asia.nikkei.com article - follow the link for more on free trade deals
Vietnam-EU deal faces major obstacles
ROBERTO TOFANI, Contributing writer, asia.nikkei.com
ROME -- Vietnam Prime Minister Nguyen Tan Dung is hoping to sign a free trade agreement with the European Union before the end of his term in 2016 but that's looking a little optimistic.
An FTA would bring substantial benefits. The EU is already Vietnam's second-largest trading partner after China but the trade deal could still boost the country's exports by 20%, according to the Konrad-Adenauer-Stiftung, a German political think tank. Europe would also get better access to Vietnam's market for selling its high-tech products. That might help to shrink its growing trade deficit with Vietnam, which grew steadily from 2.74 billion euros ($3.28 billion) in 2003 to 15.5 billion euros in 2013.
Still, the two sides are unlikely to reach an agreement until Vietnam makes marked improvements in public procurement processes, intellectual property protection and state-owned enterprise reform, say those familiar with the negotiations.
"From a European perspective, it is important for Vietnam to respect the exclusive rights to use Geographical Indications (GIs)," said Claudio Dordi, team leader of the EU's trade and investment support program for Vietnam. GIs is the name or sign used to show where goods, especially farm products, have originated.
Trademark conflicts
The problem lies in the fact that Vietnam is also negotiating with the U.S. over the Trans-Pacific Partnership multilateral trade deal and Washington wants all signatories to adhere to its own trademark system that could conflict with European GIs. For example, the Europeans insist that only cheese produced in a certain part of Italy can be called Parmesan cheese, but in the U.S., Parmesan is considered a generic term for certain hard cheeses. The same problem exists for Parma ham. An American prosciutto maker operates under the registered name of Parma Brand even though it is based in Pittsburgh, not Parma.
Vietnam will need to manage this kind of conflict between a U.S. trademark for "Parmesan cheese" and Europe's protected designation of the origin of "Parmesan cheese," said Dordi. Other countries in Asia face similar problems and there is no easy solution unless the EU and the U.S. agree to a compromise between themselves, he said.
Another problem, at least from Vietnam's point of view, is that its inefficient SOEs will be hard-pressed to compete with European competitors if they open up service sectors such as ports, logistics and communications. Ludo Cuyvers, director of the Center for Asean Studies at the University of Antwerp, said Vietnam SOEs are already under pressure to reform as they will have to compete with regional rivals when the Asean Economic Community, due to come into effect at the end of 2015, opens up Vietnam's market to its neighbors. To open the gate to more competition from the west may be too much for the SOEs to cope.
There has been some progress with the FTA negotiations. At the end of November, Vietnam's National Assembly passed the amended Enterprise Law and Investment Law, which are intended to provide more favorable conditions for foreign investment in Vietnam. Vietnam has also indicated it is ready to drop import duties on European products such as alcoholic beverages, according to an EU internal report that was written last March and seen by the Nikkei Asian Review.
Less emphasis on China
Politically, the Vietnamese government is keen to diversify its imports and buy less from China, with which it has maritime and territorial disputes in the South China Sea. In fact, Vietnam is courting stronger diplomatic support from the EU to back its claims against China. The prime minister raised the issue during his European tour in mid-October, when he also met European Commission President Jose Manuel Barroso for talks on the FTA.
Vietnam has a growing trade deficit with China. The latest figures from the Vietnamese statistics office shows Vietnam imported $39.9 billion worth of goods and services from China from January to November, up 18.9% year-on-year. That left Vietnam with a trade deficit of $26.4 billion, 22.1% more than the previous year.
As a result, Vietnam has been keen to negotiate FTA agreements with other countries in the region. One was sealed with South Korea on December 10.
The 11th round of FTA talks will take place this month in Vietnam and there is another round scheduled for early March in Brussels. If real progress is made at these talks, Prime Minister Nguyen may still see his dream come true, but there is certainly a lot more work to be done.
An FTA would bring substantial benefits. The EU is already Vietnam's second-largest trading partner after China but the trade deal could still boost the country's exports by 20%, according to the Konrad-Adenauer-Stiftung, a German political think tank. Europe would also get better access to Vietnam's market for selling its high-tech products. That might help to shrink its growing trade deficit with Vietnam, which grew steadily from 2.74 billion euros ($3.28 billion) in 2003 to 15.5 billion euros in 2013.
Still, the two sides are unlikely to reach an agreement until Vietnam makes marked improvements in public procurement processes, intellectual property protection and state-owned enterprise reform, say those familiar with the negotiations.
"From a European perspective, it is important for Vietnam to respect the exclusive rights to use Geographical Indications (GIs)," said Claudio Dordi, team leader of the EU's trade and investment support program for Vietnam. GIs is the name or sign used to show where goods, especially farm products, have originated.
Trademark conflicts
The problem lies in the fact that Vietnam is also negotiating with the U.S. over the Trans-Pacific Partnership multilateral trade deal and Washington wants all signatories to adhere to its own trademark system that could conflict with European GIs. For example, the Europeans insist that only cheese produced in a certain part of Italy can be called Parmesan cheese, but in the U.S., Parmesan is considered a generic term for certain hard cheeses. The same problem exists for Parma ham. An American prosciutto maker operates under the registered name of Parma Brand even though it is based in Pittsburgh, not Parma.
Vietnam will need to manage this kind of conflict between a U.S. trademark for "Parmesan cheese" and Europe's protected designation of the origin of "Parmesan cheese," said Dordi. Other countries in Asia face similar problems and there is no easy solution unless the EU and the U.S. agree to a compromise between themselves, he said.
Another problem, at least from Vietnam's point of view, is that its inefficient SOEs will be hard-pressed to compete with European competitors if they open up service sectors such as ports, logistics and communications. Ludo Cuyvers, director of the Center for Asean Studies at the University of Antwerp, said Vietnam SOEs are already under pressure to reform as they will have to compete with regional rivals when the Asean Economic Community, due to come into effect at the end of 2015, opens up Vietnam's market to its neighbors. To open the gate to more competition from the west may be too much for the SOEs to cope.
There's also the problem of non-tariff barriers that the Europeans are unwilling to drop. Vietnam considers the EU's rigid health, safety and environmental requirements as the greatest impediment to its exports. Some Vietnamese food exports have regularly been found to violate EU hygiene requirements and in October, the Vietnamese ministry of agriculture chose to suspend the export of certain types of vegetables to Europe after banned bacteria were found on samples. The EU also has discretionary power to ban the import of products that have violated the rules five times in a year.
Less emphasis on China
Politically, the Vietnamese government is keen to diversify its imports and buy less from China, with which it has maritime and territorial disputes in the South China Sea. In fact, Vietnam is courting stronger diplomatic support from the EU to back its claims against China. The prime minister raised the issue during his European tour in mid-October, when he also met European Commission President Jose Manuel Barroso for talks on the FTA.
Vietnam has a growing trade deficit with China. The latest figures from the Vietnamese statistics office shows Vietnam imported $39.9 billion worth of goods and services from China from January to November, up 18.9% year-on-year. That left Vietnam with a trade deficit of $26.4 billion, 22.1% more than the previous year.
As a result, Vietnam has been keen to negotiate FTA agreements with other countries in the region. One was sealed with South Korea on December 10.
The 11th round of FTA talks will take place this month in Vietnam and there is another round scheduled for early March in Brussels. If real progress is made at these talks, Prime Minister Nguyen may still see his dream come true, but there is certainly a lot more work to be done.
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