Vietnam, EU sign free trade, investment protection agreements

July 2, 2019

HANOI - The EU and Vietnam have signed the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) in Hanoi. They began negotiations on the EVFTA in 2012 and expect the EVFTA to enter into force before the end of 2019.

The European Commission says the agreement will include removal of 99% of customs duties on exports.

Vietnam's tariff elimination schedule for goods imported from the EU will cover a period of 10 years, whereas EU tariffs applicable to Vietnam originating goods will be phased out over seven years.

The EVFTA will also open up market access for services between the parties.

In a Client Alert, global lawyers Baker McKenzie say that, importantly, Vietnam has committed to phasing out its Economic Needs Test (ENT) applicable to secondary and subsequent retail establishments, five years after entry into force.

Accordingly, EU retail investors will enjoy streamlined access to the Vietnam market from 2025.

The EVFTA also includes an intellectual property chapter and liberalisation of public procurement as well as modern transparency, sustainable development and labour provisions.

Both Agreements will enter into force following their respective ratification procedures.

The EVIPA will require Member Ratification Procedures in the EU, and will likely enter into force after the EVFTA.

BM says the European Union - Singapore Free Trade Agreement (EUSFTA) and the EU-Singapore Investment Protection Agreement (EUSIPA) provide a case study on how the EVFTA and EVIPA are likely to proceed.

The EUSFTA was the first EU free trade agreement to be divided into a free trade agreement and investment protection agreement, in order to proceed with Member Ratification Procedures. Both agreements have already been ratified by the EU Parliament.

The EUSFTA is awaiting entry into force following final administrative procedures, whereas the EUSIPA must be ratified by each EU member state, in addition to the regular ratification process. (ATI).