European Union Opens Trade Door to Vietnam but closes it to Cambodia

The European Union agreed to open its markets wider to Vietnam, reports Reuters. At the same time, Cambodia sees its trade doors more closed. This is a reward for the Vietnamese progress on labour guarantees. The Cambodian government is punished for abusing human rights. The moves mark the European Union's increased insistence that trading partnerships go beyond market liberalisation and should be coupled with commitments to social, environmental and labour standards.

Second free trade deal with ASEAN member

The free trade agreement (FTA) with Vietnam was approved by more than two-thirds of the European Union lawmakers. It is one of the most comprehensive pacts of the EU with a developing country. At the same time, it is only the second deal with a member of the Association of South-East Asian Nations (ASEAN). The first agreement was made with Singapore.

Christian Verschueren, Euro Commerce Director General, comments: "We have been pushing for a free trade agreement with Vietnam for many years, and are delighted at the European Parliament's decision to approve the deal." According to Verschueren, the agreement offers real opportunities for European businesses due to the liberalisation of tariffs and deepening of business links. Exporters access is granted to a strong emerging market of close to 100 million people. "European importers and consumers can seize new opportunities in a sustainable and responsible source of quality products," he says.

Human Right Watch

Campaign groups protesting for human rights and reforms, such as Human Rights Watch, earlier urged the European lawmakers to postpone the approval. They stated Vietnam needed to make further reforms, including on freedom of assembly and to a penal code they believe puts government critics in jail. According to European trade commissioner Phil Hogan, the Vietnamese government made great efforts to improve its labour rights record. The new partnership increases Europe's potential to promote and monitor upcoming reforms.

Eliminate 99% of tariffs

The minister of Industry and Trade of Vietnam, Tran Tuan Anh, called the agreement a significant milestone. The new agreement should take effect in July. The biggest Vietnamese beneficiaries are garments, footwear and wood furniture, he says. The deal eliminates 99% of tariffs, although Vietnam will have a transition period of up to ten years for some import products, such as cars and beer. A lot of Vietnamese goods already benefit from preferential access to European markets under a scheme offered to poorer developing countries. However, this only applies to duties on two-thirds of product types. Tariffs still apply, albeit at a lower rate, and garments are not featured.

When the agreement comes into force, Vietnam will liberalise 65% of import duties on European exports to the country. The remaining percentages of duties will be eliminated in the next ten years. These are duties on products such as dairy products and wine and spirits. In the coming seven years, the European Union will eliminate its installed duties related to the deal.

Cambodia

Contrary, Cambodia will lose about 20% of the trade preferences it enjoys under the 'Everything But Arms' (EBA) scheme the EU offers 48 of the world's poorest countries. This percentage equates to about €1 billion of exports. They are the result of serious and systematic violations of human rights by the government, an EU executive stated. The European Commission will replace zero duties with standard tariffs for certain garments and footwear (12%). All travel goods and sugar are affected as well. The Cambodian government was the second biggest beneficiary of the EBA scheme that was formed in 2018. The total exports to the European Union in that year reached €5.4 billion, more than double the level of 2013.