Position Paper
Committed to free and sustainable trade
FTA Position Paper
EU-Vietnam Trade Negotiations
FTA KEY MESSAGES
1) High significance: The successful conclusion of a preferential trade agreement
between the EU and Vietnam is a top priority for European trade
2) Obstacles: A long list of trade impediments prevents the full business potential to
be exploited. These stumbling blocks must be tackled with the free trade
agreement
3) Main recommendations:
 Abolish all customs tariffs for all products
 Bring down number of non-tariff barriers to a minimum level
 Create an enabling environment for investment and market access
 Define simple rules of origin for Vietnamese imports to the EU
 Express strong support for an EU-ASEAN free trade agreement
20 November 2012
EU-Vietnam Trade Relations, 20 November 2012
2
FTA Position Paper on EU-VIETNAM Trade Negotiations
Recent years have witnessed an impressive increase in exchange of goods between the
EU and Vietnam, amounting to 18 billion Euro in 2011 compared to only 11.6 billion Euro
in 2009. This dynamic has turned Vietnam into an attractive trading partner for European
retailers, wholesalers, importers and brand companies. European trade has both
defensive (favourable conditions for importing into the EU) and offensive (commercial
presence) interests in Vietnam.
For this reason, the Foreign Trade Association (FTA) is closely involved in the on-going
negotiation process for a Free Trade Agreement, launched in October 2012, and
supports a constructive discussion on how to promote economic opportunities and to
limit risks in EU-Vietnam commerce.
A) BILATERAL TRADE AGREEMENT – A WIN-WIN SITUATION
Both sides have agreed on ambitious targets for a free trade agreement covering tariffs,
non-tariff barriers and services as well as commitments on other trade related issues such
as intellectual property rights (IPR) and regulatory cooperation.
Without any doubt, European consumers and business operators would gain
substantially from a trade agreement with Vietnam:
 Consumers in Europe would benefit from access to a larger variety of high
quality and affordable products
 European companies, retailers and wholesalers would have better market
access, improved conditions for exporting to Vietnam and greater legal certainty
 A free trade agreement would promote non-trade objectives and give enhanced
attention to corporate social responsibility (CSR) schemes such as the ‘Business
Social Compliance Initiative’ (BSCI), established by the FTA
Vietnam alike would benefit from a liberalised trade framework. The country would be
enabled to augment exports to the EU, reduce current tariff disadvantages vis-à-vis
competitors, and attract more foreign investments – in decline since 2008. A preferential
trade agreement would also stimulate the further economic opening of Vietnam.
B) HIGH RELEVANCE OF IMPORTS FROM VIETNAM
The European distribution sector imports every year Vietnamese products worth
several hundred million Euro. Products cover a broad range such as garments,
footwear, sporting goods, indoor and outdoor furniture, household goods, toys and food
FTA – Foreign Trade Association
EU-Vietnam Trade Relations, 20 November 2012
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(e.g. seafood, fish, coffee, nuts). Within ASEAN, Vietnam is a particularly important
sourcing country as it accounts for approximately 1/3 of all imports from that region.
Today, some weighty obstacles remain in place in the EU preventing favourable
import conditions for goods from Vietnam:
TARIFFS: Although Vietnam is benefiting from the GSP (Generalised System of
Preferences), allowing imports of a wide range of goods at preferential rates,
important product categories that represent the large majority of Vietnamese
imports to the EU are still taxed above-average. While the average rate is at four
per cent, duties for certain goods are considerably higher: footwear 12.5%
(excluded from GSP since 2009), outerwear 12.0% (under GSP 9.6%), seafood
10.8%, bag packs 9.7%, furniture (bamboo and rattan) 5.6%
RULES OF ORIGIN: Under the current EU Rules of Origin (RoO), clothing goods
from Vietnam very often do not meet the requirements for GSP preferences.
Consequently, European retailers do not import under preferential terms
(certificate of origin Form A) but under normal conditions (Form B). This is
because most fabric for garment production is imported to Vietnam and not
manufactured within the country as stipulated by the RoO – indeed, 80% of
material and input is imported to Vietnam
Specific recommendations:
To achieve real added-value for European retailers and importers, the negotiation process
should put particular emphasis on obstacles related to the import of Vietnamese
goods to the EU:
 TARIFFS: All industrial and agricultural products should be traded duty-free and
no tariff peaks should remain on either side. Both negotiation parties should go
beyond the fixed target of abolishing tariffs for 90 per cent of the goods
 CLOTHING and ACCESSORIES: Footwear and apparel should not be classified
as sensitive products in the free trade agreement as this would significantly reduce
benefits for European trade. In this respect, clothing, shoes and accessories (e.g.
handbags and umbrellas) should be included in the product list to be exempted
from tariffs
 RULES OF ORIGIN: This is still a major obstacle for the import of garment and
textiles to the EU. The problem could be solved if, without any exception, the same
RoO would be applied for Vietnam as in the framework of GSP for least developed
countries (LDCs)
 MARKET ECONOMY STATUS: The EU has yet to recognise Vietnam as a market
economy – in contrast to many OECD members. This status should be granted to
Vietnam at latest by the conclusion of the free trade agreement
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EU-Vietnam Trade Relations, 20 November 2012
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C) TRADE BARRIERS FOR EUROPEAN BUSINESS IN VIETNAM
Vietnam’s trade balance is chronically negative (6.3 billion Euro in 2010), mainly due to a
significant trade deficit with China. To invert this figure, the Vietnamese government has
introduced several protectionist measures in recent years. However, this policy is
doomed to failure as Vietnam is dependent on exports – 69 per cent of its GDP being
exported – and cannot afford provoking trade irritations with the EU and other main
exporting markets.
Against this difficult environment, European traders have to cope with considerable
impediments when investing and doing business in Vietnam (see also the ANNEX).
Three main groups of obstacles can be distinguished:
(I) Import restrictions and customs procedures
NON-ESSENTIAL ITEMS: The importation of alcoholic beverages, cosmetics and
mobile phones (so called ‘non-essential items’) is only allowed at ports of Saigon,
Da Nang and Hai Phong. In addition, customs require authorisation documents
provided by producers and legalised by Vietnamese embassies overseas
DISCOURAGED ITEMS: In March 2012, Vietnam released a list of 97 ‘goods
discouraged for import’, including items such as boilers, electrical equipment and
parts, and machinery. It is planned to augment import tariffs for these products
CUSTOMS: European retailers and importers are strongly affected by inconsistent
administration, lack of uniformity, slow handling processes, unclear goods
definition, and practically no possibility for legal recourse. Furthermore, the
‘automatic import licence’, introduced in 2010, is perceived as unfavourable and
holding back export goods to Vietnam
(II) Market access and investment
ECONOMIC NEEDS TEST: Before opening a retail outlet, foreign-owned
enterprises must apply for a business licence and must undergo an ‘Economic
Needs Test’ (ENT). This ENT comprises an administrative review of already
existing retail stores, the market stability, population density, and the urban
development plan. In consequence, the licensing for retail outlet opening is tightly
controlled, often arbitrary and very time-consuming
DIRECT SALES: Vietnamese authorities only grant a licence for direct sales
business against a deposit of 5.0% of the charter capital, the minimum deposit
being 1 billion Vietnam Dong1. This deposit is not released before the company
ceases to carry out direct sales, meaning that this initial payment is not freed for a
long time, if not indefinite
1
1 billion VND correspond to 37.600 Euro (exchange rate of 7 November 2012)
FTA – Foreign Trade Association
EU-Vietnam Trade Relations, 20 November 2012
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(III) Regulatory issues
WORK PERMITS: Vietnamese legislation narrowly defines and frames the
conditions for employing foreigners with the objective to substitute foreign staff by
domestic personnel. Recent legislative changes will limit the duration of work
permits for foreigners to 24 months (previously 36). Additionally, authorities will
have to approve recruitments of foreigners
IPR: Vietnamese intellectual property rights (IPR) do not meet international
standards. Despite some recent regulatory improvements, IPR laws are not
effectively implemented owing to lack of adequate resources and unrealistic
provisions regarding the burden of proof
Specific recommendations:
The FTA urges the negotiators to focus on the following priorities regarding retail and
wholesale business in Vietnam:
 UNDESIRED PRODUCTS: All regulatory acts restricting imports should be
repealed
 ECONOMIC NEEDS TEST: Vietnam must enact specific legislation that explains
and develops the content and the application of its ENT criteria
 DIRECT SALES: In addition to a minimum deposit, we recommend that the deposit
is also subject to a maximum amount (for example 3 billion Vietnam Dong)
 WORK PERMITS: We strongly recommend that employers should be allowed to
select the right candidate based on their own assessment
 IPR: The IP Law should be revised and modernised, so that infringers are fined
without the need for rights holders to prove actual losses and damages. There
should be a government-business partnership to improve coordination between
stakeholders and to enhance public awareness against counterfeits
D) EUROPEAN TRADE CALLS FOR AN AMBITIOUS APPROACH AND
DELIVERY IN TIME
Vietnam’s economy has witnessed a long and stable growth period from 2000 to present,
with annual GDP increases between six and nine per cent, making this country an
ideal partner within the EU’s free trade agreement agenda. A successful conclusion of
trade talks with Vietnam would also inject new momentum into the inter-regional trade
negotiations between the EU and ASEAN, currently interrupted but remaining the
ultimate goal.
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EU-Vietnam Trade Relations, 20 November 2012
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The EU and Vietnam should seize the opportunity to achieve real and tangible progress in
eliminating both tariffs and persistent trade obstacles at and behind the border. Real
added-value for the European distribution sector would be achieved mainly through
a liberalised tariff system, removal of technical barriers and better administrative
cooperation (going beyond the current setting of the EC-Vietnam Joint Commission and
the working groups).
The FTA is committed to closely observe the negotiation process and to take a pro-active
role by providing continuous assistance and information to both negotiating parties and by
reminding both parties of the defined target to conclude talks within two to a maximum
three years.
* * * For further information about the position paper, please contact:
Pierre Gröning – Trade Policy Advisor
pierre.groening@fta-intl.org
Direct tel: + 32 2 741 64 03
About the FTA
FTA’s mission is to promote the values of free and sustainable trade for its members
within Europe and worldwide. The FTA strives for a liberal international framework for
trade and is dedicated to improving the international supply chain in terms of corporate
responsibility.
As a large association of more than 1,000 European and international retailers, importers,
brand companies and national associations, with a total turnover of more than 600 billion
Euro, the FTA represents companies of all types and all sizes from more than 22
countries, including fashion brands, departments stores, chain of supermarkets, apparel,
discount and online.
www.fta-intl.org
FTA – Foreign Trade Association
EU-Vietnam Trade Relations, 20 November 2012
7
ANNEX
List of legal obstacles in Vietnam
Topic
Legislation
Obstacles
Recommendations
Non-essential
products
Notice 197 of the
Ministry of Industry
and Trade (MOIT)
Notice 197 should be
repealed
Goods discouraged
for import
Decision No 1380/QDBCT
 Shipment only through certain
harbours
 Authorisation documents to be
provided by producers
 Legalisation by Vietnamese
embassies abroad
 State-controlled management
of imports
 Threat to increase tariffs for
certain of these goods
 Licensing for retail outlet
opening appears to be tightly
controlled
 The procedure is lengthy,
lacks transparency and is
made on a case-by-case basis
 Lack of predictability (no clear
implementing rules)
Need for specific legislation
that develops the content
and the application of ENT
criteria
 Additional paperwork and
importation formalities
 Loss in time when importing
goods to Vietnam
 Enterprise must deposit 5% of
its Charter Capital (minimum
of VND 1 billion)
 Deposit not released until stop
of direct business
 Prevents many companies to
offer direct sale
 Extension of work permits for
foreigner requires company to
sign apprenticeship contract
with a Vietnamese
 Foreign enterprises have to
The government should
simplifying rather than
increasing administrative
burdens
ENT
(Economic Needs
Test)
Automatic import
license
(superseding Decision
No 1899/QD-BCT of
April 16, 2010)
Decree 23/2007/NDCP
(Implementing
Commercial Law,
Circular
09/2007/TTBTM
guiding the
implementation of
Decree 23, as
amended by Decree
05/2008/TT-BTM)
Circular 24/2010/TTBCT
Direct sale
Article 17 of Decree
110/2005/ND-CP
Work permits
 Decree No.
46/2011/ND-CP
(Decree 46)
(making a number of
major changes to
2
Decision 1380 should be
repealed
In addition to a minimum
deposit, there should also
be a maximum amount (for
example a maximum of
VND 3 billion)2
 Employers should be
allowed to select staff
candidate based on their
own needs and choice
 Removal of obligation to
3 billion VND correspond to 112,800 Euro (exchange rate of 7 November 2012)
FTA – Foreign Trade Association
EU-Vietnam Trade Relations, 20 November 2012
Decree 34/2008/NDCP)
 New Labour Code
(enters into force 1
May 2013)
Intellectual
property rights
Law on Intellectual
Property Rights
FTA – Foreign Trade Association
explain their need to hire a
foreign worker
 Authorities must approve such
an engagement
 Duration of a work permit for
foreign workers limited to 24
months
 IP owners must prove that
they caused losses and
damages (which is difficult to
perform)
 Power of enforcement
authorities is weak and limited
 Enforcement process is too
time consuming and inefficient
for IP owners to follow
 In almost all cases, only low
penalties are imposed
8




sign apprenticeship
contract on the occasion
of an extension of a work
permit
To satisfy government
demands: Companies
should have a training
program to train
Vietnamese staff
The IP Law should be
revised, so that infringers
are effectively fined,
without the need to prove
actual losses and
damages
Set up a governmentbusiness partnership in
anti-counterfeiting
The power of authorities
in dealing with IP
infringements should be
raised