EU and Vietnam announced on August 4th that they have agreed in principle on a comprehensive and ambitious trade and investment agreement (EVFTA).
According to the released memo, EVFTA will eliminate nearly all tariffs (over 99%) between EU and Vietnam. However, textile and apparel (T&A) is among a few exceptions what will not be able to enjoy duty free treatment on day one. Specifically:
- The EU will eliminate duties with longer staging periods (up to 7 years) for some sensitive products in the textile apparel and footwear sectors. The elimination of duties, however, will not be an open door for Chinese products to flood the EU market: to benefit from the preferential access, the strict rules of origin for garments will require the use of fabrics produced in Vietnam, with the only exception being of fabrics produced in South Korea, another FTA partner of the EU.
- The totality of EU textile fabric exports will be liberalized at entry into force.
Statistics shows that Vietnam was EU’s sixth largest extra-region apparel supplier in 2014 (after China, Bangladesh, Turkey, India and Morocco), accounting for 3.1% in value (or €22.3 billion) and 2.6% in volume. On the other hand, EU’s textile exports to Vietnam totaled €169 million.
EVFTA may further encourage investment in Vietnam’s textile industry, because together with TPP, it will make Vietnam become one of the very few regions in the world that can enjoy duty free market access treatment (even not immediately) both in the US and EU, which altogether account for nearly 50% of the global apparel import. The other region that currently enjoys such a benefit is Sub Saharan Africa (based on AGOA and GSP+ programs).