Czech Business Today

The European Commission has promoted the EU-Vietnam trade agreement as the most modern and ambitious agreement ever concluded between the EU and a developing country. Strategically, it is an important deal too, because Vietnam is the second largest trading partner of the EU among ASEAN countries. The deal will remove almost all custom duties between the two partners, 65% of them immediately and the rest of them gradually over the next ten years.

Removal of non-tariff barriers will be also crucial to businesses, especially those related to the automotive sector, export and import licencing and customs procedures. The trade deal also focuses on services and gives EU companies access to sectors, that were before not available for them, for example in environmental, postal, banking, insurance and maritime transport services, as well as access to public procurement. As always, the European Commission put a lot of emphasis on the protection of geographical indications, therefore 169 of them will be protected on the Vietnamese market.

During the negotiations, sustainable development became an important chapter of the deal. As a result, the agreement contains legally-binding rules on climate, labour and human rights. In case of non-compliance with these rules from the Vietnamese side, the trade deal can be suspended. Last but not least, investor protection and a dispute settlement mechanism is part of the agreement as well, although this part needs to be ratified by national Parliaments in order to enter into force.

European associations such as BusinessEurope, EUROCHAMBRES and SMEunited strongly supported this type of agreement. Vietnam is already involved in 12 trade agreements as well as in the Trans-Pacific Partnership (CPTPP) which means that an EU-Vietnam FTA will allow EU companies to gain ground and be on an equal footing with economic competitors from third countries.

As for the Czech Republic, Vietnam is an increasingly important market, as exports of Czech companies to Vietnam increased five-fold in the last ten years. Vietnam is a traditional export partner with a long history of cooperation, and the turnover of mutual trade reached the highest ever levels last year. Therefore, Czech business organizations welcome the conclusion of the negotiations and the imminent provisional entry into force of the trade part of the agreement. Czech companies show continual interest in the Vietnamese market and therefore it can be expected that, thanks to the agreement, interest will increase further. The Czech Republic has a long-term record of trade deficit with Vietnam and business organizations hope that the agreement will be a tool to reverse this trend, the removal of custom duties and non-tariff barriers in the automotive sector and machinery especially have the potential to change the status quo.