THE FREE TRADE AGREEMENT BETWEEN VIETNAM AND THE … EU-VN FT… · EU TRADE REGIME AND THE...
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1 REPORT THE FREE TRADE AGREEMENT BETWEEN VIETNAM AND THE EUROPEAN UNION: QUANTITATIVE AND QUALITATIVE IMPACT ANALYSIS ACTIVITY CODE: FTA-9 EU Ha Noi, 10/2011 Prepared by: Jean Marc Philip Eugenia Laurenza Federico Lupo Pasini Dinh Van An Nguyen Hoai Son Pham Anh Tuan Nguyen Le Minh
Transcript of THE FREE TRADE AGREEMENT BETWEEN VIETNAM AND THE … EU-VN FT… · EU TRADE REGIME AND THE...
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REPORT
THE FREE TRADE AGREEMENT BETWEEN VIETNAM AND THE EUROPEAN
UNION: QUANTITATIVE AND QUALITATIVE IMPACT ANALYSIS
ACTIVITY CODE: FTA-9 EU
Ha Noi, 10/2011
Prepared by: Jean Marc Philip
Eugenia Laurenza
Federico Lupo Pasini
Dinh Van An
Nguyen Hoai Son
Pham Anh Tuan
Nguyen Le Minh
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This report was prepared with financial assistance from the Commission of the European
Communities. The views expressed are those of the consultant and do not necessarily represent any
official view of the Commission or the Government of this country
Summary 1. SURVEY OF VIETNAMESE ECONOMY .................................................................................... 17
1.1. Vietnam’s Economic Growth .......................................................................................................................... 17
1.2. Structure of the GDP .......................................................................................................................................... 18
1.3. Wages and Employment .................................................................................................................................. 20
1.4. Balance of Payment and General Trade Data ....................................................................................... 21
Public finances and budget deficit ............................................................................................................................... 22
1.5. Monetary policy and inflation ....................................................................................................................... 23
2. VIET NAM’S TRADE REGIME ...................................................................................................... 24
2.1. Trade in Goods ...................................................................................................................................................... 24
2.2. Trade in Services ................................................................................................................................................. 25
2.3. Preferential trade and ASEAN integration ............................................................................................. 26
2.4. Viet Nam’s Trade Structure ............................................................................................................................ 31
2.5. EU- Viet Nam trade flows ................................................................................................................................ 33
3. EU TRADE REGIME AND THE PROSPECT OF A FUTURE EU – VIETNAM FREE
TRADE AGREEMENT ................................................................................................................................ 38
3.1. EU trade policy and trading partners ....................................................................................................... 38
3.2. EU Institutional framework ........................................................................................................................... 38
3.3. EU Trade policy instruments ......................................................................................................................... 39
3.4. EU sectoral policies ............................................................................................................................................ 41
3.5. EU-Vietnam future FTA principles .............................................................................................................. 41
3.6. EU-Vietnam FTA negotiation issues ........................................................................................................... 42
4. Vietnam Investment Climate and Impact of the EU-Vietnam FTA on Investment .............. 45
4.1. Trends and Level of Inward Investment in Vietnam ........................................................................... 45
4.1.1. Foreign direct investments inflow to Vietnam .................................................................... 46
4.1.2. Patterns and destination of FDIs in Vietnam ....................................................................... 47
4.1.3. The pattern and outflow of EU Investment in Asia and Vietnam ................................ 49
4.2. The Impact of the EU-Vietnam FTA on Investment ............................................................................. 51
4.2.1. Trade in Goods Liberalization and Investment Inflow .................................................... 52
4.2.2. Trade in Services Liberalization and Investment Inflow: “Market Access through
Market Presence” .................................................................................................................................................. 56
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4.3. Future Investment Perspectives: Towards a services-driven agenda? ....................................... 61
5. IMPACT of tariff reduction ON THE VIETNAMESE ECONOMY ....................................... 62
5.1. Introduction ........................................................................................................................................................... 62
5.2. Two variants for modeling Vietnamese trade liberalisation .......................................................... 63
5.2.1. Models structure and hypothesis ............................................................................................. 64
5.2.2. Tariff dismantling scenarios ....................................................................................................... 65
5.3. Simulation results analysis ............................................................................................................................. 67
5.3.1. The fiscal impact .............................................................................................................................. 67
5.3.2. Impact on imports in volume ..................................................................................................... 68
5.3.3. Impact on trade balance ............................................................................................................... 69
5.3.3.1. Impact on trade balance in volume .......................................................................................... 69
5.3.3.2. Impact on trade balance in value .............................................................................................. 70
5.3.1. Impact on domestic demand ...................................................................................................... 72
5.3.2. Impact on Gross Domestic Production ................................................................................... 72
5.3.3. Impact on final consumption ...................................................................................................... 73
5.3.4. Impact on investment .................................................................................................................... 74
5.3.5. Impact on saving .............................................................................................................................. 74
5.3.6. Impact on composite prices ........................................................................................................ 76
5.3.7. Simulation results by sector ....................................................................................................... 76
5.3.7.1. Impact on import prices by sector ........................................................................................... 76
5.3.7.2. Impact on imports by sector ....................................................................................................... 77
5.3.7.3. Impact on composite prices by sector .................................................................................... 80
5.3.7.4. Impact on final consumption by sector .................................................................................. 81
5.3.7.5. Impact on investment by sector ................................................................................................ 84
5.3.7.6. Impact on factor costs by sector ............................................................................................... 85
6. Qualitative analysis on the effect of preferential liberalization in selected sectors ............... 92
6.1. Automotive ............................................................................................................................................................. 92
6.2. Electronics .............................................................................................................................................................. 98
Mechanical Machinery and Equipment .................................................................................................................. 103
6.3. The Banking Sector ......................................................................................................................................... 106
7. Impact of EU tariff reduction on Vietnamese export ................................................................. 118
7.1. Quantitative impact of tariff reduction on Vietnamese export in the EU based on price
elasticities ............................................................................................................................................................................. 118
7.2. Quantitative impact of tariff reduction on Vietnamese export in the EU based on
quantitative modelling ................................................................................................................................................... 119
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7.2.1. Theoretical basis ........................................................................................................................... 119
7.2.2. Data used ......................................................................................................................................... 120
7.2.3. Model specification ...................................................................................................................... 120
7.2.4. Methodology ................................................................................................................................... 121
7.2.5. Simulation results ........................................................................................................................ 121
7.3. Qualitative benefits of a FTA between Vietnam and the EU ........................................................ 123
8. Quantitative Analysis on The Export Performance of Selected Vietnamese Sectors ......... 126
8.1. Garment and Textiles ..................................................................................................................................... 126
8.2. Footwear .............................................................................................................................................................. 130
9. Qualitative Analysis of the EU – VIETNAM FTA: Tackling Non-Tariff Measures Through
Negotiations: ................................................................................................................................................... 156
9.1. The EU and anti-dumping and countervailing duties ..................................................................... 161
9.1.1. The situation with Vietnamese imports to the EU .......................................................... 163
9.2. Overview of anti-dumping and countervailing duties in FTA agreements negotiated by
the EU 172
9.3. Statistics on the use of anti-dumping and countervailing duties by the EU with countries
with which it enjoys free trade agreements ......................................................................................................... 178
9.4. Conclusions on the potential impact of the FTA between the EU and Vietnam on the use
of anti-dumping and countervailing duty measures ........................................................................................ 181
9.5. Impact of the EU-Vietnam FTA on SPS and TBT regulations ...................................................... 184
9.6. SPS and TBT framework in the EU and barriers encountered by Vietnamese exporters
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9.7. Enhancing trade facilitation: the WTO legal framework .............................................................. 191
9.7.1. Enhancing trade facilitation: SPS and TBT-related provisions fixed in the existing
EU FTAs 198
9.7.2. Conclusions on the impact of the FTA on SPS and TBT ................................................ 214
9.8. Conclusions and Recommendations ........................................................................................................ 216
10. List of Annexes ................................................................................................................................ 221
2) EU legislation relevant to fishery and aquaculture products: .......................................................... 289
a) General food safety legislation with fish-specific provisions ............................................... 289
b) Legislation specific for fishery and aquaculture products ..................................................... 290
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EXECUTIVE SUMMARY
1. EU-Vietnam trade relations.
The report confirms that Vietnam is an export-driven economy, with 69% of GDP exported in 2008
(64% in 2009 and 61% in 2005); 16% of the GDP value is exported to the EU, for a value of 14.9 bn.
USD (14% in 2009 for 12.6 bn.) and it represents the 17% of all Vietnamese exports (constant from
2005).
The five first products exported into the EU (footwear – 4.5 bn., apparel and clothing 2.3 bn., coffee
1.4 b. , seafood – 1.1 bn. and furniture - 1 bn.) represent the 70% of total export to EU in 2008 (68% in
2009), with a the index of concentration (Herfindahl–Hirschman Index) equal to 0.12 (moderate level):
therefore the exports to the EU are exposed to industry shocks as showed by the decrease of 15% of
the export to EU in 2009 (-20% footwear, -26% coffee, -20% furniture while apparel and clothing
limited the decrease to 10%).
Simple average tariffs applied by the EU on import of Vietnam are, in 2009, around 4.1% (decreased
from 4.5% in 2005). Weighted average tariff, however, (tariff weighted with the level of trade) amount
to 7%, meaning that higher tariffs are applied to relevant products exported from Vietnam (e.g. apparel
and clothing: 11.7%, seafood: 10.8% and footwear: 12.4%) and very high tariff peaks (more than
57%). This means that the elimination of tariffs expected on substantially all the trade with the FTA
will provide important advantages for Vietnam in comparison to other competitors in the EU markets.
With regard to the tariff on import, Vietnam applied substantially reductions after WTO accession and
now the simple average tariff is 9.3% (from 13.7% in 2005); the tariffs applied to the most exported
products from the EU into Vietnam are quite low, with the exception of automotive (24.2%,
electronics: 8.9%, mechanical: 3.4%, pharmaceuticals: 2%, Iron: 2%, optical and medical apparatus:
1.3%, aircraft: 0%). In all the mentioned categories excepted aircraft, however, there are quite high
tariff peaks (from 10% of pharmaceuticals to 90% for automotive).
2. What expect from an FTA with the EU: the lessons from recent FTAs concluded by the EU
In its recent FTAs, the EU eliminated import duties on nearly all products and promoted a far-reaching
liberalization of trade in services covering all modes of supply. The agreements included provisions on
investment both in services and industrial sectors and strong disciplines in relevant areas, such as
protection of intellectual property, public procurement, competition rules, transparency of regulations
and sustainable development (i.e. environment and social rights). Other rules have been agreed on
specific commitments to eliminate and prevent non tariff obstacles to trade in specific sectors (e.g., in
the case of the agreement with Korea, automobiles, pharmaceuticals and electronics). The counterpart,
normally, has to reduce the customs duties gradually and within a deadline of 10 years, with the
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possibility of excluding from the liberalization specific identified sectors. Regarding the technical and
sanitary barriers the negotiation of an FTA is an important opportunity to discuss and deal with any
problem faced by Vietnamese exporters in accessing the EU market.
3. The impact of the future agreement: the methodology
The report analyzed the impact of the future agreement utilizing a composed methodology: a
quantitative assessment following the reduction of customs duties with a CGE model (Computational
General Equilibrium) and a qualitative assessment conducted on three selected sectors of interest for
Vietnam exports (footwear, garments and furniture) and three on Vietnamese imports (automotive,
electronics and machinery and banking). The quantitative analysis has been conducted taking into
consideration different scenarios: rapid dismantling, where 90% of the tariffs applied by Vietnam are
eliminated for all goods imported from the EU and a progressive dismantling scenario (the more
probable) where tariffs are eliminated progressively with different deadlines depending on the level of
sensitivity of each product. For example, for non sensitive products (i.e. chemicals or machinery) it
has been forecasted the elimination of tariffs in five years right after the entering into force of the
agreement; for sensitive products the reduction has been delayed by 8 years, while high sensitive
products (e.g. cars, motorcycles, etc.) have been excluded from liberalization. It is worth remembering
that the impact of quantitative analysis is probably underestimated as it does not take into account the
domino effects of the important institutional and regulatory reforms following the implementation of
the agreement.
4. The quantitative analysis
The CGE models produced positive results for all the economic variables analyzed, in both the
scenario analyzed (rapid and progressive dismantling).
The fiscal revenue would increase substantially as the revenue from the growth of imports exceed the
losses due to the reduction of tariffs (529 bn. Dong yearly from the first year of liberalization in the
rapid dismantling scenario and from 0 in the first year to 6305 bn. Dong after 15 years in the
progressive dismantling one).
Exports would increase on average by 4% annually, with peak of more than 6% annually for sectors of
interest for Vietnam which, at present, have to face relevant high tariffs on export to the EU, and 3%
on average for the other sectors (this does not exclude that specific products might show higher data).
Taking 2008 as a reference year, this means that the export to the EU will increase of more than 3.2
bn. USD in five years and more than 7.1 bn. USD in 10 years.
On average, imports would increase by 3.1%; among the most important import from EU, electronic
and machinery +2.7%, chemical +2.5% and other industries, including pharmaceuticals, 3%). For the
most sensitive products (footwear and garment and textiles) we consider relevant only the progressive
dismantling scenario, as import tariff applied for these sectors will be probably the last to be reduced:
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in 10 years the import of footwear are expected to increase by more than 6% annually (10% in 15
years) while the increase of import of garments and textiles will be more limited (+2% and + 4.5%
respectively in 10 and 15 years).
The model extended to the agriculture sector the hypothesis adopted for all the other products:
therefore the outcomes (growth of import of 6.8% for livestock, 6.9% for vegetables and 6.3% for
food products) have to be read taking into consideration that the liberalization of the agriculture sector
will be limited.
The surplus of the trade balance with the EU increases in all the scenarios identified (up to 10000 bn.
Dong in the rapid dismantling scenario); it should be noted that the improvement In the balance with
the EU will cover the forecasted deterioration of the trade balance with China and Korea which is the
consequence of the expected increase in the import of components and raw materials to be utilized for
the manufacture of final products to be exported into the EU.
The impact on the GDP will be largely positive: around +2.7% yearly in case of rapid dismantling,
while in the case of progressive dismantling there will be a gradual increase since the second year of
implementation up to +3.7% after fifteen years.
Government and private consumption are expected to increase of more than 2% in both scenarios
while investment would increase, respectively, of 2.3-2.6% in the case of rapid dismantling and up to
3.4% in the fifteenth year in the progressive dismantling one.
Prices on import and, as a consequence, composite prices (combination of domestic and import prices)
are expected to decrease for all the imported products (less for machinery and electronics, which are
the most important import from the EU) producing a natural increase of domestic consumption (2%
both households and Government consumption).
Wages are expected to increase for the sectors that, at present, are less protected (machinery,
electronics, chemical and the industrial sector in general). As the most protected sectors by Vietnam
are also those for which Vietnam foresees important increase in exports, the final result on wages will
probably be positive, due to the higher magnitude of the expected increase in exports than in imports.
Regarding, in general, the strategy for liberalization, the model shows that a progressive dismantling
scenario will bring about more positive results in the long terms than the rapid dismantling scenario.
5. Investment
The Vietnamese market is by one of the most attractive destination for FDI and is already receiving
substantial amount of FDIs. Indeed, the total amount of FDI in 2010 is estimated to be around 11
Billion US$, up to 10% compared with 2009. Nevertheless, it seems that is the quality of the
investments that is missing.
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Vietnam has a lot to gain from a free trade agreement with the EU, both in terms of trade and also in
terms of increased investment. From a qualitative analysis it seems that the biggest gains for Vietnam
(in terms of volume and quality of FDIs, but also in terms of general economic benefits) would come
from services liberalization. The reasons to this are to be found in the export propensity of European
services providers, in the general proclivity of the European Union towards further opening of services
within FTAs, and also due to the progressive need of Vietnam to promote competitiveness in the
services sector.
The competitiveness of the manufacturing sector of Vietnam is undoubted. The combination of cheap
labour force and free market access to the ASEAN+ area render Vietnam a potential export hub to the
whole region. A free trade agreement with the EU not only will increase the propensity of EU firms to
invest in Vietnam, but it will also bring additional benefits to the Vietnamese economy. These benefits
resides in an increased appeal of Vietnam as a productive and export facility (cheaper and better goods
from Europe; larger market of 3.5 billion people; increased technology transfer to Vietnam), which in
turn will attract more and of better quality investments from within and outside the FTA region.
In spite of the possible increase of FDIs in the manufacturing sector, the greater gains for Vietnam
seem to come from a preferential liberalization of some of its services sectors. These gains will not
only come from the immense economic effects originating by services liberalization, but they will
come also in form of EU FDIs. Indeed, the high export propensity of the EU services sector seems to
match perfectly with the increasing needs of Vietnam to improve its productive capacity and, more in
general, to further develop towards standards more in line with middle-income countries, which
usually base their growth on a dynamic services sector. Despite these considerations, experience seems
to indicate that the political economy of services liberalization renders difficult to liberalize services
trade on a preferential basis. The difficulties are due to the nature of public goods of some services sector
(especially telecom, energy and transport) whose liberalization requires a preliminary deep domestic
reform and an internal debate among different stakeholders. One solution might be to use the FTA to
endorse domestic regulatory and economic reforms as it happened in various north-south FTAs.
6. Selected Importing Sectors
The Vietnamese automotive industry is still at its birth stage with only 25,480 cars produced in 2009.
Compared with the 13,790,994 cars produced by China in the same year, it is clear that the automotive
sector is not yet playing an important role in the industrial development of Vietnam. For what concern
the automotive sector, a reduction of tariff and non tariff barriers from the Vietnam side will produce
an effect on the imports of components from Europe and a limited effect on the amount of FDI. For
what concern the import side, due to the cost of transport and the vicinity of competing car producers,
a reduction in tariff will probably induce an increase in imports of already assembled cars from
Europe, Much of the final impact will depend also from the growth of the demand of cars from
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Vietnamese consumers and also from enabling internal policies of the Government. for a similar
reasoning applies to the imports of parts and components, which under some circumstances could be
imported in great number from European manufacturers. Indeed, the price elasticity of parts and
components is high and a reduction of tariff would theoretically have an impact on the exports. On the
other hand, without a robust domestic industry and without European investors located in Vietnam
requiring components to be assembled, even a reduction in tariff will have only a limited effect on the
imports. For what concerns components the real factor influencing the little demand is the limited
amount of investment in the Vietnamese automotive industry. This limits drastically the effect of a
reduction in tariff. The FTA will have a little effect on FDI in the automotive industry. Indeed,
European car manufacturers seem to be little attracted by Vietnam as a productive platform for the
ASEAN area. By looking only at the tariff component, the high protection accorded to the Vietnamese
producers, combined with the parallel reduction in custom duties by the other ASEAN members and
ASEAN FTA partners, would virtually render extremely cheap to export cars from Vietnam to the
Asian region. Furthermore, the cheap labor available in Vietnam would be another important factor. In
reality, tariffs preferences and cheap labor are not sufficient to drive investment in the car
manufacturing industry. The deficiencies mentioned above (poor infrastructures, lack of support
industries, low technology) clearly inhibit foreign investors to locate the production in Vietnam. In this
respect, the reduction in tariffs on machinery and components could facilitate the inflow of European
investment into Vietnam, but alone would not be sufficient.
In 2004-2009 Vietnam annual import turnover of electronics increased by 33.6% on average. From an
import turnover of 2.6 bn. USD in 2005, after five years in 2008 it tripled reaching 7.6 bn. Conversely,
in 2009 Vietnam totalized 2.6 bn. in export of computers and parts. The main export destinations in
2009 are: the European Union countries (47%), Saudi Arabia (14%), Brazil (8%), United Arab
Emirates (7%), Canada (5%), Taiwan (4%) and Korea (2%). For what concern electronic sector, a
simple business analysis would endorse the conclusion that a reduction in tariff would have definitely
an impact on the volume and prices of electrical products and components imported from Europe.
Indeed, a reduction in tariff would at least offset the costs of transport from Europe and give a great
business advantage to European exporters vis-à-vis their Asian competitors from Japan, Korea and
China that are already benefitting from lower distances and reduced import duties.
Over the years Vietnam has been constantly increasing its demand for high quality machineries and
has thus relied heavily on importations. In 2008 Vietnam has imported 11.1 bn.USD worth of
machinery. In this respect, the EU has around 14% of the market with 1.5 bn. of export to Vietnam.
China is the biggest import partner with 2.75 bn. of export to Vietnam. For the machinery sector, a
reduction of the already low tariff applied by Vietnam on the imports of machinery will not result in a
substantial increase in imports. On the other hand, Vietnam could benefit from a consistent surge of
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FDIs from European manufacturers that could decide to locate here the production. Indeed, the
growing domestic industries coupled with the general economic growth of Vietnam could have a
domino effect on all the other support industries, which are now missing. In this respect, the general
high quality of the European products could have an important market in Vietnam, and potentially also
in the neighboring countries, such as Laos and Cambodia.
Currently, Viet Nam's banking sector comprises 5 SOCBs (Vietcombank, VietInBank, BIDV,
Agribank, and Mekong Housing Bank), 40 JSBs (11 with foreign investors), 6 100% foreign-owned
banks (HSBC, Standard Chartered, ANZ, Shinhan Vietnam Bank Ltd and Hong Leong Bank Vietnam
Ltd), 45 foreign bank branches, 55 foreign bank representative offices, and 5 joint venture banks. The
banking sector will be one of the main targets in the context of further services liberalization required
by the FTA. In this respect, there is no particular reason to foresee a huge increase of exports and FDIs
in banking coming from Europe, especially in the segment of retail banking, dominated by Vietnamese
banks. The main reason for this resides in the fact that the Vietnam itself is not an attractive market for
European banks that are not already massively present in the region, as newcomers will not be able to
compete with local banks, which benefit from an established presence in all the areas of Vietnam.
Nonetheless, there will be probably an increase in the presence of representative offices or even
branches of European banks targeting European business. On the other hand, a further liberalization in
cross border supply of banking services (MODE 1), without producing any significant impact, it could
nonetheless allow Vietnamese individuals and institution to access the European banking market
without the need for European banks to establish any form of presence in Vietnam. In the context of
preferential liberalization in the FTA with the EU Vietnam could be required to adhere to some
international financial stability standards. The upgrading of the Vietnamese regulatory framework
required by the EU would be one of the most important effects coming from the FTA, as it was ten
years ago with the BTA with the US, which opened the door for Vietnam to the entry into the WTO.
One of the possible negative implications of a further liberalization could derive from a full opening of
the capital account without the necessary prudential regulation and financial safety nets required to
prevent a systemic crisis. Indeed, the political economy and previous experiences in financial services
liberalization suggest that the complete opening of the financial services sector to foreign competition
and to foreign capital will increase the susceptibility of Vietnam to external financial shocks, which
could be absorbed only by a strong regulatory framework and by stable macroeconomic policies.
Therefore, in the context of the FTA would be wise to match an increased capital mobility with a
parallel upgrading in the financial and monetary safety nets available to Vietnamese authorities.
7. Selected exporting sectors
The textiles and garment, one of the largest industries in Vietnam (more than 2 million workers in
enterprises, mostly state-owned, concentrated in the South-East region – 58% - and in the River Delta
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– 27%) shows a high export propensity: more than 65% of production is exported to the US market,
and the rest is exported mainly to the EU and Japan. Exports of garments showed a constant growth in
the period 2005-2008 (+32% annually average) and a substantial decrease in 2009 (-10%) due to the
demand contraction (and price reduction) following the economic crisis. The rising of prices of
materials and high lending interest rates contributed to worsen the competitiveness of Vietnamese
industry. The difficulties in exporting to the EU and American markets pushed the Vietnamese
producers to look for niche markets such as Turkey, Middle East, Africa and Eastern Europe.
Furthermore, due to the reduced tariff applied by Japan in the context of the ASEAN-Japan FTA, in
2009 the textile exports to the Japanese market increased of 25%. The ASEAN-FTA agreements will
even mitigate the increase of costs of materials imported from Japan and Korea. Besides the
international turbulences, the industry faces few challenges on the export side; in the next future the
increased presence of products from China, India, Pakistan and Bangladesh will probably represent a
the most important challenge for Vietnam. Besides the other advantages, the conclusion of the FTA
will reduce to 0 the 12% tariffs at present applied by the EU on the export of Vietnamese apparel and
clothes. This will benefit, in particular, the five most exported products (Women’s and men’s suits -
285 million and 233 million USD respectively, Men’s and Women’s overcoat - 211 million and 207
million and jerseys 166 million). Based on the 2009 data, the elimination of tariffs by the EU would
produce an increase of export of the five most exported products above mentioned, on average, of
more than 20%.
Footwear production (over 500 enterprises, one million workers) accounts for 40% of the total
industrial production and has become a key export for Vietnam (10% of the export turnover, Vietnam
is among the ten leading exporters in the world). In the EU, Vietnam is the second most important
exporter after China (4.5 bn. USD in 2008; in 2009 the export reached 3.6 bn., down of 20%; China
exports 10.5 bn., India and Indonesia around 1.5 bn. each); Vietnam exports concentrate mainly on
high quality leather (48%, 2.3 bn. USD in 2008) and sport shoes produced for US and EU brands;
recently few Vietnamese producers have started to focus on domestic demand by investing in the
establishment of professional model design rooms. The share of EU import of Vietnamese footwear on
the total import of footwear in the period 2004-2008 shows a “U shape” (11% in 2004, 9.3% in 2006
and 10.5% in 2008). The decrease in 2005 and 2006 is probably the result of the antidumping duty
applied by the EU on the footwear with uppers of leather (even if the AD has been applied only in
2006, there has been an “announcement effect” as the procedure started in 2005); in this period
Vietnam diverted part of its leather footwear exports to the US. However, in the same period China
and other competitors increased their market share in the EU import (China: from 12.1% in 2004 to
21.1% in 2009; India +0.6%, Indonesia +0.5%): in 2009 the economic crisis impacted more on the
Vietnamese (-1.1. of share in the EU market) than Chinese exports (+1.5% of share). Vietnamese
exports of leather footwear are more sensitive to external shocks than Chinese ones: this is confirmed
by the trend of export from 2006 to 2009 following the application of antidumping duties. The
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weighted average tariff applied by the EU on footwear imported from Vietnam is 12.4%: however, the
tariff on import of leather footwear, including antidumping, is 17%. The losses in market share and the
sensitivity of exports to external shocks make particularly important for the export of Vietnamese
footwear the conclusion of a FTA: in the simulation with SMART (World Bank), the export of the
different types of footwear would increase from 7 to 21%; to this it must be added an increase of 14-
16% due to the forecasted expiry of the antidumping duty.
8. Trade Remedies and other Negotiating Issues
The negotiation of an FTA with the EU is expected, besides reducing and eliminating EU tariffs, to
restrict the application of non-tariff barriers, too. The biggest non-tariff challenges affecting
Vietnamese exports to the EU are connected to the EU’s use of trade defense instruments, notably
anti-dumping, and the EU’s SPS and TBT measures.
As far as trade defense instruments are concerned, it is unclear whether the EU’s negotiating proposal,
in the context of the ongoing FTA negotiations, on anti-dumping and countervailing action will
include provisions on enhanced co-operation and a set of WTO-plus obligations or will simply provide
for a mandatory notification requirement and re-state the Parties’ rights and obligations under the
WTO agreements. The EU is unlikely to make concessions on anti-dumping and countervailing duties
to Vietnam and the FTA will probably not have any significant positive impact on the EU’s resorting
to anti-dumping and countervailing action against it – on the contrary, it might pose stricter
requirements to Vietnam in the area of dumping, subsidization and the use of trade defense
instruments – unless the EU agrees, within the FTA negotiations, to recognize Vietnam as a market
economy ahead of the WTO deadline. In the same way, an immediate recognition of its market
economy status must stand as a negotiating priority for Vietnam in the context of the FTA with the
EU. Should Vietnam not obtain from the EU its immediate recognition as a market economy, it
should, nevertheless, negotiate with the latter an appropriate timeframe for such recognition and make
sure that it is at least aligned with the WTO-mandate recognition of China as a market economy.
As far as SPS and TBT measures are concerned, it seems improbable that a reduction of SPS and TBT
barriers will take place. Even after the launching of the “Global Europe” the policy of the EU has
remained unaltered: it aims at tackling non-tariff barriers, but primarily for the benefit of the EU
exporters. What is more probable is that the EU-Vietnam FTA will provide a framework for technical
assistance, discussion and further co-operation on SPS and TBT issues. The importance of negotiating
comprehensive co-operation provisions must be stressed. In this respect, the agreements concluded by
the EU with ACP Countries may provide a useful benchmark on the extent of co-operation that
Vietnam may wish to achieve with the EU on SPS and TBT matters. In these agreements, co-operation
includes also technical support and training, and measures to promote knowledge transfer and
strengthen public services. Vietnam may consider aligning its positions to what achieved by ACP
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Countries and request targeted technical assistance from to the EU in the context of its FTA
negotiations.
Finally, Vietnam in order to reduce the costs of compliance with the EU SPS and TBT requirements
Vietnam should actively seek the conclusion of mutual recognition and ad hoc equivalency
agreements with the EU. Independently of the complexity to achieve these instruments of trade
facilitation, it is clear that their pursuit, especially within the confines of an FTA, should be prioritized.
Their conclusion, particularly in those sectors where Vietnam’s exports have actual or potential market
access opportunities on the EU market, stands to offer Vietnamese producers, exporters and traders
considerable comparative advantages and “preferential” market access conditions which are
comparable to or greater than the tariff concessions that will shape the EU-Vietnam FTA. These tools
of trade facilitation will also allow for Vietnam to become an important processing center for food or
products to be then exported to the EU, thereby taking advantage of its ability to comply with relevant
EU standards and its future FTA preferences vis-à-vis the EU.
As Vietnamese exports to the EU are frequently hampered by the imposition of NTBs by the EU,
Vietnam could also consider advancing the introduction in the FTA with the EU of a dispute
settlement mechanism specifically dedicated to counter NTBs, such as the “Mediation Mechanism for
Non-Tariff Measures” envisaged under Chapter 14A of the EU-Korea FTA.
Finally, It is important that Vietnam thoroughly prepares its negotiating positions, including through
the involvement of the business community and the relevant stakeholders, and secure that: its specific
interests are furthered and that the different level of development between Vietnam and the EU is duly
taken into account and factored in the negotiations.
14
INTRODUCTION
Since the introduction of the Doi Moi policy (the Renovation) in 1986, Vietnam embarked in a journey
that, after almost 25years, radically transformed the structure of its economy. From a pure centralized
and state-controlled economy heavily dependent on agriculture, Vietnam progressively evolved into a
market-oriented economy whose structure is going toward a more balanced equilibrium between
manufacturing and services.
Until 1986 Vietnam’s economy was heavily dependent on agricultural production and on few
manufacturing sectors. The Vietnamese trade policy before the process of renovation was heavily
linked to the Soviet Union and COMECOM countries and mainly based on imports, with no foreign
investments. The multiple-exchange rate regime and the import and export quotas on various products
artificially separate Vietnam’s prices from that of the world market.
The collapse of the Soviet Union gave a further push to Vietnam to carry on the process of economic
reform towards a social and market oriented economy. The progressive liberalization had an important
phase in 1995 when Vietnam joined the ASEAN and begun its accession phase to the World Trade
Organization. Although at the beginning the trade commitments of Vietnam were little compared with
other more developed South-East Asian partners, nonetheless the incipient economic integration with
neighbouring States gave a signal to other major economies in the world about the readiness and the
true will of Vietnam to enter into the global economy.
In 1995 Vietnam strengthened its relations with the top players in the world economic system, signing
a cooperation agreement with the European Community, which unilaterally granted to Vietnam the
MFN treatment. Five years later also the United States entered into a bilateral agreement with Vietnam
that granted preferential treatment to Vietnamese products and fostered inflows of US investments into
Vietnam. The strict requirements asked by US in order to sign the agreement forced Vietnam to
embark in a further process of political, regulatory and economic reforms that propelled the accession
to the World Trade Organization. At the same time, Vietnam continued its path of progressive trade,
investment and political integration within ASEAN, by entering into new more ambitious commitment
on trade in goods, services, and investment.
In 2007, after 12 years of negotiations, brought Vietnam to the accession to the World Trade
Organization, that represents the hype and by far the most important result of the Doi Moi policy. The
strict requirements imposed by the accession to the WTO substantially transformed the regulatory and
economic environment of Vietnam to be in line with the basic requirements of the WTO. This lead to
a complete turnaround of the Vietnamese trade policy and brought a massive inflow of foreign
investment into the economy.
15
In the recent years, within the ASEAN Vietnam begun a process of preferential economic integration
with selected partners that lead to its participation in five free trade agreements (FTAs): ASEAN –
China, ASEAN – India, ASEAN – Korea, ASEAN – Japan and ASEAN – Australia – New Zealand.
In the recent time, due to its economic attractiveness Vietnam had begun FTAs negotiations also with
other potential partners, such as the United States and the European Union.
After 25 years from the renovation Vietnam is now one of the most important recipients of Foreign
Direct Investments (FDIs), ranked as the 11th world’s most attractive location for foreign investments.
The liberalization in trade in goods and services, together with a substantial improvement in IPR
policy changed also the patterns of trade. From 1986 Vietnam quadrupled its exports that now are to
be considered the engine of growth, representing 75 % of the GDP. At the same time also the trade
openness improved consistently. Indeed, the ratio of imports over GDP in 2008 was 94.7%, the
highest among all the ASEAN members.
The European Union (EU) and the ASEAN states now intend to conclude an agreement which would
put the FTA at the heart of the trade relationships between the two parties. The FTA should be in
compliance with the WTO requirements but also aims to promote a sustainable development in
Vietnam.
Vietnam is a country member of the regional organization ASEAN which is also in charge of
negotiating the FTA with the EU. As neither ASEAN organization nor ASEAN countries have signed
a FTA yet, Vietnam has decided to overcome the problems eventually arising from trade liberalization
and to negotiate a reciprocal free-trade area with the EU.
The negotiation framework foresees a gradual liberalization process up to 90% of imports from both
parties, over a ten to fifteen years period. The overall liberalization of trade between the two parties
will reach 90% of the trade flows in compliance with WTO requirements. The rest of the products are
composed of sensitive goods which will enter later on in the negotiation process.
This report aims to assess the impact of this FTA on Vietnamese economy and to identify specific
measures needed to keep the economy of Vietnam on the path of a sustainable economic growth.
This study is divided in four main sections, as follows:
• Presentation of the EU-ASEAN trade relationships;
• Overview of the economy of Vietnam
• Quantitative analysis of FTA impact
• Conclusion and recommendations.
16
List of acronyms
CGE Computable general equilibrium
CIF Cost, Insurance, Freight
EC European Commission
EU European Union
FOB Free On Board
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
HS Harmonised System (Customs classification)
IMF International Monetary Fund
LDC Least developed Country
RoW Rest of World
SAM Social Accounting Matrix
ToR Terms of Reference
VAT Value Added Tax
WTO World Trade Organisation
17
1. SURVEY OF VIETNAMESE ECONOMY
1.1. Vietnam’s Economic Growth
Vietnam is an emerging economy that over the last twenty years has constantly experienced a
relatively high GDP growth rate. On average the GDP growth rate ranged from 8.2 percent in the early
nineties to 7-7.5 percent during the 2000-2009 period.
Following the global economic downturn of 2008-2009 the Vietnamese economy experienced a period
of slowdown which consisted in a decreased GDP growth of 3.14% in the first quarter of 2009 (the
slowest in the last twenty years), and in a slow recovery in the following months, terminating with
6.9% in the last quarter of 2009. On average the GDP of Vietnam in 2009 increased by 5.3% of which
the agriculture, forestry and fishery sector rose by 1.83%; the industry and construction by 5.52%; and
the services by 6.63%.
Considered the exceptional circumstances the Vietnamese economy stood high and gained a
considerably high growth compared with other economies in the region and in the rest of the world.
An overall assessment of Vietnamese GDP growth suggests that despite its relative high rate, the GDP
is below that of countries that are in the same phase of development. This indicates that Vietnam’s
economy is not fully exploiting its potential, mainly due to low level of efficiency in its private sector
and a general lack of proper infrastructures and technology.
Table 1: Vietnamese economic growth analysis
18
1.2. Structure of the GDP1
The GDP growth of Vietnam is transforming towards a more equal balance between industry and
services. In 2009 the composition of GDP by sector revealed an economic structure in which
Agriculture contributed to 8.8% of the GDP, while industry and services contributed respectively to
46.5% and 44.7%.
The contribution to GDP growth by industries of the industrial sector shows various tendencies. The
mining industry has constantly experienced negative growth rates. The manufacturing industries
account for 32 percent of GDP growth. The electricity, gas and water production and distribution
industries contribute for 3-4 percent of GDP growth. The construction industry in the last five years
accounted for 10.7 percent of the GDP, for the 2006-09 period, growing from the 7.8 percent of the
2001-05 period. In combination, the role of industries and construction in the Vietnamese economy
declined from 50% in previous periods to 46.5 percent during the 2006-09 period.
Table 2: Recent trends in sectoral growth rates
6.5
3.0
7.07.6
6.5
3.6
7.1 7.26.2
4.1
6.1
7.2
3.1
0.4
1.5
5.4
3.9
1.3
3.5
5.54.6
1.6
4.5
5.95.32
3
7.6
11
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Gro
wth
rat
e (%
)
6 months2008
9 months2008
12 months2008
3 months2009
6 months2009
9 months2009
12months
Period
Whole countryAgri.-Forestry-FishingIndus.-ConstructionServices
Source: Pham Hoang Ha, CIEM, 2010
1 This part largely draws on Pham Hoang Ha, Some Characteristics of Vietnam’s Industrial Structure, 2010
19
Conversely the services sector is experiencing a constant rate of growth of around 6.6%. The major
service activities’ contributions to GDP growth indicate the increasing tendencies. Trade activities
have made largest contribution, about 18.4 percent of GDP growth for the 2006-09 period. The other
services having the important contribution to GDP growth are telecommunication, around 6.3 percent,
restaurant 4.5 percent, education and training 3.8 percent. The banking and financial services maintain
the contribution of more than 2.4 percent to GDP growth significantly increasing from 37.9 percent
and 35 percent during the previous periods.
Table 3: Contribution by economic sectors and industries into the GDP growth rates (in percentage of
overall GDP growth)
1996-2000 2001-2005 2006-2009
Agriculture, Forestry and Fishery 15.9 11.0 8.8
Agriculture 13.9 8.0 6.0
Forestry 0.2 0.1 0.2
Fishery 1.8 2.9 2.6
Industry and construction 49.1 51.1 46.5
Mining industries 10.4 3.7 -0.1
Manufacturing industries 27.2 31.7 31.9
Electricity, gas, and water production and distribution 3.8 4.1 4.1
Construction 7.8 11.5 10.7
Services 35.0 37.9 44.7
Trade 14.1 16.2 18.4
Hotels and restaurants 2.7 3.9 4.5
Transport, storage and communications 3.7 3.8 6.3
Financial intermediation 2.2 2.1 2.4
Scientific activities and technology 0.5 0.7 0.6
Real estate, business activities 3.2 2.2 1.5
Public administration 1.2 2.1 2.8
Education and training 2.8 3.3 3.8
20
Health and social work 1.2 1.4 1.6
Recreational, cultural and sporting activities 0.6 0.5 0.6
Activities of party and organizations 0.2 0.1 0.1
Community, social, personal services 2.3 1.6 1.9
Private households with employed persons 0.2 0.1 0.2
Source: Pham Hoang Ha, CIEM, 2010
1.3. Wages and Employment2
In 2008, the private sector created 87.2 percent of total employment, meanwhile, the state sector
accounted for 9.1 percent and the foreign invested sector for 3.7 percent. For the 2001-2008 period,
the private sector contributed 74.4 percent of new jobs, while the state sector only contributed 7.8
percent. The foreign invested sector provided significant share of 17.8 percent of new jobs. These
figures suggest that the policies promoting the expansion of private and foreign invested sectors would
have the most effective and direct impact on job creation in Vietnam.
The agriculture, forestry and fishery account for 52.6 percent of total employment of the whole
economy in 2008, although the rate is constantly decreasing. The service sector employed 26.5 percent
and industry and construction of 20.9 percent. Those two sectors are experiencing constant growth.
The manufacturing industries, created 31.3 percent of new employments in the 2001-08 period, while
trade 16.6 percent, construction 15.3 percent, fishery 7.8 percent, state administration, education, and
private households 4.6 – 5.5 percent.
Table 4: Changes in employment in economic industries (In ‘000 persons)
2001 2002 2003 2004 2005 2006 2007 2008
Agriculture, Forestry and Fishery -11 -14 -12 -13 -148 -288 -183 -177
Agriculture and Forestry -105 -213 -57 -91 -226 -361 -262 -227
Fishery 94 199 44 78 78 73 79 50
Industry and Construction 626 530 586 546 524 596 490 530
Mining 16 12 13 28 17 29 28 34
2 This part largely draws on Pham Hoang Ha, Some Characteristics of Vietnam’s Industrial Structure, 2010
21
Manufacturing 337 273 400 272 417 407 308 343
Electricity, gas and water supply 21 11 11 11 14 22 24 28
Construction 251 235 162 235 76 138 131 126
Services 339 429 493 479 565 504 528 389
Trade 166 218 251 235 166 181 178 80
Public administration 20 42 45 52 113 69 76 74
Education and training 42 53 55 39 50 67 57 45
Private households 32 25 28 39 123 75 83 83
Source: Pham Hoang Ha, CIEM, 2010
1.4. Balance of Payment and General Trade Data
“Vietnam’s balance of payments situation is not considered critical for a number of reasons. The first
reason is that Vietnam’s short-term debt obligations can be honoured. The level of reserves is
currently higher than in previous years and since there is little short-term debt servicing requirements,
there are not large demands on international reserves in the short to medium term. Reserves are also
sufficiently large to cover imports and Vietnam’s trade imbalances have shown signs of improving in
2009. Moreover, international capital flows are expected to resume their previous trends as the world
economy picks up in 2010. It is important that Vietnam sustains confidence in its economy so that capital
flight is mitigated as much as possible. This requires not only trying to stabilize the macroeconomic
situation of Vietnam, but also to ensure that the investment environment remains attractive.
In a longer-term perspective, the balance of payments situation of Vietnam is sustainable only if it can
pay off its foreign debt through future trade surplus. Some structural imbalances remain which need
addressing in order to ensure that the balance of payments position does not become alarming. These
include the need to confront structural problems linked to the trade deficit. The principal reason for the
large trade deficit is that Vietnam imports a large amount of inputs and raw materials in order to
export. By improving domestic support industries and increasing the value added of local production,
the ratio of imports to exports should decline. The protectionist measures adopted by G20 member
countries since the global financial crisis might further deteriorate the export performance of Vietnam,
which has seen a number of its sectors affect by protectionist measures in third markets.
The trade deficit has also been exacerbated by the rapid reduction in protection which Vietnam has
introduced since signing the bilateral trade agreement with the (USBTA), integration in ASEAN and
22
culminating with membership in the WTO in 2007. Vietnam is considering further bilateral trade
agreements (BTA) through ASEAN, which will potentially also lead to increased imports. A careful
evaluation of these agreements and the net benefits arising to Vietnam in signing such agreements
needs to be conducted ex ante, instead of realizing the costs ex post3
.”
Table 5: Vietnam Balance of Payment recent evolution
Public finances and budget deficit
The Vietnamese Government adopted in 2009 various measures to combat the economic crisis. These
measures relied on monetary policy and on fiscal stimulus measures, such as a temporary 30% cut in
the corporate tax rate for small and medium-sized enterprises, financial assistance for poorest, a 4
percentage point interest rate subsidy on certain bank loans, and an increased spending in
infrastructure. The stimulus package coupled with a decrease in the oil prices reduced the budget
revenue in 2009. That was partially offset by a cut in the budget spending. The budget fell into deficit,
from a surplus a year earlier. . Furthermore the government increased the import duties on some
selected products, such as milk, beef and steel. 3 Mutrap, Analyzing Viet Nam’s trade deficit and the balance of payment provisions of the WTO, 2009
23
The total Government revenues for the year 2009 was approximate to the yearly estimate, of which
domestic revenues accounted for 102.5%; revenues from crude oil was equal 86.7%; revenues from
import-export: 101.6%. Of the domestic revenues, receiving from the state-owned enterprises totalized
106.2%; from FDI enterprises (excluding crude oil): 88.8%; from non-state industrial, commercial and
service taxes: 95.6%; taxes imposed on high-income persons: 87%; petroleum fees: 157.5%; and other
fees: 90.8%.
The total Government expenditures from beginning of the year to 15/12/2009 was equal 96.2% of the
yearly estimate. Of which, spending for investment and development accounted for 95.2% (only
spending for capital construction was 93.4%); for economic and social development, national defence
and security: 99.6%; for paying debts and aids: 102.7%. The Government overspending in 2009 was
7% of GDP. (GSO)
1.5. Monetary policy and inflation
In 2009 the average Consumer Price Index increased by 6.88%, the lowest rate of the last six years and
way below the 22% rate of 2008. After the shock of 2008 the Vietnamese authorities managed to control
inflation at a bearable level, although internal factors might lead to higher inflation in the next years.
Vietnam has adopted an expansionary monetary policy to cope with the economic recession. The SBV
always maintained an exchange rate regime with a peg to the US Dollar, but in order to boost its
export and its domestic consumption the SBV depreciated the Dong against the dollar.
Table 6: Vietnam inflation evolution
24
2. VIET NAM’S TRADE REGIME
After the Bilateral Trade Agreement with United States in 2000 and after its accession to the WTO
seven years later, Vietnam has considerably changed its trade regulatory regime to put it in
consistency with its international obligations. The regulatory changes imposed by the WTO Members
went well beyond the trade aspect and touched all the institutional and legal aspect of Vietnam
overall’s regulatory and legal framework.
2.1. Trade in Goods
• MFN and National Treatment. Vietnam committed in its WTO Schedule of Commitments
to provide to all WTO Members the Most Favored Nation (MFN) treatment on all the goods
imported to Vietnam, so that the best tariff treatment accorded to one Member will be
automatically extended to all the others. The MFN suffers from few exceptions due to the
formation of Free Trade Areas with ASEAN and ASEAN partners. The national Treatment
obligation requires not discriminating foreign goods imported in Vietnam in order to
advantage similar Vietnamese products.
• Tariffs concessions and Elimination of Quotas on Goods. The WTO regulations require
that Vietnam do not raise its tariffs at a level above the bound rates notified in its Schedules of
Commitments. In practice the real applied tariff rates applied by Vietnam are often much
lower than those committed. This gives Vietnam a considerable policy space in adjusting the
applied rates according its actual needs, provided that they do not go beyond the WTO
commitments. After full implementation of the WTO tariff cuts, most imports will face tariffs
less than 15 percent—other than a relatively limited number of exceptions, bound tariffs will
be between 0 and 35 percent.
Article XI of the GATT imposes the obligation to eliminate all import and export quotas,
although Vietnam agreed to maintain export controls on rice.
• Customs System and Procedures. Vietnam entered into the WTO Custom Valuation
Agreement, which is an integral part of the Single Undertaking. In this respect Vietnam
modernized its custom regulations and procedures to align them with the international
standards required by the WTO. Furthermore, with its participation in ASEAN, Vietnam will
increasingly improve and modernize its custom system.
25
• SPS/TBT Regulations. The WTO Agreement on Sanitary and Phyto-sanitary measures (SPS)
and the Agreement on Technical Barriers to Trade impose on Vietnam the obligation not to
use technical regulations, standards or administrative procedures to discriminate between
national and foreign products by creating unnecessary obstacles to trade among WTO
Members.
• Intellectual Property Right (IPR). As a part of the WTO Single Undertaking Vietnam
entered into the TRIPs Agreement that forced Vietnam to improve substantially its legal
framework on the protection of intellectual property rights, which implies the use of criminal
sanctions against piracy and counterfeiting. Furthermore, the TRIPs Agreement automatically
extends to Vietnam the participation to some crucial International Treaties on IPR protection.
2.2. Trade in Services
The GATS. The General Agreement on Trade in Services (GATS) imposes strict requirements on the
regulatory environment for the services sector. Although there are few provisions that apply
irrespectively of the concessions given by Vietnam on its services sector, nevertheless the regulatory
framework provided by the GATS has the effect to pose a policy constraint on the legislators in order to
modernize and substantially improve the transparency and the fairness of their sector-based regulations.
As a corollary to the GATS, Vietnam has entered into the GATS Annex on Telecommunications, the
Annex on Financial Services and the Annex on the Movement of Natural Persons.
The MFN treatment obliges Vietnam to grant to all the foreign service-providers the same treatment
with respect to all the regulations, licensing procedures and taxation applicable in Vietnam.
The obligation of transparency imposes on the regulators to publish all the laws, regulation and the
relevant administrative procedures necessary for the business. Furthermore the GATS requires to
establish an enquiry point on the relevant legislation applicable to the specific sectors.
The real barometer of the degree of openness of the Vietnamese services sector to foreign providers is
given by the “horizontal” and “specific” commitments agreed upon by Vietnam during the accession
to the WTO. The commitments are made with regard to market access for foreign services suppliers
and with regard to the possibility to discriminate against foreign services suppliers.
• National Treatment. Vietnam retains the possibility to discriminate with regard to the
provision of subsidies to Vietnamese enterprises, subsidies for research and development,
subsidies for health, education and the audio-visual sector as well as subsidies to support the
welfare and employment of ethnic minorities. The movement of natural persons or the
presence of natural persons is limited to key management or specialised technical personnel.
26
• Market Access. The specific commitments on market access are divided by the four modes of
supply of the services: cross border, consumption abroad, commercial presence, and
movement of natural persons. Vietnam committed to liberalize access to 11 services sectors
and 110 service subsectors Vietnam has few restrictions on cross-border supply of services or
consumption abroad (in the Audio-Visual sector Vietnam retains the right to impose
restrictions on cross border supply or consumption abroad). The market access limitations on
mode 3, commercial presence and investment, are complex with many transition provisions
over one to three years after accession. After three years, foreign-controlled enterprises are
permitted to invest in most sectors in Vietnam. In some of the key service sectors we examine
below such as Distribution and Financial Services, Vietnam has progressed slowly with
implementation of the international commitments. In the Telecommunications sector Vietnam
has capped the foreign ownership at 49% and State Owned Enterprises continue to dominate
the sector4
.
Regional Integration (AFAS and ASEAN Free Trade Agreements). Vietnam is a member of the
Association of Southeast Asia Nations (ASEAN) and the Asia-Pacific Economic Cooperation Forum
(APEC). Within the ASEAN Framework Agreement on Services (AFAS) Vietnam offered
commitments in telecom, tourism, financial services and other areas. Moreover, the ASEAN Single
Aviation Market (SAM) progressively introduces an open-sky arrangement to the region by 2015. The
ASEAN SAM is expected to fully liberalize air travel between its member states, allowing ASEAN to
directly benefit from the global growth in air travel. In the context of the ASEAN – China Free Trade
Agreement, China has liberalized 26 sectors of interest to Vietnam and other ASEAN countries in
areas such as construction, environment preservation, transportation, sports and business. On the other
hand, Vietnam and its ASEAN partners committed to open their markets in finance, telecom,
education, tourism, construction, and medical services (Chunmei Yang, 2009)5
2.3. Preferential trade and ASEAN integration
.
Beginning in 1995 with its accession to the ASEAN, Vietnam has begun a strategy of preferential
economic integration with selected partners. Indeed Vietnam has entered into a number of Free Trade
Agreements with some commercial partners mainly at the regional level. In this respect, apart from the
ASEAN agreements, Vietnam has entered into six free trade agreements with China, India, Japan,
Korea and Australia/New Zealand. Besides this Vietnam has signed in 1995 a co-operation agreement
with the European Communities and a Bilateral Trade Agreement with United States in 2000 that
granted MFN treatment to Vietnamese products exported to United States.
4 Economic Integration and Viet Nam Development, Commissioned Report, 2009 5 MUTRAP, Serv-2A Final Report
27
ASEAN Integration. The economic ambitions of ASEAN rely on the creation of the ASEAN
Economic Community to make by 2015 ASEAN a region with free movement of goods, services,
investment, skilled labour and freer flows of capital. In this respect the key instruments of integration
so far in ASEAN are the removal of tariffs, the progressive liberalization in the services sector and an
open and transparent investment climate.
In 1995 Vietnam joined the ASEAN Free Trade Area (AFTA), which was established in 1992. The
AFTA was based on the Agreement on the Common Effective Preferential Tariff Scheme (CEPT) for
the ASEAN FTA, which was the trade instrument for the scheduling of tariff reductions. The
agreement divides products on different tracks based on the sensitivity of the single products in order
to grant a policy space to the governments. The CEPT divides products between those in the general
exclusion list (GEL), the temporary exclusion list (TEL) and the sensitive list (SL). From 2010 all the
applied tariffs for the ASEAN-6 are reduced to 0, while Cambodia, Lao PDR, Myanmar and Vietnam
are expected to reach that target by 2015.
The process of integration in goods received a further acceleration at the 14th ASEAN Summit when
the ASEAN leaders signed a new ASEAN Trade in Goods Agreement (ATIGA). ATIGA integrates all
existing ASEAN initiatives related to trade in goods into one comprehensive framework, ensuring
synergies and consistencies among those various initiatives. It contains a number of key features that
are expected to enhance transparency, certainty and predictability within the ASEAN legal framework,
and enhance ASEAN Free Trade Area’s rules-based system, which is of importance to the ASEAN
business community. After having reduced substantially all the tariff barriers, the focus of the attention
shifted towards all the other impediments to free flows of goods, such as non-tariff barriers, trade
facilitation and other barriers to the broadening and deepening of the economic integration. In addition
to Chapter on tariff liberalization (Chapter 2 with related Rules of origin in Chapter 3 and associated
annexes), ATIGA contains chapters on Non-tariff measures, (Chapter 4), Trade Facilitation (Chapter
5), Customs (Chapter 7), Standards, technical regulations and conformity assessment procedures
(Chapter 7 which refers also to relevant Mutual Recognition Agreements and Harmonization
Agreements and associated annex) and Trade remedy measures (Chapter 8).
For what concerns services liberalization, ASEAN countries signed in 1995 the ASEAN Framework
Agreement of Services since 1995 (AFAS). AFAS adopts the positive-list approach of the GATS in its
scheduling of commitments. The AFAS is based on a process of constant negotiations towards
progressive liberalization of the services sector, based on an approach of “variable geometry” that
allows members that are more eager to liberalize among themselves to go ahead without having to
extend the same concessions to all ASEAN members.
28
Mutual Recognition Agreements (MRAs) are another instrument for the liberalization of services
focused on MODE-4 (i.e. movement of natural persons, professional service providers). There are at
present seven mutual recognition arrangements that have been concluded by member states: Engineering
Services (2005), Nursing Services (2006), Architectural Services (2007), Surveying Qualifications
(2007), Accountancy services (2009), Dental Practitioners (2009), Medical Practitioners (2009).
In 1995, ASEAN also endorsed investment liberalization as a basis for enhancing its collective
"attractiveness and competitiveness" for investment. In 1998, it followed through on this mandate by
creating the ASEAN Investment Area (AIA). The AIA declared an "immediate opening up of all
industries for investment, with some exceptions...to ASEAN investors by 2010 and to all investors by
2020." It also declared "immediate national treatment" on the same schedule. The agreement is in
effect more modest. It covers five economic sectors--manufacturing, agriculture, fisheries, mining, and
quarrying--and services incidental to these sectors. This excludes two-thirds of the most attractive
areas for FDI from the outset. Exceptions in "sensitive areas" are not required to be phased out but are
to be reviewed and phased out if and when the governments are ready. As of 2006, the list of such
sensitive sectors contained 148 measures in manufacturing. Over and above these specific exceptions,
there is the General Exception List, which covers industries and investment measures that cannot be
opened up for investment or granted national treatment because of reasons of national security, public
morals, public health or environmental protection.
In late 2003, in the Bali Concord II, ASEAN declared the intention to deepen integration and to create
an ASEAN Economic Community (AEC). Paving the way for the AEC is the accelerated integration
of 11 priority sectors,6 with logistics as the 12th priority integration sector (PIS) added subsequently
in 2006. The Framework Agreement for the Integration of Priority Sectors (Framework Agreement)
and its Integration Protocols for the 11 sectors were signed in November 2004. Additionally, the target
year for AEC formation was accelerated to 2015 at the ASEAN Summit in January 20077
.
ASEAN + Free Trade Agreements. The “ASEAN plus free trade area” (ASEAN +) is an economic
zone created by different free trade agreements concluded by ASEAN with strategic economic
partners in the Asia-Pacific region. With the ASEAN at the centre, playing the pivotal role in the trade
liberalization of the region and the only Member that benefits at the full scale from this large area of
6 These 11 priority sectors are: agro-based goods, air transport, automotive products, e-ASEAN (including ICT
equipment), electronics goods, fisheries, health care products, rubber-based goods, textiles and clothing, tourism,
and wood-based products. 7 Ibid.
29
investment and trade liberalization, the ASEAN plus place itself as the largest economic zone in terms
of population8
.
The ASEAN plus is an economic zone at variable geometry and with different levels of economic
integration. The ASEAN Economic Community places itself as the hub of these preferential economic
arrangements being the common denominator of all the agreements and arguably the sub-area with the
deepest level of economic and political integration, which goes well beyond pure tariff reduction. In
fact in some of the 6 agreements that compose the area, the liberalization in good is only on of the
various components of a wider strategy of economic integration that relies also on services, investment
and in few cases, also competition and dispute settlement.
The ASEAN free trade agreements are five, and they totalize up to three billion consumers benefitting
from the liberalization. The FTAs have been selectively negotiated with the most important economic
partners in the region: China, India, Korea, Japan and Australia New Zealand. Not all the agreements
live up to a full-fledged economic liberalization. Indeed, in few cases the trade in goods represent the
only significant part of the liberalization strategy, while in others the degree of openness is such to
embody also IPRs and Competition. These differences reproduce a substantial asymmetry of
economic integration between the various agreements which undermines the economic benefits of a
the larger ASEAN plus area.
The ASEAN – China Free Trade Agreement (ACFTA) is the result of a multistep process that begun
in 2002 when the Chinese and ASEAN leaders signed the Framework Agreement on Comprehensive
economic Cooperation between ASEAN and China. The framework agreement, which promotes
liberalization on trade in goods, laid down the basis for further negotiations9
, which ultimately
resulted in the signing of the Agreement on Trade in Goods and the Agreement on Dispute Settlement
Mechanism of the Framework Agreement. The ACFTA goes further and contains also the Agreement
on Trade in Services and the Agreement on Investment.
Similarly to the ACFTA, the ASEAN – Korea Free Trade Agreement (AKFTA) is structured through
three layers of liberalization. The most important part is the Agreement on Trade in Goods with the
Annexes on the Modalities of Tariff Reduction and the one on Rules of Origin. The Agreement
8 For a good overview of the business and economic implications of the various ASEAN Free Trade Agreements see:
M. Kawai and G. Wignaraja, Asian FTAs: Trends and Challenges, Asian Development Bank Institute: Tokyo and
Manila, 2009; and, M. Kawai and G. Wignaraja, “The ASEAN Noodle Bowl”: Is It Serious For Business?, Asian
Development Bank Institute: Tokyo and Manila, 2009. 9 J. Wang, Association of South East Asian Nations – China Free Trade Agreement, p. 192
30
contains also the Agreement of Trade in Services with the Annex on Financial Services and the
Agreement on Investment.
The ASEAN – India Free Trade Agreement (AIFTA) so far only the trade in good part, which consist
of the Agreement on trade in Goods, one Understanding on Dispute Settlement Mechanism and one
Understanding on Article 4. As of May 2010 the Parties to the AIFTA are still negotiating over a
possible Chapter on Services and one Agreement on Investment.
The Japan – ASEAN Comprehensive Economic Partnership (AJCEP) is a comprehensive FTA that
goes to a quite deep level of economic regulations. Signed at various stages by different countries, the
AJCEP officially came into force on the 1st of December 2008, although some Countries have not yet
implemented it. The AJCEP is largely still in the negotiation phase for many of its chapters. When it
will be completed the Agreement will cover many of the most important issues concerning economic
integration. In fact, the AJCEP contains one chapter on tariff reduction, one on Trade in Goods, Rules
of Origin, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Dispute Settlement,
Trade in Services, Investment as well as Intellectual Property Rights.
The ASEAN – Australia – New Zealand Free Trade Area (AANZFTA) is the most comprehensive
trade agreement ever negotiated by ASEAN and by far it is the most sophisticated in terms of
economic regulations. Indeed, the AANZFTA regulates all the most important aspects of international
economic relations, going well beyond even the WTO Agreements. In fact, this FTA is not limited to
liberalization of trade in goods and services but It contains also one chapter on TBT, one on SPS,
Custom Procedures, Safeguards, Dispute Settlement, provisions on competition and intellectual
property rights, together with some commitments on economic co-operation.
Table 7: Regulatory Integration in the various FTAs
ASEAN
Economic
Integration
ASEAN - China
ASEAN - Korea
ASEAN - India
ASEAN - Japan
ASEAN – Aus/New Zealand
Tariff Reduction and Quantitative Restrictions
Yes Yes Yes Yes Yes Yes
Rules of Origin Yes Yes Yes Yes Yes Yes
Sanitary and Phytosanitary
Yes Yes
TBT Yes Yes
Safeguards Yes Yes Yes Yes Yes
31
Antidumping Yes
Services Yes Yes Yes To be neg. To be neg. Yes
Investment Yes Yes Yes To be neg. To be neg. Yes
Competition Yes
Intellectual Property
Yes
Dispute Settlement
Yes Yes Yes Yes Yes Yes
Customs Yes Yes
Other bilateral initiatives. On July 13, 2000, U.S. and Vietnam signed a bilateral trade agreement
(BTA), which entered in into force on December 10, 2001. Under this agreement the U.S. extended
temporary most-favoured nation (MFN) status to Vietnam, a step that reduced significantly U.S. tariffs
on most imports from Vietnam. In return, Vietnam agreed to undertake a wide range of market-
liberalization measures, including extending MFN treatment to U.S. exports, reducing tariffs on goods,
reducing some barriers to U.S. services (such as banking and telecommunications), committing to
protect certain intellectual property rights, and providing additional protections for inward foreign
direct investment. The BTA served as a stepping-stone for Vietnam’s accession to the WTO, it also
served as a major catalyst for even broader systematic reforms in the Vietnamese legal and governance
systems. Over these five years, as a result, Vietnam transformed and modernized its legal and
administrative systems from one based on an often confusing mix of the Napoleonic and Soviet legal
systems to one much more in line with international best practice and its major trading countries.
In 1995 Vietnam also signed a co-operation agreement with the European Communities. Following
this agreement Vietnam was granted MFN treatment to its exports. Vietnam also benefitted from the
Generalized System of Preferences (GSP).
2.4. Viet Nam’s Trade Structure
Vietnam has become over the years an export driven economy. In fact, from only 32.8% of the GDP in
1995, in 2008 exports constituted up to 78% of the Vietnamese GDP; a constant growth that
demonstrates the increasing integration of Vietnam in the world economy. After joining the World
Trade Organization in 2007, Vietnam can now be sad to be a fairly open and liberalized economy, at
least from trade-in-goods point of view. Indeed, the ratio of imports over GDP in 2008 was at 94.7%,
much more than all its ASEAN neighbours whose openness ranged between 29% of Indonesia to 80%
of Malaysia.
32
Table 8: Vietnam trade balance (2005-2009)
2005 2006 2007 2008 2009
Import 36,9 44,4 60,8 80,4 68,8
Export 32,2 39,6 48,4 62,9 56,6
Trade deficit 4,7 4,8 12,4 17,5 12,2
In the last two years Vietnam suffered from the general economic downturn. In fact, in 2009 the export
turnover dropped down to 9.7% as 2008, with a total of 56.6 Billion US$. Similarly the import
turnover turned down to 14.7% at an estimate of 68.8 Billion US$. Despite these data the trade deficit
still dropped down to 32.1% reaching 12.2 Billion US$.
Table 9: Vietnamese imports and exports with few selected countries
Being an export driven economy and a price taker Vietnam is highly dependent on world prices.
Accordingly the recent economic crisis and the drop in the value of oil reduced the export values of
Vietnamese products. The most relevant data are concisely presented below (in billion USD):
• Vietnam exports rely on few important items. Textiles is by far the most exported product
with a total value of 9.1, followed by crude oil 6.2. Seafood places third with 4.3, followed by
footwear with 4.1. Precious stones and metals totalize 2.7, computers and electronic
equipment 2.8, rice 2.6, wood and wooden products 2.5, machinery 2.1, coffee 1.7, rubber 1.2,
coal 1.3.
33
• The main export destinations of Vietnam are the United States with 11.4, the European
Union with 9.4, ASEAN with 8.6, Japan 6.3, China and Hong Kong SAR totalize 5.9, Korea
2.1, Taiwan 1.1, Switzerland 2.3.
• Vietnam’s main imports are: Machinery 12.4, Oil 6.2, Steel 5.3, Fabrics 4.2, Electronics
products and components 3.9, Raw Plastic 2.8 and Plastic Products 1.1, Chemicals 3.1,
Automotive 2.9, Raw Textiles 3.1.
• Vietnam’s main import partners are the European Union 6.4, ASEAN 13.8, India 1.6, Korea
6.97, Japan 7.5, China and Hong Kong SAR 1.7, United States 3.01, Russian Federation 1.4,
Australia 1.05.
2.5. EU- Viet Nam trade flows
The report confirms that Vietnam is an export-driven economy, with 69% of GDP exported in 2008
(64% in 2009 and 61% in 2005); 16% of the GDP value is exported to the EU, for a value of 14.9 bn.
USD (14% in 2009 for 12.6 bn.) and it represents the 17% of all Vietnamese exports (constant from
2005).
The five first products exported into the EU (footwear – 4.5 bn., apparel and clothing 2.3 bn., coffee
1.4 b. , seafood – 1.1 bn. and furniture - 1 bn.) represent the 70% of total export to EU in 2008 (68% in
2009), with a the index of concentration (Herfindahl–Hirschman Index) equal to 0.12 (moderate level):
therefore the exports to the EU are exposed to industry shocks as showed by the decrease of 15% of
the export to EU in 2009 (-20% footwear, -26% coffee, -20% furniture while apparel and clothing
limited the decrease to 10%).
Simple average tariffs applied by the EU on import of Vietnam are, in 2009, around 4.1% (decreased
from 4.5% in 2005). Weighted average tariff, however, (tariff weighted with the level of trade) amount
to 7%, meaning that higher tariffs are applied to relevant products exported from Vietnam (e.g. apparel
and clothing: 11.7%, seafood: 10.8% and footwear: 12.4%) and very high tariff peaks (more than
57%). This means that the elimination of tariffs expected on substantially all the trade with the FTA
will provide important advantages for Vietnam in comparison to other competitors in the EU markets.
With regard to the tariff on import, Vietnam applied substantially reductions after WTO accession and
now the simple average tariff is 9.3% (from 13.7% in 2005); the tariffs applied to the most exported
products from the EU into Vietnam are quite low, with the exception of automotive (24.2%,
electronics: 8.9%, mechanical: 3.4%, pharmaceuticals: 2%, Iron: 2%, optical and medical apparatus:
1.3%, aircraft: 0%). In all the mentioned categories excepted aircraft, however, there are quite high
tariff peaks (from 10% of pharmaceuticals to 90% for automotive).
34
Source : COMTRADE (value in USD)
Source : COMTRADE (value in millions of USD)
Despite its volume, the Vietnamese export in the EU is characterised by some structural features. As
Table 1 shows, the seven most exported products in the EU constitute of products with low value
added, mainly concentrated in the textiles and fisheries. Over years observed, no structural changes are
apparent as these seven products retained their share in Vietnamese export.
35
Table 10 – Most imported products from Vietnam into the EU (thousand USD)
Product label European Union (EU 27)'s imports from Viet Nam
2005 2006 2007 2008 2009
All products 7870312 9698504 12314753 14952128 12647737
Footwear 3127370 3231598 3694885 4500821 3581278
Garments 994705 1494853 1832822 2294706 2056615
Coffee, tea 547978 869561 1226807 1413560 1042776
Seafood 351628 631572 846898 1059462 1011734
Furniture 704822 825113 1098826 1210948 965538
Table 11 lists the effective, bound and MFN tariff rates, respectively, in the period 2005-2008. These
tariff rates have reduced on average by 7% to 9% over the observed period.
Table 11 – Average tariff rates
Du
ty
Av
era
ge
Valu
e of
expor
t in
the
EU
Ave
rage
Tari
ff
(in
%)
AHS
2005
30
0,9
89
6,624
,254
4.5
%
2006
36
9,9
93
8,419
,220
4.4
%
2007
43
1,4
82
10,41
9,977
4.1
%
2008
50
3,3
16
12,29
9,208
4.1
%
BND
36
2005
47
9,0
31
6,624
,258
7.2
%
2006
58
8,6
69
8,419
,224
7.0
%
2007
70
2,5
15
10,41
9,979
6.7
%
2008
82
8,0
30
12,29
9,211
6.7
%
MFN
2005
48
6,6
10
6,624
,262
7.3
%
2006
59
6,5
68
8,419
,228
7.1
%
2007
70
3,3
31
10,41
9,981
6.7
%
20
08
82
4,5
88
12,29
9,214
6.7
%
Source: COMTRADE (in thousands of $ US otherwise specified)
However, will a further reduction of the average tariff rate increase Vietnamese export in the EU? The
next section offers a short quantitative analysis of this.
In 2009 Vietnam enjoyed a trade surplus with the European Union of 3.8 Billion US$. As a result of
the economic slowdown in 2009 the exports from Vietnam to the EU reduced to 14,4% with a total
value of exports 9.3 bn US$. The pattern of export to the EU is dominated by few items: : textiles &
37
garments (revenue: ); footwear (USD ); seafood (USD); electronics and computers (USD); timber
products (USD); rice (USD$); and coffee (USD)
The main goods that Vietnam imported from the EU in 2009 were boilers-machinery & mechanical
products (€689.4mn), electrical machinery and equipment (€343.8mn), pharmaceutical products
(€222.16mn), iron & steel (€187.12mn), and vehicles (€115.29mn)10
EU-Vietnam Trade 2004-2009
0
2000
4000
6000
8000
10000
12000
Tota
l tra
de v
olum
e (E
UR m
illio
n)
-30.00
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
Gro
wth
rat
e (y
ear
on y
ear.
%)
Total trade volume (€million)Exports to VN (%grow th)Imports from VN (%grow th)
Total trade volume (€ million) 7214.124 7397.921 8754.647 10877.02 11285.06 9329.257
Exports to VN (% growth) 8.06 -12.43 14.56 53.13 -7.59 -9.11
Imports from VN (% growth) 12.53 8.92 19.63 14.78 8.71 -20.39
2004 2005 2006 2007 2008 2009
.
10 EU – Greenbook 2010
38
3. EU TRADE REGIME AND THE PROSPECT OF A FUTURE EU – VIETNAM FREE TRADE AGREEMENT
3.1. EU trade policy and trading partners11
“The services sector is the backbone of the EC economy, with a share of about 70% in both gross
value added (GVA) and employment. Manufacturing contributes around one-quarter to GVA, but its
share has been decreasing over the last few years reflecting geographical shifts in international
processing activities. As a result, the EC is implementing, since October 2005, a new industrial policy
to become more competitive. The participation of agriculture (including livestock, hunting, forestry
and fishing) in the EC's GVA is relatively low (around 2%), but remains significant for many new
Members States such as Bulgaria and Romania.
The EC accounts for some 17% of world merchandise trade. Its trade account has been in persistent
but sustainable deficit, amounting to €141.8 billion in 2006 and €153.4 billion in 2007. As a
percentage of GVA, the EC had external current account deficits of 0.8% in 2006, 0.7% in 2007, and
1% in 2008. The EC remains the world's largest trader in services, as well as the largest recipient and
supplier of foreign direct investment (FDI), accounting for some 40% of global inward stock and over
50% of global outward stock. It is also a net investor in the rest of the world.
3.2. EU Institutional framework
The Treaty of Lisbon, which will alter the structure of EC institutions, was signed by EC heads of state
or government in December 2007. Bulgaria and Romania joined the EC in January 2007, while
accession negotiations with Croatia and Turkey are ongoing.
Under the Treaty of Nice of 2001, the EC's trade policy aims to contribute to, inter alia, the
progressive dismantling of restrictions on international trade and the lowering of customs barriers. 11 This section is based on the summary of the ninth Trade Policy Review of the European Communities (6 and 8 April
2009) prepared by the WTO Secretariat. The complete list of the documents is available at:
http://www.wto.org/english/tratop_e/tpr_e/tp314_e.htm
39
These objectives are pursued by the EC at the multilateral, bilateral, and unilateral levels. At the
multilateral level, the EC has stressed the importance of the Doha Development Agenda (DDA) as the
best approach to prevent trade protectionism in the current economic downturn. The EC remains one
of the most active Members in WTO dispute settlement. The EC is also a major sponsor of trade-
related technical assistance within its Aid for Trade framework.
The EC has continued to build upon its extensive network of preferential trade agreements (PTAs), as
part of a broader policy of promoting multilateralism. These PTAs have so far resulted in free trade in
non-agricultural goods, and limited liberalization of trade in agricultural products; in some cases, these
agreements also cover trade in services. A significant number of its negotiations are with, or encourage
the creation of, regional groupings. Negotiations with regional bodies include the Andean
Community, ASEAN, Central America, the Gulf States, MERCOSUR, the Mediterranean countries,
and Economic Partnership Agreements (EPAs) with the African, Caribbean and Pacific (ACP)
regions. Negotiations on an EPA with the Caribbean region have been concluded; trade relations with
countries in the other ACP regions are governed by interim agreements. Furthermore, the EC has
launched bilateral negotiations on PTAs with India, Ukraine and signed an FTA with South Korea.
The EC grants at least MFN treatment to all WTO Members and unilateral preferences through its
Generalized System of Preference (GSP), which consists of three arrangements. First, all eligible
countries benefit from the "general arrangement". Second, a "special incentive arrangement for
sustainable development and good governance" (GSP+) provides additional benefits to countries
implementing international standards in sustainable development and good governance. Third, under
the Everything But Arms (EBA) initiative, LDCs benefit from duty-free and quota-free access to the
EC market; for rice and sugar, tariff-free and quota-free access will be introduced in 2009.
As a result of preferential agreements and the GSP scheme, the EC's MFN tariff is applied to only nine
WTO Members (Australia; Canada; Separate Customs Territory of Taiwan, Penghu, Kinmen and
Matsu; Hong Kong, China; Japan; Republic of Korea; New Zealand; Singapore; and the United
States). These nine WTO Members accounted for 27.5% of the EC's total merchandise imports in
2007, compared to about 30% in 2005.
3.3. EU Trade policy instruments
The structure of the EC's common MFN tariff, broadly unchanged over the last few years, remains
complex. It comprises ad valorem and non ad valorem rates. The non-ad valorem duties (10.1% of all
tariff lines) are specific (6.5%), compound (2.9%), and mixed or variable per entry price range (0.8%).
Non-ad valorem rates apply mainly to agricultural goods (WTO definition), many of which are also
subject to tariff quotas. The average applied MFN tariff rate has decreased slightly, to 6.7% from
40
6.9% (in 2006), with rates ranging from zero to 604.3% (an ad valorem equivalent (AVE) on
isoglucose (HS 1702.40.10)); agricultural products still attract the highest rates.
The EC's wide network of preferential trade arrangements, together with its system of unilateral
preferences, adds to the complexity of its tariff regime. Value-added tax and excise duties apply to
imports and locally produced goods (VAT also applies to services) at the same rates; these rates are set
by Member States and are not yet harmonized within the EC.
Imports prohibitions and surveillance are maintained on, inter alia, security, technical, sanitary,
phytosanitary and environmental grounds and under treaties and international conventions. Import
licences are required where products are subject to quantitative restrictions, tariff quotas, safeguard
measures or for import monitoring and surveillance purposes. Some non-agricultural products,
including some textile products, have been subject to quantitative restrictions by the EC during the
period under review. No changes were made to the EC legislation on trade remedies. The EC remains
an important user of contingency trade remedies; however, the number of contingency measures
notified by the EC to the WTO has decreased since 2005. Harmonization of technical requirements
(including technical regulations, standards, and sanitary and phytosanitary measures) among EC
Member States is still ongoing.
An export authorization or licence is required to export cultural goods and certain agricultural
products, and for the control of exports of dual-use items and technology. The EC still subsidizes
exports of a number of agricultural products. Assistance and subsidies programmes (at Community
level and by Member States) notified to the WTO can be grouped in four major categories: the
Structural Actions; the Common Agriculture Policy (CAP); Industrial Programmes; and other
programmes including assistance to SMEs, to joint-ventures, and to fisheries and aquaculture.
EC's legislation on public procurement remains broadly unchanged; it was enacted in 2004, with a
view to making the legal framework simpler, more flexible and adapting it to the electronic era. The
competition regime in the EC remains also largely unchanged; enforcement focuses on eliminating
cartels and abuses of dominant position. The intellectual property regime continues to be governed by
both Community-wide legislation and legislation of Member States. On intellectual property
protection, a new legal framework for patent protection is expected to simplify the process of seeking
protection. Trade mark and plant varieties regulations have been amended, while the legislation
related to the terms of protection of copyrights and related rights, and rental and lending rights has
been consolidated in one piece of legislation. New regulations to protect geographical indications for
wines and spirits were enacted.
41
3.4. EU sectoral policies
Services remain the priority as regards the creation of a genuine internal market through the removal
of remaining regulatory and administrative hurdles between Member States. In the last few years the
EC adopted the 2007 telecoms reform package, and the postal directive aimed at completing the
internal market for postal services by 2010-12. Moreover, the EC is implementing the financial
services strategy 2006-10 and the action plan for transport 2002-10. Nevertheless, many other services
activities are not subject to a comprehensive internal market policy; these include tourism,
distribution, construction, engineering and consultancy, certification and testing services, and
employment agencies. Certain services, such as telecoms are regulated at the EC level, while others
(e.g. education, health) are mainly the responsibility of individual Member States.
The manufacturing sector (ISIC definition) is still a major beneficiary of state aid. As a result of
declining productivity growth, a new industrial policy has been implemented since 2005. Together
with measures at Member State level, the policy is aimed at fostering the competitiveness of the
sector. MFN tariffs on manufactured imports average 6.7% (6.8% in 2006). Overall, in industries
requiring agricultural inputs that are also produced by the EC, the tariff shows mixed escalation;
because of the lack of competitiveness partly resulting from high tariff protection of the industries
processing these inputs, exports of their products require subsidies. In industries requiring inputs
(certain agricultural and mineral products in particular) that are not produced by the EC, the tariff
shows positive escalation, i.e. high effective rates of protection.
The EC is the world's largest energy importer and the second largest consumer. Faced with
unprecedented energy challenges, the EC is implementing its action plan on energy efficiency so as to
save 20% of its energy consumption by 2020 through changes in consumer behaviour and energy
efficient technologies. It has also set a target of 20% increase in the use of renewable energy and 20%
cut in greenhouse gas emissions by 2020. Some of the recent energy policy developments include the
adoption of a third package of legislative proposals aimed at solving the structural shortcomings in the
energy market, notably the lack of competition. Imports of electricity are duty free.
3.5. EU-Vietnam future FTA principles
The main principles that are expected to be implemented during the EU-Vietnam Free Trade
Agreement are as follows :
i) Free trade area: the conclusion of an FTA creates a free trade zone between the two parties.
ii) Reciprocity: in line with WTO rules about free trade areas Vietnam/EU are compelled to offer
reciprocity to European/Vietnamese exporters by opening their markets to European/Vietnamese
products, respectively.
42
However, as it has been previously emphasised, the degree of openness can be asymmetrical insofar as
the free trade zone does not cover all products, and Vietnam may not be obliged to open its borders as
much as the European Union. Therefore, the crucial point of future negotiations is to identify the
products that will be excluded from the free trade zone by both sides.
iii) Negotiations by Regional Blocks: To avoid the proliferation of agreements and to support the
regional integration process, the EU encouraged ASEAN countries to sign FTAs not individually but
as a regional block.
The EU-Vietnam FTA can also be supported by the following pillars:
i) Strengthening the cooperation which is an upstream condition to the conclusion of an FTA;
ii) Reinforcing the involvement of the state and the civil society in the cooperation process;
iii) Increasing the European FDI, through various development operations and a private sector
facilities;
iv) Promoting a more efficient trade regime in compliance with WTO rules, for which
exception to MFN clause is possible in the case of reciprocal free trade areas.
In this case, countries (or groups of countries in the case of a Custom Union) grant to each other
trade preferences not granted to all WTO members. Article XXIV of GATT establishes this
exception through custom unions and free trade areas. This article recognizes that free trade area
and custom unions do not contradict the MFN clause. Let’s note that the GATT does not impose a
full reciprocity within a free-trade area. For instance, the FTA between the EU and Vietnam
requires that 90% of trade flows have to be liberalised, but that openness can be asymmetric. At the
end of EU-FTA negociation, it could be agreed for instance an openness up to 80% for Vietnam,
and 100% for the EU. Until now, none of WTO members has challenged this interpretation yet, so
one may estimate that it still prevails.
3.6. EU-Vietnam FTA negotiation issues
Regional integration
FTA is supposed not to hamper, if not to reinforce the ongoing regional integration process in South-
Est Asia. Indeed, prior to signing FTA with the EU, the ASEAN region must form a real customs
union encompassing a common market with a common external tariff. An essential aspect of the
negotiations on FTA between the ASEAN region and the EU therefore concerns the countries of the
regions themselves above all: Which countries will decide to sign an FTA? How can regional
integration be strengthened by this process? How can an agreement be reached on the list of sensitive
products? Will Vietnam be the first to sign an agreement with the European Union?
Competition from European Imports
43
The negative impacts of suppressing customs duties on European imports are at first sight the most
emphasised potential effects of FTA.
Description of the main expected impacts:
• The consumer surplus generated by lower prices of imports will increase welfare and
purchase power of the Vietnamese consumer as well as the competitiveness of Vetnamese
enterprises due to the price reduction of their imported intermediate products.
• The risk of trade creation. The increase of the Vietnamese consumer purchase power could
benefit to EU imports to the detriment of domestic production for goods in competition with
European exports.
• The risk of trade diversion in the short run. At a regional level, the lower cost of European
products is likely to divert trade flows from the region and to create new trade flows between
Vietnam and the EU.
Therefore, sensitive products that could suffer the most from competition with European imports
should be identified so that they can be excluded from the FTA. This is a stake in the negotiations,
first regionally (all the countries of a region should reach an agreement on this list) and then bilaterally
with the EU.
• The losses in tax revenues generated by the suppression of custom tariffs on a large number
of products imported from the EU. The losses will depend on the amount of tax revenue
originating from custom duties and the weight of the EU as a trade partner.
Exports Competitiveness
The main interest of FTA compared to GSP is its potential, through the political dialogue, to exceed
traditional economic relationships by introducing development instruments. Hence, the development
dimension must clearly be seen as a goal to achieve. It can reasonably be considered that the final
success or the failure of FTA will mainly depend on the capacity of Vietnam supported by the EU to
upgrade their productive sector and to set up an efficient institutional environment. More precisely, the
increase of Vietnamese exports to the EU zone will be a major indicator of the success of the failure of
the FTA.
The GSP alternative
In case the EU-Vietnam FTA negociations would not lead to a final arrangement, the only alternative
to the free trade agreement allowed by the WTO is to maintain the Generalised System of Preferences
(GSP) granted to all developing countries. This GSP provides with:
i) a general arrangement ;
44
ii) special incentive arrangement for sustainable development and good governance so-
called GSP+ ;
iii) special arrangement for LDCs.
The general arrangement provides tariff exemption for non sensitive products, and tariff reduction
from 3.5% to 20% for sensitive products (the European Commission fixes the list of sensitive
products). The special arrangement GSP+ provides tariff exemption for nearly all products, sensitive
or not. A limited number of countries have access to GSP+ provision, under the condition of
ratification and implementation of some international conventions and agreements on Human Rights,
Labour Rights, Environment and Good Governance principles.
Vietnam presently benefits from the GSP with the EU, but contrary to the FTA, GSP preferences are
periodically reconsidered. The GSP with Vietnam was revised in 2008 and various products, such as
Vietnam's footwear, which benefited from the arrangement, did not meet the necessary conditions.
Consequently, EU-Vietnam FTA would provide Vietnam free access to the EU market, to the contrary
of GSP, but FTA would introduce reciprocity and oblige Vietnam to open its market to EU imports.
In addition, other crucial elements must be taken into account: political aspects, effects on ASEAN
regional integration, which would be hammered only if a few countries decide to sign FTA, due to the
re-export phenomena, the unilateral nature of GSP whereas FTA is negotiated.
45
4. VIETNAM INVESTMENT CLIMATE AND IMPACT OF THE EU-VIETNAM FTA ON INVESTMENT
4.1. Trends and Level of Inward Investment in Vietnam
From the implementation of the Doi Moi policy Vietnam became one of the most important
destinations for foreign direct investments (FDIs), which propelled the renovation of the State from a
centrally planned to a market oriented economy. In this respect, over the last 23 years Vietnam made
consistent use of FDIs as an engine of growth and as an incentive for the modernization of its
commercial regulatory framework and of the state apparatus as a whole. In fact, from being
completely banned before the Doi Moi period, the process of transformation of the Vietnamese
economy begun to attract immediately consistent investments, which totalized $180 million in 1990,
before surging to $2.6 billion in 1997. The initial foreign investments were aimed principally to
natural resources such as oil and gas. Eventually the pattern of FDI shifted towards manufacturing and
industry that become the primary drivers of foreign investments. According to a 2010 report by the
UNCTAD, Vietnam is one of 15 most attractive destinations for FDI capital flows in 2010.
Table 12: Trend in Foreign Direct Investments 1988 – 2008
Source: Vietnam Investment and Business Guide 2010
Vietnam’s pattern of FDIs inflow is mainly focused on the manufacturing sector. Indeed, due to its
strategic location, its increasing trade integration with other countries in the region (ASEAN + Area)
46
and its cheap labour, Vietnam is increasingly becoming an export platform for the production of
manufactured goods for the region and globally. In this respect Vietnam has the potential to become
the main competitor to China in attracting FDIs in the manufacturing sector.
4.1.1. Foreign direct investments inflow to Vietnam
The trend of FDIs has been unstable in since 1990 with ups and downs due to the East Asian Financial
crisis of 1997 and some slowdowns in regulatory reforms. Nonetheless, considering its relative
economic backwardness compared with other Asian countries, Vietnam managed to be one of the
most competitive FDIs destinations in the region. After a downturn from 1997 to 2002, FDI inflows
started increasing again in 2003, reaching $2.3 billion in 2006 and the record level of 64 billion US$ in
2008. This trend of constant growth in FDIs inflows turned negative in 2009 when FDI decreased by
5.8%. The reason to this might be associated with the general slowdown of economic activity all over
the world. It is important to notice that, even with a negative sign, nevertheless Vietnam was the less
hit by the crisis among al the other ASEAN countries, which experienced much worse decreases in
investment inflows. The occasional negative trend in FDIs seems to be finished as realised FDI in the
first eight months is estimated at USD 7.3 billion, growing by 3.6% as against the same period last
year. Overall the expected FDIs in the first eight months of 2010 are estimated around US$ 11.6
billion, equal to 87.7% compared to that in the same period in 2009.
Table 13: Recent evolution of total investment and FDIs
21.137.7
26.2
165.0
22.2
146.9
9.0
-32.0
18.1
-18.4
14.4
-11.2
15.3
-5.8
-40.0-20.0
0.020.040.060.080.0
100.0120.0140.0160.0180.0
Gro
wth
rat
e (%
)
6 months2008
12months
2008
6 months2009
12months
Period
Total Investment
FDI
Source : Le Dang Doanh, 2010
47
4.1.2. Patterns and destination of FDIs in Vietnam
After the beginning of the DOI MOI the economic landscape of Vietnam changed drastically and is
still under constant evolution. In parallel with the changes in the economic structure of the country
also the patterns of FDI inflows to Vietnam changed.
At the beginning of the Doi Moi the pattern of FDIs was driven by natural resource seekers
multinational enterprises investing in the oil ad gas industry. The vicinity of other natural-resources
champions such as Malaysia, Brunei and Indonesia quickly turned foreign investors to more
productive sectors.
In respect to other countries in the region Vietnam benefitted from a comparative advantage on labour
force and on a relative easiness in doing business. For this reason foreign investors become quickly
aware of the possibility to use the abundant and cheap Vietnamese labour force to produce efficiently
low quality manufactured goods to be exported globally. According to UNCTAD statistics by the late
1990s, the manufacturing sector accounted for almost 45 per cent of registered foreign investments,
although FDIs were directed also to other sectors such as construction, real estate and tourism.
The predominance of manufacturing FDI further increased in the past few years, as the sector attracted
more than 60 per cent of all registered capital in 2001–2007. Real estate was a very distant second
with 17 per cent of the total, followed by hotels, construction and transport with less than 6 per cent
each. As was said before, the concentration of investment in the manufacturing sector was explained
by the relative competitiveness of producing low-tech products in Vietnam to be then re-exported. The
low level in technological development of Vietnam drove most of the investment into labour-intensive
sectors, such as textiles, machinery and footwear which didn’t require skilled labour force. This lead to
the creation of investment clusters in various provinces benefitting from the economies of scale and
the reduced costs of production.
The signing of the BTA with the US in 2000, which included provisions related to investment, forced
Vietnam to improve its investment-related domestic regulations to create a more favourable
investment environment. This lead to an increased level of FDIs from United States and to a surge of
textiles and footwear exports to Europe and United States, indicating the competitiveness of the
Vietnamese garment industry. Another significant part of the manufacturing-related investments was
directed at the automotive sector. In this respect it is significant the decision of the Italian motorbike
producer Piaggio to establish in Vietnam its production to serve both the fast-growing Vietnamese
market and more in general the Asian market.
In the very recent years the economic environment of Vietnam turned towards more sophisticated
patterns of production, with more skilled labour force and an increased technological component. This
turned the attention of foreign investors which begun to delocalize their production of electronic
components and of electronic assembled products. In this respect the increased share of electronic
48
goods exported abroad indicates the upward trend in the technological advancement of the Vietnamese
industry. Furthermore, it is worth to mention the fact that hi-tech giants such as Intel (semiconductors),
Samsung (mobile phones) and other major players in the hi-tech industry decided to delocalize to
Vietnam their production. The presence of hi-tech industries will bring beneficial spillovers in terms
of technology transfer, which could induce (if properly assisted by other policy measures) the creation
of domestic owned hi-tech firms. In this regard, it would worth notice the case of Malaysia, which
consistently invested over the years in hi-tech and biotech sectors, which drove the incredible rise of
the Malaysian economy.
Table 14: Sectoral Distribution of Foreign Investment Projects 1995-2007
Source: UNCTAD (2008).
Another element to be considered is the noodle bowl of Free Trade Agreements participated by
Vietnam within the ASEAN. Apart from the ASEAN Free Trade Agreement (AFTA) that will bring to
0 all the tariffs among ASEAN Members, Vietnam is part of other five FTAs with China, Australia
and New Zealand, Japan, Korea and India. These FTAs will create in few years for Vietnam and the
other ASEAN Members an integrated (although with some asymmetries) trade zone of more than three
billion people. The increased market at 0% duties would probably offer another incentive to foreign
investors to use Vietnam as en export platform for the ASEAN + market.
In 2009 the trend of FDIs shifted for the first time towards the services sector, albeit only to real estate
and tourism (accommodation and restoration). With the manufacturing sector ranking third, Vietnam
experienced a surge of FDIs into the real estate market which lead to an extraordinary increase in the
prices. The decrease in FDIs in the manufacturing sector should not be considered a permanent trend
as 2009 was an extraordinary year for the world economy and Vietnam still maintains all the business
potential to attract FDIs in the manufacturing industry. In this respect, the decreased inflows of FDIs
to the manufacturing could be explained with the overall decrease in FDIs all over the world and with
the declined proclivity of foreign enterprises to relocate the production in extraordinary times. In
49
parallel the surge of investment in the real estate sector could be explained by the increased appeal of
Vietnamese real estate market, which has been subject over the last two years by substantial
speculation both from domestic and foreign investors. Lastly the upward trend in FDIs to restoration
and accommodation can be explained with the increased attractiveness of Vietnam as a holiday
destination for foreigners and with the increased purchasing power of the Vietnamese middle class that
is more and more willing to spend their holiday visiting the country.
Table 15: Breakdown of Foreign Investment Projects in 2009
Source: GSO official data 2009
The last element to be considered is the domestic economic growth and the parallel increase in
population. The emergence of a middle class and the increased purchasing power are more and more
appealing to foreign investors wishing to supply the market. This is op particular importance to the
services sector where the “access to market” type of FDI is one of the major drivers of commercial
presence of foreign enterprises. In this respect the liberalization of the services sector is of outmost
importance for foreign services suppliers, in particular in Telecom and in Financial Services.
4.1.3. The pattern and outflow of EU Investment in Asia and Vietnam
The bilateral investment flow between EU and Vietnam is essentially one-sided with the EU playing
the part of the investor and Vietnam that of the recipient country.
50
Asia has become an investment destination for European multinational enterprises only until very
recently. Indeed, until ten years ago the outflow of EU investment to the Asian region represented only
a small part of the overall FDI outflow, being the bulk of the FDIs concentrated within the EU or
directed to North America. Beginning in the mid-nineties EU MNE begun to redirect their investments
to ASIA that in less than ten years doubled or even quadrupled (as in the case of China).
(Based on official Eurostat data)
As showed in the Chart, the bulk of the EU investment was and is still directed at the ASEAN countries. In
this respect Singapore is the biggest recipient of FDIs with 80.988 Million Euro, more than half of the total
EU investment in ASEAN, while the rest of the countries account to 45.951 Million Euro. The huge
difference between Singapore and the other ASEAN countries can be explained by the fact that most of the
EU investments to Singapore (as also in the case of Hong Kong) are directed at the financial services sector
and are in some cases the result of M&A activity or portfolio investments.
51
(Source: ASEAN Statistical Yearbook, 2008)
On the contrary the pattern of EU investment to the other ASEAN countries is more similar to that
adopted towards China and India, mainly based on FDIs in the manufacturing sector and to industry.
According to ASEAN Statistics (see table above) the overall EU FDIs to Vietnam almost quadrupled
in nine years totalizing 871 Million US$ in 2008. Compared with other countries such as Malaysia,
Thailand or Philippines, the overall performance of Vietnam ranked the best in term of FDI’s growth.
Overall, EU outward investments are mainly driven by the export potential of the EU services sector.
Indeed, The EC-27 is the world's largest trader in services. In 2006, it accounted for 27.3% of global
services exports and 24.0% of imports.12 EC-27 services exports amounted to €501.4 billion in 2007
(up from €402.9 billion in 2005), while services imports were €413 billion in 2007 (against
€350 billion in 2005) Individually, the United Kingdom is the world's second most important exporter
of services, followed by Germany and France13
.
EU outward FDIs by Economic Activity 2002-2005
(Source: Eurostat, EU Foreign Direct Investment Yearbook 2008)
4.2. The Impact of the EU-Vietnam FTA on Investment
Quantifying ex-ante the potential impact of a future EU – Vietnam FTA on the overall level of FDIs
coming to Vietnam is not an easy task. The reasons are varies and reside on the relative uncertainty of
the economic relations between FTA and investment inflow, a general lack of data on investment
(both from the EU and from Vietnam) due to the intrinsic difficulty to collect them with regard to
firms activity, and the lack of an economic model capable to quantify ex-ante the FDI-FTA
relationship.
12 For exports, the EC was followed by the Unites States (19.1%), Japan (6.0%), China (4.5%), and India (3.6%). For
imports, it was followed by the Unites States (15.7%), Japan (7.3%), China (5.1%) and Canada (3.7%). 13 Trade Policy Review of the European Communities 2009, WTO Secretariat, p. 11
52
Until very recently there was no empirical and relevant academic discussion on the effects of a
preferential trade agreement on investment inflows into the member countries, especially from an ex-
ante perspective. Over the last ten years investment agreements, whether in the form of Bilateral
Investment Treaties (BITs) or as independent chapters contained in a free trade agreements, become
one of the most important political tool to attract foreign investment to the host country. In this respect
the recent trend of the EU and ASEAN FTAs seems to go in this direction, with all the FTAs
containing an autonomous investment chapter or at least providing in the framework agreement the
possibility to insert one in the context of the FTA. Accordingly, also the literature begun, although to
analyze the impact that FTAs have on the intra and extra-FTA investment flow on the member
countries. Unfortunately all the quantitative work done so far adopts an econometric model analyzing
only the ex-post effects of FTAs on investment inflow. Nonetheless the few studies available confirm
the positive relationship between FTA and investment.
Accordingly, in order to assess the potential impact on investment inflows due to the formation of a
free trade area the analysis will be limited only to theoretical and qualitative implications. In this
regard it is conceptually important to make one important distinction between investment inflow and
corresponding liberalization in trade in goods and investment inflow and corresponding deeper
liberalization such as trade in services. In this analysis will not be taken into consideration general
regulatory reforms or the creation of ad hoc investment-related provisions, of the kind usually inserted
in Bilateral Investment Treaties (dispute settlement mechanism, fair and equitable treatment, non
discrimination etc.). Studies prove that, unless the regulatory reform has the effect of fully liberalize
the market to foreign investors (as in the case of services liberalization) or to create fiscal or regulatory
incentives to foreign investors, general business enabling provisions or the creation of a dispute
settlement mechanism would bring only additional investment at the margin.
4.2.1. Trade in Goods Liberalization and Investment Inflow
In spite of the widespread use of free trade agreement to liberalize services trade or to lock in ancillary
regulatory obligations as in the case of intellectual property rights, competition-related provisions or
investment regulation, the reduction of tariff and non-tariff barriers to trade in goods is still the main
reason behind the conclusion of a free trade area. The economic literature has showed over the years
that the main outcomes of an FTA is the so called “trade creation” and “trade diversion” effect, by
this meaning that the FTA creates new trade among the members and at the same time diverts trade
from third countries in favour of FTA members countries. At the same time, the creation of the free
trade are has important implications on the overall level of intra-FTA and extra-FTA foreign
investments in the host countries members of the FTA.
53
Potential effects of preferential trade liberalization on investment – MEDVED 2006
For what concerns goods trade free trade agreements essentially operate a discrimination between
members and non-members of the FTA, reducing for the former all the tariff and non-tariff barriers
that impede a free flow of goods among the members, while maintaining towards the non-members all
the previous barriers to trade. How does this apply to foreign direct investment?
One of the most important host country determinants of FDIs is the market size, which allows MNCs
to enjoy economies of scale and increased productive efficiency and reduced costs of production. The
creation of an FTA has the primary effect to create among the members a larger market that permits
free trade between companies located in these countries, but which might discriminate against non-
member countries and their companies. In order to assess the effect that such discrimination has on the
decisions of MNE to invest in the host country member of the FTA is important to distinguish between
intra-FTA investment inflow and extra-FTA investment inflow.
(Source: UNCTAD 1998)
54
Extra FTA investment inflow
The discrimination entailed in an FTA precludes foreign MNE to enjoy the greater market created by
the FTA. This has the primary consequence to exclude the foreign MNEs from all the business-related
benefits of a greater market (such as economies of scales, reduced costs, increased efficiency), while at
the same time it would have also the consequence of loose market share against their intra-FTA
competitors which are benefitting from decreased costs of production due to tariff reductions when
exporting within the FTA. At the same time, the trade diversion effect of the FTA will induce intra-
FTA companies to chose to buy goods from within the FTA due to the reduced costs, locking out
foreign companies. In order to cope with those negative effects extra-MNE will try to circumvent the
high tariffs by way of delocalizing their production within the FTA (tariff jumping effect). This has in
turn a positive effect on the countries member of the FTA, which will see an increase of extra-FTA
investment inflow. This effect is particularly marked with firms in industries usually characterized by
oligopolistic structure, such as the automobile, chemical or electronic industry14
One other possible element to consider is the growth effect due to the formation of the free trade area.
In this respect the creation of a large, richer and more dynamic market would probably attract more
market-seeking MNCs from outside the FTA.
.
Intra-FTA investment inflow
The creation of a larger market has complex effects on all the firms in the region that in the long terms
will have to adjust to new business dynamics. Besides the abovementioned affects associated with the
creation of a free trade area (economies of scale, greater efficiency, reduced production costs), the
extended market increases on the firms the competitive pressure which will push existing to reorganize
their networks into specialized production units serving the entire regional market that might focus
only on final products for the needs of the free trade area or in the production of single components
delivered to be assembled by other affiliates. Although The effect of the reorganizations of the
production network on the inflow of FDIs is difficult to predict, in the case of north-south FTAs with
countries specialized in the production of labour-intensive goods, the reorganization might entail the
diversion of investment from developed to developing members, leading to the closure of inefficient
14 The economic literature has begun only recently to analyze extra-FTA investment flows. Most of
the work is purely theoretical (Motta and Norman (1996), Krugman and Venables (1996), Puga and
Venables (1997), and Ekholm, Forslid, and Markusen (2007). More recently Chen (2008), Antras and
Fritz Foley (2009) have demonstrate empirically the increase of extra-FTA FDIs observing data of US
multinational corporations after the formation of the Asean Free Trade Area.
55
affiliates in some countries and to the expansion or the establishment of new affiliates in other
countries.
Empirical studies seem to confirm these hypotheses. In this respect, Te Velde and Bezemer (2004)
find that the larger the country compared to other member countries, the more FDI it will attract “on
the back of regional integration” as the investors will seek to be closer to the markets with the largest
demand. The immediate consequence would be that countries that are located far away from the
largest member country of the FTA would attract less FDI. Put in the context of a future EU-Vietnam
FTA the immediate conclusion would seem to suggest an increase of investment on the EU side.
Rather, it is important to bear in mind that, for what trade-in-goods concerns, Vietnam would bring
along its ASEAN membership (that alone is 600 millions consumers) together with all the other five
FTAs concluded by ASEAN in which Vietnam is a member. The sum of the Vietnamese FTAs would
give to EU investors in Vietnam a market to three billion people stretching from India, to Japan and
down south to New Zealand and Australia. The immediate consequence would be that countries that
are located far away from the largest member country of the FTA would attract less FDI.
Implications for Vietnam
The economic analysis provided above combined with the proclivity of the Vietnamese manufacturing
sector to attract consistent amount of FDIs seems to indicate that the goods industry would be a
magnet to foreign direct investments. The export potential of Vietnam after the signing of the ASEAN
agreement is immense, as it would provide to foreign companies producing in Vietnam a “zero tariff”
market of three billion people. Together with the adequate conditions to improve the productive
capacity of the firms (technology, cheap labour and better infrastructures) Vietnam could easily
become in the near future the export platform of manufactured and industrial goods in the Asian area,
challenging the traditional Chinese domain.
Having said that, the main questions to be answered are how a free trade agreement with the EU could
further increase the already high level of FDIs in the manufacturing and industrial sectors, and how
these FDIs could bring additional benefits to the Vietnamese economy.
European companies are already present in Vietnam in a variety of sectors (i.e. automotive,
motorbikes, textiles, garment, footwear, electronics etc.). The reduction of trade barriers between EU
and Vietnam will not change drastically the pattern of production of European MNEs, as the main
drivers of FDIs in Vietnam (cheap labour force, large market size and generally low cost of
production) will remain there. Furthermore, those industries that need adequate infrastructures and hi-
technology and highly skilled labour force (such as biotech or pharmaceutical) will not be attracted by
Vietnam by the signing of an FTA and rather they would choose to produce in more favourable
56
environments, at least in the near future. Rather, the reduction of trade barriers will induce three main
effects:
(i) It will create an additional export market for Vietnam of 600 million people. This additional
market would bring the “0 tariff zone” enjoyed by Vietnam to 3.5 Billion consumers. One
caveat of this is the long distance separating Europe by Vietnam. In this respect, the
improvement in trade facilitation and a reduction in transport cost could definitely be an
advantage.
(ii) It will reduce the cost of valuable inputs produced in Europe (such as hi-tech components or
machinery) and then exported to Vietnam. This could have two potential effects: first,
cheaper technology from Europe could enhance the productive capacity of the firms and
in general improve the overall level of technology in Vietnam with all the beneficial
spillovers generally associated with it. This, in turn, could attract more FDIs requiring a
higher level of technology or induce the creation of new industries (as it happened with
the Biotech industry in Malaysia). Second, Vietnam could import at a cheaper rate from
Europe components not available in the ASEAN+ area (such as hi-tech or higher level
goods) that could be then assembled in the production facilities located in Vietnam. This,
in turn, could enhance the appeal of the Vietnamese products, differentiating them from
the Chinese.
(iii) It will attract third country FDIs wishing to benefit from the increased attractiveness of
Vietnam as a productive platform (the “tariff jumping” effect)
All these effect will probably induce some restructuring in the supply chain of MNEs, although it is
difficult to predict them in advance. At the same time, it is also impossible to quantifying ex-ante the
amount of FDIs that will be attracted to Vietnam and their destinations.
4.2.2. Trade in Services Liberalization and Investment Inflow: “Market Access through
Market Presence15
”
One of the recent features of the modern FTAs contain provisions related to liberalization of trade in
services among members. Although most of the individual services-related commitments simply lock-
in previous autonomous reforms, thereby binding them between members, the reduction of barriers in
trade in services can generally provide a surge of investment inflow from the countries benefitting
15 P. Sauvé
57
from the liberalization. The reason behind that resides in the high-profitability of most services
industries and in the economic structure of services trade.
The investment dynamics analyzed with regard to trade in goods liberalization in general do not apply
to the service sector, which for them most part is dominated by non-tradable services (such as
infrastructure, energy and water production and distribution, tourism, transportation and logistic, most
of the financial and business services). The non-tradability of these services resides in the fact that the
peculiar modes of supply and consumption of these services requires either the establishment of a
commercial presence in the host country, or the cross-border movement of consumers or professional
service providers or the temporary movement of personnel abroad. This means that, with the exception
of mode-1 (cross-border supply) in order to access another market, it is mostly necessary to invest
directly in the targeted market. Indeed, among all the four modes of supply described in the GATS16
,
mode three (commercial presence) is usually the most important from a firm’s perspective, since most
of the services requires a stable presence in the host country to perform the service and often FDI is
the only mean for a services firm to expand their business to other markets. For this reason FDIs in the
services sector are usually of the market-seeking type, by this meaning that is the size and profitability
of the individual targeted market that drives the investment decisions of MNCs services suppliers.
How does liberalization of services fit into the model of FDI?
On the contrary to trade in goods liberalization, which implies a decrease in fiscal revenues due to the
elimination of tariff duties, liberalization in services trade does not imply any fiscal loss for the host
government. Despite this, unfortunately, the services sector is usually heavily regulated, characterized
by the highest level of FDI restriction and the largest services industries are usually under the state
monopoly and rarely liberalized in the contest of an FTA (Sauvé and Hoeckman 1994; UNCTAD,
2006) and for the most part (especially in developing countries) precluded to foreigners. In this respect
the establishment of a commercial presence, which would imply mode-3 liberalization is often
difficult to obtain for various political economy reasons.
In addition, it must be noted that simple liberalization of mode-3 is often not enough to encourage
FDIs in the services sector. Indeed, most of the most important investment in services are the result of
M&A activity across the border. In this respect an easing in the legal and regulatory framework is
often more encouraging than artificial liberalization. In this respect, many of the strategic services
industries (such as energy, telecom or banking) usually are state-owned and in the case of a foreign
take over, it is usually necessary a formal decision of the host government, which imply a high degree
of interference in the overall process, thereby discouraging the foreign investors.
Another caveat resides in the intrinsic regulatory nature of services trade, whose barriers to trade
consist of regulatory asymmetries with the other countries that are extremely difficult to rebalance in 16 GATS, Article 2
58
the short period. In most of the cases, in spite of formal liberalization, an intricate and excessively
burdensome regulatory framework can represent serious obstacles to FDIs in services, especially for
small and medium sized firms.
Nevertheless, the improvement of the services sector usually acts as a magnet to FDIs, even for those
directed to the manufacturing sector. The reason to this resides in the economic benefits usually
associated with the development of the services sector (better technology, more productive efficiency
etc.).
The empirical analysis on the US FTA and on the Asian FTA (Miroudot and Lesher, 2006; Miroudot
2008) seems to endorse these conclusions. Miroudot and Lesher have analyzed the impact of services
and investment provisions in FTAs, concluding that the combination of trade and investment
liberalisation seems to have a greater impact on FDIs inflow especially in the case of north-south
FTAs, which typically impose stringent investment regulations. In the context of a north-south FTA
such as the possible EU-Vietnam, the insertion of an autonomous investment chapter, together with a
further opening of the services sector, would therefore attract more FDIs.
Implications for Vietnam
The progressive market opening resulting from the Doi Moi policy and the entry of Vietnam into the
WTO and to other preferential trade arrangements have enhanced consistently the openness of the
manufacturing sector, which until 2009 ranked the first in terms of FDI inflow. Conversely, the
services sector (with the notable exception of few non-strategic subsectors, such as hotel and
restaurants, real estate) is still lagging behind both in terms of openness and in value of FDI inflow.
This stands in clear contrast with progressive growth of the services sector (in 2009 counting up to
44% of the GDP, growing by 11% compared with 2008) the immense potential of the Vietnamese
services sector in terms of attractiveness to foreign investors.
FDIs in services go in parallel with market access restriction listed in the WTO schedule of
commitments of each country as “mode 3” liberalization (commercial presence)17
implies the direct
presence of foreign investors in the liberalizing country, the classical pattern of FDI. Unfortunately
both the WTO commitments of Vietnam and its unilateral opening at the domestic level do not allow
(or at least, do not offer the necessary regulatory conditions) the entrance of foreign services suppliers
in the most attractive sectors. The list of the sector or subsector in which Europe could have an interest
is infinite, as the variety and multiplicity of the European services industry would cover virtually
everything. Nevertheless, there are some sectors that are worth mentioning:
17 GATS, Article 2
59
• Financial services: Indeed banking, insurance and securities are the sectors with the higher
export potential from Europe, as it can be seen from the level of investment in financial
services-friendly countries such as Hong Kong and Singapore. Applied to Vietnam, where
only 6% of the population own a bank account and where there is constant shortage of credit
to finance the expanding business (especially in the rural area), European investors could find
the Vietnamese market highly appealing.
• Distribution: Usually the domain of French investors, especially in food, the distribution
market in Vietnam would be a top priority for European investors.
• Franchising and retail: The growing middle class would drive a higher demand of middle
quality and high quality goods. Following this, European, Asian and north American brands
would begin to look for franchising and retailing opportunities in Vietnam.
• Telecom: The Vietnamese telecom market is that with the highest FDI potential from Europe
due to the convergence of various factors (expertise of EU telecom firms, growing potential of
the market etc, growing technology). The sector is partially liberalized and liberalization could
also bring additional FDIs in the Hi-tech industry.
• Environmental services: The growing climate-change concerns and the hi-pollution of
Vietnamese urban area would attract high environmental services industries (waste disposal,
consultancy)
• Business services: Although the sector is already liberalized the presence of further European
investors would drive the demand for European business services firms. On top of this, the
growing population and the increased income would rise the demand for these kind of
services.
• Transport: The transport sector is among the most appealing for EU firms due to the
underdevelopment of the Vietnamese sector and the high profitability of the business.
Unfortunately transport is higly dependent on a parallel development of physical infrastructure
such as street, port and airport facilities.
• R&D: The case of Malaysia shades a light on the potential of this sector, both in terms of FDI
and, first of all, in terms of intrinsic economic importance. Malaysia liberalized the R&D
sector twenty years ago, becoming later one of the most advanced countries in the region.
R&D and the biotech industry become over the years the driving force behind the “Malaysian
miracle” and an engine of growth for the country, pushing forward all the other sectors of the
economy.
Table 16: Main Destinations of EU FDIs (2002-2005)
60
(Source: Eurostat, EU Foreign Direct Investment Yearbook 2008)
The export propensity and the hi-quality of the European services sector would match perfectly with
the underdeveloped and highly closed services sector in Vietnam. On top of this, Vietnam is
experiencing a population boom (100 million by 2020) with a growing middle class with increased
purchasing power. The best market conditions for FDIs in services.
Unfortunately, in the context of a free trade agreement, on the contrary to what happens to goods
trade, which has to be “substantially all” liberalized to be compatible with the WTO requirements, the
liberalization of trade in services is not compulsory, leaving to each countries’ discretion the decision
to open the market to foreign services suppliers. Indeed, experience proves that in the context of a free
trade agreement usually there is no advancement in the openness of the sector compared to the
domestic status quo. The reasons to this vary from the political difficulties associated with the opening
of some of the services sector (state monopoly, high rate of employment), which in most of the cases
demonstrated to be highly politically sensitive, to the little incentives to liberalize on a preferential
basis, instead of binding the reforms directly at the multilateral level. In this respect, despite some
exceptions, free trade agreement have been used by members to lock-in previous regulatory reforms,
thereby binding them internationally, rather than committing to additional reforms. Nevertheless, in
some cases (especially, north-south FTAs) the signing of the FTA has been used by developing countries as
an excuse to promote and to justify internally the liberalization of the services sector.
61
4.3. Future Investment Perspectives: Towards a services-driven agenda?
The Vietnamese market is by one of the most attractive destination for FDI even without any free trade
agreement. The questions to be answered are whether the signing of a free trade agreement with the
EU would bring additional investment inflow, both from the EU and from third countries, to which
sector these investments will be channelled and whether they would enhance the competitiveness of
the Vietnamese economy. In this sense, Vietnam is already receiving substantial amount of FDIs,
nevertheless it seems that is the quality of the investments that is missing.
Vietnam has a lot to gain from a free trade agreement with the EU, both in terms of trade and also in
terms of increased investment. From a qualitative analysis it seems that the biggest gains for Vietnam
(in terms of volume and quality of FDIs, but also in terms of general economic benefits) would come
from services liberalization.
The competitiveness of the manufacturing sector of Vietnam is undoubted. The combination of cheap
labour force and free market access to the ASEAN+ area render Vietnam a potential export hub to the
whole region. A free trade agreement with the EU not only will increase the propensity of EU firms to
invest in Vietnam, but it will also bring additional benefits to the Vietnamese economy. These benefits
resides in an increased appeal of Vietnam as a productive and export facility (cheaper and better goods
from Europe; larger market of 3.5 billion people; increased technology transfer to Vietnam), which in
turn will attract more and of better quality investments from within and outside the FTA region.
In spite of the possible increase of FDIs in the manufacturing sector, the greater gains for Vietnam
seem to come from a preferential liberalization of some of its services sectors. These gains will not
only come from the immense economic effects originating by services liberalization, but they will
come also in form of EU FDIs. Indeed, the high export propensity of the EU services sector seems to
match perfectly with the increasing needs of Vietnam to improve its productive capacity and, more in
general, to further develop towards standards more in line with middle-income countries, which
usually base their growth on a dynamic services sector. Despite these considerations, experience seems
to indicate that the political economy of services liberalization render difficult to liberalize services
trade on a preferential basis. One solution might be to use the FTA to endorse domestic regulatory and
economic reforms as it happened in various north-south FTAs.
62
5. IMPACT OF TARIFF REDUCTION ON THE VIETNAMESE ECONOMY
5.1. Introduction
The issue for the political decider is to analyse different types of models in order to see what choices
are left in case of a FTA agreement: how much possibilities would there be for export, how much
imports would rise? How much fiscal resources would decrease, how much jobs would be lost? Etc.
However, dynamic general equilibrium models have been extensively used for analysing potential
impacts of FTA on the Vietnamese economy and yet there is no clear and systematic explanation on
the functioning of such tools and their underlying hypothesis.
Our purpose is to demonstrate that applied general equilibrium models should not provide unique
solutions and should not be used by FTA supported with the only aim to prove that FTA has more or
less the same impact upon the different stakeholders. We aim to suggest that a CGE model elaborated
for a FTA impact analysis should present different conclusions according to a variety of assumptions
such as: would a FTA assume a stable trade balance or not, if not would a trade deficit assume an
increase of FDI, a decrease of foreign assets or an increase of debt? Etc.
Basically, standard CGE models are determined through the quadrangular interrelationship between
production activities, factor remuneration, households and foreign trade. As they use production
factors like capital and labour, which constraint production outputs, they are supply driven models, as
they present effects that essentially result from substitution between sectors, production factors, or
reallocation between supply and demand (e.g. between domestic and imported goods or between
exports and domestic goods). Factors such as labour and capital are limited, which implies that using
more than of one of them requires the use of less of the other one. They also assume that the expansion
of one of these sectors in response to increased demand opportunities requires that resources are
diverted from the other sector, consequently reducing their production.
Even if their appellation suggests that the evolution of supply and demand results from the evolution
of prices, standard CGE models offer a supply side perspective and their simulations only suggest long
term trajectories which, nevertheless, do not take into account changes in productivity and
competitiveness. They assume that the structure of the productive sector, described in the Social
Accounting Matrix (SAM), does not vary in time and, accordingly, they are unable to forecast
structural changes. Consequently, their results are generally lower than those obtained by demand
models, which do not consider factors production as exogenous endowments.
In addition, the uses of CGE models bring a very specific issue in open economies: the treatment of
external trade. Most CGE models used for trade liberalization impact analysis have a long tradition of
63
using Armington and CET functions, which means that first, production is split between exports and
domestic sales and then, on a second stage, domestic demand is split between demand for imports and
domestic output (covered by the first Armington function). If total production is assumed to remain
unchanged (which is the assumption of all standard neoclassical models), there is mechanically a
trade-off between imports and exports and introducing substitution elasticity simply increases or
decreases the level of trade-off but does not change the underlying concept. Nevertheless, decisions of
how much is imported and exported are not always in direct relation with domestic demand or
production, as assumed by standard CGE models. In the case of Vietnam, it could be realistic to
assume that some sectors present over capacity productions and unused labour factor, particularly in
footwear, textile and garnment industry, because of the existence of import taxes in the EU that limit
Vietnamese companies to export more in the region. Consequently, it would be dubious to assume a
mechanical increase of exports such as the Armington functions would do.
Standard CGE models, including the GTAP18
The issue lays in the CGE model elaboration itself and its fine-tuning.
, tend to respond to the trade liberalization impact issue
by assuming that trade balance would remain at the same level. It is a strong assumption, in line with
the logic of Armington functions determining imports and exports. The issue is that trade-off
mechanisms may sometimes go against common sense such as: if prices would decrease, should
export rise accordingly to import rise?
In the following paragraph, we present results provided by two types of models in general equilibrium:
the first one is the standard neoclassic CGE model and the second one is of the same structure, but
driven by exports, considered as exogenous.
5.2. Two variants for modeling Vietnamese trade liberalisation
We describe here two different formulations of a dynamic CGE model. We have built these models in
GAMS/MPSGE19, as it is the most versatile and compact format for building CGE models while their
structure can be easily modified. MPSGE models are built upon the MCP formulation developed by
Mathiesen20
18 GTAP (Global Trade Analysis Project) see https://www.gtap.agecon.purdue.edu
, associated with the dual nonlinear programming of the Arrow-Debreu model. A CGE
model formulated in MCP can also be interpreted as first-order necessary conditions for the dual
approach of the Arrow-Debreu model.
19 MPSGE is la programming language invented by Tom Rutherford that enable to build CGE models in the most compact
form possible (see Rutherford T. F.1999 Applied general equilibrium modeling using MPSGE as a GAMS
subsystem: an overview of the modeling framework and syntax, computational economics, 14, 1999). 20 See Mathiesen l. Computation of economic equilibrium by a sequence of linear complementarity problems,
mathematical programming study 23, North-Holland, 1985, pp. 144-162
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5.2.1. Models structure and hypothesis
The models are initially based on standard neoclassical structure. Their common data base is a Social
Accounting Matrix built for Vietnam for year 2005. Their common structure represents an open
economy with perfect competition in all markets, homogenous agents and a constant rate of
technological progress. Four different economic agents are considered: households, enterprises,
government and the Rest of the World, with a breakdown of different trade economic partners, and
sixteen sectors have been considered, both in the SAM and in the model.
• The first model (Classic) is a standard neoclassical CGE model with exogenous trade balance
in volume.
• The second model (Keynes) keeps the same hypothesis but adopts a Keynesian approach by
assuming endogenous labor endowment in order to satisfy the constraint of an increase of
exports of 6% in footwear, garment & textile and rubber sectors and 3% in the other sectors.
In the second model, the neoclassical logic has been adapted in order to be more in line with the
common sense of political deciders in Vietnam that believe that FTA would foster Vietnamese exports
and consequently labour force demand should increase accordingly. This model is an attempt to follow
a Keynesian approach, more in line with the potential impacts of the EU-Vietnam FTA expected by
the government.
The main differences between the Keynes model and a standard neoclassic model are the following:
• Contrary to neoclassical CGE models, production can follow an increase of exports without
assuming a decrease of domestic demand, which consequently leads to an increase of labour
demand and supply, hence reducing unemployment;
• labour endowment can vary in order to follow Vietnam exports scenarios, which means that trade
balance with the EU should improve. Consequently, either EU contribution to investment would
decrease either Vietnam would increase imports from other countries in order to keep a stable
global trade balance.
As far as the exchange rate, is concerned, some CGE models the use exchange rate as an endogenous
variable that fluctuates in order to maintain a fixed trade balance in volume. We used the exchange
rate as the numeraire for both models essentially because standard CGE models do not capture vicious
circle effects that would result from devaluation and inflation effects. Consequently, it would not be
realistic to identify the exchange rate with a relative price that would automatically adjust in order to
keep the trade balance constant, without having any negative impact on the economy.
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5.2.2. Tariff dismantling scenarios
Three scenarios have been elaborated in order to assess the potential economic impact of a future EU-
Vietnam Free Trade Agreement:
• the baseline scenario (Base: Business As Usual) simulation considered as the baseline for which
no dismantling at all is considered.
• the first scenario (Rapid dismantling) - in which tariffs are immediately reduced by 90% -
simulates a rapid tariff dismantling for which it is assumed that all duties are reduced by 90% for
all goods imported from the European Union. This is an extreme case of trade liberalization, but
its aims are to represent the maximal impact of the dismantling scenario on the Vietnamese
economy in the absence of any accompanying measures. It can also be seen as a benchmark for a
comparison with other scenarios.
• the second scenario (Progressive dismantling : Progressive dismantling) simulates a progressive
tariff dismantling, based on a tariff list which distinguishes products according to their degree of
sensitiveness. In this list, products have been gathered into four distinct categories21
o Category A: non sensitive products
o Category B: sensitive products
o Category C: less sensitive products
o Category D: very sensitive products.
The dismantling time table for these categories of goods originating from the EU is the following:
Table 17: Change in custom duties for goods originating from the EU, in percentage by
categories
Category Category name 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
A
Non sensitive
products -20% -20% -20% -20%
B
Low sensitive
products -20% -20% -20% -20%
C
Sensitive
products -20% -20% -20% -20%
D
Very sensitive
products 0% 0% 0% 0%
These different product categories have been elaborated on fiscal criteria; nonetheless they should be
naturally revised and carefully updated by the national authorities. 21 Details for each category are given in Annex
66
The correspondence between the timetable based on the different categories of products to be
liberalised and the sectors of the SAM is given in the table hereafter.
Table 18: Breakdown of custom duties by branch of the SAM evolution for the progressive
scenario (values in %)
SAM Branches 2009 2010 2011 2012 2013 2014
LiveStock 23.78% 23.76% 23.75% 23.74% 19.00% 15.21%
Coffee 20.48% 20.48% 20.48% 20.48% 16.50% 13.32%
Vegetable 7.09% 6.51% 6.05% 5.68% 5.14% 4.72%
Fishery 30.00% 30.00% 30.00% 30.00% 24.00% 19.20%
Wood 6.85% 6.78% 6.73% 6.69% 5.49% 4.52%
Food 30.86% 30.85% 30.85% 30.84% 29.57% 28.55%
Footwear 31.49% 31.49% 31.49% 31.49% 27.56% 24.41%
Garnment-Textile 25.09% 25.01% 24.95% 24.90% 24.22% 23.68%
Rubber 7.89% 7.53% 7.24% 7.01% 5.97% 5.13%
Chemical 1.73% 1.63% 1.55% 1.49% 1.24% 1.05%
Machinery-Electrical 3.71% 3.60% 3.52% 3.45% 2.86% 2.38%
Transport 14.59% 14.58% 14.58% 14.58% 13.35% 12.37%
Other Industries 6.11% 6.02% 5.94% 5.88% 4.91% 4.14%
Average 8.94% 8.86% 8.79% 8.74% 7.79% 7.03%
SAM Branches 2015 2016 2017 2018 2019 2020
LiveStock 12.17% 9.75% 9.75% 9.75% 9.75% 9.75%
Coffee 10.78% 8.74% 8.62% 8.53% 8.45% 8.39%
Vegetable 4.38% 4.10% 3.80% 3.55% 3.35% 3.20%
Fishery 15.36% 12.29% 12.29% 12.29% 12.29% 12.29%
Wood 3.76% 3.14% 3.04% 2.96% 2.89% 2.84%
Food 27.73% 27.08% 23.70% 21.00% 18.84% 17.12%
Footwear 21.90% 19.89% 17.52% 15.63% 14.11% 12.90%
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Garnment-Textile 23.24% 22.89% 18.63% 15.22% 12.50% 10.32%
Rubber 4.47% 3.93% 3.76% 3.62% 3.50% 3.41%
Chemical 0.89% 0.76% 0.76% 0.76% 0.76% 0.76%
Machinery-Electrical 2.00% 1.70% 1.66% 1.62% 1.60% 1.58%
Transport 11.58% 10.95% 10.70% 10.50% 10.34% 10.21%
Other_Industries 3.52% 3.03% 2.87% 2.74% 2.64% 2.55%
Average 6.42% 5.94% 5.48% 5.12% 4.83% 4.59%
5.3. Simulation results analysis
Simulations results presented below highlight fiscal and macroeconomic impacts of the EPA. When
analysing the different models results, the purpose will be to underline how changes of the standard
CGE model framework can lead to different and sometimes opposite results.
5.3.1. The fiscal impact
This first table transcripts the gap on custom duties resulting from the two different models (Classic
and Keynes) and two tariff dismantling scenarios: imports prices on goods originating from the EU are
reduced of 90% in the first year of simulation for the rapid dismantling scenario and follow a specific
temporal decrease for the progressive dismantling scenario. Not surprisingly the difference between
the two types of models is almost negligible.
Table 19: Losses of custom duties in comparison with the baseline (absolute deviation)
Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling
Classic -39.87% -39.87% -39.87% -39.86% -39.86% -39.86% -39.86% -39.86% -39.86%
Keynes -38.95% -38.94% -38.93% -38.92% -38.91% -38.91% -38.90% -38.90% -38.90%
Progressive
dismantling
Classic 0.00% 0.00% -0.48% -1.16% -7.51% -11.65% -18.11% -22.33% -22.33%
Keynes 0.00% 0.43% 0.37% 0.09% -6.08% -9.99% -16.39% -20.45% -20.27%
Source: simulation results of the CGE models for Vietnam
When impact on government fiscal resources is analysed, simulations start to present significant
differences between the models, as the following table exhibits.
FTA appears the most interesting with the Keynes model as fiscal revenues would increase in 2022 by
529 billion dongs in the case of a rapid dismantling and by 6 305 billion dongs in 2022 in case of a
progressive dismantling, while the Classic model would present a negative impact for both scenarios.
68
Simulation results consequently show that no specific fiscal effort (such as improvement of tax
collection) is necessary if the Keynes model is used, while there is a need to find other fiscal revenues
to compensate fiscal losses if the Classic model is used instead.
Table 20: Variation of government fiscal revenue (absolute deviation from the baseline)
Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling
Classic -5 785 -5 785 -5 785 -5 785 -5 785 -5 785 -5 785 -5 785 -5 785
Keynes 529 529 529 529 529 529 529 529 529
Progressive
dismantling
Classic 0 0 -72 -176 -1 157 -1 800 -2 599 -3 121 -3 121
Keynes 0 1 451 2 805 4 121 4 190 4 760 4 907 5 542 6 305
Source: simulation results of the CGE models for Vietnam
5.3.2. Impact on imports in volume
The following table shows that EU-Vietnam FTA would mechanically increase imports by 1 to 2 %,
pointing out small discrepancies between the two models. This increase appears logically lower in
percentage for the Classic model, as it was assumed that FTA would increase exports in proportion to
the increase of imports.
Table 21: Impact on imports in volume (percentage deviation from the baseline)
Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling
Classic 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%
Keynes 1.76% 1.76% 1.76% 1.76% 1.76% 1.76% 1.76% 1.76% 1.76%
Progressive
dismantling
Classic 0.00% 0.00% 0.01% 0.03% 0.16% 0.24% 0.42% 0.53% 0.53%
Keynes 0.00% 0.24% 0.48% 0.72% 1.01% 1.28% 1.56% 1.84% 1.96%
When analysing imports at a more disaggregated level, the trade liberalisation impact appears rather
similar among Vietnam’s different trade partners as it has been assumed that goods imported from
different regions were not substitutable.
Table 22: Impact on imports in volume – breakdown by trade partners (deviation in percentage
from the baseline)
Scenario Model Agent 2007 2009 2011 2013 2015 2017 2019 2021 2022 Rapid dismantling
Classic AC 0.81% 0.81% 0.81% 0.81% 0.81% 0.81% 0.81% 0.81% 0.81% CH 0.86% 0.86% 0.86% 0.86% 0.86% 0.86% 0.86% 0.86% 0.86% EU 0.72% 0.72% 0.72% 0.72% 0.72% 0.72% 0.72% 0.72% 0.72%
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KR 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% ROW 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98%
Keynes AC 1.87% 1.87% 1.87% 1.87% 1.87% 1.87% 1.87% 1.87% 1.87% CH 1.69% 1.69% 1.69% 1.69% 1.69% 1.69% 1.69% 1.69% 1.69% EU 1.59% 1.59% 1.59% 1.59% 1.59% 1.59% 1.59% 1.59% 1.59% KR 1.73% 1.73% 1.73% 1.73% 1.73% 1.73% 1.73% 1.73% 1.73% ROW 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80%
Progressive dismantling
Classic AC 0.00% 0.00% 0.01% 0.03% 0.18% 0.28% 0.41% 0.49% 0.49% CH 0.00% 0.00% 0.01% 0.03% 0.14% 0.20% 0.39% 0.51% 0.51% EU 0.00% 0.00% 0.00% 0.01% 0.12% 0.20% 0.29% 0.35% 0.35% KR 0.00% 0.00% 0.01% 0.02% 0.13% 0.20% 0.45% 0.61% 0.61% ROW 0.00% 0.00% 0.01% 0.03% 0.17% 0.26% 0.45% 0.57% 0.57%
Keynes AC 0.00% 0.27% 0.56% 0.84% 1.17% 1.49% 1.77% 2.05% 2.19% CH 0.00% 0.23% 0.48% 0.72% 0.97% 1.22% 1.51% 1.79% 1.91% EU 0.00% 0.22% 0.44% 0.65% 0.92% 1.17% 1.38% 1.60% 1.72% KR 0.00% 0.23% 0.46% 0.70% 0.94% 1.19% 1.52% 1.83% 1.95% ROW 0.00% 0.23% 0.47% 0.70% 0.99% 1.27% 1.56% 1.84% 1.96%
Source: simulation results of the CGE models for Vietnam
5.3.3. Impact on trade balance
5.3.3.1. Impact on trade balance in volume
It has been said that for both Classic and Keynes models, overall trade balance is assumed to remain
unchanged, which is an assumption followed by most of applied general equilibrium models,
including the GTAP. Consequently, simulation results do not present any difference with the baseline,
as the following table exhibits:
Table 23: Impact on trade balance in volume (absolute deviation from the baseline)
Scenario Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling
Classic 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Keynes 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Progressive
dismantling
Classic 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Keynes 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
When the breakdown by trade partners is analysed, it appears that trade balance in volume with the EU
improves for all models and scenarios, while the one with China deteriorates, which is the explanation
why global Vietnamese trade balance remains unchanged.
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Table 24: Impact on trade balance in volume – breakdown by agents (absolute deviation from
the baseline)
2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid dismantling
Classic
AC 1 258 1 387 1 529 1 686 1 859 2 050 2 260 2 492 2 616
CH -1 239 -1 367 -1 509 -1 665 -1 837 -2 026 -2 235 -2 465 -2 589
EU 80 89 99 109 121 134 149 165 173
KR -775 -855 -943 -1 041 -1 148 -1 266 -1 396 -1 540 -1 617
ROW 677 747 825 910 1 004 1 108 1 223 1 349 1 417
Keynes AC -782 -852 -930 -1 017 -1 114 -1 222 -1 341 -1 473 -1 545
CH -4 539 -5 010 -5 528 -6 098 -6 727 -7 420 -8 184 -9 026 -9 478
EU 4 107 4 530 4 996 5 510 6 077 6 701 7 389 8 147 8 555
KR -2 222 -2 454 -2 709 -2 991 -3 300 -3 642 -4 018 -4 432 -4 654
ROW 3 436 3 785 4 171 4 596 5 066 5 583 6 154 6 783 7 122
Progressive dismantling
Classic
AC 0 0 7 19 147 248 909 1 457 1 531
CH 0 0 -23 -62 -286 -472 -1 023 -1 490 -1 568
EU 0 0 6 17 61 99 154 204 216
KR 0 0 -5 -14 -132 -229 -634 -974 -1 025
ROW 0 0 15 39 211 354 594 803 846
Keynes
AC 0 -169 -378 -633 -969 -1 357 -1 634 -2 013 -2 283
CH 0 -820 -1 818 -3 022 -4 366 -5 996 -8 020 -10 398 -11 730
EU 0 709 1 576 2 623 3 870 5 351 7 204 9 353 10 528
KR 0 -388 -854 -1 412 -2 045 -2 814 -3 861 -5 061 -5 700
ROW 0 667 1 474 2 444 3 511 4 815 6 312 8 119 9 184
Source: simulation results of the CGE models for Vietnam
5.3.3.2. Impact on trade balance in value
As Vietnamese trade balance remains stable in volume, imports price decrease is sufficiently strong to
produce a positive impact on trade balance in value for all models, as the following tables and graphs
exhibit.
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Table 25: Impact on trade balance in value (absolute deviation from the baseline)
Scenario Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling
Classic 6 198 6 198 6 198 6 198 6 198 6 198 6 198 6 198 6 198
Keynes 6 303 6 304 6 304 6 305 6 305 6 306 6 306 6 306 6 306
Progressive
dismantling
Classic 0 0 73 180 1 253 1 950 2 799 3 351 3 351
Keynes 0 0 74 182 1 275 1 992 2 861 3 433 3 441
Figure 1: Impact on trade balance in value (absolute deviation from the baseline)
If we analyse trade balance in value between different partners, simulations present a significant
improvement with the EU for all models and scenarios, which exceed 10000 billion dongs for the
Keynes model in the rapid dismantling scenario. Trade balance in value with China still deteriorates,
but not sufficiently to prevent a global improvement of Vietnamese trade balance
Table 8: Impact on trade balance in value (% deviation from baseline scenario)
72
Source: simulation results of the CGE models for Vietnam.
5.3.1. Impact on domestic demand
Results on domestic demand show opposite figures according to the type of model. The Classic model
presents a negative impact due to the increase of exports, while overall production remains more or
less stable. On the other hand, the Keynes model, presents a significant increase on internal demand,
because production can follow the growth of the demand.
Table 26: Impact on trade balance in value (% deviation from baseline scenario)
Scenario Model 2007 2009 2011 2013 2015 2017 2019 2021 2022 Brutal dismantling
Classic -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% Keynes 2.25% 2.26% 2.27% 2.27% 2.28% 2.28% 2.29% 2.29% 2.29%
Progressive dismantling
Classic 0.00% 0.00% 0.00% -0.01% -0.04% -0.06% -0.08% -0.09% -0.09% Keynes 0.00% 0.49% 0.97% 1.46% 1.83% 2.25% 2.63% 3.05% 3.31%
Source: simulation results of the CGE models for Vietnam.
5.3.2. Impact on Gross Domestic Production
For both models, simulations exhibit a positive impact on GDP in comparison with the baseline in
2022, as a result of drop in domestic prices and consumer increased purchase power. However, this
increase is more significant (+3% in 2022) for the Keynes model, because production can follow the
Scenario Model Agent 2007 2009 2011 2013 2015 2017 2019 2021 2022 Brutal dismantling
Classic AC 1 258 1 258 1 258 1 258 1 258 1 258 1 258 1 258 1 258 CH -1 239 -1 240 -1 241 -1 242 -1 243 -1 244 -1 244 -1 245 -1 245 EU 6 278 6 278 6 279 6 280 6 280 6 281 6 281 6 281 6 281 KR -775 -776 -776 -777 -777 -777 -778 -778 -778 ROW 677 678 678 679 680 680 681 681 682
Keynes AC -782 -773 -765 -759 -754 -750 -747 -744 -743 CH -4 539 -4 544 -4 548 -4 551 -4 553 -4 555 -4 557 -4 559 -4 559 EU 10 410 10 413 10 415 10 417 10 418 10 419 10 420 10 421 10 422 KR -2 222 -2 226 -2 229 -2 232 -2 234 -2 236 -2 237 -2 238 -2 239 ROW 3 436 3 433 3 431 3 430 3 429 3 428 3 427 3 426 3 426
Progressive dismantling
Classic AC 0 0 6 14 99 152 506 736 736 CH 0 0 -19 -46 -194 -290 -570 -753 -754 EU 0 0 78 192 1 294 2 011 2 884 3 454 3 455 KR 0 0 -4 -10 -89 -141 -353 -492 -493 ROW 0 0 12 29 143 217 331 405 407
Keynes AC 0 -153 -311 -472 -656 -833 -910 -1 017 -1 098 CH 0 -743 -1 496 -2 255 -2 955 -3 681 -4 466 -5 252 -5 642 EU 0 643 1 371 2 140 3 894 5 277 6 872 8 157 8 506 KR 0 -352 -703 -1 054 -1 384 -1 727 -2 150 -2 556 -2 742 ROW 0 605 1 213 1 824 2 376 2 956 3 514 4 101 4 418
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increase of exports. The stronger impact on GDP observed in the Keynes model, results from the
increase of exports, which is higher than the decrease of domestic demand22
Table 27: Impact on GDP (deviation in percentage from the baseline)
.
Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling
Classic 0.22% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23%
Keynes 2.67% 2.74% 2.79% 2.83% 2.87% 2.89% 2.92% 2.94% 2.94%
Progressive
dismantling
Classic 0.00% 0.00% 0.00% 0.01% 0.05% 0.08% 0.11% 0.13% 0.13%
Keynes 0.00% 0.48% 0.97% 1.48% 1.95% 2.44% 2.91% 3.41% 3.68%
Source: simulation results of the CGE models for Vietnam
5.3.3. Impact on final consumption
In accordance with production, households’ final consumption is assumed to be fostered by a potential
EU-Vietnam FTA according to all models. Impact on households’ consumption is much higher for the
Keynes than for the Classic model as it is stimulated at the same time by a price diminution effect and
by labour demand increase, which also increase revenues. At the end of the simulation period,
households’ consumption in volume increases by more than 3% for the Keynes model, while it reaches
only 0.5% for the Classic model for the rapid dismantling scenario.
Table 28: Impact on households consumption (deviation in percentage from the baseline)
Scenario Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling
Classic 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52%
Keynes 2.87% 2.81% 2.77% 2.74% 2.71% 2.68% 2.66% 2.65% 2.64%
Progressive
dismantling
Classic 0.00% 0.00% 0.01% 0.01% 0.10% 0.16% 0.24% 0.30% 0.30%
Keynes 0.00% 0.43% 0.86% 1.28% 1.72% 2.15% 2.59% 3.02% 3.23%
Source: simulation results of the CGE models for Vietnam
Contrary to households’ consumption, government consumption presents opposite results according to
which model is used. Not surprisingly, the negative impact is produced by the Classic model, while
the Keynes model presents positive results due to the strong economic growth that brings more
revenues than the amount of losses resulting from trade liberalisation with the EU.
22 Let’s remind that labor endowment has been assumed endogenous in the Keynes model in order to enable production to
adjust to external demand.
74
Table 29: Impact on government consumption (deviation in percentage from the baseline)
Scenario Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling
Classic -4.70% -4.70% -4.70% -4.69% -4.69% -4.69% -4.69% -4.69% -4.69%
Keynes 2.02% 2.08% 2.14% 2.19% 2.22% 2.25% 2.28% 2.30% 2.31%
Progressive
dismantling
Classic 0.00% 0.00% -0.06% -0.14% -0.87% -1.34% -2.10% -2.59% -2.59%
Keynes 0.00% 1.37% 2.68% 3.97% 4.38% 5.15% 5.50% 6.23% 6.97%
Source: simulation results of the CGE models for Vietnam
5.3.4. Impact on investment
As reported in the following table, simulation results exhibit a progressive increase of investment in
volume for the Keynes model (3.4% at the end of the simulation period for the progressive scenario),
while the impact is nearly null for the Classic model. Investments are one of the variables whose
variation depend the most on modelling assumptions. In addition, breakdown between saving and
consumption could change over time in the case an intertemporal dynamic model would be used,
while it remains constant in our case, as we used a recursive dynamic model.
Table 30: Impact on investment in volume (in % difference with reference scenario)
Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantlin
g
Classic 0.01% 0.01
%
0.01
%
0.01
%
0.01
%
0.01
%
0.01
%
0.01
%
0.01
%
Keynes 2.30% 2.39
%
2.46
%
2.52
%
2.57
%
2.61
%
2.64
%
2.66
%
2.68
%
Progressiv
e
dismantlin
g
Classic 0.00% 0.00
%
0.00
%
0.00
%
0.01
%
0.01
%
0.02
%
0.03
%
0.03
%
Keynes 0.00% 0.44
%
0.89
%
1.36
%
1.78
%
2.24
%
2.67
%
3.14
%
3.40
%
Source: simulation results of the CGE models for Vietnam
5.3.5. Impact on saving
As the SAM has been built with financial flows between agents, the accumulation account (often
called savings) represents in fact a breakdown of capital expenditures in value between agents. Hence,
impact on saving can be analysed in the same way as impact on agents’ investment in value.
75
For the rapid dismantling scenario, at the end of the simulation period, government’s savings increase
for the Keynes model and decrease for the Classic model, while household’s savings decrease for the
Keynes model and increase for the Classic model. Here again simulation presents opposite results
according to which type of model is used. However, when impacts are sufficiently strong, the two
models present the same results, such as the decrease of investment for the EU and its increase for
China, which is quite logical as foreign investment is the opposite of Vietnamese trade deficit with the
corresponding region. The table below also shows that, for the Keynes model, investment growth is
essentially driven by the increase of government savings (i.e. public investments), which largely
benefit from the trade liberalisation process.
Table 31: Impact on saving (absolute deviation from the baseline scenario)
Scenario Model Agent 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling
Classic AC -1258 -1258 -1258 -1258 -1258 -1258 -1258 CH 1240 1241 1242 1243 1244 1244 1245 Ent 104 105 105 105 105 105 105 EU -81 -81 -82 -82 -82 -83 -83 Gov -3622 -3618 -3614 -3611 -3608 -3605 -3602 Hou 65 64 63 63 62 62 61 KR 776 776 777 777 777 778 778 ROW -678 -678 -679 -680 -680 -681 -682
Keynes AC 773 765 759 754 750 747 743 CH 4544 4548 4551 4553 4555 4557 4559 Ent 568 604 635 659 679 696 715 EU -4109 -4111 -4112 -4113 -4114 -4114 -4115 Gov 5856 6562 7141 7614 8002 8320 8693 Hou 433 88 -194 -425 -615 -770 -952 KR 2226 2229 2232 2234 2236 2237 2239 ROW -3433 -3431 -3430 -3429 -3428 -3427 -3426
Progressive dismantling
Classic AC 0 -6 -14 -99 -152 -506 -736 CH 0 19 46 194 290 570 754 Ent 0 1 3 18 28 50 66 EU 0 -5 -13 -41 -61 -86 -104 Gov 0 -45 -109 -747 -1160 -1594 -1864 Hou 0 -3 -8 50 86 -24 -99 KR 0 4 10 89 141 353 493 ROW 0 -12 -29 -143 -217 -331 -407
Keynes AC 153 311 472 656 833 910 1098 CH 743 1496 2255 2955 3681 4466 5642 Ent 89 186 291 396 507 625 807 EU -643 -1297 -1957 -2619 -3285 -4011 -5064 Gov 1929 3939 6047 7262 8939 10377 13528 Hou 102 127 90 65 -15 -254 -572 KR 352 703 1054 1384 1727 2150 2742
76
ROW -605 -1213 -1824 -2376 -2956 -3514 -4418
Source: simulation results of the CGE models for Vietnam
5.3.6. Impact on composite prices
The following table logically shows that rapid trade liberalization with the EU would reduce
composite goods prices, as a result of the strong price decrease of imported goods and enhanced
competitiveness. Composite prices would decrease by about 1% in 2022 for the Keynes model, which
represents the biggest impact. For the Classic model, composite price lowering is less significant (0.8
% in comparison with the baseline for the rapid dismantling scenario).
Table 32: Impact on composite prices (in % of deviation from the reference)
Model 2007 2009 2011 2013 2015 2017 2019 2021 2022
Rapid
dismantling Classic -0.80% -0.80% -0.80% -0.80% -0.80% -0.80% -0.80% -0.80% -0.80%
Keynes -1.09% -1.08% -1.08% -1.08% -1.07% -1.07% -1.07% -1.07% -1.07%
Progressive
dismantling Classic 0.00% 0.00% -0.01% -0.04% -0.21% -0.33% -0.41% -0.47% -0.47%
Keynes 0.00% -0.02% -0.07% -0.11% -0.33% -0.47% -0.61% -0.71% -0.72%
Source: simulation results of the CGE models for Vietnam
5.3.7. Simulation results by sector
5.3.7.1. Impact on import prices by sector
Without taking into account services, the table below shows that decrease of import prices affects all
categories of goods for both models, with the biggest hit on footwear sector. For this branch, the
annual import price would decrease respectively by 13.9% for the brutal scenario. However, due to the
elaboration of the progressive scenario that was built in order to reduce fiscal losses, import prices
would decrease by only 8.5% at the end of the simulation period.
There are also sensible differentiations between price reductions of different products, which means
that categories will not be affected at the same level by the FTA. However, such results are mainly the
consequence of substitution effects between sectors, based on elasticities parameters drawn from the
GTAP data base of the literature that could be revised.
Table 33: Impact on import prices by sector (% deviation from the baseline)
Scenario Model Sector 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling
Classic & Keynes
LiveStock -1.93% -1.93% -1.93% -1.93% -1.93% -1.93% -1.93% Coffee -11.99% -11.99% -11.99% -11.99% -11.99% -11.99% -11.99% Vegetable -8.41% -8.41% -8.41% -8.41% -8.41% -8.41% -8.41%
77
Fishery -9.44% -9.44% -9.44% -9.44% -9.44% -9.44% -9.44% Wood -3.76% -3.76% -3.76% -3.76% -3.76% -3.76% -3.76% Food -5.16% -5.16% -5.16% -5.16% -5.16% -5.16% -5.16% Footwear -13.86% -13.86% -13.86% -13.86% -13.86% -13.86% -13.86% GarnmText -8.61% -8.61% -8.61% -8.61% -8.61% -8.61% -8.61% Rubber -3.15% -3.15% -3.15% -3.15% -3.15% -3.15% -3.15% Chemical -0.56% -0.56% -0.56% -0.56% -0.56% -0.56% -0.56% Mach-Elec -0.47% -0.47% -0.47% -0.47% -0.47% -0.47% -0.47% OtherInd -2.24% -2.24% -2.24% -2.24% -2.24% -2.24% -2.24% Transport -0.47% -0.47% -0.47% -0.47% -0.47% -0.47% -0.47% Communic 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% ServBusiness 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% ServOther 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Progressive dismantling
Classic & Keynes
LiveStock 0.00% 0.00% 0.00% -0.77% -1.26% -1.26% -1.26% Coffee 0.00% 0.00% 0.00% -4.66% -7.64% -7.78% -7.87% Vegetable 0.00% -0.76% -1.86% -3.13% -3.94% -4.66% -5.13% Fishery 0.00% 0.00% 0.00% -3.78% -6.19% -6.19% -6.19% Wood 0.00% -0.04% -0.10% -1.42% -2.26% -2.37% -2.44% Food 0.00% 0.00% 0.00% -0.43% -0.70% -1.83% -2.55% Footwear 0.00% 0.00% 0.00% -3.46% -5.67% -7.76% -9.09% GarnmText 0.00% -0.03% -0.07% -0.54% -0.84% -3.76% -5.63% Rubber 0.00% -0.16% -0.39% -1.22% -1.75% -1.89% -1.98% Chemical 0.00% -0.04% -0.09% -0.25% -0.35% -0.35% -0.35% Mach-Elec 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% OtherInd 0.00% -0.04% -0.10% -0.80% -1.25% -1.37% -1.45% Transport 0.00% 0.00% 0.00% -0.08% -0.13% -0.14% -0.15% Communic 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% ServBusiness 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% ServOther 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
5.3.7.2. Impact on imports by sector
It was already exposed that the EU-Vietnam FTA would increase imports by about 3.1% in average
for the rapid dismantling scenario. At the sectoral level, the most significant increase of imports is
observed for agriculture (fishery products, coffee, vegetable, and livestock) then in footwear and
garnment- textile branches, which is rather logical because they are the most protected branches on a
tariff view point. On the other hand, imports increase less than the average in the services sector, due
to the substitution effects with other products.
Classic and Keynes models present different results but not at a significant level that might bring to
different conclusions at the sectoral level.
78
Table 34: Impact on imports by sector (% deviation from the baseline scenario)
Scenario Model Sector 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling
Classic LiveStock 4.61% 4.61% 4.61% 4.61% 4.61% 4.61% 4.61% Coffee 38.37% 38.37% 38.37% 38.37% 38.37% 38.37% 38.37% Vegetable 5.02% 5.03% 5.03% 5.03% 5.03% 5.03% 5.03% Fishery 15.53% 15.53% 15.53% 15.53% 15.53% 15.53% 15.53% Wood 3.47% 3.47% 3.47% 3.47% 3.47% 3.47% 3.47% Food 4.04% 4.04% 4.04% 4.04% 4.04% 4.04% 4.04% Footwear 13.11% 13.11% 13.11% 13.11% 13.11% 13.11% 13.11% GarnmText 4.03% 4.03% 4.03% 4.03% 4.03% 4.03% 4.03% Rubber 2.39% 2.39% 2.39% 2.39% 2.39% 2.39% 2.39% Chemical 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% Mach-Elec 0.44% 0.44% 0.44% 0.44% 0.44% 0.44% 0.44% OtherInd 0.79% 0.79% 0.79% 0.79% 0.79% 0.79% 0.79% Transport 0.97% 0.97% 0.97% 0.97% 0.97% 0.97% 0.97% Communic -0.12% -0.12% -0.12% -0.12% -0.12% -0.12% -0.12% ServBusiness -0.08% -0.08% -0.08% -0.08% -0.08% -0.08% -0.08% ServOther -0.46% -0.45% -0.45% -0.45% -0.45% -0.45% -0.45%
Keynes LiveStock 6.79% 6.75% 6.72% 6.69% 6.67% 6.65% 6.63% Coffee 40.65% 40.74% 40.80% 40.86% 40.90% 40.94% 40.99% Vegetable 6.93% 6.97% 7.01% 7.04% 7.07% 7.09% 7.12% Fishery 17.58% 17.68% 17.76% 17.82% 17.87% 17.92% 17.97% Wood 5.52% 5.53% 5.54% 5.55% 5.55% 5.56% 5.56% Food 6.29% 6.26% 6.24% 6.23% 6.22% 6.21% 6.19% Footwear 13.66% 13.74% 13.80% 13.85% 13.90% 13.93% 13.98% GarnmText 4.66% 4.69% 4.72% 4.75% 4.77% 4.78% 4.80% Rubber 2.59% 2.60% 2.61% 2.61% 2.62% 2.62% 2.62% Chemical 2.59% 2.57% 2.55% 2.53% 2.52% 2.51% 2.50% Mach-Elec 2.69% 2.69% 2.69% 2.70% 2.70% 2.70% 2.70% OtherInd 3.05% 3.05% 3.05% 3.05% 3.05% 3.05% 3.05% Transport 3.44% 3.44% 3.44% 3.45% 3.45% 3.45% 3.45% Communic 1.53% 1.57% 1.61% 1.64% 1.66% 1.68% 1.70% ServBusiness 1.72% 1.72% 1.72% 1.72% 1.72% 1.72% 1.72% ServOther 2.29% 2.28% 2.27% 2.26% 2.26% 2.26% 2.25%
Progressive dismantling
Classic LiveStock 0.00% 0.00% 0.01% 1.77% 2.92% 2.98% 3.02% Coffee 0.00% 0.00% -0.01% 12.78% 22.30% 22.76% 23.06% Vegetable 0.00% 0.44% 1.08% 1.81% 2.28% 2.76% 3.06% Fishery 0.00% -0.01% -0.01% 5.88% 9.92% 9.89% 9.87% Wood 0.00% 0.04% 0.09% 1.30% 2.09% 2.20% 2.28% Food 0.00% 0.00% 0.00% 0.31% 0.50% 1.41% 2.00% Footwear 0.00% 0.00% -0.01% 3.05% 5.08% 7.08% 8.38% GarnmText 0.00% 0.02% 0.05% 0.31% 0.47% 1.77% 2.62% Rubber 0.00% 0.06% 0.15% 0.57% 0.85% 1.25% 1.51% Chemical 0.00% 0.03% 0.07% 0.19% 0.26% 0.39% 0.48%
79
Mach-Elec 0.00% 0.00% 0.00% -0.02% -0.03% -0.02% 0.00% OtherInd 0.00% 0.01% 0.03% 0.20% 0.30% 0.43% 0.51% Transport 0.00% 0.00% 0.00% 0.19% 0.31% 0.34% 0.37% Communic 0.00% 0.00% 0.00% -0.03% -0.05% -0.03% -0.02% ServBusiness 0.00% 0.00% 0.00% -0.03% -0.04% -0.01% 0.01% ServOther 0.00% -0.01% -0.01% -0.09% -0.14% -0.19% -0.22%
Keynes LiveStock 0.42% 0.84% 1.25% 3.38% 4.93% 5.30% 5.89% Coffee 0.41% 0.82% 1.24% 14.54% 24.66% 25.46% 26.48% Vegetable 0.45% 1.33% 2.44% 3.51% 4.39% 5.16% 6.11% Fishery 0.43% 0.86% 1.30% 7.63% 12.19% 12.48% 13.16% Wood 0.44% 0.90% 1.39% 2.94% 4.12% 4.57% 5.26% Food 0.44% 0.86% 1.29% 1.95% 2.53% 3.78% 4.98% Footwear 0.23% 0.46% 0.69% 3.89% 6.13% 8.23% 9.89% GarnmText 0.37% 0.75% 1.13% 1.57% 1.99% 3.30% 4.52% Rubber 0.35% 0.75% 1.17% 1.69% 2.16% 2.47% 3.00% Chemical 0.44% 0.89% 1.35% 1.80% 2.24% 2.61% 3.23% Mach-Elec 0.46% 0.91% 1.36% 1.72% 2.12% 2.50% 3.15% OtherInd 0.52% 1.05% 1.57% 2.12% 2.66% 3.13% 3.89% Transport 0.49% 0.98% 1.48% 2.05% 2.60% 3.03% 3.76% Communic 0.42% 0.83% 1.25% 1.52% 1.85% 2.13% 2.72% ServBusiness 0.41% 0.82% 1.22% 1.49% 1.81% 2.12% 2.68% ServOther 0.56% 1.10% 1.64% 2.01% 2.45% 2.83% 3.57%
80
5.3.7.3. Impact on composite prices by sector
Composite prices, which are a combination of domestic prices and imports prices, change according to
the dismantling impact on import prices, but is also affected by the evolution on domestic prices. For
both models, the rapid dismantling scenario leads to a sustainable decrease of composite prices in all
sectors, especially in garment/textile, due to the significant tariff reduction observed in this branch.
For the progressive scenario Results present the same patterns. Logically, the biggest decrease is
observed for garment-textile and footwear branches, but the impact in much less significant in the
progressive dismantling scenario.
More globally, imported goods prices reduction would essentially appear in the agricultural sector,
partially in the industrial sector (especially footwear and garment textile branches), while the services
sector would be very little affected.
Table 35: Impact on composite prices by sector (% deviation from baseline scenario)
Scenario Model Sector 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling
Classic LiveStock -1.28% -1.28% -1.28% -1.28% -1.28% -1.28% -1.28% Coffee -0.54% -0.54% -0.54% -0.54% -0.54% -0.54% -0.54% Vegetable -1.85% -1.85% -1.85% -1.85% -1.85% -1.85% -1.85% Fishery -1.45% -1.45% -1.45% -1.45% -1.45% -1.45% -1.45% Wood -1.07% -1.07% -1.07% -1.07% -1.07% -1.07% -1.07% Food -1.72% -1.72% -1.72% -1.72% -1.72% -1.72% -1.72% Footwear -0.65% -0.65% -0.65% -0.65% -0.65% -0.65% -0.65% GarnmText -2.20% -2.20% -2.20% -2.20% -2.20% -2.20% -2.20% Rubber -0.39% -0.39% -0.39% -0.39% -0.39% -0.39% -0.39% Chemical -0.32% -0.32% -0.32% -0.32% -0.32% -0.32% -0.32% Mach-Elec -0.43% -0.43% -0.43% -0.43% -0.43% -0.43% -0.43% OtherInd -0.62% -0.62% -0.62% -0.62% -0.62% -0.62% -0.62% Transport -0.50% -0.50% -0.50% -0.50% -0.50% -0.50% -0.50% Communic 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% ServBusiness 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% ServOther -0.02% -0.02% -0.02% -0.02% -0.02% -0.02% -0.02%
Keynes LiveStock -1.33% -1.34% -1.34% -1.35% -1.35% -1.35% -1.36% Coffee -0.93% -0.92% -0.91% -0.90% -0.89% -0.88% -0.88% Vegetable -2.05% -2.04% -2.04% -2.03% -2.03% -2.03% -2.02% Fishery -1.75% -1.73% -1.72% -1.71% -1.70% -1.69% -1.68% Wood -1.26% -1.26% -1.26% -1.26% -1.26% -1.26% -1.26% Food -1.76% -1.77% -1.77% -1.77% -1.77% -1.77% -1.77% Footwear -1.96% -1.95% -1.94% -1.92% -1.92% -1.91% -1.90% GarnmText -2.77% -2.77% -2.76% -2.76% -2.76% -2.76% -2.76% Rubber -1.15% -1.15% -1.15% -1.15% -1.15% -1.15% -1.15% Chemical -0.24% -0.24% -0.25% -0.25% -0.25% -0.25% -0.26% Mach-Elec -0.39% -0.39% -0.39% -0.39% -0.39% -0.39% -0.39%
81
OtherInd -0.52% -0.52% -0.52% -0.52% -0.52% -0.52% -0.52% Transport -0.48% -0.48% -0.48% -0.48% -0.48% -0.48% -0.48% Communic -0.35% -0.34% -0.33% -0.33% -0.32% -0.32% -0.31% ServBusiness -0.30% -0.30% -0.30% -0.30% -0.30% -0.30% -0.30% ServOther -0.04% -0.04% -0.04% -0.04% -0.04% -0.04% -0.04%
Progressive dismantling
Classic LiveStock 0.00% 0.00% 0.00% -0.51% -0.85% -0.84% -0.83% Coffee 0.00% 0.00% 0.00% -0.20% -0.34% -0.33% -0.32% Vegetable 0.00% -0.17% -0.41% -0.69% -0.87% -1.02% -1.11% Fishery 0.00% 0.00% 0.00% -0.56% -0.94% -0.93% -0.92% Wood 0.00% -0.01% -0.03% -0.40% -0.64% -0.67% -0.69% Food 0.00% 0.00% 0.00% -0.15% -0.25% -0.62% -0.85% Footwear 0.00% 0.00% 0.00% -0.16% -0.27% -0.35% -0.41% GarnmText 0.00% -0.01% -0.02% -0.14% -0.22% -0.96% -1.43% Rubber 0.00% -0.03% -0.07% -0.20% -0.29% -0.26% -0.24% Chemical 0.00% -0.01% -0.02% -0.10% -0.16% -0.18% -0.20% Mach-Elec 0.00% 0.00% 0.00% -0.03% -0.04% -0.07% -0.09% OtherInd 0.00% -0.01% -0.02% -0.20% -0.31% -0.36% -0.40% Transport 0.00% 0.00% 0.00% -0.08% -0.12% -0.15% -0.17% Communic 0.00% 0.00% 0.01% 0.03% 0.04% 0.09% 0.11% ServBusiness 0.00% 0.00% 0.00% 0.01% 0.02% 0.05% 0.07% ServOther 0.00% 0.00% 0.00% 0.00% -0.01% 0.00% 0.00%
Keynes LiveStock -0.01% -0.02% -0.03% -0.53% -0.86% -0.88% -0.90% Coffee -0.02% -0.03% -0.05% -0.29% -0.47% -0.53% -0.57% Vegetable 0.00% -0.18% -0.42% -0.73% -0.93% -1.11% -1.23% Fishery -0.01% -0.02% -0.03% -0.62% -1.01% -1.05% -1.08% Wood -0.01% -0.03% -0.05% -0.46% -0.72% -0.78% -0.82% Food 0.00% -0.01% -0.02% -0.17% -0.28% -0.65% -0.90% Footwear -0.17% -0.34% -0.50% -0.87% -1.16% -1.46% -1.78% GarnmText -0.07% -0.14% -0.22% -0.42% -0.57% -1.42% -2.02% Rubber -0.08% -0.19% -0.32% -0.57% -0.75% -0.87% -1.02% Chemical -0.01% -0.02% -0.04% -0.10% -0.13% -0.15% -0.18% Mach-Elec 0.00% -0.01% -0.01% -0.02% -0.03% -0.04% -0.05% OtherInd 0.00% -0.01% -0.02% -0.18% -0.28% -0.31% -0.33% Transport 0.00% 0.00% 0.01% -0.07% -0.12% -0.15% -0.16% Communic -0.01% -0.03% -0.04% -0.10% -0.13% -0.18% -0.22% ServBusiness -0.02% -0.03% -0.05% -0.10% -0.14% -0.18% -0.22% ServOther 0.00% 0.01% 0.01% 0.01% 0.00% 0.00% 0.00%
5.3.7.4. Impact on final consumption by sector
Even with the existence of substitution effect between products in the household’s utility function, the
impact of dismantling scenarios on final consumption generally remains in line with composite price
reduction. However, results are quite different according to the type of model which is chosen: for the
Keynes model, households consumption increases by more than 2% in all sectors, with the biggest
impact is observed on footwear and garment textile and agricultural sector, while the impact is much
82
lower for the Classic model, with even some negative values appearing for households consumption in
communication and business services.
However, such results are closely linked to products substitution elasticities between different
branches defined in the Social Accounting Matrix. These elasticities were requested from the local
experts, but were not provided and were consequently drawn from the literature and from the GTAP
database.
Table 36: Impact on household’s consumption in volume (%deviation from the baseline)
Scenario Model Sector 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling
Classic LiveStock 1.62% 1.62% 1.62% 1.62% 1.62% 1.62% 1.62% Coffee 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% 0.70% Vegetable 2.32% 2.32% 2.32% 2.32% 2.32% 2.32% 2.32% Fishery 1.82% 1.82% 1.82% 1.82% 1.82% 1.82% 1.82% Wood 1.36% 1.36% 1.36% 1.36% 1.36% 1.36% 1.36% Food 2.16% 2.16% 2.16% 2.16% 2.16% 2.16% 2.16% Footwear 0.84% 0.84% 0.84% 0.84% 0.84% 0.84% 0.84% GarnmText 2.76% 2.76% 2.76% 2.76% 2.76% 2.76% 2.76% Rubber 0.53% 0.53% 0.53% 0.53% 0.53% 0.53% 0.53% Chemical 0.44% 0.44% 0.44% 0.44% 0.44% 0.44% 0.44% Mach-Elec 0.57% 0.57% 0.57% 0.57% 0.57% 0.58% 0.58% OtherInd 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% Transport 0.66% 0.66% 0.66% 0.66% 0.66% 0.66% 0.66% Communic -0.12% -0.12% -0.12% -0.12% -0.12% -0.12% -0.12% ServBusiness -0.03% -0.03% -0.03% -0.03% -0.03% -0.02% -0.02% ServOther 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07%
Keynes LiveStock 3.89% 3.85% 3.82% 3.80% 3.78% 3.76% 3.74% Coffee 3.38% 3.32% 3.27% 3.23% 3.20% 3.17% 3.14% Vegetable 4.80% 4.75% 4.70% 4.67% 4.64% 4.62% 4.59% Fishery 4.42% 4.35% 4.30% 4.26% 4.22% 4.19% 4.16% Wood 3.80% 3.75% 3.72% 3.69% 3.66% 3.64% 3.62% Food 4.43% 4.39% 4.36% 4.33% 4.31% 4.29% 4.27% Footwear 4.69% 4.63% 4.58% 4.53% 4.50% 4.47% 4.44% GarnmText 5.73% 5.68% 5.64% 5.61% 5.59% 5.56% 5.54% Rubber 3.66% 3.62% 3.58% 3.55% 3.53% 3.51% 3.48% Chemical 2.52% 2.49% 2.45% 2.43% 2.41% 2.39% 2.37% Mach-Elec 2.71% 2.67% 2.63% 2.60% 2.58% 2.56% 2.54% OtherInd 2.86% 2.82% 2.79% 2.76% 2.74% 2.72% 2.69% Transport 2.82% 2.78% 2.75% 2.72% 2.70% 2.68% 2.65% Communic 2.66% 2.61% 2.56% 2.52% 2.49% 2.47% 2.44% ServBusiness 2.60% 2.56% 2.52% 2.50% 2.47% 2.45% 2.43% ServOther 2.28% 2.24% 2.20% 2.18% 2.15% 2.13% 2.11%
Progressive dismantling
Classic LiveStock 0.00% 0.00% 0.01% 0.62% 1.02% 1.04% 1.06% Coffee 0.00% 0.00% 0.00% 0.23% 0.40% 0.43% 0.44%
83
Vegetable 0.00% 0.20% 0.50% 0.83% 1.04% 1.27% 1.41% Fishery 0.00% 0.00% 0.00% 0.67% 1.13% 1.15% 1.17% Wood 0.00% 0.02% 0.04% 0.48% 0.77% 0.84% 0.89% Food 0.00% 0.00% 0.01% 0.18% 0.29% 0.78% 1.09% Footwear 0.00% 0.00% 0.00% 0.19% 0.32% 0.46% 0.55% GarnmText 0.00% 0.01% 0.02% 0.17% 0.26% 1.19% 1.80% Rubber 0.00% 0.03% 0.08% 0.24% 0.34% 0.35% 0.35% Chemical 0.00% 0.01% 0.03% 0.12% 0.18% 0.25% 0.30% Mach-Elec 0.00% 0.00% 0.01% 0.03% 0.04% 0.11% 0.16% OtherInd 0.00% 0.01% 0.03% 0.23% 0.36% 0.47% 0.54% Transport 0.00% 0.00% 0.01% 0.09% 0.14% 0.22% 0.27% Communic 0.00% 0.00% 0.00% -0.04% -0.06% -0.07% -0.08% ServBusiness 0.00% 0.00% 0.00% -0.02% -0.03% -0.03% -0.03% ServOther 0.00% 0.00% 0.00% 0.00% 0.00% 0.04% 0.06%
Keynes LiveStock 0.44% 0.87% 1.29% 2.23% 3.00% 3.40% 4.02% Coffee 0.45% 0.88% 1.31% 1.94% 2.51% 2.96% 3.60% Vegetable 0.43% 1.06% 1.77% 2.48% 3.08% 3.69% 4.44% Fishery 0.44% 0.87% 1.29% 2.34% 3.18% 3.62% 4.25% Wood 0.43% 0.87% 1.31% 2.14% 2.83% 3.27% 3.92% Food 0.43% 0.86% 1.27% 1.79% 2.28% 3.11% 4.02% Footwear 0.63% 1.25% 1.86% 2.65% 3.37% 4.13% 5.14% GarnmText 0.51% 1.01% 1.52% 2.10% 2.64% 4.08% 5.45% Rubber 0.53% 1.08% 1.64% 2.28% 2.87% 3.39% 4.17% Chemical 0.44% 0.87% 1.30% 1.70% 2.10% 2.50% 3.12% Mach-Elec 0.43% 0.85% 1.26% 1.61% 1.98% 2.36% 2.96% OtherInd 0.42% 0.85% 1.27% 1.80% 2.28% 2.69% 3.30% Transport 0.42% 0.84% 1.24% 1.67% 2.09% 2.49% 3.10% Communic 0.44% 0.88% 1.31% 1.70% 2.10% 2.53% 3.17% ServBusiness 0.45% 0.88% 1.31% 1.71% 2.11% 2.53% 3.18% ServOther 0.42% 0.83% 1.24% 1.57% 1.94% 2.31% 2.90%
Table 37: Impact on government consumption in volume (%deviation from the baseline)
Scenario Model Sector 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling Classic ServOther -4.70% -4.70%
-4.69%
-4.69%
-4.69%
-4.69%
-4.69%
Keynes ServOther 2.08% 2.14% 2.19% 2.22% 2.25% 2.28% 2.31% Progressive dismantling Classic ServOther 0.00% -0.06%
-0.14%
-0.87%
-1.34%
-2.10%
-2.59%
Keynes ServOther 1.37% 2.68% 3.97% 4.38% 5.15% 5.50% 6.97%
84
5.3.7.5. Impact on investment by sector
Model simulations show that investments increase in all sectors with the Keynes model but not with
the Classic model. , because of the assumption made that were explained in the chapter related to the
impact on macroeconomic aggregates. There is also a certain discrepancy among sectors, especially
for the Classic model, for which values are negative for some sectors and positive for others. For the
Keynes model the biggest impact in investment, appears on sectors identified as the ones that should
benefit the most from the liberalization process, such as garnment-textile branches, that respectively
increase by about 4.2% and 1.8% in 2022 for in first scenario and by 4.1% in the second one.
Table38: Impact on sectoral investments (deviation in percentage from the baseline)
Scenario Model Sector 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling
Classic LiveStock 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% Coffee -0.10% -0.10% -0.10% -0.10% -0.10% -0.10% -0.10% Vegetable 0.96% 0.96% 0.96% 0.96% 0.96% 0.96% 0.96% Fishery 0.63% 0.64% 0.64% 0.64% 0.64% 0.64% 0.64% Wood 0.33% 0.33% 0.33% 0.33% 0.33% 0.33% 0.33% Food 0.86% 0.86% 0.86% 0.86% 0.86% 0.86% 0.86% Footwear -0.02% -0.02% -0.02% -0.02% -0.01% -0.01% -0.01% GarnmText 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% Rubber -0.22% -0.22% -0.22% -0.22% -0.22% -0.22% -0.22% Chemical -0.28% -0.28% -0.28% -0.28% -0.28% -0.28% -0.27% Mach-Elec -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% -0.19% OtherInd -0.04% -0.04% -0.04% -0.04% -0.04% -0.04% -0.04% Transport -0.13% -0.13% -0.13% -0.13% -0.13% -0.13% -0.13% Communic -0.65% -0.65% -0.65% -0.65% -0.65% -0.65% -0.65% ServBusiness -0.59% -0.59% -0.59% -0.59% -0.59% -0.59% -0.58% ServOther -0.52% -0.52% -0.52% -0.52% -0.52% -0.52% -0.52%
Keynes LiveStock 2.64% 2.72% 2.79% 2.84% 2.89% 2.92% 2.97% Coffee 2.31% 2.37% 2.42% 2.47% 2.50% 2.53% 2.57% Vegetable 3.24% 3.31% 3.37% 3.42% 3.45% 3.49% 3.53% Fishery 2.99% 3.05% 3.10% 3.14% 3.18% 3.21% 3.24% Wood 2.58% 2.65% 2.71% 2.77% 2.81% 2.84% 2.88% Food 3.00% 3.08% 3.14% 3.19% 3.24% 3.27% 3.32% Footwear 3.16% 3.23% 3.28% 3.32% 3.36% 3.39% 3.42% GarnmText 3.85% 3.92% 3.98% 4.03% 4.08% 4.11% 4.15% Rubber 2.49% 2.56% 2.63% 2.68% 2.72% 2.75% 2.79% Chemical 1.74% 1.82% 1.88% 1.93% 1.98% 2.01% 2.06% Mach-Elec 1.86% 1.94% 2.00% 2.05% 2.09% 2.12% 2.17% OtherInd 1.96% 2.04% 2.10% 2.15% 2.19% 2.23% 2.27% Transport 1.94% 2.01% 2.07% 2.13% 2.17% 2.20% 2.24% Communic 1.83% 1.90% 1.95% 2.00% 2.03% 2.07% 2.10% ServBusiness 1.79% 1.86% 1.93% 1.98% 2.02% 2.05% 2.09%
85
ServOther 1.57% 1.65% 1.71% 1.77% 1.81% 1.84% 1.88% Progressive dismantling
Classic LiveStock 0.00% -0.01% -0.02% 0.31% 0.52% 0.43% 0.38% Coffee 0.00% -0.01% -0.02% 0.06% 0.11% 0.02% -0.03% Vegetable 0.00% 0.13% 0.31% 0.45% 0.54% 0.58% 0.61% Fishery 0.00% -0.01% -0.02% 0.35% 0.59% 0.51% 0.45% Wood 0.00% 0.00% 0.01% 0.22% 0.36% 0.30% 0.26% Food 0.00% -0.01% -0.01% 0.02% 0.04% 0.26% 0.40% Footwear 0.00% -0.01% -0.02% 0.03% 0.06% 0.04% 0.04% GarnmText 0.00% 0.00% 0.00% 0.01% 0.02% 0.53% 0.86% Rubber 0.00% 0.02% 0.04% 0.06% 0.07% -0.03% -0.09% Chemical 0.00% 0.00% 0.00% -0.02% -0.03% -0.09% -0.13% Mach-Elec 0.00% -0.01% -0.01% -0.08% -0.13% -0.18% -0.22% OtherInd 0.00% 0.00% 0.00% 0.06% 0.09% 0.05% 0.03% Transport 0.00% -0.01% -0.01% -0.04% -0.06% -0.12% -0.15% Communic 0.00% -0.01% -0.02% -0.13% -0.19% -0.31% -0.38% ServBusiness 0.00% -0.01% -0.02% -0.11% -0.17% -0.28% -0.35% ServOther 0.00% -0.01% -0.02% -0.10% -0.16% -0.24% -0.29%
Keynes LiveStock 0.42% 0.85% 1.30% 1.99% 2.62% 2.93% 3.56% Coffee 0.43% 0.87% 1.31% 1.80% 2.29% 2.64% 3.29% Vegetable 0.42% 0.98% 1.61% 2.15% 2.67% 3.12% 3.84% Fishery 0.43% 0.86% 1.29% 2.06% 2.74% 3.07% 3.71% Wood 0.42% 0.86% 1.31% 1.93% 2.51% 2.85% 3.49% Food 0.42% 0.85% 1.29% 1.70% 2.14% 2.74% 3.56% Footwear 0.55% 1.11% 1.68% 2.27% 2.87% 3.41% 4.31% GarnmText 0.47% 0.95% 1.45% 1.90% 2.38% 3.38% 4.51% Rubber 0.48% 1.00% 1.53% 2.02% 2.53% 2.92% 3.66% Chemical 0.42% 0.86% 1.30% 1.63% 2.02% 2.33% 2.96% Mach-Elec 0.42% 0.84% 1.28% 1.57% 1.94% 2.24% 2.86% OtherInd 0.42% 0.84% 1.28% 1.70% 2.14% 2.46% 3.08% Transport 0.41% 0.84% 1.27% 1.61% 2.01% 2.33% 2.95% Communic 0.43% 0.86% 1.31% 1.64% 2.02% 2.35% 3.00% ServBusiness 0.43% 0.87% 1.31% 1.64% 2.03% 2.35% 3.00% ServOther 0.41% 0.83% 1.26% 1.55% 1.91% 2.21% 2.82%
5.3.7.6. Impact on factor costs by sector
Impacts on wages appear quite different according to the model used for the analysis. The Classic
model presents a negative impact on wages, in all primary sector plus footwear and garnment-textile,
as a result of general price decrease and labour mobility between sectors. At a global level, price labor
evolution would be in line with the variation of the general price index, at least in the short-medium
term. Substitution effects between local and imported goods would also put pressure on factors
remuneration in sectors that would import the most. Sectors such as garments and textile, for which
Vietnam foresees the biggest increase of exports, also significantly benefited of tariff protection.
86
Consequently, the increase of labour necessary to satisfy a larger amount of exports will also have to
face more competition with cheaper imported products, which explains a higher wage decrease than
the average. The Keynes model results follow the same logic, but with higher fluctuations.
Table 39: Impact on wages (deviation from the baseline scenario, in percentage)
Scenario Model Sector 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling
Classic Keynes
LiveStock -0.07%
-0.07%
-0.07%
-0.07%
-0.07%
-0.07%
-0.07%
Coffee -0.38%
-0.38%
-0.38%
-0.38%
-0.38%
-0.38%
-0.38%
Vegetable -0.48%
-0.48%
-0.48%
-0.48%
-0.48%
-0.48%
-0.48%
Fishery -0.54%
-0.54%
-0.54%
-0.54%
-0.54%
-0.54%
-0.54%
Wood -0.21%
-0.21%
-0.21%
-0.21%
-0.21%
-0.20%
-0.20%
Food 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
Footwear -0.40%
-0.40%
-0.40%
-0.40%
-0.40%
-0.40%
-0.40%
GarnmText -0.16%
-0.16%
-0.16%
-0.16%
-0.16%
-0.16%
-0.16%
Rubber 0.81% 0.81% 0.81% 0.81% 0.81% 0.81% 0.81% Chemical 1.38% 1.38% 1.38% 1.38% 1.38% 1.38% 1.39% Mach-Elec 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% OtherInd 3.94% 3.94% 3.94% 3.94% 3.94% 3.94% 3.94% Transport 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% Communic 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% ServBusiness 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.11% ServOther 0.03% 0.03% 0.03% 0.03% 0.03% 0.03% 0.03%
LiveStock -0.45%
-0.40%
-0.36%
-0.32%
-0.30%
-0.28%
-0.25%
Coffee -1.52%
-1.34%
-1.20%
-1.08%
-0.98%
-0.91%
-0.81%
Vegetable -1.91%
-1.66%
-1.46%
-1.30%
-1.16%
-1.05%
-0.92%
Fishery -1.64%
-1.45%
-1.30%
-1.17%
-1.07%
-0.98%
-0.88%
Wood -3.26%
-2.79%
-2.40%
-2.09%
-1.83%
-1.61%
-1.36%
Food -1.07%
-0.85%
-0.67%
-0.53%
-0.41%
-0.31%
-0.19%
Footwear -2.86%
-2.61%
-2.42%
-2.25%
-2.12%
-2.01%
-1.88%
GarnmText -4.02%
-3.64%
-3.34%
-3.09%
-2.88%
-2.71%
-2.51%
Rubber -0.80%
-0.73%
-0.68%
-0.63%
-0.59%
-0.56%
-0.53%
Chemical 0.17% 0.60% 0.95% 1.24% 1.48% 1.68% 1.91%
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Mach-Elec -0.34% 0.11% 0.49% 0.80% 1.06% 1.26% 1.51%
OtherInd 3.97% 4.42% 4.79% 5.10% 5.35% 5.56% 5.80%
Transport -0.94%
-0.60%
-0.31%
-0.07% 0.12% 0.28% 0.46%
Communic -4.67%
-4.10%
-3.64%
-3.25%
-2.93%
-2.67%
-2.36%
ServBusiness -2.05%
-1.82%
-1.62%
-1.46%
-1.33%
-1.23%
-1.10%
ServOther -0.92%
-0.71%
-0.54%
-0.40%
-0.29%
-0.20%
-0.09%
Progressive dismantling
Classic LiveStock 0.00% 0.01% 0.02%
-0.19%
-0.33%
-0.17%
-0.07%
Coffee 0.00% 0.00% -0.01%
-0.09%
-0.15%
-0.20%
-0.22%
Vegetable 0.00% -0.05%
-0.12%
-0.19%
-0.23%
-0.26%
-0.29%
Fishery 0.00% 0.00% -0.01%
-0.17%
-0.27%
-0.31%
-0.34%
Wood 0.00% 0.00% 0.00% -0.15%
-0.24%
-0.18%
-0.14%
Food 0.00% 0.01% 0.03% 0.11% 0.16% 0.16% 0.15%
Footwear 0.00% 0.00% -0.01%
-0.08%
-0.12%
-0.19%
-0.24%
GarnmText 0.00% 0.01% 0.03% 0.16% 0.24% 0.00% -0.15%
Rubber 0.00% 0.00% 0.00% 0.16% 0.26% 0.40% 0.50% Chemical 0.00% 0.01% 0.03% 0.24% 0.37% 0.67% 0.86% Mach-Elec 0.00% 0.02% 0.04% 0.21% 0.32% 0.61% 0.80% OtherInd 0.00% 0.04% 0.10% 0.59% 0.91% 1.81% 2.39% Transport 0.00% 0.01% 0.02% 0.07% 0.10% 0.25% 0.35%
Communic 0.00% 0.00% 0.00% -0.01%
-0.02%
-0.01% 0.00%
ServBusiness 0.00% 0.00% 0.00% 0.00% 0.00% 0.03% 0.05%
ServOther 0.00% 0.00% 0.00% 0.00% 0.00% -0.03%
-0.04%
Keynes LiveStock
-0.10%
-0.18%
-0.24%
-0.42%
-0.56%
-0.49%
-0.49%
Coffee -0.22%
-0.41%
-0.56%
-0.76%
-0.91%
-1.04%
-1.18%
Vegetable -0.30%
-0.60%
-0.86%
-1.06%
-1.22%
-1.35%
-1.50%
Fishery -0.23%
-0.42%
-0.58%
-0.83%
-1.02%
-1.14%
-1.27%
Wood -0.62%
-1.11%
-1.52%
-2.00%
-2.39%
-2.51%
-2.75%
Food -0.30%
-0.52%
-0.70%
-0.69%
-0.73%
-0.78%
-0.90%
Footwear -0.46%
-0.87%
-1.22%
-1.59%
-1.91%
-2.24%
-2.66%
GarnmText -0.71%
-1.30%
-1.82%
-2.11%
-2.43%
-3.13%
-3.88%
88
Rubber -0.21%
-0.41%
-0.60%
-0.65%
-0.74%
-0.86%
-1.07%
Chemical -0.67%
-1.19%
-1.62%
-1.16%
-0.99%
-0.76%
-0.87%
Mach-Elec -0.53%
-0.93%
-1.22%
-1.09%
-1.06%
-0.61%
-0.45%
OtherInd -0.38%
-0.60%
-0.72%
-0.14% 0.22% 1.52% 2.34%
Transport -0.37%
-0.65%
-0.86%
-1.00%
-1.12%
-0.99%
-0.97%
Communic -0.77%
-1.40%
-1.92%
-2.46%
-2.89%
-3.35%
-3.84%
ServBusiness -0.34%
-0.63%
-0.88%
-1.14%
-1.36%
-1.57%
-1.83%
ServOther -0.22%
-0.39%
-0.52%
-0.59%
-0.66%
-0.73%
-0.81%
On the other way, impacts on capital remuneration are similar for all sectors, because of the models assumptions do not make any differentiation between sectors. The EU-Vietnam FTA impact is positive for in all cases and the biggest impact appears for the Keynes model with a progressive dismantling scenario.
Table 40: Impact on capital remuneration (deviation from the baseline scenario, in percentage)
Scenario Model Sector 2009 2011 2013 2015 2017 2019 2022 Rapid dismantling
Classic All sectors 0.42% 0.41% 0.41% 0.41% 0.41% 0.41% 0.41% Keynes All sectors 1.76% 1.49% 1.27% 1.09% 0.95% 0.83% 0.69%
Progressive dismantling
Classic All sectors 0.00% 0.00% 0.01% 0.07% 0.11% 0.20% 0.25% Keynes All sectors 0.33% 0.60% 0.83% 1.00% 1.15% 1.30% 1.48%
89
CONCLUSION ON EU-VIETNAM FTA QUANTITATIVE IMPACT ANALYSIS
Among the large range of possibilities in general equilibrium modeling, we analysed the EU-Vietnam
economic impact both with a standard CGE model (Classic model) and with a CGE model with a
Keynesian approach (Keynes model). The results provided by the Keynes model, in line with the
Vietnamese government assumptions, appear more realistic than the ones of the Classic model,
because its assumption are validated by results provided by the gravity model : Vietnamese exports to
the EU would increase more than imports from the EU. This means that the EU-Vietnam FTA would
impact more positively Vietnam macroeconomic indicators if the results come from a demand-driven
model such as the Keynes model, than if they are provided by a supply-driven model, such as a
standard CGE model like the Classic model. The main results provided by the Keynes model are as
follows:
• significant growth of production and final consumption are not only explained by the fall of
import prices that provides an increase of households purchase power, but also by Vietnamese
exports to the EU that are higher than their imports, which, contrary to the Classic model,
significantly stimulates production.
• The negative effects that the Classic model exhibit, such as the diminution of duties, disappear
because more economic growth brings additional fiscal resources without any need of
appropriate fiscal reforms or by additional transfers or FDI from the EU.
Hence, assumption that Vietnamese exports to the EU would increase more than country’s imports
from the EU seems all the more realistic because it was confirmed by the results of the gravity model.
Both hypothesis and model structure hence give more credibility to the results provided by the Keynes
model than to the ones provided by the Classic model.
In the present case, a “demand driven” model seems then to present more realistic results than a
“supply-driven” model as demand models assume that supply can immediately adjust to a variation of
demand, without taking into consideration production factors constraints, such as standard CGE
models do. In addition, they are more in line both with econometric observations and the beneficiary
own analysis of the situation.
When analysing the results more in detail, the Keynes model presents the most positive effects for
goods for which Vietnam is a competitor such as textile, garments and footwear, while tariff
dismantling scenarios could still be built in order to minimize the negative fiscal impact. As Vietnam
expects to raise its exports to the EU by about 6% e in the competitive sectors such as footwear,
garment, textile, the EU-EPA appears to be a quite interesting opportunity for Vietnam.
90
However, such positive results would arise only if the FTA with the EU would really favour a
decrease of prices on the domestic market and that the benefit would not remain in the hands of
importers.
As far as the tariff dismantling strategy is concerned, the Keynes model clearly showed that a
progressive dismantling was a better solution than a rapid dismantling. Such results are in opposition
with the neoclassic theory that states that if trade liberalization enhance welfare and economic growth
it should be done as fast as possible.
As far as economic modelling is concerned, it is well stated in the literature that trade liberalisation
presents both negative and positive effects, but impact analysis studies are often focused on bringing
recommendations in order to reduce negative effects and increase positive effects instead of justifying
the choices made and the underlying hypothesis. Justification of hypothesis and choices made for the
model structure elaboration are in most of cases quite evasive. While exercises on model closures can
be found in economic modeling manuals, it is very rare to find FTA impact analysis studies presenting
various results according to different assumptions and type of models. When a CGE model is built for
a specific study, it generally follows the neoclassical theory while other types of models could also be
elaborated, more in line with the reality of the country economic structure.
In the case of EU-Vietnam FTA, a standard neoclassic CGE model would tend to model a virtual FTA
instead of a realistic potential agreement that can be foreseen on the basis of common sense and data
analysis. If a standard CGE model is used, the conclusion would be the following: neither Vietnam
nor the EU would be hampered by trade liberalization process, either because exports would be
fostered by about the same level than imports (if trade balance is assumed to remain exogenous) or
because an increase of trade balance deficit would be balanced by approximately the same amount of
FDI (if trade deficit would be endogenous). However, results would appear much less positive than
they could be expected for Vietnam, essentially because Vietnamese exports to the EU would grow of
the same amount than their imports from the EU. As a result, an optimum dismantling scenario
reducing fiscal losses at the maximum would reduce Vietnamese exports to the EU by the same token.
Models do not provide the answers, but simply quantify the impacts of underlying assumptions made
upon the evolution on key macro-economic variables such as trade deficit, investment, production ...
Consequently, an appropriate approach for quantitative impact analysis would be to first discuss and
agree on various assumptions such as: would FTA foster more Vietnamese exports than imports from
the EU? Would FTA attract more FDI? How would Vietnam global trade deficit remain unchanged?
Etc.
Only on a second stage, a CGE model would be built on the basis on agreed hypothesis.
When different set of assumptions are likely, it should then be essential not to build only a single
model, but a set of different ones with various structures based on different assumptions in accordance
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with facts observed by econometric analysis and the common sense of political deciders in order to
present different conclusions to political deciders with the same degree of feasibility. Computers and
software now enable to easily follow this kind of approach.
Independently from the quite optimistic results presented by the Keynes model on the potential EU-
Vietnam FTA and the discussion on the type of model to be built for impact analysis, some challenges
still remain for the Vietnamese government, such as:
• conditions must be created to enable investors to effectively benefit from the improvement
conditions brought about by the EU-Vietnam FTA. Public investment may be needed in
sectors foreseen as benefiting the most from the EPA, in case private investment would
default;
• products prices on the domestic market should benefit from the tariff dismantling on
imported goods, but it means that the government should closely supervise the dismantling
process in order to prevent a simple increase of the importers’ margins. In such a case, the
economic impact of the FTA policy would simply lead to a deterioration of the trade
balance, increasing the country’s dependence toward the external world.
The government should also take the opportunity of the potential EU-Vietnam FTA to start elaborating
a convincing programme in order to attract FDI for modernising the private sector, especially in the
manufacturing industry and the agricultural sector. Contrary to neoclassical theory, we have assumed
the existence of unemployment, which has enabled us to free labor market in order to satisfy the
condition of exports to the EU oversizing the level of imports, but constrains however remain on
capital demand. If Vietnam wants to benefit of the FTA in the long run, it would be also necessary to
free this second constraint, by launching incentive measures in favour of exporting companies that
would attract more local and foreign investment.
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6. QUALITATIVE ANALYSIS ON THE EFFECT OF PREFERENTIAL LIBERALIZATION IN SELECTED SECTORS
6.1. Automotive
The Vietnamese Automotive Industry
The Vietnamese automotive industry is still at its birth stage with only 25,480 cars produced in 2009.
Compared with the 13,790,994 cars produced by China in the same year, it is clear that the automotive
sector is not yet playing an important role in the industrial development of Vietnam.
The industry benefit from tariff protection with import duties up to 80% and other regulatory barriers,
which ultimately have the effect of reducing substantially the imports of foreign cars
In this scenario, all the data seem to indicate that all the most important car producers are still not
considering Vietnam as an attractive export destination and, most importantly, as a location in which
to establish the production facilities. In this respect, besides the underdevelopment of the road system,
there are many more factors, specific to the automotive industry, that de facto impede the development
of a domestic industry. In this regards the main problems faced by Vietnam are: (i) the lack of the
support industries, which are extremely necessary in the supply chain of automotives production, (ii)
lack of technology and general low quality of the machineries and the necessary equipment, (iii) the
lack of raw material, (iv) a general low level of investment, and (v) little (albeit rapidly growing)
consumer’s demand. These entire factors together offset the benefit deriving from the use of cheap
labour force that is the main driver behind the high inflow of foreign investment in the manufacturing
sector.
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The high tariffs did not prevent Vietnamese the growing Vietnamese middle class to buy imported
cars. In this respect, the major exporters are Korea, United States, Japan and China, with Europe
lagging behind with only 1510 already-assembled cars imported (mainly from Germany)23
.
The Automotive Industry in the Context of the ASEAN Free Trade Agreements
The Vietnamese automotive sector is the most protected among all those of the ASEAN Countries. In
spite of this fact, Vietnam’s automotive industry is still small compared with that of its Asian
neighbours, totalizing only 25,480 cars produced in 2009. In the Asian region China is the most
important producers (13,790,994 cars), followed by Japan (7,934,526), South Korea (3,512,926) and
India (2,632,694). Within the ASEAN countries Thailand is the main producers (966,305), followed
by Malaysia (481,891) and Indonesia (464,816).
Production of Cars in Asia (2008-2009)
Country 2008 2009 Variation in %
Japan 11,575.664 7,934,516 -31.5%
China 9,299,180 13,790,994 +48.3%
South Korea 3,826,382 3,512,926 -8.2%
India 2,332,328 2,632,694 +12.9%
Thailand 1,393,742 966,305 -30.5%
Indonesia 600,628 464,816 -22.6%
Malaysia 530,810 481,891 -8.6%
Australia 329,556 227,283 -31.0%
Vietnam 33,418 25,480 -23.6%
(Source: Own table based on OICA data (http://oica.net/category/production-statistics)
23 Official data, GSO 2010.
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Despite the reduction on tariffs in the context of the free trade area between ASEAN countries, which
would theoretically allow a more efficient supply chain for producers located in the area, the reality is
that intra-ASEAN trade still faces substantial barriers, mostly in terms of safety and environmental
regulations and tariffs24
. From a regional perspective, this implies the need for vehicle manufacturers to
modify their vehicles according to each national regulation, thereby reducing the potential economies of
scale. In this regards, there are discussions held in the context of APEC to reach a common agreement on
the harmonization of technical regulation between ASEAN countries. All this lead to the situation in
which foreign manufacturers needs to locate the production in each targeted country, with limited
possibility to create a common production hub from which then export to the region.
In the context of the free trade agreements signed by ASEAN, Vietnam has entered into preferential
arrangement with all the other ASEAN countries, China, India, Korea, Japan and Australia/New
Zealand. The noodle bowl of the Asian free trade agreement are of particular concerns to European
automobile manufacturers as the tariff differential between the above-mentioned countries with that
accorded to the EU is increasingly eroding the market share of European car manufacturers vis-à-vis
their competitors and will obstacle the market access of European exports in this fast-growing region.
One issue especially relevant in this context is the upcoming FTA between India and ASEAN, in
addition to the existing Japan – ASEAN and Korea – ASEAN FTAs. The combination of these FTAs
would facilitate more attractive and low-cost production and investment patterns in Asia. For example,
Mitsubishi and Honda both indicate to be looking forward to the India-ASEAN FTA (allowing the
manufacturers to import cheaper components and export at lower tariffs), as it facilitates them to
expand their presence and production in India, making it an export hub, and facilitation sourcing off
components from India for manufacturing sites in other South-East Asian countries.
Interestingly enough what had being said just before with regards of the Asian region in general does
not apply to Vietnam. Indeed, Vietnam has carved-out the automotive sector from its tariff
commitment in all the ASEAN+ FTAs (i.e. with China, India, Japan, Korea and Australia/New
Zealand) and has postponed the trade liberalization with the other ASEAN countries up to 2018. This
means that Japanese, Korean, Chinese and Indian manufacturers will not enjoy any significant tariff
benefits towards Vietnam from the various ASEAN FTAs (although for some tariff lines there will be
a progressive reduction in custom duties). On the contrary, producers located in Thailand, Malaysia
and Indonesia will have in future a tariff advantage in exporting to Vietnam that, coupled with an
harmonization in standards and technical regulations, could increase their export potential towards
Vietnam.
Average Tariffs (simple average) in Selected Trade Agreements 24 Trade Sustainability Impact Assessment for the FTA Between the EU and ASEAN, 2007, European Commission
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Parts &
Components
Passengers
Cars
Trucks Commercial
Vehicles
WTO -
MFN
23.6% 53.6% 11% 42%
ASEAN
(AFTA)
5% 51,4% 5% 5%
ASEAN-
China
17,3% 45.8% 3% 21.6%
ASEAN-
Japan
14.4% 48.4% 3% 25.5%
ASEAN-
Korea
15.3% 48.1% 3% 25.6%
ASEAN-
India
23.6% (MFN) 53.5% (MFN) 6% 42% (MFN)
The Automotive Industry in Europe
The auto sector is often credited as the industrial engine of Europe. Indeed, the European automotive
industry ranks first in terms of worldwide production of motor vehicles (25.5%), first in the production
of passengers cars (27.6% of total production) and second after China in the production of commercial
vehicles (12.5% of total production). The automotive industry is one of the biggest employers in
Europe. Indeed, in the EU, 2.2 million workers are directly employed in automotive manufacturing,
and an additional 9.8 million rely on the industry for their jobs in closely related sectors.
From 2007 to 2009 the European automotive industry faced a downfall of around 20% due to the
economic crisis.
In 2009 Germany was by far the largest vehicle producer (5.2 million units) in the EU, despite a
13.8% decrease compared to 2008. Following a 20.2% drop, France ranked third, while Spain, with
2.2 million vehicles, became the second largest manufacturing country in 2009. The UK ranked fourth
with more than 1 million units. Italy ranked seventh, after the Czech Republic and Poland, which
accounted for 974,569 and 879,186 vehicles respectively.
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The European automobile industry is dynamic, competitive and operates on a global scale. High-quality
products, significant investment and a highly skilled workforce deliver exports with a €42.8 billion net
trade contribution to the economy and over €70 billion of exports annually. The global framework in
which vehicle manufacturers do business is increasingly important. In this respect European
manufacturers are increasingly engaging in export towards emerging markets like China and Russia. The
main exports destinations in Asia are Japan, China, South Korea and Thailand. In this context Vietnam is
virtually inexistent with only 49 1 Million USD of exports of already assembled cars.
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Despite being only sixth in the rank of the main exporters of cars to Vietnam, Europe ranks third in the
exports of parts and components with 385,283 Mil US$.
Impact of the EU-Vietnam FTA on Vietnam
From a conceptual point of view it is important to distinguish the impact of tariff reduction in two
ways: first, the impact of tariff reduction on the exports of cars and components from the EU; second,
the impact of tariff reduction on foreign direct investment.
• Exports from the EU: Europe exports to Vietnam both already assembled cars and
components. While in the exports of cars Europe ranks sixth with only 1510 cars (mainly from
Germany), in the exports of components Europe its placed third with a total of 385,283 Mil
US$ of exports. Each of the two items has a different market with different variables at stake.
The export of already assembled car relies on the high purchasing power of the Vietnamese
high class, which is willing to pay a high price for expensive cars manufactured in Europe
(Mercedes, BMW, Bentley, Porsche and Ferrari). For such expensive cars the impact of tariff
and the cost of transport is not as relevant as for cheaper cars as the consumers’ choice is
driven more by the brand than the final price. Clearly in this segment, a reduction of tariff will
have an impact on the export, but the price elasticity of those items is very limited. On the
contrary, a factor driving the exports from Europe would be the growth in the purchasing
power of the Vietnamese upper-middle class, which would increasingly buy luxury cars
manufactured in Europe. For what concerns family car, a reduction of the high tariffs will
definitely reduce the final price of the imported cars, although, the cost of transport and, the
limited purchasing power of the Vietnamese middle will also affect the final demand of
European cars.
The export of parts and components relies on the demand of the Vietnamese automotive
industry as well as on the decision of European manufacturers to delocalize the production in
Vietnam. On the contrary to already assembled cars, the price elasticity of parts and
components is high and a reduction of tariff would theoretically have an impact on the
exports. On the other hand, without a robust domestic industry and without European
investors located in Vietnam requiring components to be assembled, even a reduction in tariff
will have only a limited effect on the imports. For what concerns components the real factor
influencing the little demand is the limited amount of investment in the Vietnamese
automotive industry. This limits drastically the effect of a reduction in tariff.
• Foreign Direct Investment: European car manufacturers seem to be little attracted by
Vietnam as a productive platform for the ASEAN area. By looking only at the tariff
component, the high protection accorded to the Vietnamese producers, combined with the
parallel reduction in custom duties by the other ASEAN members and ASEAN FTA partners,
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would virtually render extremely cheap to export cars from Vietnam to the Asian region.
Furthermore, the cheap labour available in Vietnam would be another important factor. In
reality, tariffs preferences and cheap labour are not sufficient to drive investment in the car
manufacturing industry. The deficiencies mentioned above (poor infrastructures, lack of
support industries, low technology) clearly inhibit foreign investors to locate the production in
Vietnam. In this respect, the reduction in tariffs on machinery and components could facilitate
the inflow of European investment into Vietnam, but alone would not be sufficient.
6.2. Electronics
Industry Background
The electronic industry has become over the years one of the most strategic sectors of the Vietnamese
economy. Indeed, Vietnam is emerging as an important manufacturing destination for electronic
products that are then exported, mainly to Europe. Although Vietnam’s current electronic industry’s
revenues are just a fraction of China’s and much lower than countries like Malaysia or Singapore, the
electronic industry is experiencing very high growth rates, around 17% annually, with the domestic
market expected to be worth around 6.8 billion US$ by 2014.
According to the 10-years action plan drafted by the Ministry of Information and Communications,
Vietnam will mobilize 144 trillion VND ($8.5 billion) to develop information and communication
technologies (ICT) during 2010-2020 periods in order to become a strong ICT country by 2020.
Estimated Goals 2010-2015 2016-2020
Investment Amount USD8.5 billion
USD3.2Bilion USD5.3 billion
Ranking list of the International
Telecommunication Union 70 60
ICT Industry will contribute the country’s gross
domestic product (GDP) 17-20% 20-30%
Coverage of broadband internet services to
communes and wards nationwide, optic fiber
cables radio and TV broadcast technologies in
five big cities
70％ 90％
Households nationwide telephones coverage 100% 100%
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Households will have computers and access to
broadband internet services 20-30% 70-80%
Households have TV sets 90% 100%
Finish building ICT infrastructure Urban Areas Village Areas
Software outsourcing destinations and digital
content producers Top 20 Top 10
Sources: The Vietnam Nation
There are around 400 businesses operating in the electronics industry, mostly in Hanoi, Ho Chi Minh
City and several other big cities. Foreign-invested firms account for around 30 percent of total.
Reality shows that besides foreign invested companies that mostly produce for the export and have at
their disposal high tech equipment, the majority of local electronic businesses have limited finance.
Indeed, the biggest challenge for the electronics industry is capital. Shortage of capital causes
difficulties in importing materials in a sector in which most necessary materials are imported. Another
implication deriving form the lack of capital is the poor level of the infrastructures, including a lack of
qualified testing laboratories and research and development centers. This means that Vietnamese
producers often have to use obsolete technology and equipment several generations behind the level in
other countries in the region and the world.
Indeed, local electronic companies spend only 0.3-0.5 percent of their revenue on technology reforms,
a quite low level. The figure is around one percent in some big companies, while in some other
regional countries it stays high such as five percent in India, and 10 percent in both the Republic of
Korea and China.
As a result of backward technology, most of local electronic items are labor consuming with a low
added value. Besides this, local electronics industry remains weak in the area of research and
development. Most of the products are made under foreign designs while the products that are made
using local designs remain few.
Another important element is the diffuse lack of skilled workers, such as experienced scientists,
technical engineers, specialists working in research and development of new added value items as
wells as managers.
All these shortcomings lead to the situation where the domestic electronics industry meets only 30-40
per cent of domestic consumer demand for electronics.
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The Electronic Industry in Europe
The Electrical Engineering industry is one of the biggest industries worldwide and in Europe. It
produces a wide range of products, ranging from consumer products to turbines, trains, power grids
and power stations. It employed around 2.8 million people in 2007, in approximately 200 000
enterprises, most of which are SMEs. In 2008, the overall production was 411 billion €. The share of
EEI in EU exports amounted to 10% and the EU had a slightly positive trade balance for EEI products
in 2008. With regards to Vietnam, Europe the fourth largest exporters of electronic products and
components with a total of 622.869,000 US$ of exports.
Source: own calculations based on official Tradecom data
Tariff Structure for Electronic Products and Trade Analysis
The tariff structure of electronic products is extremely complex and variegated, representing the
complexity of the electronic industry in general. With more than 500 tariff lines, it is extremely
difficult to find a common element among all the specific products. Nonetheless electronic products of
interest to Vietnam can be grouped into three main categories:
· Electronic parts: belong to groups from 8532 to 8543 in HS code: “ Spare parts and auxiliaries
of electronic equipment”; consists of parts of equipments having the function of processing electric
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signals in all fields such as: consumer electronics, medical electronics, industrial electronics, and
telecom electronics.
· Televisions (TVs): consist of varieties of flat screens, liquid crystal display (LCD) belonging to
the group 8528 in HS code: “Televisions combined or not combined with radio or tape-recorders or
sound and image copy machines, video display and projectors in the same box”.
· Computers and parts: belong to the group 8471 in HS code: “Original form computers” consist
of desktop computers, laptops, microprocessors, hard disk drives, uninterruptible power system
(UPS)”.
The tariff lines are extremely diverse and it is practically impossible to deduct from the tariff duties a
comprehensive policy behind the numbers. Indeed, if we measure the standard deviation of the tariff
lines at HS 84 and 85, it is quite high at 9.14 representing the high tariff differential within the
electronic sector.
From the entry of Vietnam into the WTO the tariff have been constantly reduced both at the
multilateral and at the preferential level. In 2009 the average MFN tariff for the whole electronic
sector was 10.2%. On the contrary, through its preferential commitments with China, India, Japan,
Korea and Australia/New Zealand, the average tariff is reduced around 5%. By far the highest level of
liberalization has been achieved in the context of the ASEAN Free Trade Agreement, where the CEPT
has an average tariff for electronic products around 1% with the highest pick only at 5%.
Trade Agreement Average Tariff (2010)
WTO - MFN 10.2%
ASEAN (AFTA) 1%
ASEAN - China 4.58%
ASEAN - Korea 5.57%
ASEAN - Japan 5.45%
ASEAN - India 5.07%
In 2004-2009 Vietnam annual import turnover increased by 33.6% on average. From an import
turnover of 2.6 bn. USD in 2005, after five years in 2008 it tripled reaching 7.6 bn. Conversely, in
2009 Vietnam totalized 2.6 bn. in export of computers and parts. The main export destinations in 2009
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are: the European Union countries (47%), Saudi Arabia (14%), Brazil (8%), United Arab Emirates
(7%), Canada (5%), Taiwan (4%) and Korea (2%).
Exporters 2005 2005 2006 2007 2008
World 2616914 2995176 3654029 5992346 7562641
China 281523 428689 637927 1798476 2414920
ASEAN 538743 677835 961575 1368119 1579881
Japan 700517 736421 763992 912593 1355848
European
Union (EU
27)
440947 396152 406699 679593 622869
Republic of
Korea
258866 318521 414407 444397 469238
'Hong Kong
(SARC)
104902 126655 151577 291193 441290
Impact of Further Trade Liberalization
According to a CIEM report25
An analysis of the trade flow between Europe and Vietnam clearly indicates that for what concerns the
electronic sector, Europe is one of the most important exporter of electronic products and components
for the Vietnamese market. Indeed, the European products are generally of high quality and would
have an even greater market in Vietnam, considering the fact that the domestic industry is able to serve
only 40% of the domestic market and taking into consideration also the increasing purchasing power
of the Vietnamese consumers and the general fast growth of the country. In this regard, a simple
business analysis would endorse the conclusion that a reduction in tariff would have definitely an
impact on the volume and prices of electrical products and components imported from Europe. Indeed,
, the electronic industry is very sensitive to input value (95,4 % share of
inputs over outputs value). This would lead to think that the even the smallest change in tariff or
monetary fluctuations would have a big impact on the final price of the product and on level of
imports from Europe.
25 “Some Characteristics of Vietnam Industrial Structure”, CIEM, 2010
103
a reduction in tariff would at least offset the costs of transport from Europe and give a great business
advantage to European exporters vis-à-vis their Asian competitors from Japan, Korea and China that
are already benefitting from lower distances and reduced import duties.
Mechanical Machinery and Equipment
Industry Background
The development of the domestic mechanical machinery industry is one of the most strategic
objectives for the advancement and growth of the domestic industrial production. Indeed, the
machinery and equipment sector, by providing technology and tools for the production to other
industries has the important function to support the industrial development of Vietnam. As of now the
industry, despite fabricating more than 500 types of products each year, is still underdeveloped,
producing only low-value mechanical tools, mostly for the agricultural sector. Vietnam’s technologies
are estimated to be 30-40 years behind the regional level and more than 50-60 years behind developed
countries. This means that in order to boost the productivity of the industry, Vietnam must import
more sophisticated equipment, as it's not able to produce high-value machinery domestically.
The industry faces different problems. One of the main difficulties is the lack of capital and
investment. This had in turn forced domestic producers to use outdated technologies and to focus on
making simple products. Furthermore, according to mechanical industry experts, there is a shortage of
skilled workers at all levels, from the low to the research and managements level. Finally, the business
strategy seems not to work for Vietnamese companies. Most enterprises are now expanding by trying
to make multiple products, but they do not intend to focus on one specific item. With such business
practices, mechanical companies do not make heavy investments, in either capital or brainpower, to
develop specific products. The reason, as said before is the difficulty to borrow money from banks and
they cannot seek state support as the Government, despite having provided many preferential credit
programs since 2002, has given them only to state-owned general corporations. All these factors
explain the modest export volume of the sector.
The poor quality of the machinery industry have its most immediate effects on all the other industry
sectors, such as automotive and shipbuilding for which the mechanical industry can only make frames
and simple parts, with other mechanical parts and complicated equipment to be imported.
For these reasons the Vietnamese Government has set up the Key Mechanical Industry Development
Program to 2010 with a vision towards 2020. According to the program the industry should meet
about 50 per cent of domestic demand for mechanical products from now to 2010, and export 30 per
cent of its output to gain an annual income of US$ 3.5 to 4 billion. The program aims to have the
industry focus on eight types of machinery, including motive power engines, tractors, agricultural
104
equipment, mechanical tools, construction engineering, ship engineering, automobile engineering and
electrical equipment.
Tariff Structure for Machinery Products and Trade Analysis
Machinery products are mostly comprised in 300 tariff lines (HS at 6 digit levels) in the chapter 84. As
with electronic products, the tariff structure of machinery products is extremely variegated, ranging
from nuclear reactors to hand pumps. Nonetheless, a simple tariff analysis confirms that as a matter of
industrial policy Vietnam decided to apply low tariffs on high quality machineries in order to furnish
its rising domestic industry.
Indeed, Vietnam has heavily reduced its tariff on the imported products, which now face only 3.5%
import duties at the MFN level, and even lower (only 0,5%) if originating from another ASEAN
country.
Trade Agreement Average Tariff (2010)
WTO - MFN 3.14%
ASEAN (AFTA) 0.5%
ASEAN - China 3.6%
ASEAN - Korea 3.2%
Vietnam - Japan 3.1%
ASEAN - India N. A.
There are some tariff peaks that range from 10% to 25%: Spark-ignition reciprocating or rotary
internal combustion piston engines and parts (8407); Compression-ignition internal combustion piston
engines and parts (diesel or semi-diesel engines) (8408); Pumps for liquids, whether or not fitted with
a measuring device; liquid elevators (8413); Hand pumps (841320); Air or vacuum pumps, air or other
gas compressors and fans; ventilating or recycling hoods incorporating a fan, whether or not fitted
with filters (8414); Air-conditioning machines, comprising a motor-driven fan and elements for
changing the temperature and humidity, including those machines in which the humidity cannot be
separately regulated (8415); Refrigerators, freezers and other refrigerating or freezing equipment,
electric or other; heat pumps (8418); Centrifuges, including centrifugal dryers; filtering or purifying
machinery and apparatus, for liquids or gases (8421); Dishwashing machines (8422); Agricultural,
horticultural or forestry machinery for soil preparation or cultivation; lawn or sports-ground rollers
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(8432); Machinery for preparing animal feeding stuffs (8436); machinery used in the milling industry
or for the working of cereals or dried leguminous vegetables (8437); Household or laundry-type
washing machines, including machines which both wash and dry (8450); Furniture, bases and covers
for sewing machines and parts (8452)
Over the years Vietnam has been constantly increasing its demand for high quality machineries and has
thus relied heavily on importations. In 2008 Vietnam has imported 11,131 Mil US$ worth of machinery.
In this respect, as showed by the graph, the EU has around 14% of the market the biggest partner, with
1,541 Mil US$. China is the biggest import partner with 2.75 Mil US$ of export to Vietnam.
(Author’s graph, based on Tradecom data 2010)
2004 2005 2006 2007 2008
VN Imports
World*
3929474 4504285 5782696 8776843 11131112
VN Import from
EU*
592027 546849 843557 1406606 1541369
% Imports
EU/World
15% 12.1% 14.5% 16% 13.8%
(USD; author’s table based on Tradecom data 2010)
106
Impact of Further Trade Liberalization
The impact analysis made by the model shows, similarly to all the other sectors, little impact of further
liberalization on the economy of Vietnam. Indeed, in any of the variables considered there is a
maximum impact of 3% on the base line. The reason to this might be that on the specific items
imported from the EU, Vietnam is already applying quite low tariffs.
Differently from what concerns imports, Vietnam could benefit from a consistent surge of FDIs from
European manufacturers that could decide to locate here the production. Indeed, the growing domestic
industries coupled with the general economic growth of Vietnam could have a domino effect on all the
other support industries, which are now missing. In this respect, the general high quality of the
European products could have an important market in Vietnam, and potentially also in the
neighbouring countries, such as Laos and Cambodia.
6.3. The Banking Sector
The Vietnamese Banking Sector
Over the last two decades the Vietnamese banking sector has transformed substantially. From the
mono-banking system in place until the late eighties in which the State Bank of Vietnam (SBV)
carried out both central and commercial banking functions, the banking sector was later changed into a
two-tier banking system with four state-owned commercial banks (SOCBs) and the creation of Joint
Stock Commercial Banks (JSCBs) and Joint Ventures Banks (JVBs).
In 2007 was issued the Law on Credit institutions, which set out possible three forms of credit
institutions.
(1) Credit institutions (banks, non-bank credit institutions, microfinance institutions): joint stock
company, limited liability company
(2) Cooperative credit institutions
(3) Foreign credit institutions: joint venture, 100% foreign-invested credit institution, foreign bank
branches, representative offices, shareholder of credit institutions operating in Vietnam (15%
maximum for one shareholder, 30% as a whole within a bank)26
Currently, Viet Nam's banking sector comprises 5 SOCBs (Vietcombank, VietInBank, BIDV,
Agribank, and Mekong Housing Bank), 40 JSBs (11 with foreign investors), 6 100% foreign-owned
banks (HSBC, Standard Chartered, ANZ, Shinhan Vietnam Bank Ltd and Hong Leong Bank Vietnam
Ltd), 45 foreign bank branches, 55 foreign bank representative offices, and 5 joint venture banks.
26 Economic Integration and Vietnam’s Development, IBM Belgium, 2009
107
Upon the entry into the World Trade Organization in 2007 and after signing the Bilateral Trade
Agreement with the United States in 2000 Vietnam committed to progressively liberalize its financial
services sector.
The EU is currently enjoying the Vietnamese WTO commitments on the liberalisation of the banking
sector. The limitations are structured are organized in four aspects:
(1) Legal Structure: Under Vietnam’s commitments to the WTO, foreign CIs are permitted to
establish a commercial presence in Vietnam in four forms: a) representative office; b) branch
of foreign commercial bank; c) commercial joint venture bank with foreign capital
contribution not exceeding 50% of chartered capital; d) bank with 100% foreign-owned
capital.
(2) Ownership and Equity Cap: For capital contribution in the form of buying shares, total equity
held by foreign institutions and individuals in each of Vietnam’s joint stock commercial bank
may not exceed 30% of the bank’s chartered capital, unless otherwise approved. Strategic
investors may own no more than 15% of chartered capital of a bank, either individually or
with affiliated entities. Strategic investors who wish to own 20% of chartered capital of a bank
will need prime minister’s approval and also subject to a 5-year lock up period.
(3) Domestic currency business: During the 5 years from the date of Vietnam’s WTO accession,
Vietnam may limit the right of a foreign bank branch to accept deposits in Vietnamese Dong
from Vietnamese citizens with which the bank does not have a credit relationship to a ration of
the branch’s allocated capital27
.
(4) Licensing: A foreign bank is eligible to receive a banking license to operate in Vietnam if its
total assets were at least 20 billion USD the year prior its application for a license.
The export propensity of the European Banking Sector
The banking sector is one of the most important sectors of the European economy. Indeed, Europe
and in particular six States (Great Britain, France, Italy, Germany, Spain and Netherland) count up to
approximately one third of the world wholesale financial services output. The most recent data (2008)
reveal that, in spite of the financial crisis, the output of the EU wholesale financial sector is estimated
to be worth around €220 billion Euro. The importance of the banking and financial services sector in
general in the European economy is revealed also in the export propensity of European banks and
financial services providers. Over the years the contribution of the financial services sector to the
overall EU services exports has grown constantly. Indeed, in 2007 the share of financial services in the
trade in services balance was almost 45% of the total services export.
27 Economic Integration and Vietnam’s Development, IBM Belgium, 2009
108
Contribution of Financial Services to extra-EU trade in services (2005-
2007)
Source: London Economics, 2009
EU Request in Financial Services in the context of Bilateral Trade Agreements
In the context of FTA negotiations, the financial services sector is of the major targets of the EU. In
this respect the pattern of liberalization is based on four important elements: 1) a positive list approach
in the scheduling of commitments, which aims at bringing additional commitments in respect to the
GATS; 2) the obligation on EU FTA partners countries to introduce international financial stability
standards; 3) additional commitment to allow EU banks to introduce “new financial services
products”; 4) the obligation to fully liberalize the movement of capital.
Scheduling Approach: There are two main models of services liberalization evident in FTAs. The
first is the “GATS-type” model, used in the MERCOSUR and in most of the European FTAs that
distinguishes between the four modes of supply used in the GATS, and that uses the same “positive
list” approach in identifying the sectors, subsectors and modes of supply in which commitments are to
be made. The second is the “NAFTA-type” model, more commonly found in the North American
FTAs that follows the NAFTA approach of having one set of commitments covering all “cross-
border” modes of supply (modes 1,2 and 4 in GATS terms), while “commercial presence” (GATS
mode 3) is covered separately in the investment chapter. The “NAFTA-type” model also involves a
“negative list” approach whereby commitments on services trade apply to all sectors and subsectors
except those specifically listed as exceptions. “
109
The EU adopts the first approach. This gives usually more flexibility in the scheduling as the positive-
list approach usually gives more flexibility in the commitments as only those commitments inscribed
in the schedule are bound on the members (while in the negative list everything is liberalized except
those exceptions listed in the commitments).
International Financial Stability Standards: During FTA negotiations, the EU tries to introduce
obligations on authorities to implement international financial stability standards. These standards are
those applied by European banks and discussed in the context of OECD, G-7 and BIS, namely:
• Basel Committee's “Core Principle for Effective Banking Supervision”,
• International Association of Insurance Supervisors' “Insurance Core Principles”,
• International Organisation of Securities Commissions' “Objectives and Principles of
Securities Regulation”,
• OECD's “Agreement on exchange of information on tax matters”,
• G-20 “Statement on Transparency and exchange of information for tax purposes”,
• Financial Action Task Force's “Forty Recommendations on Money Laundering”,
• "Nine Special recommendations on Terrorist Financing", and
• Parties had also to take note of the “Ten Key Principles for Information Exchange” promulgated by
the Finance Ministers of the G-7 Nations, and to take all steps necessary to try to apply them in their
bilateral contacts.
New Financial Services Products: The European banks can offer a vide range of new financial
products that can be then exported to foreign countries. For this reason the EU FTAs contain
commitment to allow European financial services supplier to provide in the other member country any
new financial service similar to those services that European banks are allowed to offer in their home
countries. The standard clause (see below) allow the Parties the discretion on the juridical form
through which financial services may be provided in their territories and the right to require
authorisations for the provision of the service. Finally the decision to permit the service must be made
within a reasonable time frame and may only be turned down on prudential grounds28
28 Sauvé and Ward, 2009
. This clause is
meant to allow the export into the foreign market of derivatives and other risky products that are
traded in some European fora, such as London. The opening of the banking sector to these new
products, which ultimately lead to the financial turmoil of 2008, requires a high-degree of regulatory
oversight that is extremely difficult to achieve for a developing country like Vietnam.
110
ARTICLE 7.42: “NEW FINANCIAL SERVICES” (EU-Korea Free Trade Agreement)
“Each Party shall permit a financial service supplier of the other Party established in its territory to
provide any new financial service that the Party would permit its own financial service suppliers to
supply, in like circumstances, under its domestic law, provided that the introduction of the new
financial service does not require a new law or modification of an existing law. A Party may
determine the institutional and juridical form through which the service may be provided and may
require authorisation for the provision of the service. Where such authorisation is required, a decision
shall be made within a reasonable period of time and the authorisation may be refused only for
prudential reasons”.
Capital Mobility: A very important aspect of the EU FTAs is that it restricts even further the
authorities’ capacity to control capital flows. The rules go beyond what is being agreed in the GATS,
which already prohibits restrictions on all payments for current transactions in sectors, which have
been liberalised under GATS:
• Prohibit restrictions on all payments for current transactions between residents of the
signatory countries (rather than only related to foreign investments);
• Prohibit restrictions on the free movement of capital relating to direct investments with regard
to transactions on the capital account of balance of payments.
• Require that measures ensuring the integrity and stability of a Party's financial system shall not
be more burdensome than necessary to achieve their aim, and shall not discriminate against
financial service suppliers of the other Party in comparison to its own like financial service
suppliers,
• Limit the way safeguard measures with regards to capital movements can be taken: only “in
exceptional circumstances” when payments and capital movements between the Parties cause
or threaten to cause serious difficulties for the operation of monetary policy or exchange rate
policy in one or more [signatory States];
• And only those safeguard measures with regard to capital movements “that are strictly
necessary may be taken” for a period not exceeding six months.
Such rules prohibit countries to have the necessary flexibility to prevent a financial crisis or to act
during times of financial crisis to protect the financial and other needs of the society of the host
country. There are some provisions to deal with balance of payments problems, but these are made
conditional29
.
29 Vander Stichele, 2008
111
Other Possible Request with Regards to Viet Nam’s WTO Commitments: One of the favourite ways
for European bank to enter into a foreign market is through mergers and acquisition activity. In this
regard the equity cap of 30% imposed on foreign investors with regards to acquisition of shares of
Joint Stock Commercial Bank and the limitative regulations with regards to M&A will be probably on
of the major targets of European negotiators.
Commitments on Liberalization of Services and Capital Movement in selected EU FTAs
EU -
CARIFORUM
EU - Chile EU - Mexico EU – South
Africa
EU - Korea
SERVICES GATS plus
(great
liberalization of
tourism)
GATS plus GATS plus GATS
confirmation
GATS+
(great
liberalizatio
n in
financial
services,
telecom,
maritime
transport
and e-
commerce)
INVESTMENT Included in the
services chapter
Yes No No Included in
the services
chapter
CAPITAL
MOBILITY
No restrictions
in the free
movement of
capitals for
FDIs.
Safeguard
measures in case
of difficulties
for monetary
policy or
exchange rate
No restrictions
in the free
movement of
capitals.
Safeguard
measures in case
of difficulties
for monetary
policy or
exchange rate
controls
Progressive
liberalization
of capital.
Once
liberalized
there is no
possibility of
imposing
restrictions
Safeguard
measures in
No restrictions
in the free
movement of
capitals for
FDIs.
Safeguard
measures in
case of serious
difficulties for
balance of
payment (no
No
restrictions
in the free
movement
of capitals
for FDIs.
Safeguard
measures in
case of
difficulties
for
112
controls
(maximum 6
months)
(maximum 1
year with
possibility of
extension)
case of
difficulties for
monetary
policy,
exchange rate
controls and
balance of
payment
difficulties
(maximum 6
months)
length
specified)
monetary
policy,
balance of
payment or
(maximum
6 months)
(Updated table based on: Ignacio Minambres, 2009)
Impact of Potential Liberalization on the Domestic Banking Sector
Vietnam opened progressively its banking sector since the BTA with the United States in 2000 and,
even further upon the accession to the World Trade Organization.
Few studies have already analyzed the impact of baking liberalization in Vietnam in light of the WTO
commitments. One study of MUTRAP III is particularly useful in assessing the strength and
weaknesses of the Vietnamese banking sector vis-à-vis foreign competitors investing in Vietnam.
There is no particular reason to believe that European banks would bring different effects on the
Vietnamese banking system. Indeed, it seems that European banks are not interested in the Vietnamese
market, especially in the segment of retail banking, unless this forms part of a wider and more
comprehensive strategy of expansion in Asia (as it was the case of HSBC and Standard Chartered)..
Clearly an increase in foreign investment form Europe would require a higher presence of European
banks, but mainly in the form of representative offices or branches to offer trade finance instruments
to European exporters and investors. For what concerns corporate finance, all the major European
banks have already offices in Hong Kong and Singapore that can offer all the most useful banking
services for business, such as corporate investment banking, asset management. In this case, there is
no need for European banks to establish a network within Vietnam, being sufficient only a limited
presence, which in case could then refer to the main Asian headquarters.
113
“Entry by foreign banks will add up to competitive pressure in the banking sector30
As new comers, foreign banks will initially compete with each other in providing supporting services
for FDI, FII, forex, and commercial-related services of major domestic companies of good credit
reputation. The scale of the foreign bank group thus depends on the scale of FDI.
Foreign banks can apply 1 or both 2 of the market access modes to penetrate into the retail banking
market. These include establishment of 100% foreign owned subsidiaries to expand network or making
strategic investment in domestic joint stock banks. JSBs benefit from the transfer of technology,
product development, new services, and managerial skills, risk management skills from foreign
strategic partners. The major impact of foreign bank entry would be more fierce competition in a
small market. A real danger to SOCBs comes from strategic partnership between JSBs and foreign
banks. Currently, the seek for foreign strategic partner faces difficulty due to global financial crisis
and limited capacity of JSBs.
In the situation of Viet Nam, the comprehensive commitments in opening banking service market
present a risk to Vietnamese banks due to unequal business environment. In general, Vietnamese
banks are less competitive than foreign banks in import aspects of (i) total asset size, (ii) level of
banking technology modernization, (iii) human resource and (iv) governance capacity based on
international standards.
In addition, with the ability to be commercially present in Viet Nam under all forms, foreign banks can
choose to establish both branch and subsidiary in Viet Nam31
Fast development of joint stock commercial banks help them gain quickly on market share.
. The maintenance of both branch and
subsidiary create much better competitiveness for foreign banks compared with domestic banks since
the former can develop business network through subsidiary (having national treatment) and extend
large credits through branches (credit limit is calculated upon the parent bank's capital).
As mentioned above, JSBs may gain lots of benefits from the relaxation of foreign ownership
participation. On the other hand, JSBs are much more vulnerable than foreign banks in face of
competition from SOCBs. Since many JSBs are limited in terms of geographical location, if SOCBs
perform better JSBs may go down because the SOCBs enjoy a major competitive advantage of being
able to accept more credit risks thanks to the government’s implicit guarantee and to exceed the
lending limit to a customer.
JSBs will focus on supplying services to good SMEs, risk management services when the legal
framework for such services is issued. Some JSBs will participate actively in the savings market in urban
30 SERV-2A, Final Report, MUTRAP III, pp. 291-292 31 03/5 foreign banks licensed to establish their subsidiary have maintained both branch and subsidiary in Vietnam,
including ANZ, HSBC, Standard Chartered Bank.
114
areas and provide banking service to high-income households. Foreign banks will be the major
competitors in new banking service, and SOCBs will be the main rivals in deposits and lending by JSBs.
In the coming time SOCBs continue to be the major savings mobilizer and credit allocator
SOCBs are too big to specialize in a certain target market. However, they may remain the major
service provider in rural areas. As time goes by, credit decision will become centralized and credit
allocation becomes fully commercial-based. However, a determinant factor of banking operation is
the implicit guarantee of the government towards SOCBs. This implicit guarantee may create moral
hazards in credit extension by SOCBs and also put SOCBs on a more advantageous position in
savings mobilization compared with JSBs. That said, if SOCBs do not move to fully commercial based,
the development of the banking sector will be limited and the overall size and capacity of service
provision of the banking sector will reduce. The on-going equalization policy will gradually reduce
SOCBs advantages and nourish a healthier competitive environment32
Competitiveness of individual credit institution
.
The competitiveness of any CI is not measured by its market share or even ROE, although these
indicators aim at showing better performance of a more competitive institution. There are two aspects
of an individual institution's competitiveness. The comparative advantage of a CI is closely related to
its historical role in the market, while competitiveness is more related its governance and flexibility in
the use of resources.
Comparative advantage of different groups of CIs
- Foreign banks: financing FDI and related services, specialized forex service and service for big
companies, retail banking to wealthier people (including credit card).
- JSBs: credit to SMEs, domestic transaction services, retail banking in urban areas including modern
banking when the market develop; and
- SOCBs: credit to SOEs, domestic savings mobilization especially from urban and rural areas, forex
services, payment and credit services.
Competitiveness of individual institution
A competitive CI should have the following characteristics: (i) Capacity to innovate; (ii) Capacity to
allocate and reallocate asset and liability portfolio; (iii) Capacity to improve productivity and manage
its use of resources; (iv) Solvency, capital and liquidity; and (v) Strong owners.
32 02 SOCBs (VCB and VietinBank) have accomplished equalization, other 02 SOCBs (BIDV and MHB) are in the
process of preparation for equalization.
115
Thus, for a CI to be competitive, it should have both capacity and incentive to compete. Foreign banks
are highly competitive but probably will only operate in certain suitable market segments. JSBs shall
be more competitive when their shareholders put higher demands on performance. SOCBs will face
considerable challenges in enhancing efficiency because of their historical structure, one of which is
to create pressure on the management to become more competitive. In order to achieve this, SOCBs
should operate purely on a commercial basis within the prudential framework set out for the banking
sector. They also need to be able to decide on prices, credit allocation and make other business
decisions in a commercial way.”
Impact of Potential Liberalization on the Economy and other considerations.
The liberalization of banking services brings a variety of effects on the domestic economy. The basic
economic argument in favour of banking liberalization is that the entry of new banks will provide
more credit to the economy and therefore will boost the productivity of the firms. At the same time the
increased competition will add other beneficial effects, propelling more innovation, increased
efficiency, better management and new technology33
In a potential free trade agreement with the EU the main question to ask it to what extent a further
liberalization of the banking sector, which is already quite liberalized after the entry to the WTO,
would bring additional benefits to the Vietnamese economy. In the context of the FTA there are few
issues that should be considered:
.
• Improved access to credit in the rural areas through microcredit banks: The microfinance
system in Vietnam is still underdeveloped, in spite of the fact that only a small part of the
population has access to credit. Although the main European banks do not offer microfinance,
nevertheless there is a big market to be exploited if European credit institutions wish to enter
into this business.
• Mode 1 liberalization (cross border supply of banking services from Europe to Vietnam):
Vietnam’s WTO commitments do not comprehend the liberalization of cross border banking
services (with limited exceptions). This means that Vietnamese individuals and institutions
cannot buy banking services offered by foreign banks in their home country. Mode 1
liberalization is particular important for European banks, as this does not require to establish a
business presence in the Vietnamese market (either via joint-ventures, 100% owned foreign
bank, branch etc.), that does not make sense for those European banks (the large majority) that
do not have already a stable and widespread presence in Asia. On the Vietnamese side the
liberalization of cross border supply of services would not harm the domestic industry, which
is not sophisticated enough to offer the most complex financial products available in Europe. 33 For a better overview of the implication deriving from financial services and banking liberalization: SERV-2A,
MUTRAP III.
116
• Rising up the equity cap currently at 30% on shares of JSCB and SOCB: Viet Nam’s WTO
commitments limit the right of Vietnamese and foreign individuals and institutions wishing to
buy shares of a JSCB or of a SOCB only to a maximum of thirty percent of the total shares.
Although this does not represent a discrimination against foreign services suppliers,
nevertheless it represents major obstacle towards the entry into the Vietnamese market.
Despite the full liberalization of entry for foreign banks wishing to establish in Vietnam a
100% wholly owned subsidiary, one of the most important gate to a foreign market is through
mergers and acquisition activity. The abovementioned limitation of 30% not only artificially
protects the SOCBs and the JSCBs from foreign competition (with all the detrimental effects
on the economy), but it also impede an easy entry for foreign banks through M&A activity. In
the context of the US BTA, the equity cap is raised to 49% for American banks. It is wise to
think that the 30% equity cap would be one of the main targets of European negotiators. In
this respect the cap should be raised at the same level of that applied to American banks.
• New Financial Services products: Financial innovation is one of the most important elements
when assessing the competitiveness of the banks. Indeed, the ability to produce more
diversified and innovative financial products tailored for the specific needs of the customers
allows the bank to enlarge its client base and, similarly, permits to ensure a better and more
focused financial product for the final customers. The European banking system is particularly
endowed with diversified and innovative financial services products, which therefore are one
of the main exporting items within the financial services sector. Some of the abovementioned
products are quite complex and sophisticated. In some case, such products might entail a high-
risk that can be mitigated only through a complex regulatory system. In the context of the FTA
the EU would probably push for a better market access to its new financial services products. In
this respect it is worth to note that, despite the beneficial effects of financial innovation, Vietnam
still is lagging behind in terms of regulatory infrastructure capable to minimize the risks
associated with such sophisticated and risky products. A full acceptance of new financial
services products without the necessary guarantees in terms of regulatory oversight, managerial
skills and, more in general, without a sound financial safety net system would highly increase
the possibility of frauds and of financial collapse in the case of a systemic crisis.
• International Financial Stability Standards: European negotiators usually oblige the FTA
partner country to adhere to the most important international banking standard. Although
Vietnam did not participate in the formulation of the standards, nevertheless there is no doubt
that their implementation would guarantee a high level of regulatory protection against
negative pitfalls of financial services liberalization. In this respect, the obligation to adhere to
such standard would be the most important benefit brought to Vietnam in the context of the
preferential liberalization of the banking sector in the FTA.
117
• Capital Mobility: Full capital mobility and no restrictions in the repatriation of profits is one
of the most important elements in attracting FDIs. In Vietnam there is already the possibility
to repatriate profits with only few limitation. The main problem in this respect is the limited
amount of foreign currency available to repatriate the profits. For this reason, in the context of
the FTA the EU would probably request, among all, 1) a further opening of the capital account
for repatriation of profits from FDIs and, B) a restriction in the safeguard measures applicable
in case of “exceptional circumstances”, limiting them only in case of risk of severe difficulties
in monetary or exchange rate policy, and for not more than six months. The combination of
capital account liberalization with limited safeguard measures available in case of crises when
coupled with an underdeveloped prudential regulatory framework such as that of Vietnam
could cause disastrous effects in case of a systemic crisis. In this regard, Vietnam should either
try to limit the opening of the capital account, increase the safeguards measures available,
while at the same time use the FTA as a further incentive to reform its regulatory framework
by adhering to the international financial stability standards required by the EU.
Conclusions
The banking sector will be one of the main targets in the context of further services liberalization
required by the FTA. In this respect, there is no particular reason to foresee a huge increase of exports
and FDIs in banking coming from Europe. The main reason for this resides in the fact that the
Vietnam itself is not an attractive market for European banks that are not already massively present in
the region, especially in the segment of retail banking and investment banking. Clearly, with increased
European investment in the economy of Vietnam, the appeal of Vietnam among European banks will
increase, but this will probably result only in the establishment of representative offices and branches, or
in small banks targeting international clients. On the other hand, a further liberalization in cross border
supply of banking services (MODE 1), without producing any significant impact, it could nonetheless
allow Vietnamese individuals and institution to access the European banking market without the need for
European banks to establish any form of presence in Vietnam.
In the context of preferential liberalization in the FTA with the EU Vietnam could be required to adhere to
some international financial stability standards. The upgrading of the Vietnamese regulatory framework
required by the EU would be one of the most important effects coming from the FTA, as it was ten years
ago with the BTA with the US, which opened the door for Vietnam to the entry into the WTO.
One of the possible negative implications of a further liberalization could derive from a full opening of
the capital account without the necessary prudential regulation and financial safety nets required to
prevent a systemic crisis. In the context of the FTA would be wise to match an increased capital
mobility with a parallel upgrading in the financial and monetary safety nets available to Vietnamese
authorities.
118
7. IMPACT OF EU TARIFF REDUCTION ON VIETNAMESE EXPORT
7.1. Quantitative impact of tariff reduction on Vietnamese export in the EU based on price
elasticities
In this section, a quantitative exercise is performed to gauge whether a reduction of the tariff rates on
Vietnamese products from the EU-side will result in significant improvements in Vietnamese export to
the EU. In other words, we quantify if signing a FTA agreement between Vietnam and the EU will
have direct effects onto export volume. Annual data are used for the period 2005-2008. The source of
the data is COMTRADE, except price elasticities, which are obtained from the GTAP database. We
would like to measure the impact of a reduction of the tariff by 90% on the EU side on the volume of
exports of Vietnam in the EU. All tariffs are allowed to reduce by 90%. Then, the new value of the
Vietnamese export in the EU is calculated as follows:
Vietnamese export in the EU under tariff reduction =
= Current value *(1+Price elasticity*Tariff reduction)
In this type of calculation, the most important determinant of the increase of the export volume is the
price elasticity. The higher the price elasticity, the higher the increment in the export value. Certainly,
in the estimation, the tariff-rate reduction matters. Based on such estimation, the current value of the
export in the EU (total 2005-2008) is envisaged to have increased by only 1.7% if tariff rates will have
reduced by 90%. This is agreeably a small increment, which suggests that the prospect signing of the
FTA between Vietnam and the EU will potentially lead to small direct benefits for the Vietnamese
export.
However, this type of calculation is entirely static and does not depend on other trade
characteristics, not is able to take into account potential indirect benefits from a prospect FTA. Since
this approach is based upon one information – price elasticities, in the next section we advance the
analysis by enabling export to depend on other variables and quantify the potential gain from a tariff
reduction.
119
7.2. Quantitative impact of tariff reduction on Vietnamese export in the EU based on quantitative
modelling
7.2.1. Theoretical basis
We further explore the potential benefits of tariff reduction on EU imports from Vietnam. Since the
approach based on price-elasticities calculation is apparently simple and the trade proliferation is
based only upon one information – price elasticities, here we perform more advanced analysis.
Namely, we put the potential determinants of export into a quantitative model and try to assess if
tariffs impact on export is statistically and economically meaningful. For this purpose, the starting
point is the conventional gravity model. In its simplest and conventional form, the gravity model
estimates bilateral trade flows as a function of the income levels (GDP expressed in nominal terms)
and the distance between the two trading partners. Domestic income level approximates supply and is
assumed to push export, while the foreign income approximates demand and is assumed to pull export.
Distance between the capital cities is usually used as a proxy for transportation costs and hence is
considered as trade resisting factor (Clark et al. 2004). Besides the above variables, empirical
specifications of the gravity model typically include (dummy) variables that support or reduce trade
between two countries, such as common border, common language, land areas, cultural similarity,
geographical position, historical links, and preferential trade arrangements. These variables tend to
affect the transaction costs relevant for bilateral trade and have been proven to be statistically
significant determinants of trade in various empirical applications (Anderson, 1979; Helpman and
Krugman, 1985). The real exchange rate might also have an effect on exports; according to Pugh and
Tyrrall (1999), the exchange-rate effect on exports is undoubtedly negative, though some studies
undermine the existence of two channels through such effect is realised: the uncertainty and political
economy channel, which has implications for the policy action.
However, for tariff-policy purposes, the standard gravity model has to be undoubtedly modified.
Conventionally, the model has export (or entire trade volume) of the domestic country with each
trading partner as a function of the above variables. Though, here we would like to explore the trade
relations between EU and Vietnam and hence come up with some suggestions of whether a prospect
reduction of tariffs following an FTA, will induce greater Vietnamese export in the EU. Hence, the
dependent variable is export volume for each of several product categories, which is a function of the
income levels, relative prices and tariffs. Apparently, in such modification of the standard gravity
model, the most important variable would be the tariff rate, since we observe how tariff reduction will
impact export between Vietnam and the EU. However, variables that induce or hamper trade cannot be
isolated separately, since these are constant over the whole period. In fixed effect estimation, these
effects are captured by the individual heterogeneity. However, these are neither so important for our
analysis.
120
The omitted variable of great concern is termed “multilateral resistance” and is emphasized in the
theoretical foundation of the gravity model (Anderson and van Wincoop, 2003; Frankel, 2008). These
effects are defined as a function of unobservable equilibrium price indices, and depend on bilateral
trade barriers and income shares of all the trading partners. In other words, the term “multilateral
resistance” effects summarizes the effects on a given bilateral trade from differential, possibly
unobserved, trade costs between this country pair and all other trading partners. The gravity equation
can then be interpreted as indicating that bilateral trade depends on the bilateral trade barrier between
the two countries in question, relative to the multilateral resistance indices of the two countries: for a
given bilateral trade barrier between the two countries, higher barriers between them and their other
trading partners would reduce the relative price of goods traded between them, raising bilateral trade.
In empirical applications, the multilateral resistance indices can be conveniently proxied by individual
country effects. Since we use panel approach, these aspects are accordingly included into the country-
specific effect.
7.2.2. Data used
Same data for trade are used as before. Macroeconomic data are obtained from the World
Economic Outlook, while the GDP per capita of the EU-27 has been obtained from Eurostat. We have
about 97 product categories over the period 2005-2008 which gives sufficient observations for
econometric analysis. Export volume, GDPs per capita of Vietnam and EU and the tariff rate are
accordingly logarithmised. The tariff is logariithmised in order for the estimated coefficients to be
comparable with the estimate of the price-elasticity approach; otherwise, the tariff rate does not have
to be in log.
7.2.3. Model specification
The benchmark panel specification for the analysis of aggregate trade is based on that used by Rose
(2002) and Clark et al. (2004), but modified to accommodate our purpose. We estimate the following
model:
lexijt = b0* lgdp_dijt+ b1* lgdp_fijt + b2* rerijt + b3*ltariffijt + alphai + epsilonijt
where lexijt denotes the logarithm of the export by product between Vietnam (country i) and EU
(country j) at time t; lgdp_dijt is the logarithm of the GDP per capita of Vietnam; lgdp_fijt is the
logarithm of the GDP per capita of the EU; rerijt is the real exchange rate between Vietnam and the
EU; ltariffijt is the logarithm of the bound tariff on EU import from Vietnam by products. alphai is the
country-specific effect, to capture the above mentioned effects; while epsilonijt is i.i.d random shock
and is assumed to be well-behaved.
121
7.2.4. Methodology
A reasonable starting point in panel analysis is to run a fixed-effects (FE) or random-effects (RE)
regression. Both have intuitive grounds and, hence, the distinction will be performed quantitatively.
Namely, FE estimation is preferable when all products of interest are included and when regressors are
assumed to be correlated with the country-specific effects. Though, although in the regression all
Vietnamese products exported to the EU enter, still there might be a concern that not all right-hand
side regressors are correlated with the unobserved country-specific effect (like the EU GDP per capita
– which is fully exogenous). Hence, from that viewpoint, RE is needed. However, RE estimator has
the drawback that conclusions cannot be generalized out of the sample, which is, to an extent,
acceptable in this case.
On the other hand, given the concern over the endogeneity of the domestic income in the gravity
equation, it might require IV correction. Namely, domestic income is assumed to push export (export-
led growth), but there are some theorists and empirical applications (growth-led export) which argue
that the relationship runs in the opposite direction. Two general IV estimation techniques are used for
this purpose: two-stage least squares (2SLS) and the generalized method of moments (GMM) and
results are compared. Hence, in what follows, five estimators are presented: FE, RE, IV-RE, IV-FE
and GMM. We later explain our preference.
7.2.5. Simulation results
Results are given in Table 3. In the IV estimates, lags of the instrumented variable and the foreign
GDP per capita are used as instruments. All specifications have been clustered by product, to take care
of any inter-group (inter-product) cross-correlation. Throughout all specifications, available
diagnostics are fine.
Table 41 – Gravity model simulation results
Dependent variable
Export by product
FE
Robust
RE Robust IV-2SLS
RE
IV-2SLS
FE robust
GMM
FE robust
CUE
FE robust
(1) (2) (4) (5) (6) (7)
Log of Domestic GDP per
capita
.180 .163 -.321 -.240 -.340* -.088
Log of Foreign GDP per 1.739** 1.768** 2.876* 2.684*** 2.371*** 2.408***
122
capita
Log of Real exchange rate
(decrease=depreciation)
-.018 -.018 .027 .023 .010 .020
Log of the bound tariff -.040 -.071 -.072 -.019 -.107 -.016
Constant -8.874 -9.164 -20.764 - - -
F-statistics
H0: All regressors are
insignificant
0.000 0.000 0.021 0.000 0.000 0.000
Hansen test (p-value)
H0: Instruments are valid
- - - 0.425 0.425 0.157
Hausman test (p-value)
H0: RE estimator preferred
0.999 0.998 - -
Note: *, ** and *** signify significance at the 10, 5 and 1%, respectively.
According to the Hausman test, which is a standard test to make a preference between FE and RE, RE
estimator is chosen, which is expected given the above discussion. However, the modelling
approaches within the IV techniques have been advanced so to take into account any weak
identification and so, hence we do not disregard the FE estimates easily.
In all specifications, results from the different estimators do not differ in an important way. As in most
export models for small and open economies, the domestic income does not play any significant role.
However, the foreign income, in this case the income of the EU plays a strong role for Vietnam. This
outcome is expected, given that Vietnam is small and open economy which is highly dependent on the
foreign demand. The obtained coefficient suggests that when EU demand increases by 1%,
Vietnamese export in the EU increases, on average by 1.8% to 2.8%. This is a very strong response of
Vietnamese export on the EU demand and indeed suggests that EU economy acts as an engine of the
Vietnamese trade. Relative prices (RER) are insignificant.
Interestingly, the tariff rate is insignificant across all specifications, which suggests that the tariff
policy does not play any role in affecting export from Vietnam to the EU. Though, obtained
coefficients are of comparable magnitude as those estimated within the price-elasticity approach – a
decrease of the tariff on import originating from Vietnam from the EU side by 1%, will, on average,
lead to an increase of export by 0.02% to 0.11%. Commensurate to our approach in the price-elasticity
123
section, these estimations suggest that a reduction of tariffs by 90% will lead to export increase of
1.8% to 9.9%. These estimates are of comparable magnitude to those estimated within the price-
elasticity approach, whereby the obtained figure was a 1.7% increase of export when tariffs decline by
90%. We argued there and still argue that this is low direct impact, but here we have further evidence
that this magnitude is neither statistically significant. Hence, from the viewpoint of tariffs, there are no
empirical grounds to claim that tariffs reduction will have any effect on EU demand for Vietnamese
products.
What could be the reasons for such results? Firstly, results regarding the role of the tariff might
suggest that the bound tariff has already been on a low level, as a result of the negotiations within the
international multilateral system, say. Referring back to Table 2, the weighted-average BND tariff has
already marked a declining trend over 2005-2008, positioning at 6.7% in 2008. Arguably, this could
be thought of as a level that is already reasonably moderate. Secondly, these results in general suggest
that EU demand is crucial for Vietnamese products, but not their price. Apparently, tariffs reduction
might be thought of as being unimportant in the decisions of EU trading partners. No matter the tariff,
EU will further act as engine of Vietnamese export, given the large-magnitude and very significant
coefficient on the EU income per capita.
But, do these results suggest that Vietnam should deny FTA with the EU. It seems that FTA might
lead to potential indirect benefits for the Vietnamese economy, which we point out in the next section.
7.3. Qualitative benefits of a FTA between Vietnam and the EU
Although we have estimated that the immediate reduction of import tariffs to the Vietnamese products
on the EU side will likely not result in any significant benefits for the Vietnamese export, still trade
liberalisation can deliver economic benefits other than those directly related to removal of trade
barriers — for example, mechanisms to promote closer economic, political and cultural linkages and
institutional reform and strengthening. These additional effects can, in turn, drive substantial
efficiency gains in the domestic economy. First and foremost, it is expected that Vietnam would
benefit from prospect FTA with the EU, because i) it has, on average higher tariffs on EU products
than EU had on Vietnamese products; ii) the increasing significance of Vietnamese export to the EU
relative to the total export; and iii) Vietnam being considerably more open economy than the EU, i.e.
an economy with a large share of the international trade into the GDP. These benefits are expected to
accrue around several points.
1) Macroeconomic effects. Given the three characteristics of the current trade patterns
between Vietnam and the EU, major macroeconomic benefits are expected to
accrue for Vietnam. Trade liberalisation brings greater market for the Vietnamese
products and greater domestic efficiency. The estimated strong effect of the foreign
124
demand might spur domestic efficiency and in the medium run lead to product
differentiation. This will enable a broader production base, part of which will be
consumed at home and part of which will be exported. Hence, such exogenous
stimulus is expected to increase domestic consumption as well and along the
foreign demand for export be the most important driver of the domestic economic
activity in the medium run.
The removal of bilateral trade barriers by Vietnam as part of the prospect FTA will have the effect of
increasing the marginal productivity of capital in protected sectors of the Vietnamese economy. This
rise in efficiency of capital leads to a wealth effect and an increase in real consumption. With the rise
in efficiency and consumption in the economy there will be a lift in real investment.
2) Investment. With: i) improved economic efficiency at home; and ii) closer relations
between Vietnam and the EU; it is expected that investment will improve in the
medium term, mainly those originating from the EU itself, but also from other
countries. FTA might be considered as a first step of closer economic relations
between Vietnam and the EU, but the medium term should bring increased interest
of European investment into the Vietnamese economy. The liberalised trade regime
should boost investors’ attitude to invest in an economy with comparative
advantages (like the cheap labour) and than to export the production into the EU
under a liberalised regime. In turn, the increased investment demand might have
effect on increased savings and/or further increase of capital inflows into the
economy.
3) Sectoral effects. At the outset, it is expected that the largest sectoral benefit will
accrue around the textile and food industry – the ones that are currently the most
important export sectors to the EU. However, increasing efficiency in those sectors
should lead to increase in their productivity. On the medium run, these economic
trends should be followed by a structural change of the production basis in the
economy towards sectors with higher value added. FTA is expected to play a major
role in the process of the development of those sectors.
4) Import prices. Not only will EU reduce tariffs on Vietnamese goods, but also
Vietnam will have to reduce tariffs on European goods. This means that import
prices will decline. Although in the short run this will imply greater imports and a
possible worsening of the current account, it is expected to lead to cheaper inputs
for the domestic production, increased efficiency and hence productivity. Higher
productivity in the medium run is expected to improve the overall economic
welfare of the country.
125
5) Further trade liberalization. Additional indirect effect of the FTA between EU and
Vietnam might spur the interest of further trade liberalization on the side of
Vietnam, as well as further interest in FTAs with countries with which Vietnamese
trade is not yet liberalized or not at satisfactory level. This effect is expected given
the significance of EU at the world trade scene and its significance for the
Vietnamese trade.
Overall, welfare-creation effects are expected to dominate in the Vietnamese economy, at least in the
medium term.
126
8. QUANTITATIVE ANALYSIS ON THE EXPORT PERFORMANCE OF SELECTED VIETNAMESE SECTORS
8.1. Garment and Textiles
The Garment and Textiles Industry in Europe
The textile industry in Europe covers a vast array of activities, ranging from the production of clothes
to most sophisticated productions of hi-tech synthetic yarns, industrial fibers or the more simple
transformations of fibers to yarns and fabrics.
(Source: EUROTEX, 2009)
127
The sector had in 2009 a total turnover of €167 Billion, a drop of 15,6% compared with 2008. Still the textiles
industry plays an important part in the European manufacturing industry, employing around 2 million people in
128.000 companies. The textile and clothing sector accounts for 3% of total manufacturing value added in
Europe.
After China, the EU is the world's second largest exporter of textiles, exporting around €36.3 billion of products,
mainly high quality clothes. The main destinations were Russia, Switzerland, USA, Turkey and Tunisia. At the
same time, Europe is a net importer of textiles with a total of €80.5billion. In terms of value the EU's main
suppliers in 2008 were China (39%), followed by Turkey (14%), India (7.7%), Bangladesh (6.3%) and Tunisia
(3.6%).
Indeed, the industry was severely affected by the economic crisis in 2009. In this respect, the most
affected sector was the man-made fibres, which has experience a reduction of 29% in output and also a
reduction of 16% in total investment. Also the textiles and clothing sector experience a sharp reduction
around 15-16%.
For many decades, the textiles and clothing sectors were a notable exception to the progressive
liberalization of trade in manufactured goods. Since beginning of 2009 trade in textiles and clothing is
fully liberalized and there are no longer any quantitative restrictions in the EU on textile and clothing
exports including imports originating in China. As a result of this liberalization, China has become the
EU's largest provider of textiles and clothing, and continues to capture market share in Europe from
other traditional providers in Asia.
1. The Garment and Textiles Industry in Vietnam
The Textiles and garment industry is one of the country’s largest industry, employing more than 2
million workers in various enterprises, mostly state-owned or with a participation of the State
concentrated in the South-East region (58%) and in the Red River Delta (27%). One recent feature of
the Vietnamese textiles industry is the increasingly higher number of foreign invested firms.
In line with the trend in various other industrial sectors the textiles industry exhibit a high export
propensity. Vietnam exports up to 65 per cent of its garments and textiles to the US market, while the rest is
exported mostly to Europe and Japan. In 2008 and 2009 the Vietnamese garment and textile industry was
affected by the global economic turmoil. In 2008 and 2009, all three major markets fell into recession,
which led to reduced demand for imported items. Indeed, in 2008, orders from the US decreased by 20%,
while in Europe orders from France, Spain and Germany have also dropped. The reduction in demand sent
prices down by 20/30 per cent. Furthermore, also the rising prices of materials, high lending interest rates
and volatile USD/VND exchange rate contributed to worsen the competitiveness of the Vietnamese
industry. Accordingly the exports to the US and to Europe went down.
128
In terms of export composition, the global economic crisis saw a remarkable reduction in the
consumption of expensive garments abroad, which in turn reduced the export prices down to 15% in
2009. At the same time, the exports of cheap and moderate priced garments grew faster (export share
of 75% in 2009).
The difficulties in exporting to the European and American markets pushed the Vietnamese producers to look for
niche markets such as Turkey, Middle East, Africa, and Eastern Europe. Furthermore, due to the reduced tariff
applied in the Japan – Vietnam and Japan- ASEAN FTAs (Vietnamese enterprises importing raw materials from
Japan will enjoy 0% tax rate instead of 5% to 10% as before), in 2009 the textile and garment exports to the
Japanese market increased from 23% to 25%,
In general terms, the Vietnamese industry faces few challenges on the export side. The biggest
difficulty is definitely the reduced demand for high-grade apparels and textiles due to the continued
financial crisis and economic slowdown. Furthermore, commodities from China, India, Pakistan and
Bangladesh have increased their presence on Vietnam’s key export markets and regional markets. In
particular, China is the biggest competitor for Vietnam as recently the US government eliminated
quota policy imposed on Chinese textiles. Nonetheless, with a demand of nearly US$5bn, the US still
remains the biggest market for Vietnamese exporters.
In response to the export difficulties the government launched a campaign to encourage Vietnamese
people to buy domestic products supported domestic sales of Vietnamese garment and fashion,
especially in rural areas. At the same time all the producers concentrated their efforts in acquiring
shares in the domestic market, whose demand for garments rose, increasing the sales by 20% in 2009.
Indeed, with a population of about 86mn with an annual growth rate of 1.2%, increasing salaries and
improving living standards render the Vietnamese market increasingly appealing for domestic as well
as foreign enterprises.
2. Trends in exports
Exports of garments show a constant growth until 2009, when there has been a moderate decrease due
to the effects of the international financial and economic crisis. Almost 25% of the export of HS62 are
directed to the EU (table 5) – increased from the 20% in 2004; the percentage of HS 61 products
exported to the EU, on the contrary, remained stable in the last five years (around 13%). Table 6
shows, on the contrary, that the importance of export of HS 62 products over the total export of
Vietnam has been reduced: from more than 9% in 2004 to a bit more than 7% in 2008 (HS 61 products
export ratio is at the same level of 2004). Chart 1 and 2 shows the revealed comparative advantage for
products at HS 61 and 62 disaggregated at 4 digit level. The value of almost all the RCA are higher
than 1 and for some products (i.e. men and women’s overcoat, men and women’s suit, shirts,
underwear, handkerchiefs and gloves) the value is particular high, showing high comparative
advantages. Table 8 and 9 provides a more general data regarding RCA at 2 digit level.
129
3. The simulation
The simulation, utilizing SMART from the World Bank, covered three different scenarios. The first one
was related to the conclusion of an FTA between Vietnam and the EU; in the second scenario it has been
evaluated the impact on Vietnam exports of garments by an FTA with the EU under the assumption that
even the other negotiations, forecasted or ongoing, between the EU and other countries, will be
successfully concluded. In the third scenario we assumed that VN-EU FTA will not be concluded
successfully, while all the other forecasted or ongoing agreements between the EU and other countries,
on the contrary, are successfully concluded and implemented. Table 10 illustrates that the impact of the
EU-VN FTA on the export of Garment from Vietnam is important (+16.59%: scenario 1). Scenario 2
results illustrate that the increased competition in the EU market from other countries (e.g. India,
Indonesia, Korea, Malaysia, Thailand, Brunei, Philippines) has limited effects on the exports of garment
from Vietnam (the impact of the EU-VN FTA on VN exports would be reduced by less than 1%). The
impact on export for scenario 3 seems limited (-0.91%): however, to this value should be added the
missing opportunities that could have followed from the conclusion of the EU FTA.
Table 10: Simulation with 3 different scenario
HS code Description Scenario 1 (only
VN-EU FTA):
impact on export
from VN to EU
Scenario 2: (VN-
EU FTA and EU
other FTAs under
negotiations)
Scenario 3: (NO
VN-EU FTA and
other FTAs under
negotiations)
61 ARTICLES OF APPAREL
AND CLOTHING
ACCESSORIES, KNITTED
OR CROCHETED
+ 17.14% +16.10% -0.91%
62 ARTICLES OF APPAREL
AND CLOTHING
ACCESSORIES, NOT
KNITTED OR
CROCHETED
+16.61% +15.88% -0.70%
63 OTHER MADE-UP
TEXTILE ARTICLES;
SETS; WORN CLOTHING
AND WORN TEXTILE
ARTICLES; RAGS
+14.31% +13.22% -1.08%
61+62+63 Total +16.59% +15.75% -0.78%
4. Conclusions
The impact of an FTA with the EU will have an important effects on the export of garments from
Vietnam
130
8.2. Footwear
The Footwear Sector in Europe
The EU is a major producer and exporter of footwear, especially high quality, high value fashion
shoes. The footwear industry is, for some European countries, one of the most important sectors of the
economy. The industry covers different subsectors, specialized in a wide variety of products from
normal shoes to more specialized products like snowboard boots and protective footwear. In 2008 the
EU was the second global exporter of footwear exporting €5.8 billion worth of shoes globally. In
2007, the footwear sector included 26,600 enterprises, generating €26.2 billion in turnover and €6.9
billion in added value (0.5% of total European Union manufacturing), and directly employing 388,000
people.
The EU footwear production is concentrated in three countries (Italy, Spain and Portugal with Italy),
which produce around 50% of the total EU production, while the rest is located in Poland, France, and
Germany34
. The industry consists of large number of small and medium enterprises, with differences
from one member state to the other in terms of size (French and German businesses employ about 100
workers, while Spanish and Italian businesses are mostly family firms employing around 20 workers).
Around 70% of the production is leather footwear and the EU footwear industry concentrates on
design, fashion, quality, comfort and vegetable tanned shoes. Due to the reduced cost of labour many
European producers have shifted their production to developing countries in Asia, especially to China
and Vietnam. In spite of the reduced costs, outsourcing in China by EU footwear producers is
expected to fall, due to the continued anti-dumping duties, the appreciation of the Yuan and higher
wages, which will increase the price of Chinese footwear. EU footwear producers are now outsourcing
in nearby countries that are cheaper, flexible and can supply small quantities with shorter lead times.
On the European market, EU producers face strong competition from low priced imports. Anti-
dumping measures put in place since 2006 have been extended in December 2009 in order to counter
unfair competition from China and Vietnam. An additional challenge for EU footwear producers is
ensuring a steady and open supply of raw material. The leather goods sector is widely affected by
export taxes and export restrictions. Because the price of raw materials can be between 30 and 50% of
the cost of production in this sector, barriers that raise the costs of raw materials can pose a serious
problem.
The EU is the largest consumer market for footwear, representing one third of the global market value.
In 2007, the EU consumption was € 50.3 billion (2.1 billion pairs) with an average per capita 34 European Commission, 2010
131
expenditure of € 101 or 4.2 pairs. Five countries (Germany (17.3%), France (16.6%), the UK (16.3%),
Italy (13.4%) and Spain (8.5%), which accounted for 72% of total EU consumption, dominated the
market. In 2007/2008, footwear sales slowed significantly in most EU countries, due rising prices
(inflation) and high anti dumping duties on cheap imports. Within the Eastern EU countries, producers
have suffered from competition from Asia, but they have benefited from increased demand in
neighboring countries.
In spite of the economic uncertainty and after a period of relative decline, the market is expected to grow again
from 2010, stimulated by more footwear styles, the fine and luxury footwear segments, the emerging middle
class in Eastern EU countries, and the continuing changes in fashion. EU producers focus more on innovative
footwear for emerging markets in Russia, China, Brazil, India and the Middle East and join forces to compete on
a global level.
The EU is the world’s largest importer of footwear, importing approximately 25% more than the
volume of USA imports, the next largest importer. In 2007, EU footwear imports represented 3.2
billion pairs with a value of € 26.6 billion. China, Vietnam, India, Indonesia, Brazil, Thailand, Tunisia
and Morocco are the main exporters of footwear products to Europe.
Germany, France, Italy and the UK were the largest importing countries and represented 60% of the
EU import value. Between 2003 and 2007, all EU countries increased their imports of footwear,
particularly the Eastern EU countries. Overall, total EU footwear imports rose in this period by an
annual average 4.3% in value and by 9.9% in volume because of more imports of cheap footwear.
Footwear with leather uppers, formed nearly 59% of the value of EU imports (30% by volume),
which grew from € 13.0 to € 15.9 billion between 2003 and 2007. Within this product group, outdoor
footwear represented 95%. The next largest product group was footwear with plastic or rubber uppers,
which accounted for 15% of the total EU imports (39% by volume), followed by footwear with textile
uppers. Footwear parts (included within other footwear) accounted for 9% of imports in 2007, down
from 11% in 200335
.
The Footwear Sector in Vietnam
At present, the footwear sector holds a very significant role in the national economic development of
Vietnam. Footwear production accounts for 40% of the total industrial production and has become a
key export for Vietnam, accounting for 10% of the country export turnover. In this respect, Vietnam
ranks among the top ten leading exporters in term of leather shoes in the world. Only in the EU,
Vietnam is the second most important importer behind China. In the end of 2009, Vietnam’s export
turnover of footwear and leather reached over $3.54 billion, down nearly 20% compared with 2008 35 CBI, The Footwear Market in the EU, 2009
132
due to the economic crisis in Europe and North America. Nonetheless, thanks to the recovery of the
world economy in 2010 the industry expects to export around $5 billion, up some 30 percent from
previous year. At present, the EU and America are the two primary footwear import markets of
Vietnam. Indeed, in 2007 Vietnamese exporters enjoyed around 5% of the US shoe market and 7% of
the European market, the second most important importer after China.
Vietnam’s leather and footwear sector has over 500 enterprises, creating jobs for about one million workers
domestically. Most of these enterprises (around 70%) produces under the processing method for well-known
fashion brands in the world such as Nike and Converse using foreign technique, technology and design,
meanwhile products under Vietnamese brands are very few, accounting only for 20%. The footwear exports of
Vietnam concentrates mainly on high quality leather shoes and sport shoes produced for US and European
brands and then exporter to the main markets overseas. Despite the trend of producing for foreign brands, more
recently, few Vietnamese footwear producers such as Hai Phong, Thai Binh, Duc Trieu, Biti etc. have started the
to focus on domestic demands by investing in the establishment of professional model design rooms and by
organizing various activities (such as footwear design competitions) aimed at improving the competitiveness of
the domestic brands.
During the years 2001-2008, the footwear sector saw a continuous increase in growth rate (with an
average growth of 10% per year for shoes and sandals). By the end of 2007, production capacity of
shoes and sandals of the entire sector reached 680 million pairs; in 2008 production capacity of the
sector exceeded 90% of the capacity invested36
. The country’s footwear sector now owns 750
synchronous production lines, which can make products from material processing to finishing with a
total capacity of 715 million pairs per annum. Key commodities of the sector are sport shoes,
accounting for 51% of the sector’s products, conformable with the consuming trend of the export
markets. Despite the very high export propensity of the sector, according to the Vietnam Leather and
Footwear Association (LEFASO), the added value of Vietnamese footwear is rather low, due to the
high import of raw material and the use of foreign technology and design.
Statistical and data analysis
The data utilized for the analysis below have been collected from two different sources: Comtrade and
Eurostat. Comtrade data are update until 2008. These data proved to be useful for the evolution of
Vietnamese exports to the EU compared and to the rest of the world and for the calculation of the
Revealed Comparative Advantages which requires data of the world trade. Paragraph 4, on the other
end, is based on Eurostat data which provides complete data at least until 2009, allowing a basic
assessment of the economic and financial crisis impact on the export of Vietnam into the EU.
36 Vietnam Export Portal, 2009
133
1. Vietnam exports
The tables and the charter below illustrates the evolution of the world export of Vietnamese footwear
and the composition of the exports (upper of leather, upper of textiles, uppers of rubber or plastics,
other shoes, part of footwear and water-proof footwear).
Table 1 (USD)
Code Product label 2004 2005 2006 2007 2008
'6403 Footwear, upper of leather 761358 898042 1266839 1951652 2332047
'6404 Footwear, upper of textile mat 1154765 1411017 1484107 996426 1224000
'6402 Footwear nes, outer soles and uppers of
rubber or plastics
316158 321168 510472 854756 1088410
'6405 Footwear, nes 381942 341428 288760 189843 122716
'6406 Part of footwear;removable in-soles,heel
cushion etc;gaiter etc
33915 39441 58802 76716 102492
'6401 W/p foot,outer sole/upper of rbr/pla upper
not fixd to sole nor assemb
77615 67519 45768 6806 2700
Total 2725753 3078615 3654748 4076199 4872365
Calculated from Comtrade Data – 2010
Graph 1
134
Chart 1
The three main footwear worldwide exported are footwear with upper of leather (47,86% of the total
of footwear exports), with upper of textiles (25,12%) and with upper of rubber of plastics (22,34%).
Only since 2006 the exports of footwear with upper of leather overcome those with upper of textile
material, which, after a substantial decrease in 2007, recaptured a positive trend in 2008.
Table 1 bis: Vietnamese export of footwear (country) (USD)
Importers 2004 2005 2006 2007 2008
'World 2725752 3078616 3654750 4076199 4872365
'European Union (EU 27)
Aggregation
1786330 1799242 1988686 2224888 2576022
'United States of America 415201 610971 803404 886007 1076207
Rest of the World 524221 668403 862660 965304 1220136
Chart 1 bis
135
More than half of the export of Vietnam are directed to the EU (52,9%), followed by the export to US
(22%).
2. The EU import from the world
Table 2: main exporters in EU market (USD)
Imports Growth rate
Exporters 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
'World 29154141 31967383 34836509 39454869 43220199
'China 4340106 6888592 7869377 9194913 10517996 14.89 21.55 22.59 23.30 24.34
'Viet
Nam
3171046 3127370 3231598 3689614 4490992 10.88 9.78 9.28 9.35 10.39
'India 877554 934883 1160567 1392666 1555766 3.01 2.92 3.33 3.53 3.60
'Indonesia 842175 891889 1039479 1242822 1504507 2.89 2.79 2.98 3.15 3.48
'Brazil 381636 499884 573046 697069 831282 1.31 1.56 1.64 1.77 1.92
'Tunisia 426790 456369 503669 614090 703775 1.46 1.43 1.45 1.56 1.63
'Thailand 431245 455033 500576 598819 590009 1.48 1.42 1.44 1.52 1.37
ROW 17754428 17787501 18712306 20515858 23025849 60.90 55.64 53.71 52.00 53.28
Table 3: main importers in the EU (USD)
136
Importers Imported
value in
2005
Imported
value in
2006
Imported
value in
2007
Imported
value in
2008
Imported
value in
2009
% in EU
market
(2008)
'Germany 5564553 5962208 6377277 7005895 7047779 16.21
'France 4734935 5010567 5719759 5947426 5565736 13.76
'Italy 4586064 5118679 5556900 5909715 5215707 13.67
'United
Kingdom
4768092 5033176 5371543 5281003 4852523 12.22
'Belgium 2011511 2076307 2570051 2925672 2603720 6.77
'Austria 1148351 1202977 1282009 1475753 1329795 3.41
'Denmark 729143 834999 1008680 1086366 880053 2.51
'Sweden 576072 661490 779884 785355 671606 1.82
'Portugal 515420 554737 698301 780167 663793 1.81
'Romania 430085 490362 642424 738227 563728 1.71
Graph 2: the three main exporters in EU market
Chart 2: share in the export in the EU
137
Table 4: import into the EU of footwear: HS 4 digit analysis (USD)
Product
code
Product label European Union (EU 27)'s imports from world
Value in
2004
Value in
2005
Value in
2006
Value in
2007
Value in
2008
share
(%)
'6403 Footwear, upper of
leather
16582685 18913093 20599459 22747303 24751279 57.61
'6402 Footwear nes, outer
soles and uppers of
rubber or plastics
4811582 5232792 5814637 7110227 7990319 18.60
'6404 Footwear, upper of
textile mat
3855965 3993001 4348212 5112239 5669440 13.20
'6406 Part of
footwear;romovable
in-soles,heel
cushion etc;gaiter
etc
2873369 2703055 2918234 3075595 3153310 7.34
'6405 Footwear, nes 725669 697410 734362 847250 959721 2.23
'6401 W/p foot,outer
sole/upper of
rbr/pla upper not
240040 290973 304453 391004 439780 1.02
138
fixd to sole nor
assemb
total 29089310 31830324 34719357 39283618 42963849 100
Chart 3: Import into the EU (share)
Import to the EU: HS 6403 (footwear with uppers of leather) (USD)
Exporters 2005 2006 2007 2008 2004
share
(%)
2005
share
(%)
2006
share
(%)
2007
share
(%)
2008
share
(%)
'World 18913093 20599459 22747303 24751279
'China 2842919 2992848 2955626 3319188 7.32 15.03 14.53 12.99 13.41
'Viet Nam 1807506 1710769 1765010 2261574 10.59 9.56 8.30 7.76 9.14
'India 659122 821972 1032357 1211303 3.54 3.49 3.99 4.54 4.89
'Indonesia 476411 689368 934565 1170336 2.32 2.52 3.35 4.11 4.73
139
'Brazil 388189 449336 532728 644589 1.64 2.05 2.18 2.34 2.60
'Thailand 284044 364657 461646 476927 1.54 1.50 1.77 2.03 1.93
'Tunisia 304233 329744 410401 476110 1.54 1.61 1.60 1.80 1.92
'Morocco 164447 190728 218892 239122 0.90 0.87 0.93 0.96 0.97
ROW 11986222 13050037 14436078 14952130 70.60 63.38 63.35 63.46 60.41
Import to the EU: HS 6403 (footwear with uppers of leather)
Import to the EU: HS 6403 (footwear with uppers of leather)
140
The EU is the world’s largest importer of footwear, importing approximately 25% more than the
volume of USA imports, the next largest importer. In 2008, EU footwear imports a value of USD 43.2
billion. China, Vietnam, India, Indonesia, Brazil, Tunisia and Thailand are the main exporters of
footwear products to Europe.
Germany, France, Italy and the UK were the largest importing countries and represented 56% of the
EU import value. Between 2005 and 2008, all EU countries increased their imports of footwear,
particularly the Eastern EU countries. Overall, total EU footwear imports rose in this period by an
annual average 10% in value.
Footwear with leather uppers, formed nearly 58% of the value of EU imports, which grew from € 16.6
to USD 24.8 billion between 2004 and 2008. The next largest product group was footwear with
7plastic or rubber uppers, which accounted for 19% of the total EU imports, followed by footwear
with textile uppers (13%). Footwear parts (included within other footwear) accounted for 7% of
imports in 2008, down from 10% in 2004.
3. The EU import from Vietnam
141
Table 5: EU imported shoes from Vietnam
Product Product label European Union (EU 27)'s imports from Viet Nam
2004 2005 2006 2007 2008 2004-
2008
share
2008
'6403 Footwear, upper of
leather
1756681 1807506 1710769 1765010 2261574 6.52 50.37
'6402 Footwear nes, outer
soles and uppers of
rubber or plastics
806063 734594 824992 1094113 1229946 11.14 27.40
'6404 Footwear, upper of
textile mat
581543 538833 616185 739608 894156 11.35 19.92
'6406 Part of
footwear;romovable
in-soles,heel
cushion etc;gaiter
etc
2930 15769 46670 57656 77060 126.46 1.72
'6405 Footwear, nes 22389 28909 31778 28710 25141 2.94 0.56
'6401 W/p foot,outer
sole/upper of
rbr/pla upper not
fixd to sole nor
assemb
1446 321 1199 3948 1667 3.62 0.04
total 3171052 3125932 3231593 3689045 4489544 9.08
Table 6: EU imported shoes: share of import of Vietnamese origin
Product
code
Product label European Union (EU 27)'s imports from Viet Nam:
export share
Value in
2004
Value in
2005
Value in
2006
Value in
2007
Value in
2008
142
'6403 Footwear, upper of leather 10.59 9.56 8.30 7.76 9.14
'6402 Footwear nes, outer soles and uppers of
rubber or plastics
16.75 14.04 14.19 15.39 15.39
'6404 Footwear, upper of textile mat 15.08 13.49 14.17 14.47 15.77
'6406 Part of footwear;romovable in-soles,heel
cushion etc;gaiter etc
0.10 0.58 1.60 1.87 2.44
'6405 Footwear, nes 3.09 4.15 4.33 3.39 2.62
'6401 W/p foot,outer sole/upper of rbr/pla upper not
fixd to sole nor assemb
0.60 0.11 0.39 1.01 0.38
% of import from VN/world 10.90 9.82 9.31 9.39 10.45
Graph 3: Import of shoes from Vietnam
143
Chart 4: import from Vietnam (4 digit)
Graph 4: import of shoes from VN out of total import of shoes into the EU
144
Graph 5: share of import (4 digit) from VN on the total import from the world
Graph 6: export of Vietnamese footwear to EU (HS 640399)
145
Graph 7: HS code 640399 – growth rate of product exported from Vietnam
Graph 8: EU import from Vietnam and from world
Vietnam is the second main exporter of footwear in the EU (4.5 billion USD, representing the 10.4%
of the total import of the EU from the world – table 5). Almost half of the export (48%, 2.3 bn USD) is
represented by footwear with uppers of leather, followed by footwear with upper of textile (25% and
1.2 bn) and uppers of rubbers (22% and 1.1 bn; chart 4). The share of EU import of Vietnamese
footwear over the total export of footwear, in the period 2004-2008, shows a ‘U’ shape (graph 4); from
146
the 11% in 2004 it has decreased to 9.3% in 2006 to increase up to around 10.5% in 2008. This is a
result of the slight increase of import of shoes into the EU from Vietnam (9.1% in the period 2004-
2008) compared to the worldwide import (10.3%). The relatively lower rate of growth of footwear
imported from Vietnam clashed with the well-known EU antidumping duty on some footwear with
uppers of leather. Precise data illustrating the ex ante and ex post trade value trend of the Vietnamese
footwear hit by the EU antidumping are not available. However, there are some evidences showing the
possible impact of the antidumping duty on the export of footwear with upper leather to the EU. First
of all, graph 5, illustrating the share of VN exports to the EU disaggregated at 4 digit level, shows that
the share of Vietnamese footwear hit by antidumping duty (HS 6403) over the import of footwear in
the EU kept on decreasing even in 2007, while the other two main products exported by Vietnam
(uppers of textile and rubber) increased their share in the total of EU export already in 2006, when the
EU investigation ended with the formal application of the antidumping duty37
A better explanation of the impact of AD duty on footwear exported from Vietnam has been obtained
with the disaggregation of the data at 6 digit level and selecting the most important (in terms of trade
value) footwear exported from Vietnam to the EU hit by an AD duty (HS code 640399). The trend of
the trade value does not provide relevant explanation (graph 6). The impact of the AD duty is apparent
from graph 7 (from 2005 to 2007 VN diverted part of the export of footwear under HS 640399 to the
world, clearly illustrated by the green line – VN export to the world without the EU).
.
Similar result has been obtained utilizing EU import data instead of Vietnamese export data (graph 8);
the growth rate of products classified under HS 640399 shows that, in the period 2005-2007, the
growth rate of import from the world was higher than that from Vietnam; moreover, in the three years
from 2005 to 2007 the growth rate of the import of from Vietnam was negative or slightly positive
(only in 2007).
4. China’s march towards domination of the market. The following analysis has been carried out
utilizing the Eurostat data. This allowed the possibility of having the updated data until 2009.
Table 4.1 confirms the trend already showed by data based on Comtrade (see par. 1-3).
However it is clear that the economic crisis had a tough impact on Vietnam export in 2009 (-
18%) compared to the total import in the EU from the world (-5,3%). Table 5.1 clearly
illustrates that Vietnam lost market share in the total export from China in two different
moments: from 2004 to 2005, when the EU started the antidumping investigation on the
export of footwear from Vietnam and China (-1,1% Vietnam and +6,1% China) and in
correspondence with the effects of the economic and financial crisis as well as with the
graduation from GSP of some Vietnamese footwear exported to the EU, i.e. from 2008 to
37 The provisional measure was applied already in March and the definitive AD was applied in October 2006
147
2009 (-1,1% Vietnam and + 1,5% China). At a first stage, this analysis suggests that
Vietnamese exports of footwear to the EU are more sensitive to external shocks than those
from China. In any case, there is a clear trend from 2004 to 2009: China increased its share in
EU imports from 12.4% to 21.1% and Vietnam reduced it from 9% to 6.6%. The most
important footwear products exported by Vietnam into the EU showed a substantial decrease
in the period 2004-2009 (footwear with upper of leather, HS 6403, -6,7% with upper of rubber
or plastics, HS 6402, -1,4%) or a very limited increase (footwear with upper of textile, HS
6404, +2%). The analysis at 4 digit HS level confirms the results of the analysis at 2 HS digit.
Indeed, the most important footwear products exported from Vietnam to the EU (footwear
with upper of leathers) shows a substantial reduction in the period 2004-2009 (-6,7%) while,
in the same period, China increased its export by 12.8%. What is particularly worrying is that
Vietnam is the only country showing a negative growth rate in the period: all the others main
competitors showed a positive growth rate. Of particular interest the growth rate showed in
this period by India, Bosnia-Herzegovina, Cambodia, this might by due, at least partially, to
the antidumping duty imposed to Chinese and Vietnamese footwear. This hypothesis seems to
be confirmed by the trend of Chinese exports: indeed the average growth rate in the
investigated period (+12,8%) is mainly the result of a massive increase of export in 2005
(+150%), while since 2006 the trend of footwear with uppers of leather exported from China
is negative (see table 4.5). Moreover, the Commission, in the recent expiry review procedure
ended with the continuation of the antidumping on Chinese and Vietnamese footwear (with
uppers of leather), mentioned the re-location of part of EU production in some countries.
Further analyses (which are outside the scope of this research) might be important to verify
whether the re-location has been only from Europe or even from China and Viet Nam. Even
the Vietnamese export to footwear with uppers of rubber or plastic (HS 6402) showed a
decrease in the period 2004-2009 (-1.4%), mainly due to substantial reduction in 2005 (-
15.7%) and 2009 (-19.9%). Therefore, the quota of EU imports of Vietnamese products on the
total import of EU substantially decreased, from 13.9% in 2004 to 9.3% in 2009, while, in the
same period, China boomed from 25.1% to 44.7%.
The export of Vietnamese footwear with uppers of textile shows only a slight different trend
compared to other two products: indeed, the growth of Vietnamese export in the EU in the
period 2004-2009 (2%) is much lower than the Chinese growth (11.4%) and even lower than
the growth of EU import (4.6%). It is not surprising, as a consequence, the decrease of the
share of import of Vietnamese products (from 12.% in 2004 to 10.7% in 2009) and the huge
increase of import of Chinese products (from 27.8% to 38%).
For all the three products it is clear that the economic and financial crisis had a major impact
on Vietnamese exports of footwear into the EU. The import of Chinese footwear, on the
148
contrary, with the exception of those with uppers of leathers, showed a higher growth rate than
the growth rate of the import of each product into the EU from the world.
Table 4.1: import in the EU from Vietnam and from the world.
Years 2004 2005 2006 2007 2008 2009
Vietnam 2198294,66 2107405,36 2131999,77 2100734,29 2287055,81 1873966,89
Growth
rate (2004-2009)-3.14 -4,13 1,17 -1,47 8,87 -18,06
Total
(including
Intra-27) 24325615,07
26499040,9
0
28834967,6
0
29749658,2
1
30179379,2
3
28580194,7
2
Growth
rate
(2004-2009) +
3.28 8,93 8,82 3,17 1,44 -5,30
Table 4.2: share of export in the EU import of footwear
2004 2005 2006 2007 2008 2009
China ,People's Republic of
China 12,40 18,54 19,35 19,49 19,63 21,10
Vietnam 9,04 7,95 7,39 7,06 7,58 6,56
India 2,77 2,66 2,99 3,23 3,22 3,33
Indonesia 2,15 1,95 2,17 2,17 2,33 2,69
Tunisia 1,40 1,34 1,34 1,46 1,52 1,46
Brazil 1,21 1,42 1,53 1,57 1,68 1,44
149
Chart 4.1: Vietnam export of the three most important footwear products
Export to EU: 4 HS digit analysis
0200000400000600000800000
100000012000001400000
2004 2005 2006 2007 2008 2009
anno
1000
Eur
o 640264036404
Table 4.3: growth rate of footwear originating from Vietnam into the EU
product 2005 2006 2007 2008 2009 2004-
2009
6401 -66,93 229,28 -73,11 596,29 -76,34 -13,57
6402 -15,73 13,32 18,21 3,07 -19,89 -1,40
6403 0,88 -9,88 -14,24 12,11 -19,26 -6,73
6404 -7,97 18,42 7,24 9,27 -13,27 2,06
6405 31,57 3,66 -14,48 -21,32 38,68 4,94
6406 485,83 157,56 21,55 28,82 -31,96 74,27
Table 4.4: share of export of footwear with uppers of leather into the EU (HS 6403)
Ratio EU import x/world 2004 2005 2006 2007 2008 2009
China ,People's Republic
of 6,13 13,52 12,41 10,65 10,48 10,12
Vietnam 9,10 8,12 6,74 5,73 6,44 5,81
150
India 3,31 3,21 3,65 4,15 4,42 5,10
Indonesia 1,81 1,83 2,44 2,85 3,23 3,85
Brazil 1,51 1,87 2,08 2,08 2,29 2,11
Tunisia 1,48 1,52 1,49 1,71 1,81 1,73
Thailand 1,09 1,08 1,25 1,37 1,23 1,24
Morocco 0,86 0,81 0,88 0,90 0,92 1,13
Bosnia and Herzegovina 0,44 0,42 0,51 0,61 0,68 0,74
Cambodia 0,24 0,13 0,33 0,50 0,48 0,59
Table 4.5: Growth rate of footwear with uppers of leather (HS 6403)
Growth rate 2004-2009 2005 2006 2007 2008 2009
Total world import 2,05 13,05 8,60 0,88 -0,19 -10,48
China ,People's Republic
of 12,83 149,44 -0,31 -13,45 -1,72 -13,55
Vietnam -6,73 0,88 -9,88 -14,24 12,11 -19,26
India 11,29 9,92 23,19 14,73 6,35 3,34
Indonesia 18,60 13,92 45,22 17,64 13,00 6,69
Brazil 9,09 39,95 20,58 0,98 9,63 -17,29
Tunisia 5,20 15,63 6,39 16,01 5,61 -14,50
Thailand 4,74 11,67 26,43 10,12 -10,66 -9,23
Morocco 7,87 6,69 17,66 3,15 2,81 9,71
Bosnia and Herzegovina 13,49 9,63 32,01 19,66 11,66 -2,65
Cambodia 22,23 -37,74 171,46 54,68 -3,94 8,62
151
Table 4.6: share of export of footwear with uppers of rubber or plastics (HS 6402)
Ratio import x/tot import 2004 2005 2006 2007 2008 2009
China ,People's Republic
of 25,11 33,32 38,64 41,60 42,18 44,76
Vietnam 13,87 10,96 11,16 11,88 11,76 9,29
Indonesia 2,69 2,12 1,97 1,41 1,07 1,35
ROW 58,33 53,60 48,22 45,11 44,99 44,59
Brazil 0,65 0,60 0,59 0,65 0,69 0,60
Cambodia 0,63 0,39 0,23 0,20 0,35 0,57
Table 4.7: growth rate of footwear with uppers of rubber or plastics (HS 6402)
Growth rate 2004-2009 2005 2006 2007 2008 2009
EU import 6,81 6,63 11,25 11,07 4,15 1,32
China ,People's Republic
of 19,91 41,52 29,01 19,57 5,60 7,53
Vietnam -1,40 -15,73 13,32 18,21 3,07 -19,89
Indonesia -6,91 -16,07 3,46 -20,58 -20,95 28,25
Brazil 5,19 -1,60 9,02 22,74 11,09 -11,97
Cambodia 4,64 -35,01 -32,74 -6,28 86,63 64,09
Table 4.8: share of export of footwear with uppers of textile (HS 6404)
ratio import x/world 2004 2005 2006 2007 2008 2009
China ,People's Republic
of 27,85 32,93 35,56 36,78 35,90 38,05
Vietnam 12,14 10,94 11,88 11,93 12,76 10,72
Indonesia 3,00 2,52 1,46 0,96 1,53 1,90
Thailand 1,62 1,41 1,15 0,96 0,74 0,69
152
Table 4.9: growth rate of footwear with uppers of textile (HS 6404)
growth rate 2004-2009 2005 2006 2007 2008 2009
Total 4,64 2,18 9,03 6,76 2,14 3,28
China ,People's Republic
of 11,39 20,84 17,73 10,43 -0,29 9,46
Vietnam 2,06 -7,97 18,42 7,24 9,27 -13,27
Indonesia -4,48 -13,94 -37,05 -29,46 62,18 28,29
Thailand -11,81 -10,60 -11,05 -11,28 -21,66 -3,49
5. The Vietnamese footwear export sector: the SMART simulation
Four different set of simulation with SMART have been carried out. The first one (first scenario) has
been conducted assuming the supply elasticity, the substitution elasticity and the import elasticity
equal to one and the second to 1.5. In the third one we assume the entry into force of the main FTAs
the EU has been negotiating with the main Vietnamese competitors in exporting footwear in the EU
market. In particular, it has been assumed the elimination of tariff for the import in the EU of footwear
from India (the FTA has been negotiated since 2007 and the last round took place in 2010), individual
ASEAN countries (Indonesia and Thailand, after Viet Nam, are the main exporters of footwear to the
EU from the region) and Brazil (MERCOSUR has been negotiated since 2004, and they have been re-
launched as of May 2010). In the third scenario we identified two main sub-scenarios: in the first one
even Vietnam benefit from the entry into force of the FTA with the EU while in the second one we
assume the failure of the negotiations. The fourth scenario assumes the elimination of the antidumping
duty applied by the EU on the footwear from Vietnam (this scenario has three sub-scenario; the first
one assumes the elimination of the AD duties to both Chinese and Vietnamese footwear, while the
other two, respectively, are based on the elimination of AD to footwear originating from one of the
two countries).
Table 5.1: the result of the four scenario SMART simulations: export of footwear in the EU
Simulation el.=1 Simulation el.=1.5 EU FTA AND VN
EU FTA WITHOUT
VN
Trade Growth Trade Growth Trade Growth Trade Growth
TOTAL 863,942.68 13.29 1,080,835.32 16.63 798,769.77 11.94 -67,725.23 -1.01
640110 15.994 21.19 19.992 26.49 15.915 21.08 -0.086 -0.11
153
640192 233.322 21.19 291.686 26.49 232.481 21.11 -1.052 -0.10
640199 58.969 21.14 73.71 26.42 58.088 20.82 -0.974 -0.35
640212 542.622 20.71 678.875 25.91 535.676 20.45 -8.628 -0.33
640219 22,128.11 17.98 27,654.80 22.48 21,238.94 17.26 -947.81 -0.77
640220 2,434.90 20.60 3,045.02 25.76 2,256.00 19.08 -208.029 -1.76
640291 24,915.06 19.97 31,217.86 25.02 24,815.14 19.89 -121.837 -0.10
640299 130,784.25 19.29 163,752.34 24.15 128,755.80 18.99 -2,310.99 -0.34
640312 8.608 8.43 10.76 10.53 8.499 8.32 -0.112 -0.11
640319 4,407.14 7.81 5,507.69 9.76 3,762.50 6.67 -659.783 -1.17
640320 11.199 8.59 13.999 10.74 6.27 4.81 -4.966 -3.81
640340 182.655 8.60 228.319 10.75 171.411 8.07 -11.806 -0.56
640351 234.965 8.53 293.693 10.66 179.657 6.52 -56.541 -2.05
640359 548.958 7.96 686.177 9.95 392.358 5.69 -159.38 -2.31
640391 18,903.71 7.42 23,622.90 9.27 14,536.12 5.71 -4,452.92 -1.75
640399 90,139.20 7.14 112,630.01 8.93 70,306.12 5.57 -20,219.83 -1.60
640411 52,841.52 18.46 66,094.56 23.09 50,996.13 17.81 -2,012.54 -0.70
640419 82,875.15 19.17 103,714.01 23.99 80,963.84 18.73 -2,131.67 -0.49
640420 300.52 21.04 375.621 26.29 277.977 19.46 -24.42 -1.71
640590 404.487 11.08 505.629 13.85 393.63 10.78 -11.569 -0.32
Table 5.2: the result of the SMART simulation: the effects on the export to EU of other countries
Elasticity = 1 Elasticity=1.5
EU FTAs incl
VN EU FTA excl VN
Trade Growth Trade Growth Trade Growth Trade Growth
Total Brazil -10,683 -0.84 -13,318 -1.04 90,716 6.12 101,061 6.82
Total China
-
283,222 -1.73 -355,389 -2.17
-
417,647 -2.40
-
129,898 -0.75
154
Total India -15,119 -0.67 -18,872 -0.84 309,778 10.85 324,286 11.36
Total
Indonesia -21,231 -1.09 -26,428 -1.36 154,455 7.49 174,645 8.47
Total Vietnam 863,943 13.29 1,080,835 16.63 798,770 11.94 -67,725 -1.01
Total Thailand -7,597 -1.04 -9,457 -1.29 57,468 7.78 64,743 8.77
The outcomes of the SMART simulations based on the four different scenarios provide convergent
results: the footwear sector of Vietnam will benefit substantially from the reduction of customs duties
applied by the EU following to the conclusion of the FTA; the model showed a potential increase of
export of footwear in the EU market from 11.9% to 13.3%. Moreover, the reduction of customs duties
in bilateral trade will provide further incentives to the re-location of the production of footwear in
Vietnam. This will further improve the export potential of the country; the results of the simulation n.
3 shows that the conclusion of an FTA with will have a positive impact on Vietnam’s export of
footwear even if the main competitors will be part of similar bilateral FTAs with the EU; in this case,
the erosion of preferences appears not to particularly affect the export of Vietnamese footwear (11.9%
growth compared to the 13.3% growth in case of only Vietnam, among the main exporters to the EU,
conclude an FTA with the EU). On the contrary, the case the main competitors participate to an FTA
with the EU but Vietnam produces huge losses in term of relative trade and market share, especially
with regard to India (12.4%, which is the sum of Indian growth, 11.4 and Vietnamese losses, 1%),
which, especially in the export of footwear with uppers of leather, is growing market share in the EU.
Table 5.3: results of elimination of antidumping duty (3 scenario)
trade effect
Elimination of AD duty vs Vietnam and not vs
China 16.71
Elimination of AD duty vs Vietnam and vs China 14.32
Elimination of AD duty vs Vietnam and not vs
China -2.38
6. Conclusions
The economic and financial crisis and the imposition of antidumping duties produced a deterioration
of the relative position of Vietnamese exports to the EU. Eurostat data shows a deterioration of the
155
share of Vietnamese footwear imported to EU (-2.5% in the period 2004-2009 and -1.5% in 2004-
2008); the negative trend of export performances since 2004 are mainly due to the huge losses suffered
in 2009: indeed, there has been a contraction of export of 3.14% in the period 2004-2009 while in the
period 2004-2008 the import of Vietnamese footwear increased, on average, by 1%. However, the
evolution of Vietnamese exports of footwear, in general, shows a lower increase than the increase of
import of footwear worldwide (+3.3% in the period 2004-2009 and +5.5% in the period 2004-2008).
The external shocks had a stronger impact on export of Vietnamese footwear than Chinese one;
indeed, the export performances of Vietnam in 2009 (-18%) have been worse than those of China and
other competitors in the EU market. This produced a reduction in the share of import of EU footwear
(- 2.5% in 5 years) to the advantage of China (+8.7%), India (+0.6%) and Indonesia (+0.5%). The
analysis at 4 digit level confirmed the trends above mentioned: footwear with uppers of leather, the
most important Vietnamese footwear product exported to EU, showed a negative growth rate in the
five years (-6.7%), compared to the positive trend of Indian (11.3%), Indonesia (18.6%) and Bosnia
and Herzegovina (13.5%). Similar conclusion can be drawn for the other two main footwear products
exported to the EU, the footwear with upper of textiles and with upper of rubber or plastic. The
relative reduction in the import share of the EU has been compensated at least in part by re-directing
the exports to the non EU-members; indeed, the growth rate of the export to the US and to the rest of
the world in the period 2004-2008 has been of, respectively, 26.9% and 23.5%.
The four simulations of an FTA concluded between VN and EU produced convergent results. The
FTAs would promote the recovery of the market share of Vietnamese footwear in the EU and it will
reduce the risks of a further deterioration of the Vietnamese footwear in the EU markets following to
the possible (probable) conclusion, by other competitors in this sector, of bilateral FTA. The latter
event shows the opportunity for Vietnam to speed up the negotiations and the conclusion of the FTA
with the EU, as the further deterioration of the market share of Vietnamese footwear in the EU could
be counterbalanced with more difficulties, than those encountered in the past, with a re-direction of
exports to other countries, especially to the United States.
156
9. QUALITATIVE ANALYSIS OF THE EU – VIETNAM FTA: TACKLING NON-TARIFF MEASURES THROUGH NEGOTIATIONS:
In the Communication “Global Europe – Competing in the World”,38
In terms of content new competitiveness-driven FTAs would need to be comprehensive and ambitious
in coverage, aiming at the highest possible degree of trade liberalization including far-reaching
liberalization of services and investment. A new, ambitious model EU investment agreement should
be developed in close coordination with Member States. Where our partners have signed FTAs with
other countries that are competitors to the EU, we should seek full parity at least. Quantitative import
restrictions and all forms of duties, taxes, charges and restrictions on exports should be eliminated.
the European Commission
(hereinafter, the EU Commission) set its new strategy for external trade. This includes, inter alia,
negotiating a series of ambitious Free Trade Agreements (hereinafter, FTAs) with key trading partners
selected on the basis of economic criteria. According to the EU Commission strategy,
FTAs should also tackle non tariff barriers through regulatory convergence wherever possible and
contain strong trade facilitation provisions. FTAs should include stronger provisions for IPR and
competition, including for example provisions on enforcement of IP rights along the lines of the EC
Enforcement Directive. We will seek to include provisions on good governance in financial, tax and
judicial areas where appropriate. We should also ensure Rules of Origin in FTAs are simpler and more
modern and reflect the realities of globalization. We will put in place internal mechanisms to monitor
the implementation and the results of new FTAs.
In considering new FTAs, we will need to work to strengthen sustainable development through our
bilateral trade relations. This could include incorporating new co-operative provisions in areas relating
to labor standards and environmental protection. We will also take into account the development needs
of our partners and the potential impact of any agreement on other developing countries, in particular
the potential effects on poor countries’ preferential access to EU markets. […]
On the basis of such new strategy, on 23 April 2007 the Council of the European Union authorized the
EU Commission to start negotiating a FTA with the Association of Southeast Asian Nations
(hereinafter, ASEAN). Negotiations were officially launched at the EU-ASEAN Economic Ministers
Consultations held in Brunei Darussalam on 4 May 2007. Negotiations between the EU and ASEAN
were intended to take place on a region-to-region approach, while recognizing and taking into account
the different levels of development and capacity of individual ASEAN members. As progress in the 38 Available at http://trade.ec.europa.eu/doclib/docs/2006/october/tradoc_130376.pdf
157
EU-ASEAN negotiations was slow, both sides agreed in March 2009 to suspend the negotiations. On
22 December 2009, the EU Commission announced that EU Member States authorized the EU
Commission to pursue negotiations towards FTAs with individual ASEAN countries.
Vietnam’s most exported products to the EU include: footwear, apparel, food products, in particular
seafood and fisheries. Other important exports to the EU are wood products and furniture, electric and
electronic products and plastic products.
In addition to import tariffs, these products are subject to a range of non-tariff measures. The
negotiation of an FTA with the EU will reduce and eliminate EU tariffs applied to Vietnamese
exports. However, the negotiations should also be aimed at avoiding that tariff concessions are
rendered moot by the imposition of non-tariff barriers. The biggest non-tariff challenges affecting
Vietnamese exports to the EU are connected to the EU’s use of trade defense instruments (hereinafter,
TDI), notably anti-dumping, and the EU’s sanitary and phytosanitary measures (hereinafter, SPS) and
technical barriers to trade (hereinafter, TBT) regulations.
The EU’s use of TDI has hit hardly Vietnamese footwear exports. In fact, the EU is the first export
destination for Vietnamese footwear production. The Vietnamese footwear industry is heavily export-
oriented, exporting 90% of its production, 50% of which to the EU. In terms of value, Vietnamese
exports of footwear to the EU amounted to USD 2 Billion in 2008. The EU is unlikely to grant
concessions in the field of anti-dumping and countervailing duties. In many cases, especially in
relation to older FTAs, provisions on anti-dumping and countervailing duties in previous FTAs
concluded by the EU are shallow and provide for little more than the re-affirmation of rights and
obligations of the WTO. However, the FTA negotiations between the EU and Vietnam could provide
the context for an early recognition of Vietnam’s market economy status. In addition, the negotiation
of the TDI chapter could result in the identification and solution of specific procedural issues related to
anti-dumping and countervailing duties and in the creation of an institutional mechanism for co-
operation.
Compliance with SPS and TBT requirements of the EU is a precondition for Vietnamese exporters to
be granted access in the EU market, even in the context of an FTA. SPS and TBT measures concern
basically all the most important sectors of export to the EU: footwear, garment, food products, wood
products and furniture, electric and electronic products and plastic products. As SPS and TBT
measures are qualitative in nature, no preferences will be accorded to FTA partners in the form of
easier of softer requirements. However, the FTA may prove to be an ideal framework to engage in co-
operation on SPS and TBT matters, including perhaps the provision of a framework for technical
discussions in relation to specific barriers that Vietnamese exports may encounter. In addition, the
FTA may provide a useful forum for the discussion and possibly the conclusion of mutual recognition
agreements and equivalency agreements.
158
METHODOLOGY OF THE QUALITATIVE ASSESSMENT
The qualitative impact analysis will focus on the possible effects of the EU-Vietnam FTA on non-
tariff measures which are normally faced or can be faced by Vietnamese exports to the EU: anti-
dumping and countervailing duties, SPS and TBT requirements. In particular, on the basis of the
request put forward by the Beneficiary and agreed with the Team Leader, the qualitative analysis will
look at the following:
The potential impact of the FTA on the use of anti-dumping and countervailing duties, which will
build on an overview of the situation in relation to anti-dumping and countervailing duties measures
between the EU and Vietnam, the relevant provisions included in FTAs concluded by the EU and a
statistical analysis of the EU’s behavior with countries with which it enjoys FTAs;
The potential impact of the FTA on SPS and TBT measures; and
Key issues and advice for Vietnamese negotiators to maximize the impact of the EU-Vietnam FTA.
In relation to anti-dumping and countervailing duties, this assessment will provide: an overview of the
EU regulatory framework; an assessment of the situation in relation to the application of anti-dumping
measures against imports of Vietnam; an overview of anti-dumping and countervailing duties
provisions in the FTA negotiated by the EU; a statistical analysis of anti-dumping and countervailing
duties on imports of FTA trading partners; and a set of conclusions for Vietnam. Safeguard measures
are excluded from the scope of this report.
In relation to SPS and TBT measures, this assessment will provide: an overview of EU SPS and TBT
requirements having an impact on Vietnamese exports; an overview of the WTO regulation of SPS
and TBT measures with an emphasis on instruments of trade facilitation; a comparative assessment of
SPS and TBT provisions negotiated by the EU in its FTAs; and a set of conclusions for Vietnam.
Currently, the EU enjoys bilateral trade agreements with a number of countries, territories and regions.
In particular:
• Three customs unions (with Andorra, San Marino and Turkey);
• Agreements including FTAs with eleven European countries and territories not part of the EU
(the Stabilization and Association Agreements with Albania, Bosnia-Herzegovina, Croatia, the
Former Yugoslav Republic of Macedonia (hereinafter FYROM), Montenegro; the interim
trade agreement with Serbia; the European Economic Area (hereinafter, EEA) agreement with
Iceland, Liechtenstein and Norway; the European Free Trade Agreement with Switzerland;
and the free trade area with the Faroe Islands);
159
• Euro-Mediterranean Agreements (with Algeria, Egypt, Israel, Jordan, Lebanon, Morocco,
Palestinian Authority, Syria and Tunisia);
• Free trade agreements with other countries and territories (Overseas territories of the EU,
Chile, Mexico and South Africa).
• The EU is currently negotiating Economic Partnership Agreements (hereinafter, EPAs) or
Interim Economic Partnership Agreements (hereinafter, IEPAs) with regional groupings of
African Caribbean and Pacific (hereinafter, ACP) countries. The situation in relation to such
negotiations is summarized in the Table included in Annex I. In particular, a full EPA has
been signed between the EU and CARIFORUM States39
• IEPA between the EU-Central African Party:
on 15 October 2008 and approved
by the European Parliament on 25 March 2009. The agreement is not yet in force, but is
already provisionally applied since 29 December 2008. In relation to the other regions, the
situation is as follows:
40
• Stepping Stone Economic Partnership Agreement between the EU and Côte d'Ivoire:
signed on 15 January 2009 by the EU and
Cameroon; not into force, or provisionally applied yet;
41
• Stepping Stone Economic Partnership Agreement between the EU and Ghana:
signed
on 26 November 2008 and approved by the European Parliament on 25 March 2009; not into
force, or provisionally applied yet;
42
39 Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, the Dominican Republic, Grenada, Guyana,
Haiti, Jamaica, Saint Lucia, Saint Vincent and the Grenadines, Saint Christopher and Nevis, Suriname,
Trinidad and Tobago.
signature of
the agreement is pending;
40 The Central Africa Party is party to the Economic Community of Central African States
(CEMAC), which also includes the following members: Gabon, Equatorial Guinea, Congo
Brazzaville, Democratic Republic of Congo, Chad, São Tomé e Príncipe. Gabon and Congo
trade with the EU under its Generalised System of Preferences scheme. Chad, the Central
African Republic, the Democratic Republic of Congo, São Tomé e Príncipe and Equatorial
Guinea are Least Developed Countries and fall under the EU’s “Everything but Arms” scheme. 41 Côte d'Ivoire and Ghana are parties to the Economic Community of West African States (ECOWAS), which
also includes the following members: Benin, Burkina Faso, Cape Verde, Gambia, Guinea, Guinea-Bissau, Liberia,
Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo. The latter are Least Developed Countries and
have, thus, no interest in the conclusion of an Interim EPA, as they are granted duty free access to the EU under the
“Everything but Arms” scheme, until the conclusion of a full EPA; with the exception of Cape Verde and Nigeria.
As of 1 January 2008, Cape Verde is not classified as a Least Developed Country; however, it was agreed that it
will continue to benefit from the “Everything but Arms” scheme for 3 more years. For its part, Nigeria benefits
from the regular EU Generalised System of Preferences.
160
• Agreement establishing a framework for an economic partnership agreement between the EU
and East African Community partner states:43
• IEPA between the EU and the ESA EPA states:
the agreement has been initialed;
44
• EU-SADC: IEPA signed on 4 June 2009 by Botswana, Lesotho, Mozambique and Swaziland.
The signature of Namibia is pending. South Africa has a separate trade and development
agreement with the EU; and
signed on 29 August 2009 by Madagascar,
Mauritius, the Seychelles and Zimbabwe. Comoros required time to further examine the
agreement and Zambia expressed the will to consult with other LCDs of the region;
• EU-Pacific: IEPA signed by Papua New Guinea on 30 July 2009 and by Fiji on 11 December
2009.
• The EU has already been applying the improved EPA market access to all ACP Countries that
initialed an agreement. Bilateral provisional application applies between the EU and
CARIFORUM States. The EU-CARIFORUM EPA, the IEPA between the EU and Côte
d'Ivoire and the IEPA between the EU-Central African Party have been notified to the WTO.
• For the purposes of this qualitative analysis, all of the agreements above, except for the
customs union with Andorra and San Marino, the agreement with the Overseas Territories of
the EU and the EEA, were taken into account.
• In addition, the EU is currently in the process of ratifying its FTA with South Korea. The
agreement with South Korea is perhaps the most interesting example of the structure and
content of the new free agreements that the EU is currently negotiating. Although it has not
entered into force yet, this agreement could serve as a benchmark to assess the type of
provisions and obligations that the EU might include in the FTA with Vietnam.
• At the time of writing the EU finalized the negotiations on the trade pillar of the Association
Agreement with Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua
and Panama). In addition, the European Commission concluded trade talks with Peru and
Colombia in view of the signature of a Multiparty Trade Agreement between the EU and
Andean countries. The analysis of these agreements is not included in this report.
In general, the EU FTAs may be systematically categorized, on the basis of their respective scope and
regulatory structure, into the following four groups:45 42 See supra, footnote 4.
43 Burundi, Kenya, Rwanda, Tanzania and Uganda. 44 Comoros, Djibouti, Eritrea, Ethiopia, Malawi, Mauritius, Madagascar, Seychelles, Sudan, Zambia and Zimbabwe. 45 Raymond J. Ahearn, Congressional Research Service Report of 22 March 2010, ‘Europe’s Preferential Trade
Agreements: Status, Content and Implications, available at: http://www.fas.org/sgp/crs/row/R41143.pdf.
161
1. Agreements with geographically proximate countries, which might eventually accede to the
EU.
This category encompasses the agreements that the EU has concluded with neighboring third
countries, including in the process of their accession to the Union (i.e., the Stabilization and
Association Agreements with the Western Balkans and the, now obsolete, Europe Agreements with
the Central and Eastern European States);
2. Agreements aiming at ensuring overall stability in the wider EU region.
This second category encompasses those agreements that the EU has concluded with the aim of
establishing a climate of economic and political stability around its borders. The rationale behind the
conclusion of such agreements is that any turbulent economic and political conditions in the wider EU
region might result in negative spill-over effects within the EU itself; the possibility for any
disruptions must, therefore, be minimized (i.e., the Euro-Mediterranean Association Agreements);
3. Agreements whose primary focus is to foster the development of a certain region.
This category contains the agreements that the EU has concluded with third countries on the basis of
historical and developmental considerations. Their conclusion aims at the reduction of poverty and at
boosting the economic growth in developing and least developed countries that in the past had colonial
ties with the EU (i.e., the EPAs with ACP Countries); and
4. Agreements having as a primary objective to secure commercial benefits for the EU exporters.
This category encompasses trade agreements that the EU has concluded primarily with the goal of
ensuring that its traders enjoy the greatest possible commercial benefits when exporting their products
to the respective third countries. The Agreements with Chile, Mexico and South Korea fall under this
grouping.
Full titles of the agreements and references of their publication in the Official Journal of the EU are
provided in the table included in Annex I to this report.
9.1. The EU and anti-dumping and countervailing duties
The EU remains a leading user of anti-dumping and countervailing duties. However, the number of
such measures notified by the EU to the WTO has decreased since 2005.46
46 WTO Trade Policy Review of the EU, 6 and 8 April 2009.
The following table shows
the anti-dumping and countervailing measures that have been notified to the WTO since 2005 (please
162
note that the figures in this table only report the measures that were notified to the WTO and,
therefore, related to measures adopted to imports of WTO Members):
2005 2006 2007 2008 2009
Antidumping
Initiation of investigations 24 35 9 17 14
Definitive measures 19 13 12 11 11
Countervailing
Initiation of investigations 2 1 0 2 5
Definitive measures 0 0 0 0 1
Source: WTO Trade Policy of the European Communities and information from DG Trade47
The imposition of anti-dumping and countervailing duties must follow a set of procedures established
by the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and
Trade 1994 (hereinafter, Agreement on Anti-dumping) and the WTO Agreement on Subsidies and
Countervailing Measures (hereinafter, the ASCM). The procedures are further detailed in WTO
Members’ domestic legislation. The relevant regulatory framework of the EU includes:
• Council Regulation (EC) No 1225/2009 on protection against dumped imports from countries
not members of the European Community;48
• Council Regulation (EC) No 597/2009 on protection against subsidized imports from
countries not members of the European Community.
and
49
From January 2005 to December 2009, anti-dumping investigations were initiated against imports
from 101 different countries. According to the latest official available data from the EU Commission,
the definitive anti-dumping measures in force on 31 December 2008 were applied against imports
from the following sources: 1 applied to imports from Algeria; 1 to imports from Australia; 3 to
imports from Belarus; 1 to imports from Brazil; 48 to imports from China; 1 to imports from Croatia;
47 Please note that this table includes only measures adopted against WTO Members. This is why these figures differ
from those indicated below, in relation to measures enforced by the EU against all Countries. 48 OJ L 343/71. 49 OJ L 188/93.
163
1 to imports from Egypt; 1 to imports from the Faroe Islands; 8 to imports from India; 5 to imports
from Indonesia; 1 to imports from Israel; 2 to imports from Kazakhstan; 5 to imports from the
Republic of Korea; 1 to imports from Laos; 1 to imports from Macau; 1 to imports from FYROM; 4
to imports from Malaysia; 1 to imports from Moldova; 1 to imports from Morocco; 1 to imports from
Pakistan; 1 to imports from the Philippines; 8 to imports from Russia; 1 to imports from Saudi Arabia;
2 to imports from South Africa; 1 to imports from Sri Lanka; 6 to imports from Taiwan; 7 to imports
from Thailand; 6 to imports from Ukraine; 4 to imports from the USA; and 4 to imports from
Vietnam. Products subject to anti-dumping measures include: certain chemicals, steel products,
footwear with uppers of leather, ironing boards, lighters, plastic sacks and bags, refrigerators, ring
binder mechanisms, saddles, frozen strawberries, sweet corn, salmon and large rainbow trout.
In relation to countervailing duties, from January 2005 to December 2009, anti-subsidy investigations
were initiated against imports from 11 countries. According to the latest official data, the definitive
countervailing measures in force on 31 December 2008 were applied as follows: 6 to imports from
India; 1 applied to imports from Brazil and 1 to imports from Israel (both following an anti-
circumvention investigation). The products concerned were antibiotics, cotton-type bed linen, graphite
electrode systems, PET, PET film and sulphanilic acid.
9.1.1. The situation with Vietnamese imports to the EU
The table in the following page presents data in relation to the imposition of anti-dumping duties on
products originating in Vietnam since 2001:
164
2001 2002 2003 2004 2005 2006 2007 2008 2009
Vietnam • AD
measur
es on
monos
odium
glotam
ate are
still in
force.
• New AD
investiga
tion on
imports
of
lighters
(disposa
ble gas
fuelled).
• Anti-
circumve
ntion
investiga
tion
initiated
(in
relation
to China)
on
imports
of zinc
• Decisio
n for
non-
impositi
on of
AD
measur
es on
imports
of
lighters
(dispos
able gas
fuelled)
.
• Expirati
on of
AD
duty on
imports
of
monoso
• New AD
investigation on
imports of
bicycles.
• New AD
investigation on
imports of tube
or pipe fittings.
• New AD
investigation on
imports of
stainless steel
fasteners and
parts thereof.
• Anti-
circumvention
investigation
• Imposition of
provisional AD
duties on imports
of stainless steel
fasteners and
parts thereof.
• Imposition of
definitive AD
duties on imports
of bicycles.
• Decision for non-
imposition of AD
measures on
imports of tube or
pipe fittings.
• New AD
investigation on
imports of
• Imposition
of
provisional
AD duties
on imports
of footwear
with uppers
of leather.
• Imposition
of
definitive
AD duties
on imports
of footwear
with uppers
of leather.
• Expira
tion of
AD
duties
on
import
s of
zinc
oxides
.
• Expiry
review
initiated on
imports of
footwear
with uppers
of leather.
• Interim
review
initiated on
imports of
stainless
steel
fasteners
and parts
thereof.
• Imposition
of AD
duties on
imports of
footwear
with uppers
of leather
following
an expiry
review.
• Review
concluded
with the
amendment
of the AD
duties
imposed on
imports of
stainless
steel
fasteners
165
oxides. dium
glutama
te.
• Anti-
circumv
ention
investig
ation
conclud
ed (in
relation
to
China)
with
extensi
on of
AD
duty on
imports
of zinc
oxides.
initiated (in
relation to
China) on
imports of
integrated
electronic
compact
fluorescent
lamps.
• Anti-
circumvention
investigation
concluded (in
relation to
China) with
extension of AD
duty on imports
of ring binder
mechanisms.
footwear with
uppers of leather.
• Anti-
circumvention
investigation
concluded (in
relation to China)
with extension of
AD duty on
imports of
integrated
electronic
compact
fluorescent
lamps.
and parts
thereof
166
The main anti-dumping cases concerning Vietnamese imports to the EU are:
• Integrated electronic compact fluorescent lamps (expiry review - circumvention)
(Regulation (EC) No 1205/2007);50
• Ring-binder mechanisms (circumvention) (Regulation (EC) No 1208/2004);51
• Zinc Oxides (circumvention) (Regulation (EC) No 1623/2003);52
• Footwear with uppers of leather (original proceedings and expiry review) (Regulation
(EC) No 1472/2006 and expiry review, Regulation (EU) 1294/2009);53
• Bicycles (Regulation (EC) No 1095/2005);54
and
• Stainless steel fastener (original proceedings and interim review) (Regulation No
1890/2005 and Regulation (EC) No 768/2009).55
As of 31 January 2008, definitive anti-dumping duties were in force for the following imports
from Vietnam: bicycles, footwear with uppers of leather, ring binder mechanisms (extension of
the same imports from China) and stainless steel fasteners and parts thereof.
The 2009 witnessed the extension, for 15 months only, of the controversial duties of footwear
with uppers of leather. In particular, following an investigation initiated in 2005, definitive anti-
dumping duties on imports of (Chinese and) Vietnamese footwear with uppers of leather were
imposed by the EU Council on 5 October 2006 by Council Regulation (EC) No 1472/2006 for
50 OJ L 272/2007. 51 OJ L 232/2004. 52 OJ L 232/2003. 53 OJ L 275/2006 and OJ L352/2009, respectively. 54 OJ L 183/2005. 55 OJ L 302/2005 and OJ L 221/2009, respectively.
167
an initial period of two years. Duties were not imposed on certain sports footwear, slippers and
other indoor footwear and footwear with a protective toecap, which were outside the scope of
the investigation. Vietnamese imports were subject to a duty rate of 10% applicable to all
exporters. An expiry review was initiated on 7 October 2008 upon request by the European
Confederation of the Footwear Industry. As the outcome of the review revealed that there is
likelihood that injurious dumping will continue after the expiry of the duties, the EU Council,
upon the EU Commission’s proposal, extended the duties for 15 more months (see Council
Implementing Regulation (EU) No 1294/2009).
In this respect it is noted that as of 1 January 2009 footwear exports also lost the benefits of the
EU Generalized System of Preferences.
Another sector which stands to be affected by the EU’s use of anti-dumping is seafood exports.
In fact, Vietnam’s seafood exports to the EU have increased in volume over the years, whereas
export prices have decreased.
Factors having the greatest impact on the imposition of anti-dumping duties from EU
authorities are:
• The non-recognition of Vietnam as a market economy, which leads more easily to
findings of dumping and higher rates; and
• Circumvention practices seeking to avoid anti-dumping measures applied against
Chinese products.
In relation to the first issue, it must be recalled that the relevant EU anti-dumping
legislation allows the EU in anti-dumping investigations against Vietnam to determine
normal value on the basis of the price or constructed value in a market economy third
country, unless it is shown by the producers subject to the investigation that market
economy conditions prevail for them. In particular, producers have to show compliance
with five main criteria:
• Business decisions and costs must be made in response to market signals, without State
interference;
168
• Firms must be equipped with clear accounting records which are independently audited;
• There is no significant distortion carried over from the former non-market economy
system (in particular in relation to depreciation of assets, other write-offs, barter trade
and payment via compensation of debts);
• The firms are subject to bankruptcy and property laws; and
• Exchange rate conversions are carried out at the market rate.
The direct consequences for enterprises from non-market economy Countries are the following:
• The normal value will not be calculated on the basis of prices applicable in the country
of origin, but on the basis of data collected in a third country (i.e., the “analogue”
country); and
• Companies will be subject to a Country-base rate, i.e., there will be no individual rate.
Normal value will be established on the basis of four methods:
• Domestic prices in the analogue country (used in stainless steel fasteners, footwear,
bicycles);
• Constructed normal value (used in stainless steel fasteners in other cases, bicycles):
normally utilized when no domestic sales in the ordinary course of trade for comparable
product types;
• Export to a third country; and
• Any other reasonable basis.
Market economy treatment (hereinafter, MET) has been granted seldom to Vietnamese
companies in EU investigations. In particular:
• In Bicycles, 7 Vietnamese companies requested MET. One company did not export to
the EU. Five of them were denied MET status on the basis of the Commission’s finding
of state interference, proven by the inclusion in the business licenses and in the articles
169
of association of an export obligation. In addition, 4 out of 5 companies did not prove
to have accounting records independently audited and in line with international
standards. MET was granted to one company. For this company, the dumping margin
amounted to 15,8%. For the other companies the dumping margin amounted to 34,5%;
• In Footwear, all 8 companies requesting MET treatment were denied the treatment. Six
of them were found not to comply with the independence from state interference
criterion; 7 companies did not prove to have accounting records independently audited
and in line with international standards. In relation to all companies significant
distortions carried over from the former non-market economy system were found. The
Country-wide dumping margin (anti-dumping duty-rate) amounted to 10%. The duty
rate was confirmed for 15 more months following the expiry review;
• In Stainless steel, MET was denied in the original proceedings, but was subsequently
granted to one company following the interim review. The dumping margin rate
amounted to 7,7%. Following the review, the dumping margin rate of the company
obtaining MET amounted to 0%.
In general terms, recourse to third country prices in the conduct of anti-dumping and anti-
subsidy investigations tends to lead to findings of high(er) dumping margins, inter alia because
the third countries chosen may be at a different stage of economic development and because its
application may often result arbitrary. In particular, the possibility of using third-country market
prices could lead the investigating authorities to determine higher dumping margins and to
apply higher anti-dumping duty rates.
The graph below shows a comparison of the EU Commission and Vietnam’s view in relation to
the choice of Brazil as the “analogous third country” in Footwear:
Vietnam’s Concerns about Brazil
EU Commission
Brazil is too different from an economic
development point of view.
Non-market economies do not have the same
characteristics as market economies. This does
not prevent Brazil being chosen.
170
Vietnam and Brazil are not comparable from
income per capita point of view.
In terms of economic development Brazil is
not very different from other proposed
analogue countries such as Thailand and
Indonesia.
Labor costs are not comparable.
The choice of analogue country is not
necessarily made among countries having the
same or the closest labor costs. These costs are
deemed biased in non-market economies (the
same reasons why Mexico was considered
appropriate in Bicycles).
India, Pakistan and Indonesia are more
appropriate.
Insufficient level of cooperation from
companies in India, Pakistan and Indonesia.
Differences in costs of production structures
between Brazil and Vietnam (in Vietnam
some costs – design/R&D – are supported by
the EC customers).
Adjustments can be made for such costs when
establishing normal value.
Source: The EC anti-dumping cases on Vietnamese products, EU-Vietnam MUTRAP III,
Presentation to VASEP delivered by Claudio Dordi, Hanoi, 30 September 2009.
Under the terms of Vietnam’s accession to the WTO, the possibility of resorting to third
country prices in anti-dumping investigations against imports originating from Vietnam expires
on 31 December 2018.56
56 Report of the Working Party on the Accession of Vietnam, WTO, document WT/ACC/VNM/48.
Some countries, such as, inter alia, Argentina, Australia, ASEAN
Member States, Chile, India and South Korea have already granted to Vietnam non-market
171
economy status, mostly in the context of FTAs. Reports indicate that Vietnam entered into the
ASEAN-India FTA upon recognition by India of its market economy status. Perhaps a similar
approach could be followed in the framework of negotiations with the EU.
Therefore, a positive impact of the EU-Vietnam FTA is to provide the negotiating forum for
Vietnam to request an early recognition of its market economy status. This must stand as a
negotiating priority for Vietnam.
It must be also noted that China, which is a frequent target of EU’ trade defense action and
whose industry and exports are competing with those of Vietnam enjoys, in relation to trade
defense (rectius, price comparability), a status which is similar to that of Vietnam. However,
under the terms and conditions of China’s accession to the WTO, China must be recognized as
a market economy by 2016 at the latest. The two-year difference between the mandatory
recognition of China and Vietnam as market economies is likely to create great prejudice to
Vietnam, as this stands to lose its attractiveness as an investment location for manufacture
industries vis-à-vis China. Therefore, should Vietnam not obtain from the EU the immediate
recognition as a market economy, it should negotiate with the EU an appropriate timeframe for
such recognition and make sure that it is at least aligned with the WTO-mandate recognition of
China as a market economy.
In addition, the impact of the FTA on the use of anti-dumping and countervailing duties may
well depend on the substance of the specific provisions that Parties will include in the dedicated
chapter. In this respect, as described more in detail below, the provisions concerning anti-
dumping and countervailing duties in the FTA agreements with the EU range from a mere re-
affirmation of the rights and obligations under the WTO Agreements to the provision requiring
the notification of the receipt of a complaint. In particular, in earlier bilateral agreements the
negotiators’ tendency in relation to anti-dumping and countervailing duties was to re-affirm
Parties’ rights and obligations under the WTO Agreements and possibly to include some sort of
mandatory notification when an anti-dumping or countervailing duty complaint was received.
As the statistics presented in the table in Annex III and commented in section 1.5 show, this has
resulted in anti-dumping and countervailing duty provisions in FTA having little impact on the
recourse to such instruments by the EU.
It is only with the EU-Korea FTA that a mechanism for co-operation is established and some
specific “WTO-plus” obligations are provided for.
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9.2. Overview of anti-dumping and countervailing duties in FTA agreements negotiated by
the EU
All the EU FTAs under review contain provisions on anti-dumping and subsidization.
These provisions may range from a mere re-statement of the rights and obligations of
the parties under the relevant WTO agreements, to provisions requiring parties, inter
alia, to notify to each other the initiation of the proceedings and to give priority to those
measures which least disturb the functioning of the agreement. It is only within the
framework of the EEA (between the EU, Iceland, Liechtenstein and Norway) that anti-
dumping and countervailing duties are abolished, except in respect of certain products
(such as fisheries) where the EU aquis has not been fully integrated in the agreement.
The recently-concluded EU-Korea FTA envisages an entire chapter on trade remedies,
which includes the establishment of an institutional mechanism for co-operation and
some specific obligations.
In particular, Article 37 of the EU-Albania Stablisation and Association Agreement provides
that:
1. None of the provisions in this Agreement shall prevent either Party from taking trade defence action in
accordance with paragraph 2 of this Article […].
2. If one of the Parties finds that dumping and/or countervailable subsidisation is taking place in trade
with the other Party, the first Party may take appropriate measures against this practice in accordance
with the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and
Trade 1994 and the WTO Agreement on Subsidies and Countervailing Measures and its own related
internal legislation.
Here, the rights of the Parties under the relevant WTO agreements are maintained in the FTA
and the Parties are free to initiate anti-dumping and anti-subsidies investigations and to impose
measures, provided that they comply with the applicable obligation of the WTO agreements and
their internal legislation. The agreement does not envisage any additional procedure or provide
for additional cooperation in addition to the provisions of the WTO.
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An identical provision is included in the Interim Agreement on trade and trade-related matters
(as well as in the Stabilization and Association Agreement – yet to enter into force) between the
EU and Bosnia-Herzegovina; in the Stabilization and Association Agreement between the EU
and Montenegro; and in the Interim Agreement on trade and trade-related matters (as well as in
the Stabilization and Association Agreement – yet to enter into force) between the EU and
Serbia.
In addition, similar provisions are foreseen in the Association Agreement between the EU and
Chile and in the EU-South Africa Trade Development and Cooperation Agreement (see table in
Annex II).
The Euro-Mediterranean Agreements between the EU and Egypt and the EU and Lebanon
provide for similar rules in relation to anti-dumping.
In a number of other agreements, whereas the possibility for the Parties to adopt measures
under the relevant WTO Agreements is confirmed, additional obligations, including that of
informing the exporting Party as soon as an investigation is initiated by the authorities of the
importing Party are also provided for. For example, in the Euro-Mediterranean Agreement
between the EU and Israel it is provided that:
Article 22
If one of the Parties finds that dumping is taking place in trade with the other Party within the
meaning of Article VI of the GATT, it may take appropriate measures against this practice in
accordance with the Agreement on implementation of Article VI of the GATT and with its
relevant internal legislation, under the conditions and in accordance with the procedures laid
down in Article 25.
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Article 25
[…]
2. In the cases specified in Articles 22, 23 and 24, before taking the measures provided for
therein or, as soon as possible in cases to which paragraph 3(d) applies, the Party in question
shall supply the Association Committee with all relevant information required for a thorough
examination of the situation with a view to seeking a solution acceptable to the Parties. In the
selection of appropriate measures, priority shall be given to those which least disturb the
functioning of the Agreement. […]
3. For the implementation of paragraph 2, the following provisions shall apply:
(a) as regards Article 22, the Association Committee shall be informed of the dumping case as
soon as the authorities of the importing Party have initiated an investigation. If no end has been
put to the dumping or no other satisfactory solution has been reached within 30 days of the
notification being made, the importing Party may adopt the appropriate measures; […]
(d) where exceptional circumstances requiring immediate action make prior information or
examination, as the case may be, impossible, the Party concerned may, in the situations
specified in Articles 22, 23 and 24 apply forthwith such precautionary measures as are strictly
necessary to remedy the situation, and shall inform the other Party immediately.
Under this agreement, in relation to anti-dumping measures,57
• Supply the Association Committee (a body established under the agreement) with all relevant
information with a view to seeking a solution acceptable to the two Parties;
Parties must:
• Give priority to those measures which least disturb the functioning of the agreement; and
• Inform the exporting Party of the dumping case as soon as the authorities of the
importing Party have initiated an investigation. Measures can be adopted only when no
end has been put to the dumping or no other satisfactory solution has been reached
within 30 days of the matter being referred, the importing Party.
57 In fact, reference is made only to anti-dumping.
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Similar provisions are included in: the Stabilisation and Association Agreement between the
EU and Croatia; in the Agreement between the EU and the Faroe Islands; the Stabilisation and
Association Agreement between the EU and FYROM; the Euro-Mediterranean Agreements
between the EU and Algeria,58
In addition, similar provisions are to be found in the Agreement between the EU and the Swiss
Confederation (see table in Annex II). All the agreements between the EU and ACP Countries
except for the IEPA with the SADC region provide, in addition to the reference to the
possibility for the Parties to adopt anti-dumping and countervailing duties in accordance with
the relevant WTO Agreements, an obligation of the EU to notify to the other Signatory States
the receipt of a properly documented complaint before initiating any investigation. An EU
obligation to inform about the initiation of anti-dumping proceedings is included also in the
relevant provisions of the customs union between the EU and Turkey.
the EU and Jordan, the EU and Morocco, the EU and the
Palestinian Authority, the EU and Tunisia.
59
Finally, the Free Trade Agreement between the EU and Korea (hereinafter, EU-Korea FTA),
currently under ratification, foresees an entire chapter regulating trade remedies (Chapter 3). Of
particular relevance to the present analysis are Articles 3.8 to Article 3.16.
In addition, in this
agreement the EU commits to give preference to price undertakings rather than duties.
In particular, under the EU-Korea FTA the Parties agree to maintain their rights and obligations
under the relevant WTO agreements, except as otherwise provided for in Chapter 3 of the
agreement. In addition, the Parties agree that anti-dumping and countervailing duties should be
based on a fair and transparent system as regards proceedings affecting goods originating in the
other Party. For this purpose, the Parties commit to ensure, immediately after any imposition of
provisional measures and in any case before the final determination, full and meaningful
disclosure of all essential facts and considerations which form the basis for the decision to apply
measures, without prejudice to Article 6.5 of the Anti-Dumping Agreement and Article 12.4 of
58 The Euro-Mediterranean Agreement with Algeria includes an additional article according to which the
provisions of the WTO ASCM applies between the Parties and that Parties may adopt countervailing
measures in accordance with the WTO ASCM and their internal legislation. 59 See, in particular, the Declaration in the Declaration of the Parties to the Agreement, the Statement by the
EU Community on Article 44 (see Annex II).
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the SCM Agreement.60
In addition, with the purpose of ensuring the maximum efficiency in handling anti-dumping or
countervailing duty investigations, and in particular considering the adequate right of defense,
the EU-Korea FTA requires Parties to accept the use of English for documents filed in anti-
dumping or countervailing duty investigations. Specific provisions are foreseen to allow Korea
to request a written clarification when:
The agreement provides that disclosures shall be made in writing and
must allow interested parties sufficient time to make their comments.
(a) The meaning of the documents filed is not deemed reasonably clear by Korea’s
investigating authorities for the purposes of the anti-dumping or countervailing duty
investigation; and
(b) The request is strictly limited to the part which is not reasonably clear for the purposes
of the anti-dumping or countervailing duty investigation.
The agreement requires that, when it does not unnecessarily delay the conduct of the
investigation, interested parties be granted the opportunity to be heard in order to express their
views during the anti-dumping or countervailing duty investigations.
Similarly to the other agreements seen above, the EU-Korea Free Trade Agreement requires
Parties, after the receipt of their competent authorities of a properly documented antidumping or
countervailing duty application, to provide, no later than 15 days before initiating an
investigation, written notification to the other Party of its receipt of the application.
Under the EU-Korea FTA Parties are also required to “endeavor to consider the public interests
before imposing an anti-dumping or a countervailing duty”. This wording does not lead to
conclude that the Parties are under an obligation to factor-in the investigation the public interest
test, but only that they must “endeavor” to consider the public interest. However, as seen above,
EU authorities are already required by EU law to apply the public interest test in anti-dumping
and countervailing duty investigations.
The agreement however, requires both Parties to apply the lesser duty rule. In particular, under
the agreement, the amount of an anti-dumping or countervailing duty that a Party decides to
impose must not exceed the margin of dumping or countervailable subsidies, and it should be
60 The two articles regulate the treatment of confidential information.
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less than the margin if such lesser duty would be adequate to remove the injury to the domestic
industry. As it is the case for the public interest rule, the EU authorities are already required to
apply, under EU law, the lesser duty rule.
Other relevant provisions relating to the conduct of the investigations and the imposition of
duties include:
• A provision according to which the Parties agree to examine, with special care, any
application for initiation of an antidumping investigation on a good originating in the
other Party and on which anti-dumping measures have been terminated in the previous
12 months as a result of a review. Under the agreement, unless this pre-initiation
examination indicates that the circumstances have changed, the investigation shall not
proceed;
• When imports from more than one country are simultaneously subject to anti-dumping
or countervailing duty investigation, an obligation to examine, with special care,
whether the cumulative assessment of the effect of the imports of the other Party is
appropriate in light of the conditions of competition between the imported goods and
the conditions of competition between the imported goods and the like domestic goods;
and
• A provision requiring the applicability of de minimis standards to reviews of anti-
dumping determinations.
Chapter 3 of the EU-Korea FTA also provides for an institutional mechanism of co-operation in
trade remedies matters. In particular, the agreement establishes the Working Group on Trade
Remedy Co-operation to serve as a forum for dialogue for trade remedy co-operation, and
whose functions are to:
(a) Enhance a Party’s knowledge and understanding of the other Party’s trade remedy laws,
policies and practices;
(b) Oversee the implementation of this Chapter;
(c) Improve co-operation between the Parties’ authorities having responsibility for matters
on trade remedies;
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(d) Provide a forum for the Parties to exchange information on issues relating to anti-
dumping, subsidies and countervailing measures and safeguards;
(e) Provide a forum for the Parties to discuss other relevant topics of mutual interest
including;
(i) International issues relating to trade remedies, including issues relating to the
WTO Doha Round Rules negotiations; and
(ii) Practices by the Parties’ competent authorities in anti-dumping, and
countervailing duty investigations such as the application of “facts available”
and verification procedures; and
(f) Co-operate on any other matters that the Parties agree as necessary.
The Working Group is normally to meet annually and, if necessary, additional meetings could
be organized at the request of either Party.
Therefore, the EU and Korea have agreed on a set of provisions on anti-dumping and
countervailing duties which include:
• The regulation of specific procedural instances;
• The inclusion of WTO-plus obligations; and
• An institutional mechanism for co-operation.
9.3. Statistics on the use of anti-dumping and countervailing duties by the EU with countries
with which it enjoys free trade agreements
Overall, as the above description shows, the provisions concerning trade defense in the FTA
agreements with the EU range from the re-affirmation of the rights and obligations under the
WTO Agreements to the provision of notification requirements, to well-established co-
operation mechanism and WTO-plus obligations. In earlier bilateral agreements the negotiators’
tendency in relation to anti-dumping and countervailing duties was to re-affirm Parties’ rights
and obligations under the WTO Agreements and possibly to include some sort of mandatory
notification when an anti-dumping or countervailing duty complaint was received. It is only
with the EU-Korea FTA that a mechanism for co-operation is established and some specific
obligations are provided for.
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In general, it appears that the existence of bilateral agreements with the EU had, has and stands
to have, little impact on the EU’s authorities’ decision to initiate investigations and impose anti-
dumping and countervailing duties to imports into the EU. In the absence of any substantive
provision in the bilateral agreement limiting the recourse to trade defense action, the conclusion
and entry into force of a bilateral agreement does not appear to result into any substantial
change to the frequency through which the EU resorts to anti-dumping and countervailing
action.
This is evidenced in the statistics presented in Annex III, where it is shown that the exports
from trading partners that were frequent target of trade defense action continued to be
investigated and subject to duties even after the entry into force of the FTA.
In particular, where the FTA provided for a mere re-affirmation of the rights and obligations of
the Parties under the WTO agreements (inter alia, the FTA between the EU and Chile, the EU
and Egypt and the EU and South Africa) the table in Annex III shows that no substantive
change in the frequency of the initiation of trade defense actions and the imposition of measure
was brought by the entry into force of the FTA. For example, South African imports have been
subject to anti-dumping and countervailing duties both before and after the entry into force of
the FTA with the EU. Similarly, anti-dumping duties have been imposed against imports Egypt
before and after the entry into force of the agreements with the EU.
As explained above, a number of agreements contained the following additional obligations:
• The provision to a body specified in the FTA of all relevant information with a view to seeking a
solution acceptable to the two Parties;
• Give priority to those measures which least disturb the functioning of the agreement; and
• Inform the exporting Party of the dumping case as soon as the authorities of the
importing Party have initiated an investigation. Measures can be adopted only when no
end has been put to the dumping or no other satisfactory solution has been reached
within 30 days of the matter being referred, the importing Party.
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This is the case of, inter alia, FTAs between the EU and Croatia, the EU and FYROM, the EU
and Israel, the EU and Jordan, the EU and Morocco and the EU and Tunisia. It is not possible to
estimate whether such additional obligations had any concrete impact on the initiation of trade
defense investigations. However, the table in Annex III shows that anti-dumping duties have
been imposed against imports from Croatia and FYROM both before and after the entry into
force of the agreements with the EU. No duties were imposed on imports from Jordan, Morocco
or Tunisia, both before and after the entry into force of the FTA. No duties were imposed on
imports from Algeria after the entry into force of the FTA.
Perhaps, of relevance to Vietnam is the treatment of imports originating from some of the EU
new Member States prior to their accession to the EU. In fact, some of these Countries
(including Poland, Czech Republic, Hungary) presented features which appear comparable to
those of Vietnam (inter alia, the transition to a market economy). Since the mid-90s and before
their accession to the EU, relations between these countries and the EU were regulated through
the Europe Agreements, which contained provisions on anti-dumping and countervailing duties
which are similar to those of the Stabilisation and Association Agreements with Balkan
Countries (see Annex II). However, as the table b) of Annex III shows, exports from these
Countries were often the target of anti-dumping action before and after the entry into force of
the Europe Agreements. For example, between 1996 and 2003, imports from the Czech
Republic have faced 6 new anti-dumping investigations, 6 provisional anti-dumping duties and
6 definitive anti-dumping duties, whereas only in one case EU authorities decided not to impose
anti-dumping measures. The Europe Agreement between the EU and the Czech Republic
entered into force in 1995. Similarly, notwithstanding the conclusion and the entry into force of
the Europe Agreement between the EU and Poland in 1994, 7 new anti-dumping investigations,
6 provisional anti-dumping duties and 6 definitive duties were applied against imports from
Poland between 1996 and 2003. In one case only EU authorities decided not to impose anti-
dumping measures.
It can be concluded that, to the extent that the bilateral agreement between the EU and any
given country does not contain any significant obligation in relation to anti-dumping and
countervailing action, the incidence according to which the EU will initiate its investigations
and impose measures against the imports of that country stands to remain mostly unchanged. As
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it may be inferred from the provisions above, in earlier agreements the negotiators’ trend was to
include provisions that would simply re-state Parties’ rights and obligations in relation to anti-
dumping and countervailing duties. In fact, the elimination of anti-dumping and countervailing
duties within an FTA is not a condition of compliance of the FTA with the requirements of
Article XXIV of the GATT and there is no incentive on the EU’s side to make concessions in
trade defense.
Perhaps the provisions of the EU-Korea FTA stand to have greater impact on the use of anti-
dumping and countervailing duties between the two Parties. This agreement is the most
significant example of the new types of FTA agreements that the EU is concluding. The EU-
Korea FTA includes a number of so-called WTO-plus commitments and, in the area of anti-
dumping and countervailing action, it provides for a number of obligations and an institutional
mechanism for co-operation.
9.4. Conclusions on the potential impact of the FTA between the EU and Vietnam on the use
of anti-dumping and countervailing duty measures
In the context of the EU-Vietnam FTA negotiations, it is unclear whether the EU’s negotiating
proposal on anti-dumping and countervailing action will include provisions on enhanced co-
operation and a set of WTO plus obligations or will simply provide for a mandatory notification
requirement and re-state the Parties’ rights and obligations under the WTO agreements. In this
respect, the recent EU’s negotiating practice has varied, according to the trading partner
concerned.
This is true especially in relation to the most recent FTAs negotiated by the EU. The goal of the
Economic Partnership Agreements with ACP Countries is to replace the EU’s unilateral trade
preferences with WTO-consistent FTAs between the EU and regional groupings of ACP
Countries. These agreements are intended to foster development in ACP regions, encouraging
regional integration between the ACP Countries and stimulating ACP Countries’ exports to the
EU. In this context, with the exception of the IEPA with the SADC region, the relevant
provisions on anti-dumping and countervailing measures included in the EPAs between the EU
and ACP Countries contains, in addition to the reference to the possibility for the Parties to
adopt anti-dumping and countervailing duties in accordance with the relevant WTO
Agreements, an obligation of the EU to notify to the other Signatory States the receipt of a
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properly documented complaint before initiating any investigation, as well as specific rules on
the avoidance of multiple imposition of trade defense remedies at the regional/sub-regional and
Signatory State level.
On the other hand, as explained in more detail above, the EU-Korea FTA contains a set of
WTO-plus obligations, detailed procedural requirements and a mechanism for enhanced co-
operation that creates the basis for a dialogue between the EU and Korea on issues of trade
defense.
The agreement between the EU and Vietnam stands to have a number of peculiar elements.
Vietnam is a developing country and a country in transition (like a number of Easter European
countries that are now part of the EU: however, in contrast to such countries, there is no
prospect of accession to the EU). On the other hand, negotiations with Members of ASEAN,
including Vietnam, are more aimed at securing commercial benefits for the EU, under the
principles of the EU Commission Communication Global Europe. Pursuant to this strategy, the
EU will likely propose the inclusion of a comprehensive – possibly WTO-plus – set of rules. At
the same time, the EU is unlikely to make concessions on anti-dumping and countervailing
duties. However, Vietnam’s economy relies greatly on exports, with the EU now constituting
Vietnam’s second export market for garment and the first export destination for footwear
products – two of Vietnam’s the key manufactured exports. The EU’s application of anti-
dumping duties (and, possibly in the future, countervailing duties) brings significant losses to
Vietnamese exporters.
From the analysis made in the preceding sections, it is concluded that the negotiation and
conclusion of a bilateral agreement with the EU is likely not to have any significant impact on
the EU’s resorting to anti-dumping and countervailing action against imports from Vietnam –
on the contrary, it might pose stricter requirements to Vietnam in the area of dumping,
subsidization and the use of trade defence instruments – unless the EU agrees, within these
negotiations, to recognize Vietnam as a market economy ahead of the WTO deadline. The early
recognition of market economy status stands to have the greatest impact in terms of reducing
EU’s anti-dumping action – and in particular the amount of duties – against imports of Vietnam
and must be viewed as one of the key negotiating priorities for Vietnam in the context of the
negotiation of the trade defense chapter with the EU. Under the terms of Vietnam’s accession to
the WTO, the possibility of resorting to third country prices in anti-dumping investigations
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against imports originating from Vietnam expires on 31 December 2018. Some countries, such
as, inter alia, Argentina, Australia, ASEAN Member States, Chile, India and South Korea have
already granted to Vietnam non-market economy status, mostly in the context of FTAs. Reports
indicate that Vietnam entered into the ASEAN-India FTA upon recognition by India of its
market economy status. Perhaps a similar approach could be followed in the framework of
negotiations with the EU.
An immediate recognition of its market economy status must stand as a negotiating priority for
Vietnam. Should this request not be successful Vietnam should achieve at least that its non-
market economy status be phased out before the WTO-mandated deadline, and certainly before
China is recognized as a market economy. The two-year difference between the WTO-required
recognition of China and Vietnam as market economies is likely to create great prejudice to
Vietnam, as the latter stands to lose its attractiveness as an investment location for manufacture
industries vis-à-vis China. Therefore, should Vietnam not obtain from the EU the immediate
recognition as a market economy, it should negotiate with the EU an appropriate timeframe for
such recognition and make sure that it is at least aligned with the WTO-mandate recognition of
China as a market economy.
In addition, the impact of the FTA on the use of anti-dumping and countervailing duties may
well depend on the substance of the specific provisions that Parties will include in the dedicated
chapter. In addition to the early recognition of Vietnam as a market economy country, the EU-
Vietnam FTA should also envisage provisions requiring Parties to notify to each other the
receipt of an anti-dumping or countervailing duty complaint and an institutional mechanism for
co-operation similar to that established under the EU-Korea FTA. In the absence of any
substantive obligation to refrain from the initiation of anti-dumping and countervailing duty
investigations, such co-operation mechanism, applied to the FTA between the EU and Vietnam,
stands to improve relations between the Parties on issues of trade defense measures by, inter
alia:
• Improving co-operation between the Parties’ authorities having responsibility on trade
defense matters; and
• Providing a forum for discussion of, inter alia, practices by the Parties’ competent
authorities.
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Lastly, the negotiations may also provide the framework for Vietnam to discuss with the EU
enhanced co-operation on procedural issues of interest to Vietnam. As seen above, in the EU-
Korea FTA Parties agreed on a set of procedures and WTO-plus requirements. Vietnam should
consider whether it has any specific further negotiating priority in relation to anti-dumping and
anti-subsidies investigations and procedures and table its request to the EU in the context of the
FTA negotiations.
9.5. Impact of the EU-Vietnam FTA on SPS and TBT regulations
Pursuant to its strategy as set out in “Global Europe – Competing in the World”, the new FTAs
negotiated by the EU will include chapters on SPS and TBT measures:
FTAs should also tackle non tariff barriers through regulatory convergence wherever possible
and contain strong trade facilitation provisions. […]
In considering new FTAs, we will need to work to strengthen sustainable development through
our bilateral trade relations.
Under the EU’s strategy, the inclusion of SPS and TBT chapters in FTAs is mainly
aimed at avoiding that EU exports are hampered by non-tariff requirements. This stands
true particularly for those FTAs having as a primary objective to secure commercial
benefits for the EU exporters. In fact, as SPS and TBT measures are qualitative in
nature, no preferences will be accorded by the EU to FTA partners, in the form of
easier of softer requirements. However, the EU-Vietnam FTA may prove to be an ideal
framework to engage in co-operation on SPS and TBT matters, including perhaps
technical discussions in relation to specific barriers that Vietnamese exports may
encounter, and may include provisions for technical support and training, and measures
to promote knowledge transfer and strengthen public services. In addition, the FTA
may provide a useful forum for the discussion and possibly the conclusion of mutual
recognition agreements and equivalency agreements. Therefore, in the framework of
the FTA negotiations with the EU, in order to secure a positive impact on SPS and TBT
issues, Vietnam should focus on how to use the negotiations to enhance compliance
with EU SPS and TBT requirements in a cost-effective way.
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9.6. SPS and TBT framework in the EU and barriers encountered by Vietnamese exporters
SPS measures are requirements imposed by governments to protect human, animal and plant life
or health against certain food safety risks and certain diseases carried by animals. The WTO SPS
Agreement allows WTO Members to impose such measures, subject to the condition that they are
based on science and are applied in a transparent and non-discriminatory fashion. On the other
hand, TBT measures include technical regulations, standards and conformity assessment procedures
designed by governments with the aim to ensure the quality and safety of the products placed on the market.
The WTO TBT Agreement recognizes the right of WTO Members to adopt such measures, while
at the same time ensuring that they do not create unnecessary obstacles to trade.
Compliance with the EU SPS and TBT requirements is a precondition for Vietnamese exporters
to be granted access to the EU market, even in the context of an FTA. In fact, SPS and TBT
measures regulate all the important sectors of export to the EU: footwear, garment, food
products, wood products and furniture, electric and electronic products and plastic products.
A specific survey of the SPS and TBT requirements affecting Vietnamese exports to the EU in
key sectors has already been conducted in the context of two MUTRAP III activities:
“Overcoming SPS Barriers to Enhanced Exports of Vietnamese Products to the European
Union” and “Overcoming TBT Barriers to Enhanced Exports of Vietnamese Products to the
European Union”, dated July 2009, Activity Code WTO-7.
The relevant EU regulatory framework affecting Vietnamese exports is explained in detail in
the above mentioned reports and can be found in Annexes IV and V to this report.
In relation to SPS issues, as explained in the surveys, Vietnam’s major exports of agriculture
and fishery/aquaculture products are fish and shellfish, coffee, rice, cashew, tea, pepper, timber,
fruit and vegetables, and honey. Of these:
• Coffee and tea, timber and rice do not usually encounter significant barriers to
international trade in the form of SPS measures; however, there may be requirements
for the products to be free from excessive residues of agricultural chemicals and from
insect infestation;
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• In contrast, fish and fish products (including crustaceans) are usually subject to very
intensive controls in order to ensure food safety and zoo-sanitary health; and
• Trade in fresh fruit and vegetables also tends to be constrained by SPS measures.
Vietnam exports fresh fruit and vegetables to the EU, but these account for a very
small fraction of the latter’s total imports of fresh fruit and vegetables. Exports of fresh
dragon fruit are a key area of growth in Vietnam’s exports. Baby corn, chilies and
mushrooms may, also, become growth sectors in the future.61
Fish and fish products are among the most valuable exports to the EU. The Vietnamese
Government has pursued a specific strategy, aimed at achieving access to the EU
market. In this context, legislation has been effected and state agencies with jurisdiction
in food quality control and safety have been established.
Vietnam’s current success in exporting to the EU is the result of a strategy planned and
implemented at both government and business levels, partially funded by international aid
programs. Market access to the EU is granted to selected private operators and is the result of
the fulfillment of a number of health and supervisory requirements (e.g. Hazard Analysis
Critical Control Point-based procedures and product standards and testing plans). As the crucial
issue in recognizing equivalence is the evaluation of a set of requirements related to the
exporting country’s organization and capability to control safety both at the administrative and
enterprise level, Vietnam’s ability to export fisheries to the EU was basically the result of a
two-fold strategy:
• Creating a legal and regulatory framework, fitting the legal standards required to access
the specific market; and
• Involving private and public sector in investments in processing, facilities, machineries
and marketing skills, which are competiveness-drivers on global markets.
61 “Overcoming SPS Barriers to Enhanced Exports of Vietnamese Products to the European Union”, MUTRAP
III, July 2009, p. 6.
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Vietnam has upgraded its internal sanitary legislation and food processing in line with
international standards, during the past years. Actions have been taken with the aim of setting-
up a network of authorities and laboratories, applying internationally-recognized standards in
sampling and inspection tests. In addition, the implementation of capacity building activities
has been a key factor for the successful development of the strategy. In this context, Vietnam
has also given particular importance to trade facilitation mechanisms by entering into
equivalence and mutual recognition agreements with the EU.62
The production of EU-compliant fishery products was not without turbulences and had
implications for all operators involved in the fisheries’ business. Staff training, the
establishment of competent authorities with appropriate enforcing powers, and the improvement
of facilities are only some aspects to be mentioned. The cost of all of these initiatives is
unknown, but certainly very large. However, the benefits are evident in Vietnam’s ability to
supply reputable products to the EU and to other countries with high sanitary standards. In
addition, the domestic market of Vietnam has benefited from the application of high sanitary
standards in exported fish and fish products, as the same safe products are sold domestically,
too.63
In general, compliance with SPS requirements implies high costs for Vietnamese exporters,
especially where the standards that apply in export markets, like the EU, are significantly
stricter than those that apply in Vietnam. The example can be made of the costs of conducting
laboratory tests to demonstrate freedom from pesticide residues in export consignments, which
can be high in relation to the expected profits from trade. The framework of a future FTA
between the EU and Vietnam should be conducive to the achievement of facilitated patterns of
SPS compliance, certification and market access. This must be an active ingredient of the recipe
for further trade liberalization, together with the traditional aspects of tariff reduction. As seen
in this report, there are several instruments of SPS-related trade facilitation that can be used to
achieve such effective degree of greater market integration and trade development.
62 International Trade Center, Case Study, “Vietnam’s Fisheries Exports to the EC Public - Private
Collaboration to Address Non-Tariff Measures”, available at
http://www.intracen.org/btp/publications/vietnam-fisheries.pdf. 63 “Overcoming SPS Barriers to Enhanced Exports of Vietnamese Products to the European Union”, supra, p.
7.
188
In relation to TBT issues, the survey elaborated in the context of a previous MUTRAP III
project explains that the industry associations of key export sectors did not identify any
particular TBT issue creating significant difficulties to exporters (i.e., exporters do not appear to
be experiencing exceptional difficulties in meeting TBT requirements in key export sectors).
This is partly because compliance with EU TBT requirements is mediated by the EU buyers
who set the products specification, packaging requirements, conformity assessment and
certification procedures. In many cases, the EU buyers also supply or nominate suppliers to
supply the raw materials and require conformity assessment and certification by specific
laboratories and certification companies. Vietnamese exporters produce under contract to
clearly defined parameters and specifications which the buyer determines will meet the relevant
EU TBT requirements.64
However, the industry associations are concerned about the impact of revisions of the EU
legislation, possibly imposing new TBT requirements on imports of raw materials and, also,
restricting exports. In specific, the potential problems were categorized into 3 groups:
• Uncertainty regarding future changes to EU TBT requirements;
• Potential increase in the cost of conformity assessment and certification; and
• Potential requirement for new investment in production technology and operational
training.
In relation to the first point, particular concerns were expressed, inter alia, by the industry of
leather and footwear, apparel and textiles and wood and furniture on the potential impact of the
EU REACH Regulation.65
64 “Overcoming TBT Barriers to Enhanced Exports of Vietnamese Products to the European Union”,
MUTRAP III, July 2009, p. 21.
65 Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning
the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European
Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and
Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives
91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC, OJ L 396/2006. REACH was adopted with the aim of
ensuring that all chemical substances used in the EU, whether imported or manufactured, meet certain health and
safety requirements. It provides, inter alia, for the responsibility of manufacturers and importers of chemicals as
regards the substances’ safe use and handling; the replacement of the most hazardous with less hazardous chemical
substances; and the setting up of a European Chemicals Agency entrusted with the task to register, evaluate and
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Environmental protection requirements are also relevant for key export sectors. Of specific
concern to the furniture industry is the application of the EU FLEGT scheme.
EU FLEGT Scheme
The EU attributes great significance to the fight against illegal logging and deforestation.
Having as an ultimate goal the achievement of a sustainable management of forests, it
adopted in 2003 an Action Plan for Forest Law Enforcement, Governance and Trade
(hereinafter, FLEGT). This Action Plan constitutes the first step towards that direction, in
focusing, primarily, on ensuring the legality of forest operations. Emphasis is put, inter
alia, on the issues of improved governance, capacity building and development of
Voluntary Partnership Agreements (hereinafter, VPAs).
In more detail, the EU is to conclude VPAs with interested countries and regional
organizations.66
authorise the use of all such substances. It is important to note that this regulation outlines
restrictions on the manufacture and use of chemicals in the EU and is not, therefore, directly
applicable to the use of chemicals by Vietnamese manufacturers, with the exception of certain
prohibitions and restrictions set out in Annex XVII of the regulation, which were previously set
out in Council Directive of 27 July 1976 on the approximation of the laws, regulations and
administrative provisions of the Member States relating to restrictions on the marketing and use
of certain dangerous substances and preparations. However, Vietnamese exporters and
manufacturers are worried of the indirect impact of REACH, in particular that European buyers
might be reluctant to buy imported products which are manufactured using chemicals that are
not allowed for use by EU manufacturers. This could result into EU importers requiring their
suppliers in third countries, including Vietnam, to only use chemicals that are registered under
REACH. For more information, see “Overcoming TBT Barriers to Enhanced Exports of
Vietnamese Products to the European Union”, MUTRAP III, July 2009.
Besides containing specific commitments against the illegal harvesting of
66 In relation to the specific case of Vietnam, it established a bilateral VPA Technical Working
Group with the EU in 2008, with the task of exploring the possibility of concluding a FLEGT
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timber, including a more rigorous enforcement of forest law and the development of
appropriate systems to supervise forest operations and the flow of timber, these VPAs
introduce licensing schemes in order to ensure that only legally harvested timber is placed
by them on the EU market.
Regulation (EC) No 2173/2005 on the establishment of a FLEGT licensing scheme for
imports of timber into the European Community establishes the body of EU rules in
relation to the implementation of the licensing scheme for certain specifically defined
imported timber products. The regulation aims at controlling whether the timber entering
the EU from the countries that have signed bilateral FLEGT VPAs is accompanied by a
FLEGT license guaranteeing that it has been legally harvested.
In addition, Regulation (EC) No 1024/2008 laying down detailed measures for the
implementation of Council Regulation (EC) No 2173/2005 on the establishment of a
FLEGT licensing scheme for imports of timber into the European Community sets out the
information to be included in the license and provides for a standardised format of the
FLEGT licenses in order to facilitate their effective implementation.
In the framework of FLEGT, the EU has recognized the importance of capacity-building,
especially for developing countries. Accordingly, the EU Commission has indicated its
willingness to provide aid to countries in need through funding mechanisms and support to
NGOs and relevant private sector actions.
Vietnam established a bilateral VPA Technical Working Group with the EU in 2008, with the
task of exploring the possibility of concluding a FLEGT VPA. As processed timber products
constitute a major part of Vietnam’s exports, the latter has an interest in joining the EU and US
VPA. As processed timber products constitute a major part of Vietnam’s exports, the latter has
an interest in joining the EU and US schemes developed in order to preserve and, even, increase
its position in the relevant market. The main constraints that this initiative faces include
underdeveloped and improperly implemented policies, insufficiency of monitoring mechanisms
and limited capacity of forest owners.
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schemes developed in order to preserve and, even, increase its position in the relevant market.
The main constraints that this initiative faces include underdeveloped and improperly
implemented policies, insufficiency of monitoring mechanisms and limited capacity of forest
owners.
In relation to the second point, there are concerns related to the fear that new TBT measures
would include new increased certification requirements posing additional costs on the
exporters.
Lastly, there are also fears that new TBT measures could require investment in new production
and distribution technology in order to meet the compliance requirements. This could require
personnel training on the operation of new equipment and increase operating costs.67
9.7. Enhancing trade facilitation: the WTO legal framework
As mentioned above, the relevant international rules regulating the adoption of SPS and TBT
measures are included in the WTO SPS and TBT Agreements.
The SPS Agreement allows WTO members to adopt the appropriate SPS measures that they
consider necessary to protect life and health, provided that they are consistent with its
provisions. In particular, it is required that SPS measures be based on scientific principles, are
maintained on the basis of scientific evidence, are not discriminatory and are not applied as to
result in a disguised restriction to trade. In addition, the SPS Agreement encourages the
harmonization of health-related food standards, requiring WTO Members to base, to the extent
possible, their SPS measures on international standards, where they exist. It expressly
recognizes three international standards-setting bodies:
• The Codex Alimentarius Commission;
• The International Office of the Epizootics; and
• Secretariat of the International Plant Protection Convention.
67 “Overcoming TBT Barriers to Enhanced Exports of Vietnamese Products to the European Union”, supra, p. 21-23.
192
WTO Members retain the right to implement SPS measures which result in a higher level of
protection than the one that would be achieved by measures based on the relevant international
standards, guidelines or recommendations, provided that there is a scientific justification or on
the basis of a risk assessment.
The TBT Agreement seeks to assure that mandatory product regulations, voluntary product
standards and conformity assessment procedures (i.e., procedures designed to test a product’s
conformity with mandatory regulations or voluntary standards) do not become unnecessary
obstacles to international trade, are not employed to obstruct trade and are non-discriminatory.
As the SPS Agreement, the TBT Agreement also promotes harmonisation of technical
regulations and conformity assessment procedures. In particular, it provides that WTO
Members shall use relevant international standards, or the relevant parts of them, as a basis for
their technical regulations, except where such international standards or relevant parts would be
an ineffective or inappropriate means for the fulfillment of the legitimate objectives pursued. In
relation to conformity assessment procedures, the TBT Agreement provides that in cases where
a positive assurance is required that products conform with technical regulations or standards,
and relevant guides or recommendations issued by international standardizing bodies exist or
their completion is imminent, WTO Members must ensure that central government bodies use
them, or the relevant parts of them, as a basis for their conformity assessment procedures;
except where such guides or recommendations or relevant parts are inappropriate for the
Members concerned for legitimate reasons (inter alia, national security requirements; the
prevention of deceptive practices; the protection of human health or safety, animal or plant life
or health, or the environment; fundamental climatic or other geographical factors; and
fundamental technological or infrastructural problems).
Both the SPS and TBT Agreements promote the use of equivalence and mutual recognition
agreements (MRAs) as tools of trade facilitation to minimize the trade-distortive consequences
of product testing and certification procedures that must be undertaken in order to enter third
markets. These include, inter alia: increased costs and delays associated with the repetition of
tests for different markets; increased transportation costs (if the product is considered not to
comply with the importing country’s regulatory requirements and must be returned to the
exporting country); possible harm to the product or country image; and delays and costs
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associated with inspection visits, which may be undertaken by the authorities in the importing
country.68
In particular, equivalence is a mechanism for minimizing barriers to trade by treating different
standards as having a similar effect, while allowing them to remain intact and in effect.
Through equivalence agreements, trading partners recognize that their different standards
achieve comparable results in terms of the level of protection that they seek to ensure (i.e., food
safety, animal health, environmental protection, etc.).
Mutual recognition is the outcome of a process of evaluation which leads to an agreement
among countries that the standards employed in their respective territories are such as to allow
goods produced in one country to be freely marketed in the other(s).
Formal equivalency agreements covering countries’ entire health and safety systems are rare
even among developed and well-equipped countries, due to the highly-technical issues involved
that render difficult and time-consuming the negotiation of such agreements. Therefore, it is
easier and more feasible for governments to recognize each other’s measures as applied to
specific products. Ad hoc acceptance of the equivalence of specific products or of certain
aspects of SPS measures is becoming a practical alternative to formal agreements and often
occurs at a technical level and is not necessarily reflected in any formal bilateral agreement.
MRAs constitute an alternative to formal equivalency agreements. In particular, MRAs
facilitate trade by enabling manufacturers to have their products tested and certified, in the
country of origin, for compliance with the regulatory requirements of the importing country.
Under MRAs, governments agree to recognize the results of each other’s testing, inspection,
SPS certification or other procedures. Therefore, the manufacturer can meet both parties’
standards by undergoing one inspection, testing, or certification procedure by approved bodies
in whichever country is most convenient.
MRAs can take several forms. They can be limited to testing methods, cover conformity
assessment certificates or be full-fledged and include the standards themselves. For example,
mutual recognition may apply to categories of products traded between countries which are
parties to an agreement or only to specified products, and all requirements applicable to
specified products (including technical regulations and food standards) or only some (such as
68 International Trade Center, Case Study, “Vietnam’s Fisheries Exports to the EC Public - Private Collaboration to
Address Non-Tariff Measures”, supra p. 22.
194
conformity assessment procedures). The feasibility of establishing mutual recognition will be
greatest between countries which have broadly similar attitudes to the appropriate level of
protection against health risks and deception of consumers, and between countries which have
broadly similar capabilities in relation to the monitoring and enforcement of requirements.
Mutual recognition is also more likely to be established between countries that are in some kind
of political or legal association with each other. Often such countries will be neighbours with a
long tradition of trading food and other SPS-regulated products. The example of the MRA
initiatives launched within ASEAN and APEC (which Vietnam is partaking) is a clear
testimony to the validity and commercial attractiveness of such approach.69
The WTO SPS and TBT Agreement encourage equivalence, albeit in different ways. In
particular, the SPS Agreement permits each WTO Member to set its own level of sanitary and
phytosanitary protection, no matter how high that might be, provided that certain specifically-
stated requirements are abided by. In doing so, however, it recognizes that different SPS
measures may be equally effective in satisfying a country’s appropriate level of protection and,
accordingly, calls upon WTO Members to recognize the equivalence of other measures, as long
as the level of protection that they deem appropriate is met. The equivalence of SPS measures,
thus, does not require duplication or sameness of measures, but the acceptance of alternative
measures that meet an importing Member’s appropriate level of sanitary or phytosanitary
protection.
In this context, Article 4 of the SPS Agreement states that:
1. Members shall accept the sanitary or phytosanitary measures of other Members as equivalent, even if
these measures differ from their own or from those used by other Members trading in the same product, if
the exporting Member objectively demonstrates to the importing Member that its measures achieve the
importing Member's appropriate level of sanitary or phytosanitary protection. For this purpose,
reasonable access shall be given, upon request, to the importing Member for inspection, testing and other
relevant procedures.
2. Members shall, upon request, enter into consultations with the aim of achieving bilateral and
multilateral agreements on recognition of the equivalence of specified sanitary or phytosanitary
measures.
69 For a more detailed analysis of equivalence and WTO see “Inventory of the Applicable WTO Rules and
Procedures on Equivalency and MRAs”, MUTRAP II, February 2006, p. 2-11.
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Thus, Article 4 of the SPS Agreement obliges WTO Members to enter into consultations, upon
request, with the aim of achieving bilateral and multilateral agreements on the recognition of
equivalence of specified SPS measures. However, it does not set any legal obligation for their
actual conclusion. These so-called ‘equivalence agreements’ provide the institutional
framework for the implementation of equivalence and establish a basis for the exchange of
information on standards, recognition of certification, provisions for retests and appeal, and the
return of rejected consignments.
On 26 October 2001, the WTO Committee on Sanitary and Phytosanitary Measures
(hereinafter, the ‘SPS Committee’) adopted a Decision on the Implementation of Article 4 of the
Agreement on the Application of Sanitary and Phytosanitary Measures (hereinafter, the
‘Equivalence Decision’),70 setting out the guidelines for WTO Members that request the
recognition of equivalence of their SPS measures and for the importing WTO Members towards
which the request is directed.71
70 See the WTO document G/SPS/19/Rev.2 of 23 July 2004, revising the Decision of 26 October 2001.
71 With respect to the potential coverage of the recognition of equivalence, the Equivalence Decision
establishes that equivalency may be declared and accepted for a specific measure or measures related to
certain products or categories of products, or on a system-wide basis. In practice, however, formal
system-wide equivalency agreements covering countries’ entire health and safety systems are rare even
among developed and well-equipped countries, due to the highly-technical issues involved that render
difficult and time-consuming their negotiation. It is, therefore, easier and more feasible for governments
to ad hoc accept the equivalence of specific products or of certain aspects of SPS measures at a technical
level, without that necessarily being reflected in any formal bilateral agreement. Such practice has, also,
been backed by the SPS Committee and the WTO Secretariat.
In addition, the Equivalence Decision provides that importing WTO Members must, upon
request by interested WTO Members:
• Seek to accept the equivalence of an SPS measure related to certain products or
categories of products;
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• Explain the objective and rationale of their domestic SPS measure and clearly
identify the risks that the relevant measure is intended to address;
• Indicate the appropriate level of protection which their measure is designed to
achieve. The explanation should be accompanied by a copy of the risk assessment
on which the SPS measure is based or by a technical justification based on a
relevant international standard, guideline or recommendation; and
• Provide any additional information which may assist the exporting Member to
provide an objective demonstration of equivalence of its own measure.
The burden of proving equivalence rests with the exporting country. The exporting WTO
Member bears the obligation to provide appropriate science-based and technical information to
support its objective demonstration that its measure achieves the appropriate level of protection
identified by the importing WTO Member. In addition, and upon request, the exporting WTO
Member must provide reasonable access to the competent authorities of the importing WTO
Member for inspection, testing and other relevant procedures for the recognition of equivalence.
The Equivalence Decision requires that the importing WTO Member, when considering a
request for recognition of equivalence, analyze the science-based and technical information
provided by the exporting WTO Member on its sanitary of phytosanitary measures in order to
determine whether the measures achieve the level of protection provided by its own relevant
measures. In addition, it must respond to any request from the exporting WTO Member in a
timely manner, which the Equivalence Decision quantifies in a six-month period, accelerating
its procedure for determining equivalence in respect of those products that it has historically
imported from the exporting WTO Member.
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Contrary to the SPS Agreement, the TBT Agreement recognizes the concept of
equivalence in a much weaker form. In more detail, Article 2.7 of the TBT Agreement
states:
Members shall give positive consideration to accepting as equivalent technical
regulations of other Members, even if these regulations differ from their own, provided
they are satisfied that these regulations adequately fulfil the objectives of their own
regulations.
The relevant provision does not impose any substantial obligation on importing WTO
Members, which must only give “positive consideration” to proposals of equivalence.
In addition, the determination of equivalence is premised on a subjective criterion (i.e.,
the “satisfaction” of the importing WTO Member).
Independently of the complexity to achieve these instruments of trade facilitation, it is
clear that their pursuit, especially within the confines of an FTA, should be prioritized.
Their conclusion, particularly in those sectors where Vietnam’s exports have actual or
The Decision also provides that the consideration by an importing WTO Member of a request
by an exporting WTO Member for recognition of the equivalence of its measures with regard to
a specific product or category of products must not be, in itself, a reason to disrupt or suspend
on-going imports from that WTO Member of the product or products in question. If an
importing WTO Member were to disrupt or suspend trade solely because it had received a
request for an equivalence determination, it would be in apparent violation of its obligations
under the SPS Agreement (i.e., under Article 2 thereof). Such a provision is meant to give
confidence to WTO Members to request for and negotiate equivalency.
Finally, one key objective of the Equivalence Decision is to help developing countries, which
sometime use less sophisticated health and safety technologies than those required by importing
countries, to prove that their products are equally safe. To this end, the need for technical
assistance to facilitate the implementation of Article 4 of the SPS Agreement by developing
countries is emphasized.
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potential market access opportunities on the EU market, stands to offer Vietnamese
producers, exporters and traders considerable comparative advantages and
“preferential” market access conditions which are comparable to or greater than the
tariff concessions that will shape the EU-Vietnam FTA. These tools of trade
facilitation will also allow for Vietnam to become an important processing center (for
example, as it already happens, to import third countries’ fisheries, such as Bangladeshi
products, for processing in Vietnam under strict application of EU standards, and re-
export to the EU) and take advantage of its ability to comply with relevant EU
standards and its future FTA preferences vis-à-vis the EU.
9.7.1. Enhancing trade facilitation: SPS and TBT-related provisions fixed in the
existing EU FTAs
A full overview of the SPS and TBT provisions contained in existing FTAs of the EU is
contained in Annex VI. As already apparent from the table therein included, the EU
does not appear to use a simple standard SPS and TBT model in all of its FTAs. In
contrast, it opts for a flexible approach in order to better accommodate the different
trade liberalization agendas being pursued in the specific preferential trading
arrangement.
SPS and TBT provisions in Stabilization and Association Agreements with Balkan
Countries
The agreements falling under this grouping contain similar SPS and TBT provisions. In
relation to SPS provisions, these agreements provide for a general exception to the free
movement of goods on the grounds of protection of the health and life of humans,
animals or plants. In addition, they establish close co-operation with the EU in the
sanitary and phytosanitary field, with the aim of gradually harmonizing the legislation
of the third country under consideration with the applicable EU standards as part of the
overall adoption of the “acquis communautaire”.72
Moreover, some of these
agreements make reference to the provision of technical assistance by the EU as far as
the gradual harmonization of the legislation is concerned.
72 With the exception of the interim Agreements of Bosnia Herzegovina and Serbia.
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In relation to TBT provisions, these agreements73
contain provisions aimed at achieving
gradual conformity with EU technical regulations and EU standardisation, metrology,
accreditation and conformity assessment procedures. To this end, the agreements
contain an obligation for the Parties to:
• Promote the use of EU technical regulations, European standards and conformity assessment
procedures;
• Provide assistance to fostering the development of quality infrastructure: standardization,
metrology, accreditation and conformity assessment;
• Promote the participation of the non-EU Party in the work of organizations related to standards,
conformity assessment, metrology and similar functions (in particular CEN, Cenelec, ETSI, EA,
Welmec, Euromet); and
• Where appropriate, conclude European Conformity Assessment Protocols once the relevant
legislative framework and procedures are sufficiently aligned on those of the EU and
appropriate expertise is available.
Euro-Mediterranean Agreements and the EU-South Africa TDCA
The Euro-Mediterranean Association Agreements contain similar SPS provisions,
which do not differ so much from those encountered in the Stabilization and
Association Agreements analyzed above. In particular, they all provide for a general
exception for purposes of protecting the health and life of humans, animals or plants
and establish broad cooperation on SPS matters between the Parties. In addition, all
Euro-Mediterranean agreements emphasize the necessity of co-operation on SPS issues.
However, explicit mention of the objective of harmonizing the relevant legislation and
of providing technical assistance for this purpose is made only in some of them.
Technical assistance is included within the provisions on support for the agricultural
and rural sectors. Similar provisions are included in the EU-South Africa TDCA.
The Euro-Mediterranean Agreement between the EU and Israel contains a specific
Protocol (i.e., Protocol 3) on plant protection matters. Under Protocol 3, the EU and
Israel agree that certification is required only for certain cut flower and fruits, whereas
73 With the exception of the interim Agreements of Bosnia Herzegovina and Serbia.
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with respect to other plants the permission for importation can be granted even if in
general the importation into one of the two Parties is prohibited. The granting of such
permission is based on a pest risk analysis. Therefore, on the basis of this protocol, the
Parties assume conformity with plant protection measures for all other products than
the defined cut flowers and fruit species. In addition, under the Protocol, Parties
commit to consult with each other when new SPS measures are being planned.74
The texts of these agreements do not contain specific procedural cooperation
mechanisms. However, a number of those have been negotiated and agreed at a later
stage.
In relation to TBT issues, the Euro-Mediterranean Agreements generally provide for
co-operation aimed at reducing divergences on standardisation and conformity
assessment procedures. With different emphasis, a number of such agreements mention
the need that, when appropriate, Parties conclude mutual recognition agreements in the
field of conformity assessment. Under the EU-South Africa Trade Development and
Cooperation Agreement, Parties agreed to cooperate in the field of standardization,
metrology, certification and quality assurance in order to reduce their differences in
these areas, remove technical barriers and facilitate bilateral trade.
Agreements with ACP Countries
Most of these agreements contain dedicated Chapters for SPS and TBT provisions. The
SPS provisions deal, inter alia, with the affirmation of the commitments undertaken
under the SPS Agreement of the WTO, the harmonization of intra-regional measures,
the establishment of a co-operation with the EU, the designation of competent
authorities, the regular exchange of information and conduct of consultations in cases
that problems arise and the provision of Article XX GATT-style exceptions. The
interim EPAs with the East African Community and the Eastern and Southern African
States gather the least detailed SPS provisions of all the other EPAs, but contain
74 B. Rudloff and J. Simons in “InBrief – Comparing EU free trade agreements, Sanitary and Phytosanitary
Standards”, European Centre for Development Policy Management and CTA, No. 6B – July 2004, p. 3.
201
“rendez-vous” clauses, providing for the explicit commitment of the parties to continue
negotiations in the sanitary and phytosanitary field. Similarly, some agreements with
ACP Countries include detailed chapters on TBT, which include provisions on co-
operation, re-affirmation of the WTO TBT obligations, regional integration,
transparency, exchange of information and consultation, co-operation in international
bodies.
The extent of co-operation established between the Parties on SPS and TBT matters
varies from agreement to agreement. The EU-CARIFORUM EPA provides for very
detailed co-operation provisions. In the EU-Côte d'Ivoire IEPA assistance and co-
operation is envisaged in the following fields:
a) The establishment of an appropriate framework for the exchange of information and
sharing of expertise between the Parties;
b) The adoption of technical standards and regulations, conformity assessment procedures and
sanitary and phytosanitary measures which are harmonized at regional level on the basis of
the relevant international standards;
c) The strengthening of the capacities of public and private stakeholders, including
information and training, with a view to complying with the standards, regulations and
measures of the EU, and to participating in international authorities; and
d) The development of national capacities for assessing the conformity of products and access
to the market of the EU.
In general, under the agreements the objectives of co-operation include:
• The facilitation and increase of trade between the parties;
• The strengthening of regional integration; and
• The promotion of the capacity of the private and public sector to comply with regional
and EU SPS/TBT measures.
Most agreements contain specific provisions on training and capacity building in order
to improve quality and competitiveness of priority exports from ACP regions, on the
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development of SPS and TBT measures harmonized at regional level on the basis of
international standards, on regional integration and trade facilitation and on compliance
with regional and EU SPS and TBT measures. Co-operation includes technical support
and training, and measures to promote knowledge transfer and strengthen public
services.
For example, in the EU-Central African Party, priority areas for capacity building include
promoting a quantitative and qualitative increase in the goods and services produced and
exported by the Central African region, inter alia, in standards and certification (SPS measures,
quality, zootechnical standards, etc.). Under the agreement, the Parties agree that, in relation to
certain products (listed in Appendix IA of the agreement), co-operation must be aimed at
strengthening both regional integration within the signatory Central African States and control
so to facilitate trade between the signatory Central African States. In relation to products
referred to in Appendix IB, the Parties agree to cooperate with a view to improving the
competitiveness and quality of their products. In the EU-Pacific States IEPA, the Parties agree
to define a list of priority products for export from the Pacific States to the EU and a list of
priority products for trade among the Pacific States.
The IEPAs with the ESA and EAC Regions provide for specific co-operation provisions in the
development of the fisheries sector and aquaculture development. The objectives of cooperation
in inland fisheries and aquaculture development are to promote sustainable exploitation of
inland fisheries resources and enhance aquaculture production, remove supply-side constraints,
improve fish and fish products quality to meet SPS standards in the market of the EU, improve
access to the market of the EC Party, address intra-regional trade barriers, attract capital inflows
and investment into the sector, build capacity and enhance access to financial support for the
private investors for inland fisheries and aquaculture development.
Explicit mention of recognition of equivalence is made in the EU-CARIFORUM EPA, where
the assistance to the CARIFORUM States in establishing harmonized intra-regional SPS
measures with a view to facilitating the recognition of equivalence of such measures with those
existing in the EU is among the objectives of the SPS Chapter, and in the EU-Pacific IEPA,
where it is specifically stated that:
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1. The Parties recognise the importance of making operational the provisions of Article 4 of the
SPS Agreement and enabling the Pacific States to have the equivalence of their SPS measures
recognised by developed importing countries.
2. The Parties reaffirm the Decision on the implementation of Article 4 of the Agreement on the
Application of Sanitary and Phytosanitary Measures of 23 July 2004 of the WTO Committee on
Sanitary and Phytosanitary Measures. The EC Party agrees to give due consideration to
reasonable requests from one or more of the Pacific States to examine the equivalence of their
SPS measures in areas of particular export interest to the Pacific States.
In addition, some agreements provide for co-operation for the removal of barriers to trade. Such
provisions are quite detailed in the EU-SADC IEPA, according to which Parties agree to identify and
implement the most appropriate mechanisms for particular priority issues or sectors mechanisms, among
those supported by the TBT Agreement, including:
1. Intensifying their collaboration, with a view to facilitating access to their
respective markets, by increasing the mutual knowledge and understanding of
their respective systems in the field of technical regulations, standards,
metrology, accreditation and conformity assessment;
2. Exchanging information, identifying and implementing appropriate mechanisms
for particular issues or sectors (i.e., alignment with international standards,
reliance on the supplier’s declaration of conformity, the use of internationally-
recognized accreditation to qualify conformity assessment bodies and the use of
international product testing and certification schemes);
3. Identifying and organizing sector-specific interventions on technical regulations
and conformity assessment with a view to facilitating understanding of and
access to their respective markets. These sectors will be chosen taking into
account key areas of trade, including priority products;
4. Developing cooperation activities and measures with a view to supporting the
implementation of the rights and obligations under the TBT Agreement;
5. Developing common views and approaches on technical regulatory practices,
including transparency, consultation, necessity and proportionality, the use of
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international standards, conformity assessment requirements, the use of impact
and risk assessment, enforcement and market surveillance, where appropriate;
6. Promoting harmonization, whenever possible and in areas of mutual interest,
towards international standards, and the use of such standards in the development
of technical regulations and conformity assessment procedures;
7. Undertaking to consider, in due course, negotiating mutual recognition
agreements in sectors of mutual economic interest;
8. Promoting collaboration between the Parties’ and SADC IEPA States’, as the
case may be, organizations responsible for technical regulations, metrology,
standardization, testing, certification, inspection and accreditation; and
9. Promoting the participation by the SADC IEPA States in international standards-
setting bodies.
These agreements also feature environmental co-operation clauses, more or less
detailed depending on the agreement under consideration, aimed at ensuring that trade
liberalisation does not impede sustainable development. The sustainable management
of forestry is explicitly mentioned in some of them.
The interim IEPA with the Central African Party devotes an entire chapter on forestry
governance and trade in timber and forest products. In specific, Article 50 of the
agreement states the following:
1. The Parties shall work together to facilitate trade between the EC Party and the Central
Africa Party in timber and forest products which come from objectively verifiable legal sources
and help to achieve sustainable development. The Parties agree to:
(a) implement measures to increase market confidence regarding the origin of forest products,
particularly their legal and/or sustainable origin. These measures may include systems to
improve the traceability of timber and forest products sold both within Central Africa and
between the Central Africa Party and the EC Party;
(b) put in place an audit and surveillance system that is independent of the control chain.
2. The Parties shall explore possible ways of improving commercial opportunities for timber
and forest products with a legal or sustainable origin in Central Africa on the market of the EC
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Party. These measures may include, inter alia, stronger public procurement policies, measures
to raise consumerawareness, measures to promote the processing of forest products in Central
Africa, and activities and initiatives in association with private-sector operators.
3. The Parties undertake to develop non-discriminatory policies and/or legislation within the
scope of this Chapter; they also undertake to ensure the effective and non-discriminatory
implementation of these policies and/or legislation, in accordance with WTO provisions.
In addition, the agreement provides for capacity-building and technical assistance to the Central
African Party and states, in relation to FLEGT:
Without prejudice to the provisions of this Chapter, trade in timber and forest products shall be
governed in line with the Convention on International Trade in Endangered Species of Wild
Fauna and Flora (CITES) and any voluntary partnership agreements to which signatory Central
African States might adhere individually or collectively with the European Community under
the European Union's action plan on forest law enforcement, governance and trade (FLEGT).
As far as the existence of VPAs in the context of the FLEGT Action Plan is concerned, the EU
has concluded negotiations with Ghana and the Republic of Congo. In addition, the EU is
engaged in such negotiations with the Central African Party, the Central African Republic and
Liberia.75
Agreements between the EU and Mexico, the EU and Chile, and the EU and South Korea
These agreements contain deep and detailed provisions on SPS and TBT issues. This is
particularly the case of the EU-Korea FTA which was negotiated after the “Global
Europe” strategy of 2006. In general terms, these agreements provide, inter alia, for the
re-affirmation of the Parties’ commitments under the WTO SPS and TBT Agreements,
the use of international standards, the establishment of co-operation frameworks with
the EU, and the creation of special committees on SPS and TBT issues.
In particular, the EU-Mexico FTA provides that: 75 The EU is, also, currently negotiating VPAs with some non-African countries (i.e., Malaysia and Indonesia).
For more information on the evolution of the negotiations consult the website of DG Development of the
EU Commission:
http://ec.europa.eu/development/policies/9interventionareas/environment/forest/forestry_intro_en.cfm#F3.
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[…] [t]he Joint Council shall decide on the arrangements and timetable for a bilateral,
progressive and reciprocal liberalisation of tariff and non-tariff barriers to trade in goods, in
accordance with the relevant WTO rules, in particular Article XXIV of the General Agreement
on Tariffs and Trade (GATT), and taking account of the sensitive nature of certain products.
This decision shall include, in particular, the following matters:
[…]
(j) technical regulations and standards, sanitary and phytosanitary legislation, mutual
recognition of conformity assessment, certifications, marks systems, inter alia;
[…]
(k) general exceptions justified on grounds of public morality, public policy or public
security; the protection of human, animal or plant life or health; the protection of
industrial, intellectual and commercial property [...].
More detailed provisions on SPS and TBT can be found in the Decision 2/2000 of the
Joint Council. In relation to SPS measures, under Decision 2/2000 parties re-affirm
their rights and obligations set out in the WTO SPS Agreement. The general exceptions
maintained under the agreement are similar to those envisaged under Article XX of the
GATT. Of specific importance under this FTA is the establishment of a Special
Committee on Sanitary and Phytosanitary Measures, which is comprised of
representatives of both Parties. The mandate of the Special Committee is essentially
threefold:
a) To provide a forum to identify and address problems that may arise from the
application of specific sanitary or phytosanitary measures, with a view to reaching
mutually acceptable solutions;
b) To consider, as necessary, the development of specific provisions for the application of
regionalization, or for the assessment of equivalence; and
c) To consider the development of specific arrangements for information exchange.
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Similarly, in relation to TBT issues, under Decision 2/2000 Parties re-affirm their rights and
obligations under the WTO TBT Agreement. Parties must intensify their bilateral cooperation
in the field of standards, technical regulations and conformity assessment procedures in light of
their mutual interest to facilitate access to both Parties’ markets and to increase mutual
understanding and awareness of their respective systems. To this end, the Parties must work
towards:
a) Exchanging information on standards, technical regulations and conformity assessment
procedures;
b) Holding bilateral consultations concerning specific technical barriers to trade;
c) Promoting the use of international standards, technical regulations and conformity
assessment procedures; and
d) Facilitating the adoption of their respective standards, technical regulations and
conformity assessment procedures on the basis of international requirements.
In order to achieve such objectives, a Special Committee on Standards and Technical
Regulations is established. The Special Committee is comprised of representatives of the Parties
and has the following mandate:
a) Providing a forum to consult and discuss on issues relating to standards, technical
regulations and conformity assessment procedures;
b) Working towards the approximation and simplification of labeling requirements,
including voluntary schemes, the use of pictograms and symbols, and the convergence
of the terms applied to leather products with international practices; and
c) Enhancing cooperation on the development, application and enforcement of standards,
technical regulations and conformity assessment procedures.
The EU-Chile FTA contains more detailed provisions in relation to SPS matters including a
provision for the determination of equivalence. In particular, the agreement includes a general
provision on co-operation through technical assistance for the strengthening of sanitary and
phytosanitary control systems, with a view to supporting as far as possible the promotion of
equivalence and mutual recognition agreements. In addition, it provides for comprehensive
annexes of which Annex IV covers SPS measures applicable to trade in animals and animal
products, plant products and other goods, including animal welfare, Annex V on trade in wines
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and Annex VI on spirit drinks and aromatized drinks. The annexes reaffirm an overall
commitment to WTO rules.
Annex IV on Agreement on Sanitary and Phytosanitary measures applicable to trade in animals
and animal products, plants, plant products and other goods and animal welfare includes a
comprehensive article on the determination and suspension of equivalence on and considers
time schedules for the consultation process between the Parties. The provisions are
supplemented by appendices with procedural details on the consultation process, the priority
sectors concerned and conditions for the provisional approval of establishments without prior
inspection by the importing party. Further appendices provide guidelines for conducting
verifications, import checks and inspection fees and for certification. The scope of SPS
objectives covers also animal welfare standards on stunning and slaughter of animals.
Additional provisions relate to detailed requirements for information exchange, transparency
and a safeguard clause reiterating WTO rules on implementing transitional SPS measures when
scientific evidence is insufficient. A Joint Management Committee is established with the
mandate of:
a) Monitoring the implementation of the Agreement on Sanitary and Phytosanitary
measures applicable to trade in animals and animal products, plants, plant products and
other goods and animal welfare;
b) Reviewing its Appendices, notably in the light of progress made under the equivalence
consultations and procedures; and
c) Modify the Appendices or make recommendations for the modification of the
Agreement on Sanitary and Phytosanitary measures applicable to trade in animals and
animal products, plants, plant products and other goods and animal welfare.
The relevant provisions of the EU-Chile on TBT measures include co-operation provisions and
confirmation of the relevant WTO definitions, rights and obligations. In addition, under the
agreement Parties agreed, inter alia, to:
• Intensify their bilateral cooperation in the field of standards, technical regulations and
conformity assessment with a view to facilitating access to their respective markets, by
increasing the mutual knowledge, understanding and compatibility of their respective
systems; and
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• Aim at identifying which mechanisms or combination of mechanisms (such as, inter
alia, convergence and/or equivalence of technical regulations and standards, alignment
to international standards, reliance on the supplier's declaration of conformity and use
of accreditation to qualify conformity assessment bodies, and mutual recognition
agreements) are the most appropriate for particular issues or sectors;
Under the agreement a Special Committee on Technical Regulations, Standards and Conformity
Assessment is established, with the mandate of, inter alia:
a) Monitoring and reviewing the implementation and administration of the provisions
relating to TBT;
b) Providing a forum for discussion and exchanging information on any matter related to
TBT and in particular as it relates to the Parties’ systems for technical regulations,
standards and conformity assessment procedures, as well as developments in related
international organizations;
c) Providing a forum for consultation and prompt resolution of issues that act or can act as
unnecessary barriers to trade, within the scope and meaning of this section, between the
Parties;
d) Encouraging, promoting and otherwise facilitating cooperation between the Parties’
organizations, public and/or private, for metrology, standardization, testing,
certification, inspection and accreditation; and
e) Exploring any means aimed at improving access to the Parties’ respective markets and
enhancing the functioning of this section.
Finally, the EU-Korea FTA provides for dedicated chapters on SPS and TBT co-operation. In
relation to SPS matters, the agreement provides for the reaffirmation of the rights and
obligations of the WTO SPS Agreement, co-operation in the interpretation and development of
international standards, provisions on transparency and exchange of information, co-operation
on the determination of pest- or disease free areas and areas of low pest or disease prevalence.
Co-operation covers also animal welfare, in particular through the exchange of information,
expertise and experiences and in the development of animal welfare standards in international
fora. Under the agreement, Parties established an SPS Committee with, inter alia, the objective
of:
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a) Developing the necessary procedures or arrangements for the implementation of the
provisions relating to SPS;
b) Monitoring the progress of the implementation of the provisions on SPS;
c) Confirming the successful completion of the confidence-building activity relating to co-
operation on pest- or disease free areas and areas of low pest or disease prevalence;
d) Developing procedures for the approval of establishments for products of animal origin
and, where appropriate, of production site for products of plant origin; and
e) Providing a forum for discussion of problems arising from the application of certain
SPS measures with a view to reaching mutually acceptable alternatives.
The TBT chapter of the EU-Korea FTA provides for a detailed regulation of TBT issues
between the Parties. In particular, it includes a reaffirmation of the Parties’ rights and
obligations under the WTO TBT Agreement, which is incorporated and made part of the FTA,
mutatis mutandis. Parties agreed to strengthen bilateral co-operation in the field of standards,
technical regulations and conformity assessment procedures with a view to increasing the
mutual understanding of their respective systems and facilitating access to their respective
markets. To this end, according to the agreement, they may establish regulatory dialogues at
both the horizontal and sectoral levels. In addition, the TBT chapter of the agreement envisages
specific and detailed provisions on technical regulations, standards and conformity assessment
provisions. In particular, in relation to technical regulations, under the agreement Parties
agreed, inter alia:
a) To fulfill the transparency obligations of the Parties as indicated in the TBT Agreement;
b) To use relevant international standards as a basis for technical regulations, including
conformity assessment procedures, except when such international standards would be
an ineffective or inappropriate means for the fulfillment of the legitimate objectives
pursued. Where international standards have not been used as a basis, Parties agree to
explain on request to the other Party the reasons why such standards have been judged
inappropriate or ineffective for the aim pursued;
c) When a Party has adopted or is proposing to adopt a technical regulation, to provide the
other Party on request with available information regarding the objective, legal basis
and rationale for the technical regulation;
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d) To establish mechanisms for providing improved information on technical regulations
(including through a public website) to the other Party’s economic operators;
e) To take appropriate consideration of the other Party’s views where a part of the process
of developing a technical regulation is open to public consultation and, on request, to
provide written responses to the comments made by the other Party;
f) When making notifications in accordance with the TBT Agreement, to allow at least 60
days following the notification for the other Party to provide comments in writing on
the proposal; and
g) To leave sufficient time between the publication of technical regulations and their entry
into force for economic operators of the other Party to adapt, except where urgent
problems of safety, health, environmental protection or national security arise or
threaten to arise, and where practicable to give appropriate consideration to reasonable
requests for extending the comment period.
Under the agreement, each Party must ensure that economic operators and other interested
persons of the other Party are allowed to participate in any formal public consultative process
concerning development of technical regulations, on terms no less favorable than those
accorded to its own legal or natural persons.
In relation to standards, Parties reconfirm their obligations under Article 4.1 of the TBT
Agreement to ensure that their standardizing bodies accept and comply with the Code of Good
Practice for the Preparation and Adoption of Standards in Annex 3 to the TBT Agreement, and
also have regard to the principles set out in Decisions and Recommendations adopted by the
Committee since 1 January 1995, G/TBT/1/rev.8, 23 May 2002, Section IX (Decision of the
Committee on Principles for the Development of International Standards, Guides and
Recommendations with relation to Articles 2, 5 and Annex 3 of the Agreement), issued by the
WTO Committee on Technical Barriers to Trade. In addition, Parties agree to exchange
information on:
a) Their use of standards in connection with technical regulations;
b) Each other’s standardization processes and the extent of use of international standards
as a base for their national and regional standards; and
c) Co-operation agreements implemented by either Party on standardization, for example
information on standardization issues in free trade agreements with third Countries.
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On conformity assessment and accreditation, under the agreement, Parties recognize the
existence of a broad range of mechanisms to facilitate the acceptance of the results of
conformity assessment procedures conducted in the territory of the other Party. These are listed
in Article 4.6 of the Chapter 4 (on TBT) of the agreement. On such basis, under the agreement
the Parties undertook:
a) facilitating the acceptance of conformity assessment results;
b) To exchange information on conformity assessment procedures, and in particular on the
criteria used to select appropriate conformity assessment procedures for specific
products;
c) To exchange information on accreditation policy, and to consider how to make best use
of international standards for accreditation, and international agreements involving the
Parties’ accreditation bodies, for example, through the mechanisms of the International
Laboratory Accreditation Co-operation and the International Accreditation Forum; and
d) In line with Article 5.1.2 of the TBT Agreement, to require conformity assessment
procedures that are not more strict than necessary.
In relation to the sector of motor vehicles in particular, it is important to note that the Korea
FTA provides for far-reaching provisions on TBT issues. Pursuant to the agreement, it accepts
to recognise a wide range of international standards, which are expected to minimise the
considerable costs face by European exporters so far. In particular, as far as core safety
standards are concerned, Korea is to consider the UN-ECE standards as equivalent to its
domestic standards. Furthermore, within a period of 5 years, it is to align 29 other standards to
the UN-ECE ones. For standards not falling under the aforementioned cases of equivalence or
harmonization, Korea is to ensure that they are not applied in a trade-restrictive manner.
Finally, equivalency with European standards in relation to on-boards diagnostic devices
(OBD) is also provided.
Detailed provisions are also envisaged in relation to technical regulations providing for marking
and labelling requirements. In particular, the Parties agreed that where a Party requires
mandatory marking or labelling of products, such Party:
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a) Must endeavour to minimise its requirements for marking or labelling other than
marking or labelling relevant to consumers or users of the product. Where labelling for
other purposes, for example, for fiscal purpose is required, such a requirement shall be
formulated in a manner that is not more trade restrictive than necessary to fulfil a
legitimate objective;
b) May specify the form of labels or markings, but shall not require any prior approval,
registration or certification in this regard. However, this provision is without prejudice
to the right of the Party to require prior approval of the specific information to be
provided on the label or marking in the light of the relevant domestic regulation;
c) Where it requires the use of a unique identification number by economic operators,
such Party must issue such number to the economic operators of the other Party
without undue delay and on a non-discriminatory basis;
d) Must remain free to require that the information on the marks or labels be in a specified
language. Where there is an international system of nomenclature accepted by the
Parties, this may also be used; and
e) Where it consider that legitimate objectives under the TBT Agreement are not
compromised, it must endeavour to accept non-permanent or detachable labels, or
marking or labelling in the accompanying documentation rather than physically
attached to the product.
Finally, under the agreement the Parties nominate TBT Co-ordinators (one for each Party),
whose functions include, inter alia:
a) Monitoring the implementation and administration of TBT Chapter of the agreement;
b) Enhancing co-operation in the development and improvement of standards, technical
regulations and conformity assessment procedures;
c) Arranging the establishment of regulatory;
d) Arranging the establishment of working groups, which may include or consult with
non-governmental experts and stakeholders as mutually agreed by the Parties;
e) Exchanging information on developments in non-governmental, regional and
multilateral fora related to standards, technical regulations and conformity assessment
procedures; and
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f) Reviewing the TBT provisions of the agreement in light of any developments under the
TBT Agreement.
9.7.2. Conclusions on the impact of the FTA on SPS and TBT
In the context of the EU-Vietnam FTA negotiations, it appears improbable that a reduction of
EU SPS and TBT barriers will take place. However, what can be achieved is that the EU-
Vietnam FTA provides a framework for technical assistance, discussions and co-operation on
SPS and TBT issues, encouraging and fostering compliance of Vietnamese exports with EU
standards.
As in the case of trade defense instruments, the EU looks posed to adopt a varied approach vis-
à-vis its trading partners in the field of SPS and TBT matters. The preceding analysis shows, for
example, that while in the Stabilization and Association Agreements and the Euromed
Agreements the relevant SPS and TBT provisions are quite general and stereotypical, the FTA
with Korea goes much further, dedicating entire chapters to them. As the EU-Korea FTA is
among the first agreements to have been signed after the issuing of the Communication of the
EU Commission “Global Europe”, it is still to be seen whether this more comprehensive
approach will also be employed in the case of the FTA with Vietnam.
On the one hand, as far as SPS matters are concerned, in the context of the negotiations of the
EU-Vietnam FTA, Vietnam should, besides insisting on the inclusion of provisions related to
the co-operation in interpreting and developing international standards, to transparency and
information exchange, and to co-operation in the determination of areas where diseases and
pests are either absent or of low prevalence, also insist on the institution of a relevant bilateral
SPS Committee which would provide for an appropriate forum where problems could be
discussed and solutions sought before any recourse to the multilateral WTO system.
On the other hand, as far as TBT matters are concerned, Vietnam should seek the establishment
of a close co-operation with the EU in the field of standards, technical co-operation and
conformity assessment procedures so that a better understanding of the relevant procedures can
be achieved. This is particularly relevant as very often it is the lack of knowledge and
experience with the EU TBT standards that deprives producers of access to the respective
market. In this context, Vietnam should also promote the idea of using international standards
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as far as possible. The institution of a specialized TBT Committee could, once more, prove very
useful.
The importance of negotiating comprehensive co-operation provisions must be stressed.
In this respect, the agreements concluded by the EU with ACP Countries may provide a
useful benchmark on the extent of co-operation that Vietnam may wish to achieve with
the EU on SPS and TBT matters. As seen above, the extent of co-operation established
between the ACP Countries Parties to the agreements on SPS and TBT matters varies
from agreement to agreement. In general, under the agreements the objectives of co-
operation include:
• The facilitation and increase of trade between the parties;
• The strengthening of regional integration; and
• The promotion of the capacity of the private and public sector to comply with regional
and EU SPS/TBT measures.
Most agreements between the EU and ACP Countries contain specific provisions on
training and capacity building in order to improve quality and competitiveness of
priority exports from ACP regions, on the development of SPS and TBT measures
harmonized at regional level on the basis of international standards, on regional
integration and trade facilitation and on compliance with regional and EU SPS and TBT
measures. Co-operation includes also technical support and training, and measures to
promote knowledge transfer and strengthen public services. Vietnam may consider
aligning its positions to what achieved by ACP Countries and request targeted technical
assistance from to the EU in the context of its FTA negotiations.
As a final point, it is important to stress the importance of trade facilitation mechanisms, also
and maybe more fittingly, within an FTA context. While these instruments can be achieved and
used even where no FTA exists (i.e., in the WTO context), it is evident that their existence
within an FTA can lead to the maximization of trade benefits. If Vietnam were to secure trade
facilitation mechanisms with the EU on SPS and TBT matters, it could draw even greater
advantage from its lower production costs and, consequently, export to the EU at more
advantageous conditions than its competitors.
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In this context, mutual recognition agreements and ad hoc informal agreements should be
preferred to equivalence agreements. MRAs facilitate trade by enabling manufacturers to have
their products tested and certified, in the country of origin, for compliance with the regulatory
requirements of the importing country. Under MRAs, governments agree to recognize the
results of each other’s testing, inspection, SPS certification or other procedures. Therefore, the
manufacturer can meet both parties’ standards by undergoing one inspection, testing, or
certification procedure by approved bodies in whichever country is most convenient.
In contrast, formal equivalency agreements appear to be more onerous solutions. The highly-
technical issues involved, which render difficult and time-consuming their negotiation, make
them rare even among developed and well-equipped countries. It is much easier and more
feasible for governments to recognize each other’s measures as applied to specific products. Ad
hoc acceptance of the equivalence of specific products or of certain aspects of SPS measures is
becoming a practical alternative to formal agreements and often occurs at a technical level and
is not necessarily reflected in any formal bilateral agreement.
It is, therefore, recommended that, within the context of the FTA, Vietnam seeks the
negotiation of mutual recognition agreements or concludes ad hoc agreements in the fields of
utmost commercial interest. The FTA negotiations will be a natural venue to address this issues
and achieve these trade facilitation objectives.
9.8. Conclusions and Recommendations
This report, concluded in the context of the project EU-ASEAN/Vietnam FTA MUTRAP III –
Activity FTA-9, aims at assisting Vietnam’s Government and its business community in
identifying the best options and negotiating positions to be adopted during the ongoing EU-
ASEAN/Vietnam FTA negotiations.
The EU is Vietnam’s second largest export market after the US. In 2008, exports to the EU
accounted for 20.32% of all Vietnamese exports and included, inter alia, footwear, apparel,
food products (particularly seafood and fisheries), wood products and furniture, electric and
electronic products and plastic products.
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In addition to import tariffs, the aforementioned are subject to a range of non-tariff measures.
The negotiation of an FTA with the EU is expected, besides reducing and eliminating EU
tariffs, to restrict the application of non-tariff barriers, too. The biggest non-tariff challenges
affecting Vietnamese exports to the EU are connected to the EU’s use of trade defense
instruments, notably anti-dumping, and the EU’s SPS and TBT measures.
As far as trade defense instruments are concerned, it is unclear whether the EU’s negotiating
proposal, in the context of the ongoing FTA negotiations, on anti-dumping and countervailing
action will include provisions on enhanced co-operation and a set of WTO-plus obligations or
will simply provide for a mandatory notification requirement and re-state the Parties’ rights and
obligations under the WTO agreements. In this respect, the recent EU’s negotiating practice has
varied, depending on the trading partner concerned, as is evident if one compares the relevant
provisions found in the ACP EPAs (or IEPAs) and the recently initialed EU-Korea FTA.
However, pursuant to its market access strategy, the EU will likely propose the inclusion of a
comprehensive – possibly WTO-plus – set of rules.
The EU is unlikely to make concessions on anti-dumping and countervailing duties to Vietnam
and the FTA will probably not have any significant positive impact on the EU’s resorting to
anti-dumping and countervailing action against it – on the contrary, it might pose stricter
requirements to Vietnam in the area of dumping, subsidization and the use of trade defence
instruments – unless the EU agrees, within the FTA negotiations, to recognize Vietnam as a
market economy ahead of the WTO deadline.
Under the terms of Vietnam’s accession to the WTO, the possibility of resorting to third
country prices in anti-dumping investigations against imports originating from it expires on 31
December 2018, but several countries have already granted to Vietnam non-market economy
status, mostly in the context of concluded FTAs. In the same way, an immediate recognition of
its market economy status must stand as a negotiating priority for Vietnam in the context of the
FTA with the EU.
Should Vietnam not obtain from the EU its immediate recognition as a market economy, it
should, nevertheless, negotiate with the latter an appropriate timeframe for such recognition and
make sure that it is at least aligned with the WTO-mandate recognition of China as a market
economy. The reason for this is that the two-year difference between the WTO-required
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recognition of China and Vietnam as market economies is likely to create great prejudice to
Vietnam; the latter risking to lose its attractiveness as an investment location for manufacture
industries vis-à-vis China.
Besides the issue of Vietnam’s recognition as a market economy, the impact of the FTA on the
use of anti-dumping and countervailing duties may well depend on the substance of the specific
provisions that Parties will include in the dedicated chapter. Therefore, the EU-Vietnam FTA
should also envisage provisions requiring Parties to notify each other over the receipt of an anti-
dumping or countervailing duty complaint and institute an institutional mechanism for co-
operation similar to that established under the EU-Korea FTA. In the absence of any substantive
obligation to refrain from the initiation of anti-dumping and countervailing duty investigations,
such co-operation mechanism could improve relations between the Parties on issues of trade
defense measures by, inter alia:
• Improving co-operation between the Parties’ authorities having responsibility on trade
defense matters; and
• Providing a forum for discussion of, inter alia, practices by the Parties’ competent
authorities.
Finally, the negotiations may also provide the framework for Vietnam to discuss with the EU
the issue of enhanced co-operation on procedural issues of interest to Vietnam. As seen above,
in the EU-Korea FTA, Parties agreed on a set of procedures and WTO-plus requirements.
Vietnam should consider whether it has any specific further negotiating priority in relation to
anti-dumping and anti-subsidies investigations and procedures and table its request to the EU in
the context of the FTA negotiations.
As far as SPS and TBT measures are concerned, it seems improbable that a reduction of SPS
and TBT barriers will take place. What is more probable is that the EU-Vietnam FTA will
provide a framework for technical assistance, discussion and further co-operation on SPS and
TBT issues.
Vietnam should not expect the EU to lower its SPS and TBT standards. Even after the
launching of the “Global Europe” the policy of the EU has remained unaltered: it aims at
tackling non-tariff barriers, but primarily for the benefit of the EU exporters.
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However, the FTA provides an excellent opportunity for Vietnam to profoundly discuss issues
such as those of close co-operation in the fields of SPS and TBT regulation, employment of
international standards to the furthest extent possible, and provision of technical assistance and
capacity-building, including training. In addition, Vietnam should seek the establishment of an
institutional framework, which would enhance co-operation and aid in the swift resolution of
SPS/TBT-related commercial problems. The aim should, therefore, be the conclusion of
detailed comprehensive SPS and TBT chapters in the FTA. Relevant benchmarks in this respect
are provided by the agreements recently concluded by the EU with ACP Countries and the EU-
Korea FTA.
The importance of negotiating comprehensive co-operation provisions must be stressed.
In this respect, the agreements concluded by the EU with ACP Countries may provide a
useful benchmark on the extent of co-operation that Vietnam may wish to achieve with
the EU on SPS and TBT matters. In these agreements, co-operation includes also
technical support and training, and measures to promote knowledge transfer and
strengthen public services. Vietnam may consider aligning its positions to what
achieved by ACP Countries and request targeted technical assistance from to the EU in
the context of its FTA negotiations.
Finally, Vietnam in order to reduce the costs of compliance with the EU SPS and TBT
requirements Vietnam should actively seek the conclusion of mutual recognition and ad
hoc equivalency agreements with the EU. Independently of the complexity to achieve
these instruments of trade facilitation, it is clear that their pursuit, especially within the
confines of an FTA, should be prioritized. Their conclusion, particularly in those
sectors where Vietnam’s exports have actual or potential market access opportunities
on the EU market, stands to offer Vietnamese producers, exporters and traders
considerable comparative advantages and “preferential” market access conditions
which are comparable to or greater than the tariff concessions that will shape the EU-
Vietnam FTA. These tools of trade facilitation will also allow for Vietnam to become
an important processing center (for example, as it already happens, to import third
countries’ fisheries, such as Bangladeshi products, for processing in Vietnam under
strict application of EU standards, and re-export to the EU) and take advantage of its
ability to comply with relevant EU standards and its future FTA preferences vis-à-vis
the EU. The upcoming FTA between the EU and Vietnam must be the right forum in
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which to table and conduct such important technical negotiations in light of achieving
important trade facilitation objectives and comparative advantages.
As Vietnamese exports to the EU are frequently hampered by the imposition of NTBs
by the EU, Vietnam could also consider advancing the introduction in the FTA with the
EU of a dispute settlement mechanism specifically dedicated to counter NTBs, such as
the “Mediation Mechanism for Non-Tariff Measures” envisaged under Chapter 14A
of the EU-Korea FTA. Such non-adjudicatory system is aimed at facilitating the finding
of a mutually agreed solution to non-tariff measures adversely affecting trade between
the Parties through a comprehensive and expeditious procedure with the assistance of a
mediator. Whereas the details concerning the procedures and the functioning of the
mechanism can be found in the EU-Korea FTA,76
Vietnam might consider proposing a
similar tool, duly adopted and shaped according to Vietnam’s negotiating agenda and
needs, for the resolution of disputes concerning the application by the EU of anti-
dumping and countervailing duties, SPS and TBT measures.
Broadly, it is noted the EU negotiations with Vietnam will be aimed at reducing market
access barriers for European exporters and unfair commercial practices causing
prejudice to its manufacturers, inter alia in the fields of trade defence and SPS and TBT
measures. It is important that Vietnam thoroughly prepares its negotiating positions,
including through the involvement of the business community and the relevant
stakeholders, and secure that: its specific interests are furthered and that the different
level of development between Vietnam and the EU is duly taken into account and
factored in the negotiations.
76 See http://trade.ec.europa.eu/doclib/docs/2009/october/tradoc_145188.pdf.
221
10. LIST OF ANNEXES
1. THE DESIGN OF SOCIAL ACCOUNTING MATRIX
2. EQUATIONS OF THE CGE MODEL IN GAMS/MPSGE
3. Further Quantitative Analysis on the Export Performance of the Garments and Textiles Industries
4. Table on the provisions on anti-dumping and countervailing duties in the analyzed agreements;
5. Table on statistics on anti-dumping and countervailing duties applied by the EU with its FTA partners
6. EU regulatory framework: sanitary and phytosanitary measures affecting Vietnamese exports
7. EU regulatory framework: technical barriers to trade affecting Vietnamese exports
222
ANNEX 1: THE DESIGN OF SOCIAL ACCOUNTING MATRIX
Data that were necessary to collect for the elaboration of the SAM for Vietnam are as follows: • Value added and the intermediary consumption by sectors, • Imports and exports by each source and destination countries, • Vietnam‘s trade tax by trading partners (Import and Export tax) and taxonomy, • Final consumption by agents, • Private and public investments • Transfers between agents.
The basic structure of the SAM elaborated for the study is as follows (variable names):
223
FACTORS AGENTS BRANCHES 1 2 3 4 5 6 7 8 9 10 1 Labour Sal1 Sal2 Sal3 2 Capital Rk1 Rk2 Rk3 3 Households Sal Rkm Salg Tem Trm 4 Firms Rke Tge 5 Government Taxym Taxrk Teg Trg Taxx1 Taxx2 Taxx3
6 Vietnam main trade partners
7 Rest of the World
8 Agriculture 9 Industry 10 Services 11 Agriculture 12 Industry 13 Services 14 Agriculture Cmu1 Cgu1 Ciu11 Ciu12 Ciu13 15 Industry Cmu2 Cgu2 Ciu21 Ciu22 Ciu23 16 Services Cmu3 Cgu3 Ciu31 Ciu32 Ciu33 20 Agriculture Xeu1 Xru1 22 Industry Xeu3 Xru3 24 Services Xeu5 Xru5 26 Accumulation Smu Seu Sgu Bct Bcr PRODUCTS EXPORTS S-I 13 14 15 19 20 23 27 1 Labour 2 Capital 3 Households 4 Firms 5 Government Taxm1 Taxm2 Taxm3
6 Vietnam main trade partners
Meu1 Meu2 Meu3
7 Rest of the World
Mru1 Mru2 Mru3
224
13 Agriculture Xu1 Iu1 15 Industry Xu2 Iu2 17 Services Xu3 Iu3 18 Agriculture 20 Industry 22 Services 23 S-I
With the following decomposition:
• sal1, sal2, sal3: wages by sector (agriculture, industry, services) • rk1, rk2, rk3: remuneration of capital by sector • sal: total wages • rkm: total remuneration of capital given to the households • salg: public wages • trm: transfers from the row to the government • rke: total remuneration of capital given to the enterprises • tge: transfers from the government to the enterprises • taxym: taxes on households • taxrk: taxes on firms • trg: transfers from the row the government • taxx1, taxx2, taxx3: taxes on products • taxm1, taxm2, taxm3: taxes on imports • mru1, mru2, mru3:imports from the row • chu1, chu2, chu3: final consumption of households • cgu1, cgu2, cgu3: final consumption of the government • ciu11 ciu12, ciu13 • ciu21 ciu22, ciu23 • ciu31 ciu32, ciu33 : intermediary consumption of the enterprises • inv1, inv2, inv3: investment by branches • xru1, xru2, xru3: exports of G&S to Vietnam main trade partners • xrw1, xrw2, xrw3: exports of G&S to the row • smu : saving of households • seu : saving of enterprises • sgu : saving of the government • bcr : balance of payment with the main trade partners
In the sectoral decomposition, 1, 2, 3 representing respectively agriculture, industry and services. Indeed, the SAM sectoral break-down comprises the following sectors/products:
• Agr : agriculture • Ind_Auto : automotive industry • Ind_Elec : electric industry • Ind_Mach : machinery industry • Ind_Othe : other industries • Serv_BkIn : Banking and Insurance services
225
• Serv_Othe : other services
Expenditures appear along the rows, and incomes down the columns.
We can observe from the previous table that: • Households, enterprises and government all receive income. • Firms’ revenue comes from capital revenue and transfers from the government, • Government income comes from direct taxes on households and enterprises and from
indirect taxes on imports and production. • Households income derives from wages and capital revenue plus transfers from abroad, • Two different trading partners are distinguished: the main trade partners and Rest of the
World both on the import and export sides. • The role of government is limited to collect taxes and to allocate them among the firms. • The financial inflows considered are very broad, including foreign direct investment,
portfolio investment, loans, net factor service income, and grants.
Firms produce goods, a proportion of which is intended for the domestic market while the rest is exported. On the domestic market the goods consumed are composite goods composed with domestic and imported goods.
In line with the standard approach, the distinct economic agents to be considered have been defined as follows:
• Households • Enterprises • Government • Vietnam main trade partners • Rest of the World
As far as Vietnam trade partners’ decomposition is concerned, the following decomposition was used, based on the structure of Vietnam trade, as briefly presented above:
• EU : European Union • AC : ASEAN countries • CH : China • KR : Korea • ROW : other countries
226
The Social Accounting Matrix for Vietnam (figures for year 2007)
Lab Cap Hou Ent Gov EU AC CH KR ROW Dtax Stax Mtax Etax LiveStock Coffee Vegetable Fishery Wood Food Footwear GarnmTexRubber Chemical Mach-Elec Transport OtherInd Communic ServBusiness ServOther Acc TOTAL
Lab 5 794 33 647 24 098 41 880 8 518 10 137 49 369 44 161 13 765 6 980 26 158 10 524 30 440 44 649 44 649 50 395 445 164Cap 1 547 21 603 22 372 28 734 15 815 9 411 44 412 64 564 3 500 12 960 45 915 14 182 49 985 96 803 41 212 42 140 515 155Hou 445 164 318 511 229 749 993 424Ent 124 334 118 437 242 771Gov 72 310 124 102 70 052 20 771 59 721 346 956EU 249 302 1 748 46 654 284 1 525 2 542 75 3 700 516 2 869 28 146 11 865 15 430 321 321 32 294 351 637AC 656 172 2 586 768 10 794 279 4 299 7 730 91 473 549 549 55 262 175 117CH 87 59 3 573 159 2 385 1 536 1 063 22 610 1 077 6 186 38 067 5 412 71 754 712 712 71 646 227 036KR 34 1 65 92 979 306 467 15 823 950 1 949 12 267 3 371 31 482 313 313 31 543 99 957ROW 228 941 17 349 162 552 74 618 3 877 63 5 934 1 523 9 710 15 216 1 341 40 495 3 009 12 578 66 973 12 322 138 678 1 441 1 441 145 053 943 113Dtax 5 816 118 286 124 102Stax 4 716 6 179 4 962 6 036 1 754 2 087 9 665 5 670 2 210 1 437 5 635 2 416 6 754 4 881 4 881 768 70 052Mtax 458 198 1 228 678 856 2 233 532 7 167 244 213 1 598 671 4 695 0 20 771Etax 118 2 197 2 730 3 506 965 1 148 9 031 9 847 1 691 214 5 232 791 17 368 360 360 4 165 59 721LiveStock 20 308 79 365 88 8 1 198 11 1 22 10 25 52 5 141 17 53 247 56 593 9 9 255 1 547 25 099Coffee 6 776 15 721 2 765 733 814 12 328 203 11 405 89 462 961 93 262 62 124 460 104 441 1 1 68 21 603 64 489Vegetable 6 490 3 237 17 316 7 527 344 11 793 252 13 504 222 574 597 58 1 630 194 616 2 859 648 2 743 47 47 255 22 372 80 337Fishery 994 13 732 2 615 1 065 3 718 30 522 323 17 647 143 737 767 149 837 497 791 184 333 881 10 10 562 28 734 88 269Wood 19 932 2 608 1 143 2 530 565 7 369 89 5 178 78 203 422 41 1 152 137 435 1 011 92 969 54 54 1 452 15 815 56 334Food 47 563 2 234 2 626 1 183 874 10 000 106 6 212 234 241 503 49 1 371 163 518 2 405 545 1 154 112 112 1 209 9 411 82 831Footwear 8 883 35 896 979 1 220 858 27 577 83 4 167 37 190 395 192 1 078 128 407 1 182 214 1 134 11 11 586 44 412 125 646GarnmText 3 297 30 154 5 896 2 334 3 727 102 966 908 48 1 817 401 2 070 4 310 418 11 758 466 4 441 20 628 4 676 49 469 305 305 1 649 64 564 316 609Rubber 2 932 2 707 2 016 13 881 1 123 5 185 156 8 312 138 356 740 72 2 019 240 763 3 542 803 8 495 36 36 588 3 500 49 647Chemical 65 886 153 1 319 62 98 1 513 20 1 39 43 45 93 181 255 606 2 889 447 101 21 452 115 115 6 227 12 960 114 621Mach-Elec 78 878 10 199 16 009 3 520 2 137 45 215 482 26 965 1 702 1 100 2 290 222 6 247 742 2 359 10 960 24 842 26 283 21 424 21 424 28 927 45 915 351 870Transport 25 932 2 148 2 223 61 55 7 162 729 39 1 459 322 1 662 3 461 335 9 441 1 122 3 565 16 562 11 262 3 972 6 070 6 070 1 311 14 182 119 145OtherInd 99 716 26 418 69 610 19 408 5 688 134 760 1 601 85 3 205 706 3 652 7 603 7 369 51 846 12 320 39 162 36 383 8 247 87 252 1 284 1 284 8 671 49 985 676 258Communic 47 808 253 668 186 55 1 293 19 1 38 8 43 89 9 244 29 92 428 97 1 027 2 124 1 594 33 057 96 803 185 965ServBusiness 72 401 1 394 1 198 514 192 3 814 13 1 25 6 29 60 6 163 19 61 285 65 684 1 416 8 934 4 871 41 212 137 364ServOther 226 930 45 617 25 665 22 061 9 471 3 535 67 782 1 069 57 2 140 472 2 438 5 076 492 13 847 1 645 5 230 24 293 5 506 11 652 2 917 2 917 50 729 42 140 573 682Acc 3 579 124 485 72 397 179 038 8 959 700 1 548 124 448 515 155TOTAL 445 164 515 155 993 424 242 771 346 956 351 637 175 117 227 036 99 957 943 113 124 102 70 052 20 771 59 721 25 099 64 489 80 337 88 269 56 334 82 831 125 646 316 609 49 647 114 621 351 870 119 145 676 258 185 965 137 364 573 682 515 155
227
ANNEX 2: EQUATIONS OF THE CGE MODEL IN GAMS/MPSGE
$MODEL:RECURSIF
$SECTORS:
Y(i,t) ! Output
IT(t) ! Investment
CTH(t)
CG(t)
E(ae,i,t)$E0(ae,i)
M(ae,i,t)$M0(ae,i)
Q(i,t)
MT(i,t)$SUM(ae,M0(ae,i))
ET(i,t)$SUM(ae,E0(ae,i))
$COMMODITIES:
RK(t) ! Return to capital
PK(t) ! Capital price
PL(i,t) ! Wage rate
PC(t)
PG(t)
PM(ae,i,t)$M0(ae,i)
PD(i,t)
PE(ae,i,t)$E0(ae,i)
PMT(i,t)$SUM(ae,M0(ae,i))
PET(i,t)$SUM(ae,E0(ae,i))
PQ(i,t)
PFX(ae,t)
$CONSUMERS:
HOU(t) ! Representative agent
ENT(t)
GOV(t)
ROW(t)
$AUXILIARY:
K(t) ! capital demand
228
DTAX(ac,t)
MK(i,t)
$PROD:Y(j,t) va:SigmaF(j) t:SigmatZ(j)
O:PET(j,t) Q:(SUM(ae,E0(ae,j)))
O:PD(j,t) Q:D0(j)
I:PL(j,t) Q:(F0('lab',j)) va:
I:RK(t) Q:(F0('cap',j)) va:
I:PQ(i,t) Q:CIJ0(i,j)
$PROD:IT(t) s: sigmaIT
O:PK(t) Q:IT0
I:PQ(i,t) Q:Inv0(i)
$PROD:CTH(t) s: sigmaH
O:PC(t) Q:(SUM(i,C0('Hou',i)))
I:PQ(i,t) Q:(C0('Hou',i))
$PROD:CG(t) s:2
O:PG(t) Q:(SUM(i,C0('Gov',i)))
I:PQ(i,t) Q:(C0('Gov',i))
$PROD:ET(i,t)$ET0(i) t:2
O:PE(ae,i,t) Q:E0(ae,i)
I:PET(i,t) Q:(SUM(ae,E0(ae,i)))
$PROD:MT(j,t)$MT0(j) s:2
O:PMT(j,t) Q:(SUM(ae,M0(ae,j)*Pm0(ae,j)))
I:PM(ae,j,t) Q:M0(ae,j)
$PROD:E(ae,i,t)$E0(ae,i)
O:PFX(ae,t) Q:(E0(ae,i)*Pwe0(ae,i)) a:GOV(t) t:taue(ae,i)
I:PE(ae,i,t) Q:E0(ae,i)
$PROD:M(ae,j,t)$M0(ae,j)
229
O:PM(ae,j,t)$M0(ae,j) Q:(M0(ae,j))
I:PFX(ae,t) Q:(Pwm0(ae,j)*M0(ae,j)) a:GOV(t) t:tm(ae,j,t)
$PROD:Q(j,t) s:sigmaQ(j)
O:PQ(j,t) Q:Q0(j) a:GOV(t) t:tauz(j)
I:PD(j,t) Q:D0(j)
I:PMT(j,t) Q:MT0(j)
$DEMAND:GOV(t)
D:PG(t) Q:(SUM(i,C0('Gov',i))) P:Pref(t)
D:PK(t) Q:(S0('Gov')) P:Pref(t)
E:RK(t) Q:(spf("Gov","Cap")) R:K(t)
* Direct ETaxs
E:PG(t) Q:(1) R:DTAX("Ent",t)
E:PG(t) Q:(1) R:DTAX("Hou",t)
* Transfers
E:PC(t) Q:(SUM(ag,(Trn0(ag,"Gov")-Trn0("Gov",ag)))*Qref(t))
$DEMAND:HOU(t)
D:PC(t) Q:(SUM(i,C0('Hou',i))) P:Pref(t)
D:PK(t) Q:((S0('Hou'))) P:Pref(t)
E:RK(t) Q:(spf("Hou","Cap")) R:K(t)
E:PL(i,t) Q:(F0('Lab',i)*Qref(t)) R:MK(i,t)
* Direct Taxes
E:PG(t) Q:(-1) R:DTAX("Hou",t)
* Transfers
E:PC(t) Q:(SUM(ag,(Trn0(ag,"Hou")-Trn0("Hou",ag)))*Qref(t))
$DEMAND:ENT(t)
D:PK(t) Q:((S0('Ent'))) P:Pref(t)
E:RK(t) Q:(spf("Ent","Cap")) R:K(t)
230
* Direct Taxes
E:PG(t) Q:(-1) R:DTAX("Ent",t)
* Transfers
E:PC(t) Q:(SUM(ag,(Trn0(ag,"Ent")-Trn0("Ent",ag)))*Qref(t))
$DEMAND:ROW(t)
D:PK(t) Q:(SUM(ae,S0(ae))) P:Pref(t)
E:RK(t) Q:(SUM(ae,spf(ae,"Cap"))) R:K(t)
E:PFX(ae,t) Q:(-B0(ae)*QRef(t))
* Transfers
E:PC(t) Q:(SUM(ag,SUM(ae,(Trn0(ag,ae)-Trn0(ae,ag))))*Qref(t))
$CONSTRAINT:MK(i,t)
E('4_EU',i,t) =E= QRef(t) ;
$CONSTRAINT:DTAX(ac,t)
DTAX(ac,t) =E= Taud(ac)*(SUM(f,SAM(ac,f))*CTH(t)) ;
$CONSTRAINT:K(t)
K(t) =E= SUM(i,F0('cap',i))$T1(t) +(1-delta)*K(t-1) + (IT(t-1
Annex 4:
Table 2 (USD)
Product code
Product label Viet Nam's exports to world
2004 2005 2006 2007 2008 2009
'TOTAL All products 26485036 32447128 39826224 48561344 62685128 59193656
'61 Articles of apparel, accessories, knit or crochet
1596162 1720275 2031766 3035134 3894278 3680092
'62 Articles of apparel, accessories, not knit or crochet
2539682 2837741 3385356 4168867 4605473 4352171
'63 Other made textile articles, sets, worn clothing etc
245944 269104 372241 445471 454781 429768
Calculated from Comtrade data (2010)
Graph 1: VN export to world
231
Graph 2: export to EU vs World
Graph 3: details of main exported products (HS 61)
232
Graph 4: Details of main exported products (HS 62)
Chart 1: revealed comparative advantages of specific products (HS61)
233
Chart 2: Revealed Comparative Advantage of specific products (HS 62)
234
Table 3: export to EU of some specific products (HS 62)
Product code
Product label European Union (EU 27)'s imports from Viet Nam
2005 2006 2007 2008 2009
'6204 Women's suits, jackets,dresses skirts etc&shorts
108097 214860 289739 331993 285026
'6203 Men's suits, jackets, trousers etc & shorts 112107 207770 247117 292032 232711
'6201 Men's overcoats, capes, windjackets 128719 141792 161110 197890 211411
'6202 Women's overcoats,capes,wind-jackets etc 125038 135374 182151 243160 206594
'6205 Men's shirts 98799 118033 128807 151986 149131
'6210 Garment 37599 65680 84904 123506 120265
'6211 Track suits, ski suits and swimwear; other garments
45932 60769 60937 97561 77270
'6206 Women's blouses & shirts 13889 25516 40239 52625 47655
'6212 Brassieres,girdles,corsets,braces,suspenders etc&parts
39465 46220 60138 68594 44477
'6209 Babies' garments and clothing accessories 4710 7347 8968 10503 13470
235
'6216 Gloves, mittens and mitts 8778 5976 6842 9319 10215
'6215 Ties, bow ties and cravats 14215 12676 13347 13892 9409
'6207 Men's singlets, briefs, pyjamas, bathrobes etc 1928 3701 7138 7197 6113
'6208 Women's singlets, slips, briefs, pyjamas, bathrobes etc
5448 4459 5024 5735 4287
'6214 Shawls, scarves, mufflers, mantillas, etc 940 1035 1132 1534 1516
'6217 Clothing accessories nes; o/t of hd 62.12 2662 1776 1668 2295 1235
'6213 Handkerchiefs 125 139 171 218 167
Table 4: export to EU of some specific products (HS 61)
Product code
Product label European Union (EU 27)'s imports from Viet Nam
2005 2006 2007 2008 2009
'6110 Jerseys, pullovers, cardigans, 80192 169418 171749 233157 166340
'6109 T-shirts, singlets and other vests 38778 97411 123319 126594 100366
'6104 Women's suits,dresses,skirt etc 13222 22030 35786 53030 59654
'6102 Women's overcoat,cape 18458 24100 26927 39629 41714
'6105 Men's shirts, knitted or crocheted 19894 29052 36660 50069 37411
'6112 Track suits, ski suits and swimwear 10937 12414 18737 34413 36035
'6108 Women's slips,panties,pyjamas, bathrobes etc
21044 27474 31864 38413 23125
'6106 Women's blouses & shirts 7919 12026 17320 21419 19698
'6107 Men's underpants,pyjamas,bathrobes etc 6950 6211 11802 13945 15720
'6116 Gloves, mittens and mitts, knitted or crocheted
2997 7423 16681 16242 15234
'6103 Men's suits,jackets,trousers etc 7633 8807 11513 14710 12833
'6101 Men's overcoats,capes,etc 8191 11965 10772 12534 12260
'6114 Garments 2252 5833 7252 9658 8413
'6111 Babies' garments, knitted or crocheted 4633 5548 5859 6090 7075
'6115 Panty hose, tights, stockings & other hosiery
396 861 2613 5642 5438
'6117 Clothing access 807 915 1569 1814 1849
'6113 Garment,made up of knitted/crochetd fabric of hd no 59.03,06,07
269 239 487 833 1126
Table 5: export trend in EU compared to world
236
% of export of Vietnam in EU/World 2004 2005 2006 2007 2008
Export HS 61 13.52 15.18 18.89 14.76 13.58
Export HS 62 20.01 21.32 24.57 24.05 24.95
Export HS 63 37.35 31.88 27.23 26.47 22.11
Table 6: relevance of garments exports on total export from Vietnam
weight of Vietnamese exports gar/tot 2004 2005 2006 2007 2008
Export HS 61 6.03 5.30 5.23 6.25 6.21
Export HS 62 9.59 8.75 8.72 8.58 7.35
Export HS 63 0.93 0.83 0.96 0.92 0.73
Table 7: diversification of garments exports
Export diversification 2004 2005 2006 2007 2008
Export HS 61 6.14 7.01 8.86 6.78 6.23
Export HS 62 9.29 9.97 11.64 11.42 11.91
Export HS 63 18.52 15.78 13.47 13.09 10.92
Trade intensity coefficient 0.47 0.45 0.47 0.49 0.46
Table 8: Revealed comparative advantage (at HS 2 level)
Revealed Comparative Advantage 2004 2005 2006 2007 2008
Export HS 61 4.75 4.41 4.25 5.02 5.45
Export HS 62 6.53 6.21 6.46 6.95 6.41
Export HS 63 2.90 2.54 3.07 3.12 2.58
Table 9: Revealed comparative advantage in exporting to EU (at HS 2 level)
RCA vs EU 2004 2005 2006 2007 2008
Export HS 61 3.19 3.59 4.29 3.92 3.89
Export HS 62 6.30 6.92 7.93 7.71 7.59
Export HS 63 5.84 5.13 4.94 4.47 3.32
237
ANNEX 5: Table on the provisions on anti-dumping and countervailing duties in the analyzed agreements
(* The countries are given in alphabetical order.
** The EU-Turkey Customs Union is also included in the table below.)
Agreement Relevant legal provisions
1. Albania Stabilisation and Association Agreement
• In the body of the Agreement:
Article 37
Dumping and subsidy 1. None of the provisions in this Agreement shall prevent either Party from taking trade defence action in accordance with paragraph 2 of this Article […]. 2. If one of the Parties finds that dumping and/or countervailable subsidisation is taking place in trade with the other Party, the first Party may take appropriate measures against this practice in accordance with the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and the WTO Agreement on Subsidies and Countervailing Measures and its own related internal legislation.
2. Algeria Association Agreement (EUROMED)
• In the body of the Agreement: Article 22 If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI of GATT 1994, it may take appropriate measures against this practice in accordance with the WTO Agreement on the Implementation of Article VI of GATT 1994, related internal legislation and the procedures laid down in Article 26. Article 23 The WTO Agreement on Subsidies and Countervailing Measures shall be applicable between the Parties. If one of the Parties finds
238
that subsidies are being used in trade with the other Party within the meaning of Articles VI and XVI of GATT 1994, it may take appropriate measures against this practice in accordance with the WTO Agreement on Subsidies and Countervailing Measures and its own legislation on the matter. Article 26 1. In the event of the Community or Algeria subjecting imports of products liable to give rise to the difficulties referred to in Article 24 to an administrative procedure having as its purpose the rapid supply of information on trade flow trends, it shall inform the other Party. In the cases specified in Articles 22 and 25, before taking the measures provided for therein or, in cases to which paragraph 2(c) of this Article applies, as soon as possible, the Community or Algeria, as the case may be, shall supply the Association Committee with all relevant information with a view to seeking a solution acceptable to the two Parties. In the selection of measures, priority shall be given to those which least disturb the functioning of this Agreement. 2. For the implementation of the second subparagraph of paragraph 1, the following provisions shall apply: (a) as regards Article 22, the exporting Party shall be informed of the dumping case as soon as the authorities of the importing Party have initiated an investigation. When no end has been put to the dumping within the meaning of Article VI of GATT 1994 or no other satisfactory solution has been reached within 30 days of the matter being referred, the importing Party may adopt the appropriate measures;[…] (c) where exceptional circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Community or Algeria, whichever is concerned, may, in the situations specified in Articles 22 and 25, apply forthwith the precautionary measures strictly necessary to deal with the situation and shall inform the other Party immediately thereof.
239
3. Bosnia and Herzegovina Interim Agreement on trade and trade-related matters
• In the body of the Agreement:
Article 23
Dumping and subsidy
1. None of the provisions in this Agreement shall prevent any Party from taking trade defence action in accordance with paragraph 2 of this Article […].
2. If one of the Parties finds that dumping and/or countervailable subsidisation is taking place in trade with the other Party, that Party may take appropriate measures against this practice in accordance with the WTO Agreement on Implementation of Article VI of the GATT 1994 or the WTO Agreement on Subsidies and Countervailing Measures and the respective related internal legislation.
4. Chile Association Agreement
• In the body of the Agreement:
Article 78
Antidumping and countervailing measures
If a Party determines that dumping and/or countervailable subsidisation is taking place in its trade with the other Party, it may take appropriate measures in accordance with the WTO Agreement on Implementation of Article VI of the GATT 1994 and the WTO Agreement on Subsidies and Countervailing Measures.
5. Croatia Stabilisation and Association Agreement
• In the body of the Agreement:
Article 37
240
Dumping
1. If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI of the GATT 1994, it may take appropriate measures against this practice in accordance with the Agreement on implementation of Article VI of the GATT 1994 and its own related internal legislation.
2. As regards paragraph 1 of this Article, the Stabilisation and Association Council shall be informed of the dumping case as soon as the authorities of the importing Party have initiated an investigation. When no end has been put to the dumping within the meaning of Article VI of the GATT or no other satisfactory solution has been reached within 30 days of the matter being referred to the Stabilisation and Association Council, the importing Party may adopt the appropriate measures.
Article 70 Competition and other economic provisions 1. The following are incompatible with the proper functioning of the Agreement, in so far as they may affect trade between the Community and Croatia: (i) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition; (ii) abuse by one or more undertakings of a dominant position in the territories of the Community or of Croatia as a whole or in a substantial part thereof; (iii) any State aid which distorts or threatens to distort competition by favoring certain undertakings or certain products. 2. Any practices contrary to this Article shall be assessed on the basis of criteria arising from the application of the competition rules applicable in the Community, in particular from Articles 81, 82, 86 and 87 of the Treaty establishing the European Community and interpretative instruments adopted by the Community institutions. 3. The Parties shall ensure that an operationally independent public body is entrusted with the powers necessary for the full application of paragraph 1(i) and (ii) of this Article, regarding private and public undertakings and undertakings to which special rights have been granted. 4. Croatia shall establish an operationally independent authority which is entrusted with the powers necessary for the full application of paragraph 1(iii) of this Article within one year from the date of entry into force of this Agreement. This authority shall have, inter alia, the powers to authorise State aid schemes and individual aid grants in conformity with paragraph 2 of this
241
Article, as well as the powers to order the recovery of State aid that has been unlawfully granted. 5. Each Party shall ensure transparency in the area of State aid, inter alia by providing to the other Party a regular annual report, or equivalent, following the methodology and the presentation of the Community survey on State aid. Upon request by one Party, the other Party shall provide information on particular individual cases of public aid. 6. Croatia shall establish a comprehensive inventory of aid schemes instituted before the establishment of the authority referred to in paragraph 4 and shall align such aid schemes with the criteria referred to in paragraph 2 within a period of no more than four years from the entry into force of this Agreement. (a) For the purposes of applying the provisions of paragraph 1(iii), the Parties recognise that during the first four years after the entry into force of this Agreement, any public aid granted by Croatia shall be assessed taking into account the fact that Croatia shall be regarded as an area identical to those areas of the Community described in Article 87(3)(a) of the Treaty establishing the European Community. (b) Within three years form the entry into force of this Agreement, Croatia shall submit to the Commission of the European Communities its GDP per capita figures harmonised at NUTS II level. The authority referred to in paragraph 4 and the Commission of the European Communities shall then jointly evaluate the eligibility of the regions of Croatia as well as the maximum aid intensities in relation thereto in order to draw up the regional aid map on the basis of the relevant Community guidelines. 7. With regard to products referred to in Chapters II of Title IV: - paragraph 1 (iii) shall not apply; - any practices contrary to paragraph 1(i) shall be assessed according to the criteria established by the Community on the basis of Articles 36 and 37 of the Treaty establishing the European Community and specific Community instruments adopted on this basis. 8. If one of the Parties considers that a particular practice is incompatible with the terms of paragraph 1 of this Article, it may take appropriate measures after consultation within the Stabilisation and Association Council or after thirty working days following referral for such consultation. Nothing in this Article shall prejudice or affect in any way the taking, by either Party, of antidumping or countervailing measures in accordance with the relevant Articles of GATT 1994 and WTO Agreement on Subsidies and Countervailing Measures or related internal legislation.
6. EEA Agreement (Iceland, Liechtenstein, Norway)
• In the body of the Agreement:
Article 26
Anti-dumping measures, countervailing duties and measures against illicit commercial practices attributable to third countries shall not be applied in relations between the Contracting Parties, unless otherwise specified in this
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Agreement.
• In the Protocols to the Agreement:
PROTOCOL 13 on the non-application of anti-dumping and countervailing measures
The application of Article 26 of the Agreement is limited to the areas covered by the provisions of the Agreement and in which the Community acquis is fully integrated into the Agreement. Moreover, unless other solutions are agreed upon by the Contracting Parties, its application is without prejudice to any measures which may be introduced by the Contracting Parties to avoid circumvention of the following measures aimed at third countries:
- anti-dumping measures;
- countervailing duties;
- measures against illicit commercial practices attributable to third countries.
7. Egypt Association Agreement (EUROMED)
• In the body of the Agreement:
Article 22
If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of the provisions of Article VI of the GATT 1994, it may take appropriate measures against this practice in accordance with the WTO Agreement on the Implementation of Article VI of the GATT 1994 and related internal legislation.
Article 23
Without prejudice to Article 34, the WTO Agreement on Subsidies and Countervailing Measures shall apply between the Parties. Until the necessary rules referred to in Article 34(2) are adopted, if either Party finds that subsidy is taking
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place in trade with the other party within the meanings of Articles VI and XVI of the GATT 1994, it may invoke appropriate measures against this practice in accordance with the WTO Agreement on Subsidies and Countervailing Measures and related internal legislation.
8. Faroe Islands FTA
• In the body of the Agreement: Article 27 If one of the Contracting Parties finds that dumping is taking place in trade with the other Contracting Party, it may take appropriate measures against this practice in accordance with the Agreement on Implementation of Article VI of the GATT 1994, under the conditions and in accordance with the procedures laid down in Article 29. Article 29 1. […] 2. In the cases specified in Articles 24 to 28, before taking the measures provided for therein or, in cases to which paragraph 3 (d) of this Article applies, as soon as possible, the Contracting Party in question shall supply the Joint Committee with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Contracting Parties. In the selection of measures, priority must be given to those which least disturb the functioning of this Agreement. […] 3. For the implementation of paragraph 2, the following provisions shall apply: […] (c) as regards Article 27, consultation in the Joint Committee shall take place before the Contracting Party concerned takes the appropriate measures; (d) where exceptional circumstances requiring immediate action make prior examination impossible, the Contracting Party concerned may, in the situations specified in Articles 26, 27 and 28 and also in the case of export aids having a direct and immediate incidence on trade, apply forthwith the precautionary measures strictly necessary to remedy the situation.
9. FYROM Stabilisation and Association Agreement
• In the body of the Agreement:
Article 36
Dumping
1. If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI
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of the GATT 1994, it may take appropriate measures against this practice in accordance with the Agreement on implementation of Article VI of the GATT 1994 and its own related internal legislation.
2. As regards paragraph 1 of this Article, the Stabilisation and Association Council shall be informed of the dumping case as soon as the authorities of the importing Party have initiated an investigation. When no end has been put to the dumping within the meaning of Article VI of the GATT or no other satisfactory solution has been reached within 30 days of the matter being referred to the Stabilisation and Association Council, the importing Party may adopt the appropriate measures.
10. Israel Association Agreement (EUROMED)
• In the body of the Agreement:
Article 22
If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI of the GATT, it may take appropriate measures against this practice in accordance with the Agreement on implementation of Article VI of the GATT and with its relevant internal legislation, under the conditions and in accordance with the procedures laid down in Article 25.
Article 25
[…]
2. In the cases specified in Articles 22, 23 and 24, before taking the measures provided for therein or, as soon as possible in cases to which paragraph 3(d) applies, the Party in question shall supply the Association Committee with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Parties. In the selection of appropriate measures, priority shall be given to those which least disturb the functioning of the Agreement. […]
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3. For the implementation of paragraph 2, the following provisions shall apply:
(a) as regards Article 22, the Association Committee shall be informed of the dumping case as soon as the authorities of the importing Party have initiated an investigation. If no end has been put to the dumping or no other satisfactory solution has been reached within 30 days of the notification being made, the importing Party may adopt the appropriate measures;
(d) where exceptional circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Party concerned may, in the situations specified in Articles 22, 23 and 24 apply forthwith such precautionary measures as are strictly necessary to remedy the situation, and shall inform the other Party immediately.
Article 36 1. The following are incompatible with the proper functioning of the Agreement, in so far as they may affect trade between the Community and Israel: (i) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition; (ii) abuse by one or more undertakings of a dominant position in the territories of the Community or Israel as a whole or in a substantial part thereof; (iii) any public aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods. 2. The Association Council shall, within three years of the entry into force of the Agreement, adopt by decision the necessary rules for the implementation of paragraph 1. Until these rules are adopted, the provisions of the Agreement on interpretation and application of Articles VI, XVI and XXIII of the GATT shall be applied as the rules for the implementation of paragraph 1(iii). 3. Each Party shall ensure transparency in the area of public aid, inter alia, by reporting annually to the other Party on the total amount and the distribution of the aid given and by providing, upon request, information on aid schemes. Upon request by one Party, the other Party shall provide information on particular individual cases of public aid. 4. With regard to agricultural products referred to in Title II, Chapter 3, paragraph 1(iii) does not apply. 5. If the Community or Israel considers that a particular practice is incompatible with the terms of paragraph 1 and: - is not adequately dealt with under the implementing rules referred to in paragraph 2, or - in the absence of such rules, and if such practice causes or threatens to cause serious prejudice to the interest of the other Party or material injury to its domestic industry, including its services industry, it may take appropriate measures after consultation within the Association Committee or after 30 working days following referral for such consultation.
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With reference to practices incompatible with paragraph 1(iii), such appropriate measures, when the GATT is applicable to them, may only be adopted in accordance with the procedures and under the conditions laid down by the GATT or by any other relevant instrument negotiated under its auspices and applicable to the Parties. 6. Notwithstanding any provisions to the contrary adopted in accordance with paragraph 2, the Parties shall exchange information taking into account the limitations imposed by the requirements of professional and business secrecy.
11. Jordan Association Agreement (EUROMED)
• In the body of the Agreement:
Article 23
If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI of the GATT, it may take appropriate measures against this practice in accordance with the Agreement on implementation of Article VI of the GATT and with its relevant internal legislation, under the conditions and in accordance with the procedures laid down in Article 26.
Article 26
[…]
2. In the cases specified in Articles 23, 24 and 25, before taking the measures provided for therein, or, as soon as possible in cases to which paragraph 3(d) applies, the Party in question shall supply the Association Committee with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Parties. In the selection of appropriate measures, priority must be given to those which least disturb the functioning of the Agreement. […]
3. For the implementation of paragraph 2, the following provisions shall apply:
(a) as regards Article 23, the exporting Party shall be informed of the dumping case as soon as the authorities of the
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importing Party have initiated an investigation. Where no end has been put to the dumping within the meaning of Article VI of GATT or no other satisfactory solution has been reached within 30 days of the notification being made, the importing Party may adopt the appropriate measures; […]
(d) where exceptional circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Party concerned may, in the situations specified in Articles 23, 24 and 25, apply forthwith such precautionary measures as are strictly necessary to remedy the situation, and shall inform the other Party immediately.
Article 53 1. The following are incompatible with the proper functioning of the Agreement, in so far as they may affect trade between the Community and Jordan: (a) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition; (b) abuse by one or more undertakings of a dominant position in the territories of the Community or Jordan as a whole or in a substantial part thereof; (c) any public aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods. 2. Any practice contrary to this Article shall be assessed on the basis of the criteria resulting from the application of the rules contained in Articles 85, 86 and 92 of the Treaty establishing the European Community, and, for products covered by the Treaty establishing the European Coal and Steel Community, by those contained in Articles 65 and 66 of that Treaty and the Community rules on State aids, including secondary legislation. 3. The Association Council shall, within five years of the entry into force of the Agreement, adopt by decision the necessary rules for the implementation of paragraphs 1 and 2. Until these rules are adopted, the provisions of the Agreement on interpretation and application of Articles VI, XVI and XXIII of the GATT shall be applied as the rules for the implementation of paragraph 1(c) and the relevant parts of paragraph 2. 4. (a) For the purposes of applying the provisions of paragraph 1(c), the Parties recognise that, during the first five years of the entry into force of the Agreement, any public aid granted by Jordan to undertakings shall be assessed taking into account the fact that Jordan shall be regarded as an area identical to those areas of the Community where the standard of living is abnormally low or where there is serious underemployment, as described in Article 92(3)(a) of the Treaty establishing the European Community. The Association Council shall, taking into account the economic situation of Jordan, decide whether that period should be extended for further periods of five years. (b) Each Party shall ensure transparency in the area of public aid, inter alia, by reporting annually to the other Party on the total amount and the distribution of the aid given and by providing, upon request, information on aid schemes. Upon request by one Party, the other Party shall provide information on particular individual cases of public aid.
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5. With regard to products referred to in Title II, Chapter 2: - paragraph 1(c) does not apply, - any practices contrary to paragraph 1(a) shall be assessed according to the criteria established by the Community on the basis of Articles 42 and 43 of the Treaty establishing the European Community and in particular those established in Council Regulation No 26/62. 6. If the Community or Jordan considers that a particular practice is incompatible with the terms of paragraph 1, and: - is not adequately dealt with under the implementing rules referred to in paragraph 3, or - in the absence of such rules, and if such practice causes or threatens to cause serious prejudice to the interest of the other Party or material injury to its domestic industry, including its services industry, it may take appropriate measures after consultation within the Association Committee or after 30 working days following referral for such consultation. With reference to practices incompatible with paragraph 1(c) of this Article, such appropriate measures, when the GATT is applicable to them, may only be adopted in accordance with the procedures and under the conditions laid down by the GATT or by any other relevant instrument negotiated under its auspices and applicable to the Parties. 7. Notwithstanding any provisions to the contrary adopted in conformity with paragraph 3, the Parties shall exchange information taking into account the limitations imposed by the requirements of professional and business secrecy.
12. Lebanon Association Agreement (EUROMED)
• In the body of the Agreement:
Article 23
If one of the Parties finds that dumping is taking place in trade with the other Party in line with prevailing international rules as defined in Article VI of the General Agreement on Tariffs and Trade (GATT) 1994 and related internal legislation, it may take appropriate measures against this practice in accordance with the WTO Agreement on the implementation of Article VI of the GATT 1994 and related internal legislation.
Article 24
1. Without prejudice to Article 35, the WTO Agreement on Subsidies and Countervailing Measures shall apply
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between the Parties.
2. Until the necessary rules referred to in Article 35(2) are adopted, if either Party finds that subsidy is taking place in trade with the other Party in line with prevailing international rules as defined in Articles VI and XVI of the General Agreement on Tariffs and Trade (GATT) 1994 and related internal legislation, it may invoke appropriate measures against this practice in accordance with those rules as defined by the WTO Agreement on Subsidies and Countervailing Measures and related internal legislation.
13. Mexico Economic Partnership, Political Coordination and Cooperation Agreement
• In the body of the Agreement:
Article 5
Trade in goods
In order to achieve the objective laid down in Article 4, the Joint Council shall decide on the arrangements and timetable for a bilateral, progressive and reciprocal liberalisation of tariff and non-tariff barriers to trade in goods, in accordance with the relevant WTO rules, in particular Article XXIV of the General Agreement on Tariffs and Trade (GATT), and taking account of the sensitive nature of certain products. This decision shall include, in particular, the following matters:
[…]
(e) anti-dumping and countervailing measures;
(f) safeguard and surveillance measures;
[…]
• In Decision No 2/2000 of the EC-Mexico Joint Council of 23 March 2000
Article 14
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Antidumping and countervailing measures The Community and Mexico confirm their rights and obligations arising from the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and from the WTO Agreement on Subsidies and Countervailing Measures.
14. Montenegro Stabilisation and Association Agreement
• In the body of the Agreement: Article 40 Dumping and subsidy 1. None of the provisions in this Agreement shall prevent any of the Parties from taking trade defence action in accordance with paragraph 2 of this Article […]. 2. If one of the Parties finds that dumping and/or countervailable subsidisation is taking place in trade with the other Party, that Party may take appropriate measures against this practice in accordance with the WTO Agreement on Implementation of Article VI of the GATT 1994 or the WTO Agreement on Subsidies and Countervailing Measures and the respective related internal legislation.
15. Morocco Association Agreement (EUROMED)
• In the body of the Agreement:
Article 24
If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI of the General Agreement on Tariffs and Trade, it may take appropriate measures against this practice in accordance with the Agreement relating to the application of Article VI of the General Agreement on Tariffs and Trade, related internal legislation and the conditions and procedures laid down in Article 27 of this Agreement.
Article 27
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[…]
2. In the cases specified in Articles 24, 25 and 26, before taking the measures provided for therein or, in cases to which paragraph 3(d) of this Article applies, as soon as possible, the Community or Morocco, as the case may be, shall supply the Association Committee with all relevant information with a view to seeking a solution acceptable to the two Parties.
In the selection of measures, priority shall be given to those which least disturb the functioning of this Agreement. […]
3. For the implementation of paragraph 2, the following provisions shall apply:
(a) as regards Article 24, the exporting Party shall be informed of the dumping case as soon as the authorities of the importing Party have initiated an investigation. When no end has been put to the dumping within the meaning of Article VI of the General Agreement on Tariffs and Trade or no other satisfactory solution has been reached within 30 days of the matter being referred, the importing Party may adopt the appropriate measures; […]
(d) where exceptional circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Community or Morocco, whichever is concerned, may, in the situations specified in Articles 24, 25 and 26, apply forthwith the precautionary measures strictly necessary to deal with the situation and shall inform the other Party immediately thereof.
Article 36 1. The following are incompatible with the proper functioning of this Agreement, in so far as they may affect trade between the Community and Morocco: (a) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition; (b) abuse by one or more undertakings of a dominant position in the territories of the Community or of Morocco as a whole or in a substantial part thereof; (c) any official aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, with the exception of cases in which a derogation is allowed under the Treaty establishing the European Coal and Steel Community.
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2. Any practices contrary to this Article shall be assessed on the basis of criteria arising from the application of the rules of Articles 85, 86 and 92 of the Treaty establishing the European Community and, in the case of products falling within the scope of the European Coal and Steel Community, the rules of Articles 65 and 66 of the Treaty establishing that Community, and the rules relating to State aid, including secondary legislation. 3. The Association Council shall, within five years of the entry into force of this Agreement, adopt the necessary rules for the implementation of paragraphs 1 and 2. Until these rules are adopted, the provisions of the Agreement on interpretation and application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and Trade shall be applied as the rules for the implementation of paragraph 1(c) and related parts of paragraph 2. 4. (a) For the purposes of applying the provisions of paragraph 1(c), the Parties recognise that during the first five years after the entry into force of this Agreement, any State aid granted by Morocco shall be assessed taking into account the fact that Morocco shall be regarded as an area identical to those areas of the Community described in Article 92(3)(a) of the Treaty establishing the European Community. During the same period of time, Morocco may exceptionally, as regards ECSC steel products, grant State aid for restructuring purposes provided that: - it leads to the viability of the recipient firms under normal market conditions at the end of the restructuring period, - the amount and intensity of such aid are strictly limited to what is absolutely necessary in order to restore such viability and are progressively reduced, - the restructuring programme is linked to a comprehensive plan for rationalising capacity in Morocco. The Association Council shall, taking into account the economic situation of Morocco, decide whether the period should be extended every five years. (b) Each Party shall ensure transparency in the area of official aid, inter alia, by reporting annually to the other Party on the total amount and the distribution of the aid given and by providing, upon request, information on aid schemes. Upon request by one Party, the other Party shall provide information on particular individual cases of official aid. 5. With regard to products referred to in Chapter II of Title II: - the provisions of paragraph 1(c) do not apply, - any practices contrary to paragraph 1(a) shall be assessed according to the criteria established by the Community on the basis of Articles 42 and 43 of the Treaty establishing the European Community, and in particular those established in Council Regulation (EEC) No 26/62. 6. If the Community or Morocco considers that a particular practice is incompatible with the terms of paragraph 1, and: - is not adequately dealt with under the implementing rules referred to in paragraph 3, or - in the absence of such rules, and if such practice causes or threatens to cause serious prejudice to the interest of the other Party or material injury to its domestic industry, including its services industry, it may take appropriate measures after consultation within the Association Committee or after 30 working days following referral
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to that Committee. In the case of practices incompatible with paragraph 1(c) of this Article, such appropriate measures may, where the GATT applies thereto, only be adopted in accordance with the procedures and under the conditions laid down by the General Agreement on Tariffs and Trade and any other relevant instrument negotiated under its auspices which is applicable between the Parties. 7. Notwithstanding any provisions to the contrary adopted in accordance with paragraph 3, the Parties shall exchange information taking into account the limitations imposed by the requirements of professional and business secrecy.
16. Palestinian Authority Interim Association Agreement (EUROMED)
• In the body of the Agreement:
Article 20
If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI of GATT, it may take appropriate measures against this practice in accordance with the Agreement on implementation of Article VI of the GATT and with its relevant internal legislation, under the conditions and in accordance with the procedures laid down in Article 23 of this Agreement.
Article 23
[…]
2. In the cases specified in Articles 20, 21 and 22, before taking the measures provided for therein, or, as soon as possible in cases to which paragraph 3 (d) of this Article applies, the Party in question shall supply the Joint Committee with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Parties. In the selection of appropriate measures, priority must be given to those which least disturb the functioning of the Agreement. […]
3. For the implementation of paragraph 2, the following provisions shall apply:
(a) As regards Article 20, the exporting Party shall be informed of the dumping case as soon as the authorities of the
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importing Party have initiated an investigation. When no end has been put to the dumping within the meaning of Article VI of GATT or no other satisfactory solution has been reached within 30 days of the notification being made, the importing Party may adopt the appropriate measures; […]
(d) Where exceptional circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Party concerned may, in the situations specified in Articles 20, 21 and 22 apply forthwith such precautionary measures as are strictly necessary to remedy the situation, and shall inform the other Party immediately.
Article 30 1. The following are incompatible with the proper functioning of the Agreement, insofar as they may affect trade between the Community and the Palestinian Authority: (i) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition; (ii) abuse by one or more undertakings of a dominant position in the territories of the Community or the West Bank and the Gaza Strip as a whole or in a substantial part thereof; (iii) any public aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods. 2. The Parties shall, as appropriate, assess any practice contrary to this Article on the basis of the criteria resulting from the application of Community competition rules. 3. The Joint Committee shall, before 31 December 2001, adopt by decision the necessary rules for the implementation of paragraphs 1 and 2. Until these rules are adopted, the provisions of the Agreement on Subsidies and Countervailing Measures shall be applied as the rules for the implementation of paragraph 1 (iii) and the relevant parts of paragraph 2. 4. As regards the implementation of paragraph 1 (iii), the Parties recognize that the Palestinian Authority may wish to use, during the period until 31 December 2001, public aid to undertakings as an instrument to tackle its specific development problems. 5. Each Party shall ensure transparency in the area of public aid, inter alia by reporting annually to the other Party on the total amount and the distribution of the aid given and by providing, upon request, information on aid schemes. Upon request by one Party, the other Party shall provide information on particular individual cases of public aid. 6. With regard to products referred to in Title I, Chapter 2: - paragraph 1 (iii) does not apply, - any practices contrary to paragraph 1 (i) shall be assessed according to the criteria established by the Community on the basis of Articles 42 and 43 of the Treaty establishing the European Community and in particular those established in Council Regulation
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No 26/62. 7. If the Community or the Palestinian Authority considers that a particular practice is incompatible with the terms of paragraph 1 of this Article, and: - is not adequately dealt with under the implementing rules referred to in paragraph 3, or - in the absence of such rules, and if such practice causes or threatens to cause serious prejudice to the interest of the other Party or material injury to its domestic industry, including its services industry, it may take appropriate measures after consultation within the Joint Committee or after 30 working days following referral for such consultation. With reference to practices incompatible with paragraph 1 (iii) of this Article, such appropriate measures, when the GATT is applicable to them, may only be adopted in accordance with the procedures and under the conditions laid down by GATT or by any other relevant instrument negotiated under its auspices and applicable between the Parties. 8. Notwithstanding any provisions to the contrary adopted in accordance with paragraph 3, the Parties shall exchange information taking into account the limitations imposed by the requirements of professional and business secrecy.
17. Serbia Interim Agreement on trade and trade-related issues
• In the body of the Agreement:
Article 25
Dumping and subsidy
1. None of the provisions in this Agreement shall prevent any of the Parties from taking trade defence action in accordance with paragraph 2 of this Article […].
2. If one of the Parties finds that dumping and/or countervailable subsidisation is taking place in trade with the other Party, that Party may take appropriate measures against this practice in accordance with the WTO Agreement on Implementation of Article VI of the GATT 1994 or the WTO Agreement on Subsidies and Countervailing Measures and the respective related internal legislation.
18. Swiss Confederation
• In the body of the Agreement:
256
Agreement Article 25 If one of the Contracting Parties finds that dumping is taking place in trade with the other Contracting Party, it may take appropriate measures against this practice in accordance with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, under the conditions and in accordance with the procedures laid down in Article 27. Article 27 […] 2. In the cases specified in Articles 22 to 26, before taking the measures provided for therein or, in cases to which paragraph 3(d) applies, as soon as possible the Contracting Party in question shall supply the Joint Committee with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Contracting Parties. In the selection of measures, priority must be given to those which least disturb the functioning of the Agreement. […] (c) as regards Article 25, consultation in the Joint Committee shall take place before the Contracting Party concerned takes the appropriate measures; (d) where exceptional circumstances requiring immediate action make prior examination impossible, the Contracting Party concerned may, in the situations specified in Articles 24, 25 and 26 and also in the case of export aids having a direct and immediate incidence on trade, apply forthwith the precautionary measures strictly necessary to remedy the situation.
19. Tunisia Association Agreement (EUROMED)
• In the body of the Agreement:
Article 24 If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI of the General Agreement on Tariffs and Trade, it may take appropriate measures against this practice in accordance with the Agreement relating to the application of Article VI of the General Agreement on Tariffs and Trade, related internal legislation and the conditions and procedures laid down in Article 27. Article 27 […] 2. In the cases specified in Articles 24, 25 and 26, before taking the measures provided for therein or, in cases to which paragraph 3(d) applies, as soon as possible, the Community or Tunisia, as the case may be, shall supply the Association Committee with all relevant information with a view to seeking a solution acceptable to the two Parties. In the selection of measures, priority shall be given to those which least disturb the functioning of this Agreement. […]
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3. For the implementation of paragraph 2, the following provisions shall apply: (a) as regards Article 24, the exporting Party shall be informed of the dumping case as soon as the authorities of the importing Party have initiated an investigation. When no end has been put to the dumping within the meaning of Article VI of the GATT or no other satisfactory solution has been reached within 30 days of the matter being referred, the importing Party may adopt the appropriate measures; […] (d) where exceptional circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Community or Tunisia, whichever is concerned, may, in the situations specified in Articles 24, 25 and 26, apply forthwith the precautionary measures strictly necessary to deal with the situation and shall inform the other Party immediately thereof. Article 36 1. The following are incompatible with the proper functioning of the Agreement, insofar as they may affect trade between the Community and Tunisia: (a) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition; (b) abuse by one or more undertakings of a dominant position in the territories of the Community or of Tunisia as a whole or in a substantial part thereof; (c) any official aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, with the exception of cases in which a derogation is allowed under the Treaty establishing the European Coal and Steel Community. 2. Any practices contrary to this Article shall be assessed on the basis of criteria arising from the application of the rules of Articles 85, 86 and 92 of the Treaty establishing the European Community and, in the case of products falling within the scope of the European Coal and Steel Community, the rules of Articles 65 and 66 of the Treaty establishing that Community, and the rules relating to state aid, including secondary legislation. 3. The Association Council shall, within five years of the entry into force of this Agreement, adopt the necessary rules for the implementation of paragraphs 1 and 2. Until these rules are adopted, the provisions of the Agreement on interpretation and application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and Trade shall be applied as the rules for the implementation of paragraph 1(c) and related parts of paragraph 2. 4. (a) For the purposes of applying the provisions of paragraph 1(c), the Parties recognize that during the first five years after the entry into force of this Agreement, any State aid granted by Tunisia shall be assessed taking into account the fact that Tunisia shall be regarded as an area identical to those areas of the Community described in Article 92(3)(a) of the Treaty establishing the European Community.
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During the same period of time, Tunisia may exceptionally, as regards ECSC steel products, grant State aid for restructuring purposes provided that: - it leads to the viability of the recipient firms under normal market conditions at the end of the restructuring period, - the amount and intensity of such aid are strictly limited to what is absolutely necessary in order to restore such viability and are progressively reduced, - the restructuring programme is linked to a comprehensive plan for rationalising capacity in Tunisia. The Association Council shall, taking into account the economic situation of Tunisia, decide whether the period should be extended every five years. (b) Each Party shall ensure transparency in the area of official aid, inter alia by reporting annually to the other Party on the total amount and the distribution of the aid given and by providing, upon request, information on aid schemes. Upon request by one Party, the other Party shall provide information on particular individual cases of official aid. 5. With regard to products referred to in Chapter II of Title II: - the provisions of paragraph 1(c) do not apply, - any practices contrary to paragraph 1(a) shall be assessed according to the criteria established by the Community on the basis of Articles 42 and 43 of the Treaty establishing the European Community, and in particular those established in Council Regulation No 26/62. 6. If the Community or Tunisia considers that a particular practice is incompatible with the terms of paragraph 1, and: - is not adequately dealt with under the implementing rules referred to in paragraph 3, or - in the absence of such rules, and if such practice causes or threatens to cause serious prejudice to the interest of the other Party or material injury to its domestic industry, including its services industry, it may take appropriate measures after consultation within the Association Committee or after 30 working days following referral to that Committee. In the case of practices incompatible with paragraph 1(c) of this Article, such appropriate measures may, where the General Agreement on Tariffs and Trade applies thereto, only be adopted in accordance with the procedures and under the conditions laid down by the General Agreement on Tariffs and Trade and any other relevant instrument negotiated under its auspices which is applicable between the Parties. 7. Notwithstanding any provisions to the contrary adopted in accordance with paragraph 3, the Parties shall exchange information taking into account the limitations imposed by the requirements of professional and business secrecy.
20. Turkey Customs Union
• In the body of the Agreement:
Article 44
259
1. The Association Council shall review upon the request of either Party the principle of application of trade defence instruments other than safeguard by one Party in its relations with the other. During any such review, the Association Council may decide to suspend the application of these instruments provided that Turkey has implemented competition, State aid control and other relevant parts of the acquis communautaire which are related to the internal market and ensured their effective enforcement, so providing a guarantee against unfair competition comparable to that existing inside the internal market.
2. The modalities of implementation of anti-dumping measures set out in Article 47 of the Additional Protocol remain in force.
Article 46
By derogation from the principle of the free movement of goods laid down in Chapter I where one Party has taken or is taking anti-dumping measures or other measures pursuant to trade policy instruments as referred to in Article 44 in its relations with the other Party or with third countries, that Party may make imports of the products concerned from the territory of the other Party subject to the application of those measures. In such cases it shall inform the Customs Union Joint Committee accordingly.
Article 47
When completing the formalities involved in importing products of a type covered by trade policy measures, provided for in the preceding Articles, the authorities of the importing State shall ask the importer to indicate the origin of the products concerned on the customs declaration.
Additional supporting evidence may be requested where absolutely necessary because of serious and well-founded doubts in order to verify the true origin of the product in question.
• In the Declarations of the Parties to the Agreement:
260
Statement by the Community on Article 44:
In relation to Article 44 (2), the Community states that the Commission of the European Communities, without prejudice to the position of the Council of the European Union, in the exercise of its responsibilities for anti-dumping and safeguard measures, will offer information to Turkey before the initiation of proceedings. To this effect, appropriate modalities of application of Article 49 will be set out jointly before the entry into force of this Decision. Furthermore the Community will give, on a case by case basis, where appropriate, a clear preference to price undertakings rather than duties in order to conclude anti-dumping cases where injury is found.
261
b) Relevant legal provisions in the ACP EPAs:
21. CARIFORUM EPA
• In the body of the Agreement:
Article 23
Anti-dumping and countervailing measures
1. Subject to the provisions of this Article, nothing in this Agreement shall prevent the EC Party or Signatory CARIFORUM States, whether individually or collectively, from adopting antidumping or countervailing measures in accordance with the relevant WTO agreements. For the purpose of this Article, origin shall be determined in accordance with the non-preferential rules of origin of the Parties or Signatory CARIFORUM States.
2. Before imposing definitive anti-dumping or countervailing duties in respect of products imported from CARIFORUM States, the EC Party shall consider the possibility of constructive remedies as provided for in the relevant WTO agreements.
3. Where an anti-dumping or countervailing measure has been imposed on behalf of two or more Signatory CARIFORUM States by a regional or sub-regional authority, there shall be one single forum of judicial review, including the stage of appeals.
4. A Signatory CARIFORUM State shall not apply an antidumping or countervailing measure on a product where it falls within the scope of a regional or sub-regional measure imposed on the same product. Similarly, the CARIFORUM States shall ensure that a regional or sub-regional measure imposed on a product does not apply to any Signatory CARIFORUM State which is applying such a measure on the same product.
5. The EC Party shall notify the exporting Signatory CARIFORUM States of the receipt of a properly documented complaint before initiating any investigation.
6. The provisions of this Article shall be applicable in all investigations initiated after this Agreement enters into force.
7. The provisions of this Article shall not be subject to the Dispute Settlement provisions of this Agreement.
262
22. Central Africa Party (Cameroon) IEPA
• In the body of the Agreement:
Article 29
Anti-dumping and countervailing measures
1. Subject to the provisions of this Article, nothing in this Agreement shall be construed to prevent the EC Party or the signatory Central African States, individually or collectively, from adopting anti-dumping or countervailing measures in accordance with the relevant WTO Agreements. For the purposes of this Article, origin shall be determined in accordance with the Parties' non-preferential rules of origin.
2. Before imposing definitive anti-dumping or countervailing duties in respect of products from signatory Central African States, the EC Party shall consider the possibility of constructive remedies as provided for in the relevant WTO Agreements.
3. Where an anti-dumping or countervailing measure has been imposed on two signatory Central African States at least by a regional or sub-regional authority, there shall be one single instance of judicial review, including the stage of appeals.
4. Where anti-dumping or countervailing measures may be imposed on a regional or sub-regional basis and on a national basis, the Parties guarantee that these measures shall not be applied simultaneously to the same product by the regional or sub-regional authorities and the national authorities.
5. The EC Party shall notify the signatory Central African States of the receipt of a properly documented complaint before initiating any investigation.
6. The provisions of this Article shall be applicable in all investigations initiated after this Agreement enters into force.
7. The provisions of this Article shall not be subject to the dispute settlement provisions of this Agreement.
23. Côte d'Ivoire IEPA
• In the body of the Agreement:
Article 23
Anti-dumping and countervailing measures
263
1. Subject to the provisions of this Article, the Agreement does not prevent the EC Party or Côte d'Ivoire from adopting anti-dumping or countervailing measures in accordance with the relevant WTO agreements. For the purposes of this Article, origin shall be determined in accordance with the non-preferential rules of origin of the Parties.
2. Before imposing definitive anti-dumping or countervailing measures on goods, the Parties shall consider the possibility of constructive solutions, such as those provided for in the relevant WTO agreements. In particular, they may hold appropriate consultations to this end.
3. The EC Party shall notify Côte d'Ivoire of the receipt of a sufficiently-documented complaint before opening an inquiry.
4. The provisions of this Article shall be applicable to all investigations initiated after this Agreement enters into force.
5. The provisions of this Article shall not be subject to the dispute settlement provisions of this Agreement.
Article 26
Cooperation
1. The Parties recognise the importance of cooperation on trade defence instruments.
2. The Parties agree to cooperate in accordance with Article 4, including through the facilitation of assistance measures, particularly in the following fields:
(a) the development of regulations and institutions to ensure trade defence;
(b) the development of capacity to use the trade defence instruments provided for in this Agreement.
24. East African Community IEPA
• In the body of the Agreement:
Article 19
Anti-dumping and countervailing measures
1. Subject to the provisions of this Article, nothing in this Agreement shall prevent the EC Party or the EAC Partner States, whether individually or collectively, from adopting anti-dumping or countervailing measures in accordance with the relevant WTO agreements. For the purpose of this
264
Article, origin shall be determined in accordance with the non-preferential rules of origin of the Parties.
2. Before imposing definitive anti-dumping or countervailing duties in respect of products imported from EAC Partner States, the EC Party shall consider the possibility of constructive remedies as provided for in the relevant WTO agreements.
3. Where an anti-dumping or countervailing measure has been imposed on behalf of two or more EAC Partner States by a regional authority, there shall be one single forum of judicial review, including at the stage of appeals.
4. Where anti-dumping or countervailing measures can be imposed on a regional basis and on a national basis the Parties shall ensure that such measures are not applied simultaneously in respect of the same product by regional authorities on the one hand, and national authorities on the other.
5. The EC Party shall notify the exporting EAC Partner States of the receipt of a properly documented complaint before initiating any investigation.
6. The provisions of this Article shall be applicable in all investigations initiated after this Agreement enters into force.
7. The provisions of this Article shall not be subject to the Dispute Settlement provisions of this Agreement.
25. ESA IEPA Article 19
Anti-dumping and countervailing measures
1. Subject to the provisions of this Article, nothing in this Agreement shall prevent the EC Party or Signatory ESA States, whether individually or collectively, from adopting anti-dumping or countervailing measures in accordance with the relevant WTO agreements. For the purpose of this
Article, origin shall be determined in accordance with the non-preferential rules of origin of the Parties.
2. Before imposing definitive anti-dumping or countervailing duties in respect of products imported from ESA States, the EC Party shall consider the possibility of constructive remedies as provided for in the relevant WTO agreements.
3. Where anti-dumping or countervailing measures have been imposed on behalf of two or more Signatory ESA States by a regional authority, there
265
shall be one single forum of judicial review, including at the stage of appeals.
4. Where anti-dumping or countervailing measures can be imposed on a regional or sub-regional basis and on a national basis the Parties shall ensure that such measures are not applied simultaneously in respect of the same product by regional or sub-regional authorities on the one hand, and national authorities on the other.
5. The EC Party shall notify the exporting Signatory ESA States of the receipt of a properly documented complaint before initiating any investigation.
6. The provisions of this Article shall be applicable in all investigations initiated after this Agreement enters into force.
7. The provisions of this Article shall not be subject to the Dispute Settlement provisions of this Agreement.
26. Ghana IEPA Article 23
Anti-dumping and countervailing measures
1. Subject to the provisions of this Article, nothing in this Agreement shall prevent the EC Party or the Ghanaian Party from adopting anti-dumping or countervailing measures in accordance with the relevant WTO agreements. For the purpose of this Article, origin shall be determined in accordance with the non-preferential rules of origin of the Parties.
2. Before imposing definitive anti-dumping or countervailing duties the Parties shall consider the possibility of constructive remedies as provided for in the relevant WTO agreements. To this end, the Parties may hold appropriate consultations.
3. The EC Party shall notify the Ghanaian Party of the receipt of a properly documented complaint before initiating any investigation.
4. The provisions of this Article shall be applicable in all investigations initiated after this Agreement enters into force.
5. The provisions of this Article shall not be subject to the Dispute Settlement provisions of this Agreement.
Article 26
Cooperation
266
1. The Parties recognise the importance of cooperation in the field of trade defence measures.
2. The Parties agree to cooperate, in accordance with the provisions of Article 4, including by facilitating assistance measures, notably in the following fields:
(a) development of regulation and institutions to ensure trade defence;
(b) capacity building for the use of trade defence measures provided for by the present
Agreement.
27. Pacific States IEPA
Article 19
Anti-dumping and countervailing measures
1. Subject to the provisions of this Article, nothing in this Agreement shall prevent the EC Party or Pacific States, both WTO members and non-WTO members, whether individually or collectively, from adopting anti-dumping or countervailing measures in accordance with the relevant WTO agreements. For the purpose of this Article, origin shall be determined in accordance with the non-preferential rules of origin of the Parties.
2. The EC Party may not impose definitive anti-dumping or countervailing duties in respect of products imported from Pacific States before considering the possibility of constructive remedies foreseen in the relevant WTO agreements, in accordance with EC law. In that respect, the EC Party shall provide appropriate assistance to the exporters from the Pacific States which are proposing such constructive remedies.
3. Where an anti-dumping or countervailing measure has been imposed on behalf of two or more Pacific States by a regional or sub-regional authority, there shall be one single forum of judicial review, including the stage of appeals.
4. Where anti-dumping or countervailing measures can be imposed on a regional or sub-regional basis and on a national basis the Parties or Pacific States as the case may be shall ensure that such measures are not applied simultaneously in respect of the same product by regional or sub-regional authorities on the one hand, and national authorities on the other.
5. The EC Party shall notify the exporting Pacific States of the receipt of a properly documented complaint before initiating any investigation.
267
6. The provisions of this Article shall be applicable to all investigations initiated after this Agreement enters into force.
7. The provisions of this Article shall not be subject to the Dispute Settlement provisions of this Agreement.
28. SADC IEPA Article 32 Anti-dumping and countervailing measures
The rights and obligations of the EC Party or the SADC EPA States in respect of the application of antidumping or countervailing measures shall be governed by the relevant WTO Agreements. Any disputes related to these measures can only be settled through WTO Dispute Settlement procedures.
29. South Africa Trade Development and Cooperation Agreement
• In the body of the Agreement:
Article 23
Anti-dumping and countervailing measures
1. Nothing in this Agreement shall prejudice or affect in any way the taking, by either Party, of anti-dumping or countervailing measures in accordance with Article VI of the GATT 1994, the Agreement on Implementation of Article VI of the GATT 1994, the Agreement on Subsidies and Countervailing Measures, annexed to the Marrakech Agreement establishing the WTO.
2. Before definitive anti-dumping and countervailing duties are imposed in respect of products imported from South Africa, the Parties may consider the possibility of constructive remedies as provided for in the Agreement on Implementation of Article VI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures.
268
c) Relevant legal provisions in the EU-Korea FTA:
30. Korea Free Trade Agreement
• In the body of the Agreement:
Chapter 3
Section D
Anti-Dumping and Countervailing Duties
Article 3.8: General Provisions
1. Except as otherwise provided for in this Chapter, the Parties maintain their rights and obligations under Article VI of GATT 1994, the Agreement on Implementation of Article VI of GATT 1994, contained in Annex 1A to the WTO Agreement (hereinafter referred to as the “Anti-Dumping Agreement”) and the Agreement on Subsidies and Countervailing Measures, contained in Annex 1A to the WTO Agreement (hereinafter referred to as the “SCM Agreement”).
2. The Parties agree that anti-dumping and countervailing duties should be used in full compliance with the relevant WTO requirements and should be based on a fair and transparent system as regards proceedings affecting goods originating in the other Party. For this purpose the Parties shall ensure, immediately after any imposition of provisional measures and in any case before the final determination, full and meaningful disclosure of all essential facts and considerations which form the basis for the decision to apply measures, without prejudice to Article 6.5 of the Anti-Dumping Agreement and Article 12.4 of the SCM Agreement. Disclosures shall be made in writing, and allow interested parties sufficient time to make their comments.
3. In order to ensure the maximum efficiency in handling anti-dumping or countervailing duty investigations, and in particular considering the adequate right of defence, the use of English shall be accepted by the Parties for documents
269
filed in anti-dumping or countervailing duty investigations. Nothing in this paragraph shall prevent Korea from requesting a clarification written in Korean if:
(a) the meaning of the documents filed is not deemed reasonably clear by Korea’s investigating authorities for the purposes of the anti-dumping or countervailing duty investigation; and
(b) the request is strictly limited to the part which is not reasonably clear for the purposes of the anti-dumping or countervailing duty investigation.
4. Provided that it does not unnecessarily delay the conduct of the investigation, interested parties shall be granted the opportunity to be heard in order to express their views during the anti-dumping or countervailing duty investigations.
Article 3.9: Notification
1. After receipt by a Party’s competent authorities of a properly documented antidumping application with respect to imports from the other Party, and no later than 15 days before initiating an investigation, the Party shall provide written notification to the other Party of its receipt of the application.
2. After receipt by a Party’s competent authorities of a properly documented countervailing duty application with respect to imports from the other Party, and before initiating an investigation, the Party shall provide written notification to the other Party of its receipt of the application and afford the other Party a meeting to consult with its competent authorities regarding the application.
Article 3.10: Consideration of public interests
The Parties shall endeavor to consider the public interests before imposing an anti-dumping or countervailing duty.
Article 3.11: Investigation after termination resulting from a review
270
The Parties agree to examine, with special care, any application for initiation of an antidumping investigation on a good originating in the other Party and on which anti-dumping measures have been terminated in the previous 12 months as a result of a review. Unless this pre-initiation examination indicates that the circumstances have changed, the investigation shall not proceed.
Article 3.12: Cumulative Assessment
When imports from more than one country are simultaneously subject to anti-dumping or countervailing duty investigation, a Party shall examine, with special care, whether the cumulative assessment of the effect of the imports of the other Party is appropriate in light of the conditions of competition between the imported goods and the conditions of competition between the imported goods and the like domestic goods.
Article 3.13: De-minimis standard applicable to review
1. Any measure subject to a review pursuant to Article 11 of the Anti-Dumping Agreement shall be terminated where it is determined that the likely recurring dumping margin is less than the de-minimis threshold set out in Article 5.8 of the Anti-Dumping Agreement.
2. When determining individual margins pursuant to Article 9.5 of the Anti-Dumping Agreement, no duty shall be imposed on exporters or producers in the exporting Party for which it is determined, on the basis of representative export sales, that the dumping margin is less than the de-minimis threshold set out in Article 5.8 of the Anti-Dumping Agreement.
Article 3.14: Lesser duty rule
Should a Party decide to impose an anti-dumping or countervailing duty, the amount of such duty shall not exceed the margin of dumping or countervailable subsidies, and it should be less than the margin if such lesser duty would be adequate to remove the injury to the domestic industry.
Article 3.15: Dispute settlement
Neither Party may have recourse to Chapter Fourteen (Dispute Settlement) for any matter arising under this Section.
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Section E
Institutional Provisions
Article 3.16: Working group on trade remedy co-operation
1. The Working Group on Trade Remedy Co-operation established pursuant to Article 15.3.1 (Working Groups) is a forum for dialogue for trade remedy co-operation.
2. The functions of the Working Group shall be to:
(a) enhance a Party’s knowledge and understanding of the other Party’s trade remedy laws, policies and practices;
(b) oversee the implementation of this Chapter;
(c) improve co-operation between the Parties’ authorities having responsibility for matters on trade remedies;
(d) provide a forum for the Parties to exchange information on issues relating to anti-dumping, subsidies and countervailing measures and safeguards;
(e) provide a forum for the Parties to discuss other relevant topics of mutual interest including;
(i) international issues relating to trade remedies, including issues relating
to the WTO Doha Round Rules negotiations; and
(ii) practices by the Parties’ competent authorities in anti-dumping, and countervailing duty investigations such as the application of “facts available” and verification procedures; and
(f) co-operate on any other matters that the Parties agree as necessary.
3. The Working Group shall normally meet annually and, if necessary, additional meetings could be organised at the request of either Party.
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ANNEX 6: Table on statistics on anti-dumping and countervailing duties applied by the EU with its FTA partners
(*No statistics are provided for the Republic of Korea, as the EU-Korea FTA has not entered into force yet. The Agreement between the EU and CARIFORUM is the only EPA provisionally applied.
**Below the name of each country, the date of entry into force of the agreement with the EU is given.)
1996 1997 1998 1999 2000 2001 2002
1. Albania
(2009)
- - - - - - -
2. Algeria
(2005)
- - - New AD investigation on imports of solutions of urea and ammonium nitrate.
Imposition of provisional AD duties on imports of solutions of urea and ammonium nitrate.
Imposition of definitive AD duties on imports of solutions of urea and ammonium nitrate.
- -
3. Bosnia and Herzegovina
- - - - - - -
273
(2008)
4. CARIFORUM
(2008)
- - - - - - -
6. Chile
(2005)
- - - - - - New AD investigation on imports of salmon.
7. Croatia
(2005)
- - New AD investigation on imports of seamless pipes and tubes.
New AD investigation on imports of malleable cast iron tube or pipe fittings.
Imposition of provisional AD duties on imports of seamless pipes and tubes.
New AD investigation on imports of urea.
Imposition of definitive AD duties on imports of seamless pipes and tubes of non-alloy steel.
Decision for non-imposition of AD measures on imports of tube or pipe fittings (malleable cast iron).
Imposition of provisional AD duties on imports of urea.
Imposition of definitive AD duties on imports of urea.
8. Egypt
(2004)
New AD investigation on imports of
New AD investigation on
Imposition of provisional AD duties on
- New AD investigation on imports of
New AD investigation on imports of flat-
-
274
cotton-type bed linen.
Imposition of provisional AD duties on imports of unbleached cotton fabrics.
imports of cotton grey fabrics.
Imposition of provisional AD duties on imports of cotton-type bed linen.
Imposition of definitive AD duties on imports of cotton-type bed linen.
imports of cotton fabric (unbleached).
Decision for non-imposition of AD measures on imports of cotton fabric (unbleached).
urea.
rolled products of iron or non-alloy steel (hot-rolled coils).
New AD investigation on imports of rubber-grade carbon blacks.
Decision for non-imposition of AD measures on imports of urea.
9. Faroe Islands
(1997)
- - - - - - New AD investigation on imports of salmon.
New AD investigation on imports of large rainbow trout.
10. FYROM
(2004)
- - - - - - -
11. Israel
(2000)
- - - - - - -
12. Jordan
(2002)
- - - - - - -
13. Lebanon
(2006)
- - - - - - -
14. Mexico Imposition of Imposition of New AD Imposition of - - -
275
(2000) provisional AD duties on imports of magnetic disks (3, 5’’ microdisks).
definitive AD duties on imports of lighters (gas-fuelled, non-refillable pocket flint lighters).
investigation on imports of steel stranded ropes and cables.
provisional AD duties on imports of steel ropes and cables.
Imposition of definitive AD duties on imports of steel ropes and cables.
15. Montenegro
(2010)
- - - - - - -
16. Morocco
(2000)
- - - - - - -
17. Palestinian Authority
(1997)
- - - - - - -
18. Serbia
(2010)
- - - - - - -
19. South Africa
(2000)
- - New AD investigation on imports of steel stranded ropes and cables.
New AD investigation
New AD investigation on imports of flat rolled products of iron or non-alloy steel.
New CVD investigation on
Imposition of definitive AD duties on imports of flat rolled products of iron or non-alloy steel (hot
- -
276
on imports of stainless steel heavy plates.
imports of flat rolled products of iron or non-alloy steel.
Imposition of provisional AD duties on imports of steel ropes and cables.
Imposition of definitive AD duties on imports of steel ropes and cables.
Decision for non-imposition of AD duties on stainless steel heavy plates.
rolled coils).
Decision for non-imposition of CVD on imports of flat rolled products of iron or non-alloy steel (hot rolled coils).
20. Swiss Confederation
(1973)
- - - - - - -
21. Tunisia
(1998)
- Decision for non-imposition of AD measures on imports of portland cement.
- - - - -
277
22. Turkey
(1995)
Imposition of provisional AD duties on imports of unbleached cotton fabrics.
Decision for non-imposition of AD measures on imports of cotton fabrics.
Decision for non-imposition of AD measures on imports of bed linen.
New AD investigation on imports of cotton grey fabrics.
Decision for non-imposition of AD measures on imports of portland cement.
Imposition of provisional AD duties on imports of cotton fabric (unbleached).
Decision for non-imposition of AD measures on imports of cotton fabric (unbleached).
New AD investigation on imports of steel wire rod.
New AD investigation on imports of steel ropes and cables.
New AD investigation on imports of paracetamol.
New AD investigation on imports of colour television receivers.
Decision for non-imposition of AD measures on imports of steel wide rod.
New AD investigation on imports of flat-rolled products of iron or non-alloy steel (hot-rolled coils).
New AD investigation on imports of welded tubes and pipes, of iron or non-alloy steel.
Imposition of provisional AD duties on imports of steel ropes and cables.
Imposition of definitive AD duties on imports of steel ropes and cables.
Decision for non-imposition of AD measures on imports of colour television receivers.
Decision for non-imposition of AD measures on
New AD investigation on imports of hollow sections.
Imposition of provisional AD duties on imports of welded tubes and pipes, of iron or non-alloy steel.
Imposition of definitive AD duties on imports of welded tubes and pipes, of iron or non-alloy steel.
278
imports of paracetamol.
2003 2004 2005 2006 2007 2008 2009
1. Albania
(2009)
- - - - - - -
2. Algeria
(2005)
- - - - - - -
3. Bosnia and Herzegovina
(2008)
- - - - New AD investigation opened on import of welded tubes and pipes, of iron or non-alloy steel.
Decision for non-imposition of AD duties on imports of welded tubes and pipes, of iron or non-alloy steel.
-
4. CARIFORUM
(2008)
- - - - - - -
6. Chile
(2005)
Decision for non-imposition of AD duties on imports of salmon.
- - - - - -
7. Croatia - - New AD investigation
Imposition of definitive AD
- Repeal of definitive AD
-
279
(2005) on imports of seamless pipes and tubes, of iron or steels.
duties on imports of seamless pipes and tubes, of iron or steels.
duties on imports on urea.
8. Egypt
(2004)
Decision for non-imposition of AD duties on imports of flat-rolled products of iron or non-alloy steel / hot rolled coils.
Decision for non-imposition of AD duties on imports of rubber-grade carbon blacks.
- - New AD investigation opened on imports of ferro-silicon.
Imposition of provisional AD duties on imports of ferro-silicon.
Imposition of definitive AD duties on imports of ferro-silicon.
-
9. Faroe Islands
(1997)
Imposition of provisional AD duties on imports of large rainbow trout.
Decision for non-imposition of AD duties on imports of salmon.
Imposition of definitive AD duties on imports of large rainbow trout.
- - - - -
10. FYROM
(2004)
- - - New AD investigation
Imposition of provisional
Imposition of definitive AD
Repeal of the AD duty imposed on imports of
280
opened on imports of ferro-silicon.
AD duties on imports of ferro-silicon.
duties on imports of ferro-silicon.
ferro-silicon.
11. Israel
(2000)
- - - - - - -
12. Jordan
(2002)
- - - - - - -
13. Lebanon
(2006)
- - - - - - -
14. Mexico
(2000)
- - - - - - -
15. Montenegro
(2010)
- - - - - - -
16. Morocco
(2000)
- - - - - -
17. Palestinian Authority
(1997)
- - - - - - -
18. Serbia
(2010)
- - - - - - -
19. South Africa
(2000)
- - Imposition of definitive AD duties on
New AD investigation opened on
Imposition of provisional AD duties on
Imposition of definitive AD duties on imports
-
281
imports of steel ropes and cables.
imports of manganese dioxides.
imports of manganese dioxides.
of manganese dioxides.
20. Swiss Confederation
(1973)
- - - - - - -
21. Tunisia
(1998)
- - - - - - -
22. Turkey
(1995)
Decision for non-imposition of AD duties on imports of flat-rolled products of iron or non-alloy steel / hot rolled coils.
Imposition of provisional AD duties on imports of hollow sections.
Decision for non-imposition of definitive AD duties on imports of hollow sections.
- Imposition of definitive AD duties on imports of iron or steel ropes and cables.
New AD investigation opened on imports of pentaerythritol.
Decision for non-imposition of AD duties on imports of pentaerythritol.
Decision for non-imposition of AD duties on imports of welded tubes and pipes, of iron or non-alloy steel.
New AD investigation on imports of wire rod.
New AD investigation on imports of welded tubes, pipes and hollow profiles of square or rectangular cross-section, of iron other than cast iron or steel other than
Decision for non-imposition of AD duties on imports of wire rod.
Decision for non-imposition of AD duties on imports of welded tubes, pipes and hollow profiles of square or rectangular cross-section, of iron other than cast iron or steel other than stainless.
282
stainless.
Decision for non-imposition of AD duties on imports of welded tubes of iron or non-alloy steel.
b) Statistics on Anti-Dumping and Anti-Subsidy proceedings against the EU-10, before their accession to the EU (2004):
(*Below the name of each country, the date of entry into force of the respective ‘Europe agreement’, if existing, is given.)
1996 1997 1998 1999 2000 2001 2002 2003
1.Cyprus - - - - - - - -
2.The Czech Republic
(1995)
New AD investigation on imports of seamless pipes and tubes, of iron or non-alloy steel.
Imposition of definitive AD duties on imports of hematite pig
Imposition of provisional AD duties on imports of seamless pipes and tubes, or iron or non-alloy steel.
Imposition of definitive AD duties on imports of
New AD investigation on imports of polypropylene binder or baler twine.
Imposition of provisional AD duties on imports of polypropylene binder or baler twine.
New AD investigation on imports of malleable cast iron tube or pipe fittings.
Imposition of definitive AD duties on imports of polypropyle
New AD investigation on imports of steel ropes and cables.
Imposition of provisional AD duties on imports of tube or pipe fittings
New AD investigation on imports of tube and pipe fittings, of iron or steel.
New AD investigation on imports of welded tubes and pipes, of
Imposition of provisional AD duties on imports of welded tubes and pipes, of iron or non-alloy steel.
Imposition of definitive AD duties on imports of tube and pipe
-
283
iron.
Decision for non-imposition of AD measures on imports of portland cement.
seamless pipes and tubes, of iron or non-alloy steel.
Decision for non-imposition of AD measures on imports of steel section of iron or non-alloy steel.
ne binder or baler twine.
(malleable cast iron).
Imposition of definitive AD duties on imports of tube or pipe fittings (malleable cast iron).
iron or non-alloy steel.
Imposition of provisional AD duties on imports of steel ropes and cables.
Imposition of definitive AD duties on imports of steel ropes and cables.
fittings, of iron or steel.
Imposition of definitive AD duties on imports of welded tubes and pipes, of iron or non-alloy steel.
3.Estonia
(1998)
- New AD investigation on imports of hardboard.
Imposition of provisional AD duties on imports of hardboard.
Imposition of definitive AD duties on imports of hardboard.
New AD investigation on imports of urea.
Imposition of provisional AD duties on imports of urea.
Imposition of definitive AD duties on imports of urea.
-
4.Hungary
(1994)
- Decision for non-imposition of AD measures on imports of steel section of iron or non-alloy steel.
New AD investigation on imports of polypropylene binder or baler twine.
New AD investigation on imports of steel stranded
Imposition of provisional AD duties on imports of steel ropes and cables.
Imposition of definitive
- New AD investigation on imports of flat-rolled products of iron or non-alloy steel (hot-rolled coils).
- Decision for non-imposition of AD measures on imports of flat-rolled products of iron or non-alloy steel (hot-rolled coils).
284
ropes and cables.
Imposition of provisional AD duties on imports of polypropylene binder or baler twine.
AD duties on imports of polypropylene binder or baler twine.
Imposition of definitive AD duties on imports of steel ropes and cables.
5.Latvia
(1998)
- New AD investigation on imports of hardboard.
Imposition of provisional AD duties on imports of hardboard.
Imposition of definitive AD duties on imports of hardboard.
- - - -
285
6.Lithuania
(1998)
- New AD investigation on imports of hardboard.
Imposition of provisional AD duties on imports of hardboard.
New AD investigation on imports of solutions of urea and ammonium nitrate.
New AD investigation on imports of cathode-ray colour television picture tubes.
New AD investigation on imports of ammonium nitrate.
Imposition of definitive AD duties on imports of hardboard.
New AD investigation on imports of urea.
Imposition of provisional AD duties on imports of solutions of urea and ammonium nitrate.
Imposition of definitive AD duties on imports of solutions of urea and ammonium nitrate.
Decision for non-imposition of AD measures on imports of colour television picture tubes (cathode-ray).
New AD investigation on imports of filament yarns of cellulose acetate.
Imposition of provisional AD duties on imports of urea.
Decision for non-imposition of AD duties on ammonium nitrate.
Imposition of provisional AD duties on imports of filament yarn of cellulose acetate.
Imposition of definitive AD duties on imports of urea.
Decision for non-imposition of AD measures on imports of filament yarns of cellulose acetate.
7.Malta - - - - - - - -
286
8.Poland
(1994)
Decision for non-imposition of AD measures on imports of portland cement.
New AD investigation on imports of hardboard.
Imposition of provisional AD duties on imports of unwrought, unalloyed zinc.
Imposition of provisional AD duties on imports of flat pallets of wood.
Imposition of definitive AD duties on imports of unwrought, unalloyed zinc.
Imposition of definitive AD duties on imports of flat pallets of wood.
New AD investigation on imports of polypropylene binder or baler twine.
New AD investigation on imports of steel stranded ropes and cables.
Imposition of provisional AD duties on imports of hardboard.
Imposition of provisional AD duties on imports of polypropylene binder or baler twine.
New AD investigation on imports of ammonium nitrate.
Imposition of provisional AD duties on imports of steel ropes and cables.
Imposition of definitive AD duties on imports of hardboard.
Imposition of definitive AD duties on imports of polypropylene binder or baler twine.
Imposition of definitive AD duties on imports of steel
New AD investigation on imports of welded tubes and pipes, of iron or non-alloy steel.
Imposition of definitive AD duties on ammonium nitrate.
Decision for non-imposition of AD measures on imports of urea.
New AD investigation on imports of grain oriented electrical sheets and strips.
Imposition of provisional AD duties on imports of welded tubes and pipes, of iron or non-alloy steel.
Imposition of definitive AD duties on imports of welded tubes and pipes, of iron or non-alloy steel.
Decision for non-imposition of AD measures on imports of grain-oriented electrical sheets and strips.
287
ropes and cables.
9.Slovakia
(1995)
New AD investigation on imports of seamless pipes and tubes, of iron or non-alloy steel.
Decision for non-imposition of AD measures on imports of portland cement.
Imposition of provisional AD duties on imports of seamless pipes and tubes, or iron or non-alloy steel.
Imposition of definitive AD duties on imports of seamless pipes and tubes, of iron or non-alloy steel.
- New AD investigation on imports of solutions of urea and ammonium nitrate.
Decision for non-imposition of AD measures on imports of solutions of urea and ammonium nitrate.
New AD investigation on imports of tube and pipe fittings, or iron or steel.
New AD investigation on imports of flat-rolled products of iron or non-alloy steel (hot-rolled coils).
Imposition of definitive AD duties on imports of tube and pipe fittings, of iron or steel.
Decision for non-imposition of AD measures on imports of flat-rolled products of iron or non-alloy steel (hot-rolled coils).
10.Slovenia
(1999)
- - New AD investigation on imports of stainless steel heavy plates.
Decision for non-imposition of AD duties on stainless steel heavy plates.
- - - -
288
ANNEX 7: EU regulatory framework: sanitary and phytosanitary measures affecting Vietnamese exports 77
1) EU regulatory framework on food safety:
• Council Regulation (EEC) No 2377/90 of 26 June 1990 laying down a Community procedure for the establishment of maximum residue limits of veterinary medicinal products in foodstuffs of animal origin;
• Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety;
• Regulation (EC) No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene of foodstuffs; • Regulation (EC) No 853/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific hygiene rules for
food of animal origin; • Regulation (EC) No 854/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific rules for the
organisation of official controls on products of animal origin intended for human consumption; • Regulation (EC) No 882/2004 of the European Parliament and of the Council of 29 April 2004 on official controls performed to ensure
the verification of compliance with feed and food law, animal health and animal welfare rules; • Regulation (EC) No 396/2005 of the European Parliament and of the Council of 23 February 2005 on maximum residue levels of
pesticides in or on food and feed of plant and animal origin and amending Council Directive 91/414/EEC; • Commission Regulation (EC) No 2073/2005 of 15 November 2005 on microbiological criteria for foodstuffs; • Commission Regulation (EC) No 1250/2008 of 12 December 2008 amending Regulation (EC) No 2074/2005 as regards certification
requirements for import of
77 This Annex does not contain information on the EU regulatory framework on Genetically Modified Organisms (i.e., GMOs).
289
• fishery products, live bivalve molluscs, echinoderms, tunicates and marine gastropods intended for human consumption;
• Council Directive 89/107/EEC of 21 December 1988 on the approximation of the laws of the Member States concerning food additives authorized for use in foodstuffs intended for human consumption;
• European Parliament and Council Directive No 95/2/EC of 20 February 1995 on food additives other than colours and sweeteners;
• Council Directive 96/22/EC of 29 April 1996 concerning the prohibition on the use in stockfarming of certain substances having a hormonal or thyrostatic action and of ß-agonists, and repealing Directives 81/602/EEC, 88/146/EEC and 88/299/EEC;
• Council Directive 96/23/EC of 29 April 1996 on measures to monitor certain substances and residues thereof in live animals and animal products and repealing Directives 85/358/EEC and 86/469/EEC and Decisions 89/187/EEC and 91/664/EEC;
• Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs; and
• Council Directive 2002/99/EC of 16 December 2002 laying down the animal health rules governing the production, processing, distribution and introduction of products of animal origin for human consumption.
2) EU legislation relevant to fishery and aquaculture products:
a) General food safety legislation with fish-specific provisions
• Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety;
• Regulation (EC) No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene of foodstuffs;
• Regulation (EC) No 853/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific hygiene rules for food of animal origin;
• Regulation (EC) No 854/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific rules for the organisation of official controls on products of animal origin intended for human consumption;
• Regulation (EC) No 396/2005 of the European Parliament and of the Council of 23 February 2005 on maximum residue levels of pesticides in or on food and feed of plant and animal origin and amending Council Directive 91/414/EEC;
• Council Regulation (EEC) No 2377/90 of 26 June 1990 laying down a Community procedure for the establishment of maximum residue limits of veterinary medicinal products in foodstuffs of animal origin;
• Regulation (EC) No 882/2004 of the European Parliament and of the Council of 29 April 2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules;
• Commission Regulation (EC) No 2074/2005 of 5 December 2005 laying down implementing measures for certain products under Regulation (EC) No 853/2004
290
of the European Parliament and of the Council and for the organisation of official controls under Regulation (EC) No 854/2004 of the European Parliament and of the Council and Regulation (EC) No 882/2004 of the European Parliament and of the Council, derogating from Regulation (EC) No 852/2004 of the European Parliament and of the Council and amending Regulations (EC) No 853/2004 and (EC) No 854/2004;
• Commission Regulation (EC) No 2073/2005 of 15 November 2005 on microbiological criteria for foodstuffs;
• Commission Regulation (EC) No 2076/2005 of 5 December 2005 laying down transitional arrangements for the implementation of Regulations (EC) No 853/2004, (EC) No 854/2004 and (EC) No 882/2004 of the European Parliament and of the Council and amending Regulations (EC) No 853/2004 and (EC) No 854/2004;
• Commission Regulation (EC) No 1881/2006 of 19 December 2006 setting maximum levels for certain contaminants in foodstuffs;
• Council Directive 96/22/EC of 29 April 1996 concerning the prohibition on the use in stockfarming of certain substances having a hormonal or thyrostatic action and of ß-agonists, and repealing Directives 81/602/EEC, 88/146/EEC and 88/299/EEC;
• Council Directive 96/23/EC of 29 April 1996 on measures to monitor certain substances and residues thereof in live animals and animal products and repealing Directives 85/358/EEC and 86/469/EEC and Decisions 89/187/EEC and 91/664/EEC; and
• Council Directive 97/78/EC of 18 December 1997 laying down the principles governing the organisation of veterinary checks on products entering the Community from third countries.
b) Legislation specific for fishery and aquaculture products
• Council Regulation (EC) No 1093/94 of 6 May 1994 setting the terms under which fishing vessels of a third country may land directly and market their catches at Community ports;
• Council Regulation (EC) No 104/2000 of 17 December 1999 on the common organisation of the markets in fishery and aquaculture products;
• Commission Regulation (EC) No 2065/2001 of 22 October 2001 laying down detailed rules for the application of Council Regulation (EC) No 104/2000 as regards informing consumers about fishery and aquaculture products;
• Regulation (EC) No 854/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific rules for the organisation of official controls on products of animal origin intended for human consumption;
• Council Directive 2006/88/EC of 24 October 2006 on animal health requirements for aquaculture animals and products thereof, and on the prevention and control of certain diseases in aquatic animals;
• 97/296/EC: Commission Decision of 22 April 1997 drawing up the list of third countries from which the import of fishery products is authorized for human consumption;
• 2003/804/EC: Commission Decision of 14 November 2003 laying down the animal health conditions and certification requirements for imports of molluscs, their eggs and gametes for further growth, fattening, relaying or human consumption; and
• 2003/858/EC: Commission Decision of 21 November 2003 laying down the animal health conditions and certification requirements for imports of live fish, their eggs and gametes intended for farming, and live fish of aquaculture origin and products thereof intended for human consumption.
291
3) Plant health requirements:
• Council Directive 2000/29/EC of 8 May 2000 on protective measures against the introduction into the Community of organisms harmful to plants or plant products and against their spread within the Community.
ANNEX 8: EU regulatory framework: technical barriers to trade affecting selected Vietnamese exports 78
1) EU regulatory framework on garments and textiles:
• Regulation (EC) No 1907/2006 of the European Parliament of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC;
• Council Directive 73/44/EEC of 26 February 1973 on the approximation of the laws of the Member States relating to the quantitative analysis of ternary fibre mixtures;
• Council Directive 88/378/EEC of 3 May 1988 on the approximation of the laws of the Member States concerning the safety of toys;
• European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste;
• Directive 96/73/EC of the European Parliament and of the Council of 16 December 1996 on certain methods for the quantitative analysis of binary textile fibre mixtures;
• Directive 96/74/EC of the European Parliament and of the Council of 16 December 1996 on textile names; and
• Directive 2008/121/EC of the European Parliament and of the Council of 14 January 2009 on textile names.
2) EU regulatory framework on footwear:
• Regulation (EC) No 1907/2006 of the European Parliament of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC;
• Directive 94/11/EC of the European Parliament and of the Council of 23 March 1994 on the approximation of the laws, regulations and administrative provisions of the Member States relating to labelling of the materials used in the main components of footwear for sale to the consumer; and
78 This Annex does not contain information on the EU regulatory framework on Genetically Modified Organisms (i.e.,
GMOs).
292
• European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste.
3) EU regulatory framework on plastic products:
• Regulation (EC) No 1907/2006 of the European Parliament of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC;
• European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste; and
• Commission Directive 2002/72/EC of 6 August 2002 relating to plastic materials and articles intended to come into contact with foodstuffs.
4) EU regulatory framework on wood products: • Council Regulation (EC) No 2173/2005 of 20 December 2005 on the establishment of a
FLEGT licensing scheme for imports of timber into the European Community; • Regulation (EC) No 1907/2006 of the European Parliament of the Council of 18 December
2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC;
• Proposal for a Regulation of the European Parliament and of the Council laying down the obligations of operators who place timber and timber products on the market {SEC(2008) 2615} {SEC(2008) 2616};
• Council Directive 88/378/EEC of 3 May 1988 on the approximation of the laws of the Member States concerning the safety of toys;
• European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste;
• Directive 98/8/EC of the European Parliament and of the Council of 16 February 1998 concerning the placing of biocidal products on the market; and
• The 2006 International Tropical Timber Agreement – European Community Declaration in accordance with Article 36(3) of the Agreement – Declaration of EC – Implementation in EU.
5) EU regulatory framework on electric and electronic products: • Regulation (EC) No 1907/2006 of the European Parliament of the Council of 18 December
2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC;
• Council Directive 88/378/EEC of 3 May 1988 on the approximation of the laws of the Member States concerning the safety of toys;
• Council Directive 89/336/EEC of 3 May 1989 on the approximation of the laws of the Member States relating to electromagnetic compatibility
293
• European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste;
• Directive 96/57/EC of the European Parliament and of the Council of 3 September 1996 on energy efficiency requirements for household electric refrigerators, freezers and combinations thereof;
• Directive 98/37/EC of the European Parliament and of the Council of 22 June 1998 on the approximation of the laws of the Member States relating to machinery;
• Directive 1999/5/EC of the European Parliament and of the Council of 9 March 1999 on radio equipment and telecommunications terminal equipment and the mutual recognition of their conformity;
• Directive 2002/95/EC of the European Parliament and of the Council of 27 January 2003 on the restriction of the use of certain hazardous substances in electrical and electronic equipment;
• Directive 2002/96/EC of the European Parliament and of the Council of 27 January 2003 on waste electrical and electronic equipment (WEEE) - Joint declaration of the European Parliament, the Council and the Commission relating to Article 9;
• Directive 2004/108/EC of the European Parliament and of the Council of 15 December 2004 on the approximation of the laws of the Member States relating to electromagnetic compatibility and repealing Directive 89/336/EEC;
• Directive 2005/32/EC of the European Parliament and of the Council of 6 July 2005 establishing a framework for the setting of ecodesign requirements for energy-using products and amending Council Directive 92/42/EEC and Directives 96/57/EC and 2000/55/EC of the European Parliament and of the Council;
• Directive 2006/66/EC of the European Parliament and of the Council of 6 September 2006 on batteries and accumulators and waste batteries and accumulators and repealing Directive 91/157/EEC;
• Directive 2006/95/EC of the European Parliament and of the Council of 12 December 2006 on the harmonisation of the laws of Member States relating to electrical equipment designed for use within certain voltage limits; and
• Commission communication in the framework of the implementation of Directive 2004/108/EC of the European Parliament and of the Council of 15 December 2004 on the approximation of the laws of the member states relating to electromagnetic compatibility and repealing Directive 89/336/EEC.
6) EU regulatory framework on fish and fishery products:
• Regulation (EC) No 853/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific hygiene rules for food of animal origin;
• Council Regulation (EC) No 1005/2008 of 29 September 2008 establishing a Community system to prevent, deter and eliminate illegal, unreported and unregulated fishing, amending Regulations (EEC) No 2847/93, (EC) No 1936/2001 and (EC) No 601/2004 and repealing Regulations (EC) No 1093/94 and (EC) No 1447/1999;
• European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste;
• Directive 98/8/EC of the European Parliament and of the Council of 16 February 1998 concerning the placing of biocidal products on the market; and
• Commission Directive 2002/72/EC of 6 August 2002 relating to plastic materials and articles intended to come into contact with foodstuffs.
7) EU regulatory framework on agricultural and food products:
294
• Commission Regulation (EC) No 1221/2008 of 5 December 2008 amending Regulation (EC) No 1580/2007 laying down implementing rules of Council Regulations (EC) No 2200/96, (EC) No 2201/96 and (EC) No 1182/2007 in the fruit and vegetable sector as regards marketing standards;
• Council Directive 79/117/EEC of 21 December 1978 prohibiting the placing on the market and use of plant protection products containing certain active substances;
• European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste;
• Directive 98/8/EC of the European Parliament and of the Council of 16 February 1998 concerning the placing of biocidal products on the market; and
• Commission Directive 2002/72/EC of 6 August 2002 relating to plastic materials and articles intended to come into contact with foodstuffs.
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