreements?
A Free Trade Agreement (FTA) is a legally binding agreement between two or more countries that outlines the terms of trade between them. These agreements dictate the tariffs and duties imposed on imports and exports, aiming to foster economic cooperation by reducing trade barriers. Through FTAs, countries can enhance their trade relations, leading to increased market access for their goods and services.
List of Vietnam’s Free Trade Agreements
Vietnam currently boasts a network of 18 active and planned Free Trade Agreements. These FTAs provide significant trade advantages and opportunities for the Vietnamese economy. Here’s a comprehensive list:
| Free Trade Agreement | Abbreviation | Signatories | Effective Date |
|---|---|---|---|
| ASEAN Free Trade Area | ASEAN | ASEAN Member States: Brunei, Malaysia, the Philippines, Singapore, Thailand, Cambodia, Laos, Myanmar, Indonesia, Vietnam |
1993 |
| ASEAN-China Comprehensive Economic Cooperation Agreement | ACFTA | ASEAN Member States, China | 2005 |
| ASEAN-South Korea Comprehensive Economic Cooperation Agreement | AKFTA | ASEAN Member States, South Korea | 2007 |
| ASEAN-Japan Comprehensive Economic Partnership | AJCEP | ASEAN Member States, Japan | 2008 |
| Japan-Vietnam Economic Partnership Agreement | VJEPA | Japan | 2009 |
| ASEAN-India Comprehensive Economic Cooperation Agreement | AIFTA | ASEAN Member States, India | 2010 |
| ASEAN-Australia and New Zealand Free Trade Agreement | AANZFTA | ASEAN Member States, Australia, New Zealand | 2010 |
| Vietnam-Chile Free Trade Agreement | CVFTA | Vietnam, Chile | 2012 |
| South Korea-Vietnam Free Trade Agreement | VKFTA | South Korea, Vietnam | 2015 |
| Eurasian Economic Union-Vietnam Free Trade Agreement | VEAEU | Belarus, Kazakhstan, Armenia, Kyrgyz Republic, Vietnam | 2016 |
| Comprehensive and Progressive Agreement for Trans-Pacific Partnership | CPTPP | Australia, Canada, Japan, Mexico, New Zealand, Singapore, Vietnam, Peru, Brunei, Chile, Malaysia | 2019 |
| ASEAN-Hong Kong, China Free Trade Agreement | AHKFTA | ASEAN Member States, Hong Kong | 2019 |
| EU-Vietnam Free Trade Agreement | EVFTA | EU Member States (27 countries), Vietnam | 2020 |
| United Kingdom – Vietnam | CEPA | United Kingdom, Vietnam | 2025 |
| Regional Comprehensive Economic Partnership | RCEP | ASEAN Member States, Australia, Japan, China, New Zealand, South Korea | 2022 |
| Vietnam – Israel Free Trade Agreement | VFITA | Vietnam, Israel | 2023 |
| Vietnam – UAE Comprehensive Economic Partnership Agreement | Vietnam – UAE FTA | Vietnam, United Arab Emirates (UAE) | 2024 |
Vietnam’s Ministry of Planning and Investment forecasts that the CPTPP could increase Vietnam’s GDP by 1.3 percentage points by 2035, while the EVFTA could boost GDP by a remarkable 15 percent.
Planned Free Trade Agreements
Vietnam is currently negotiating future agreements, notably the Vietnam-Israel FTA and discussions with the European Free Trade Association, which includes Switzerland, Norway, Iceland, and Liechtenstein. Additionally, Vietnam is actively engaged in ongoing FTA negotiations between ASEAN and Canada.
The Effects of Free Trade Agreements in Vietnam
Advantages of Free Trade Agreements
Beyond fostering trade, Vietnam’s FTAs bring several strategic advantages. The agreements facilitate economic development, enabling a shift from exporting low-tech manufacturing products to more complex, high-tech goods such as electronics, machinery, and medical devices.
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Boosting Export Competitiveness: FTAs allow Vietnam to diversify its sourcing partners, leveraging larger trade networks and importing intermediate goods at lower costs. For instance, agreements like the RCEP and EVFTA enable Vietnam to expand its trade partnerships worldwide, attracting exporting companies to establish production facilities in Vietnam and tap into global markets.
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Partnerships for Technological Growth: Collaborations with foreign firms facilitate technology transfer, vital for advancing to higher value-added production. A prime example is VinFast, a Vietnamese electric vehicle manufacturer collaborating with global giants like Intel and LG to produce car components. Such endeavors exemplify Vietnam’s capacity to enhance labor productivity and extend its export potential.
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Alignment with International Standards: FTAs like the CPTPP and EVFTA compel Vietnam to conform to international norms concerning labor rights and environmental protections. This alignment provides an avenue for modernization in Vietnam’s labor laws and industrial relations systems, ultimately establishing the country as a manufacturing and exporting hub.
Challenges of Free Trade Agreements
Despite the benefits, FTAs present potential challenges, particularly regarding competition from foreign entities. In sectors like agriculture, local businesses face aggressive competition from imported products, particularly in meat and dairy from the EU, Australia, and Canada. To counteract these challenges, Vietnamese firms must adapt, innovate, and seize new market opportunities through strategic partnerships.
Double Tax Avoidance Agreements
Double Tax Avoidance Agreements (DTAAs) are crucial in preventing the double taxation of foreign investors, ensuring they only pay taxes in one jurisdiction. Vietnam has signed DTAAs with 80 countries and territories, including France, China, and Canada. These treaties help streamline tax obligations for foreign investors operating in multiple countries, making Vietnam a more attractive investment destination.
Foreign investors operating in Vietnam should be well-versed in the applicable DTAAs and their provisions to optimize their tax situations effectively.
Conclusion
Vietnam’s strategic engagement in free trade agreements has paved the way for a more competitive and diversified economy. While the landscape presents both opportunities and challenges, the focus remains on leveraging these frameworks to enhance trade, attract investment, and facilitate sustainable economic growth.