Vietnam’s participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) has expanded international destinations for Vietnam’s strategic produces while creating leverage in such markets due to reduced tariff duties. During 2020-2021 period, when the global economy was suffering financial consequences from the Covid-19 pandemic, Vietnam ranked number 1 in GDP in Southeast Asia due to increase in export of agricultural products.
On a more micro level, the domestic consumers have benefited from an increase in product quality. This is because farmers now have access to foreign advanced technology and farming procedures must dramatically change for the better to satisfy SPS and TBT requirements under the Free Trade Agreements.
Most exported products include aquatic products, vegetables and fruits, rice, and tea. Official data showed that the agriculture sector expanded by 2.74% during the January-September period and contributed significantly to Vietnam’s overall economic growth, affirming its role as a supporting pillar of the Vietnamese economy. To further its competitiveness on the global market, the Vietnam government has issued many measures to promote digital transformation in the agriculture sector, making it one of the priorities for the period 2021-2030.
A comparison between EVFTA and CPTPP commitments:
| EVFTA (1 August 2020)
|
CPTPP (14 January 2019) | |
| Tariff duties
|
||
| Aquatic produce | Remove immediately 50% of tariff lines, the remaining 50%: 3- 7 years
|
Remove almost all immediately, only a few tariff lines related to semi-processed seafood needs to wait 2-3 years.
|
| Vegetables | 520/560 of tariff lines immediately reduced to 0%; processed vegetables: 85.6% reduced to 0%
|
Remove all immediately for fresh tropical vegetables; processed vegetables: 3 – 5 years |
| Coffee beans, pepper | 93% of tariff lines reduced to 0%
|
9 countries removed tariffs immediately (except Mexico) |
| Cashew
|
0% | 0% |
| Rice | Broken rice: reduced to 0% after 5 years
Apply TRQ (80,000 tons)
|
6 countries: 0%
Mexico: 8-10 years Japan: no commitment |
| Forestry products | 87.55% of products: 0%
The remaining: 3-5 years
|
Remove almost all immediately for all Vietnam’s export products
|
| Tariff quota (TRQ) | Applicable to 9 groups of agricultural produce
|
Applicable to a few groups only |
| SPS
|
Same procedures for products of from all regions of the other Party (except for certain regions marked with diseases)
|
Advanced SPS procedure |
| Rule of Origin
|
Fully integrated rules of origin | Raised regional content requirements
|
As of March 2022, the UK has submitted its application to join the CPTPP.
EVFTA:
_ Under Chapter 2 (National Treatment and Market Access for Goods), each Party is required to reduce tariffs for goods originating from the other Party. Vietnam complied to this commitment by issuing Decree 111/2020/ND-CP of 18.09.2020 on Preferential export tariff schedule, special preferential import tariff schedule of Vietnam to implement the Free Trade Agreement between the Socialist Republic of Vietnam and the European Union in the 2020 – 2022 period.
_ The EU’s preferential tax rate under the EVFTA shall in no case be higher than the normal EU tax rate applicable to goods originating from Vietnam on the day before the effective date of the EVFTA. This obligation applies from that date to the 7th year after the entry into force of this Agreement.
CPTPP:
_ Rule of Origin: Apply “De Minimis” (Latin term) principle: the insignificant proportion of raw materials that have not undergone the process of code conversion but are still considered to be originating. This regulation was introduced by the negotiating countries with the aim of reducing difficulties in meeting the CTC origin criteria and diversifying to enjoy preferential tariffs in FTAs.
Please do not hesitate to contact Dr. Oliver Massmann under [email protected] if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
