UK trade pact benefits Vietnam
The UK-Vietnam Free Trade Agreement (UKVFTA), which took effect on May 1, 2021, will see the elimination of virtually all customs duties between the two countries when it is fully implemented.
Outstanding tariff preferences
The British Embassy in Vietnam has forecast that Vietnam will save about US$151 million in tariffs from the deal, while the UK stands to save around US$36 million. Although the UKVFTA took effect at a time when the pandemic was ravaging the two countries, bilateral trade still reached US$6.6 billion in the pact’s first year.
In fact, 65 percent of all tariffs have already been eliminated from UK-Vietnam trade. In the first six years of the deal, the UK will eliminate 99.2 percent of tariff lines on Vietnam’s imports. This is higher than the terms of the EU-Vietnam Free Trade Agreement (EVFTA) with 70.3 percent tariff elimination. Vietnam pledges to eliminate 48.5 percent of tariffs, matching other EU countries under the EVFTA.
|Import tax on most types of Vietnam’s raw shrimp into the UK is being scrapped
Other tariff preferences in the UKVFTA include zeroing out import tax on most types of raw shrimp into the UK from 10-20 percent; a tax rate of zero percent in the next five years for wood products; and elimination of 94 percent of the total 547 tariff lines for fruits. The UK trade pact has retained the EU-Vietnam commitments on liberalizing public procurement and ensuring enforceable market access. Vietnam has committed to eliminating the economic needs test (ENT) applicable to secondary and subsequent retail establishments within five years.
The UKVFTA has yielded significant benefits to sectors and firms from both countries. British firms can exploit opportunities in sectors where the UK has advantages, especially in education, as Vietnamese parents are willing to spend big money on training courses for their children. Renewable energy is also a promising sector in Vietnam thanks to its great potential and government support, making it more attractive to foreign investors.
Given Vietnam’s increasingly improved and developed infrastructure to meet the pace of urbanization, railway and aviation sectors also present great opportunities for British investors. In addition, Vietnam’s growing middle class and aging population have resulted in rapidly growing demand for high-quality healthcare, opening up great opportunities for private services.
The year 2022 is critical for Vietnam to promote economic growth and restore it to their pre-pandemic levels. As a result, free trade agreements will play an increasingly important role in the country’s economic growth and business development. However, they must overcome numerous challenges, such as high sea freight rates, rising input costs, and the impacts of the Russia-Ukraine war.
|Cumbersome administrative procedures, customs and infrastructure delays are hindering Vietnamese businesses in making good use of free trade agreements. However, the government is making greater efforts to improve the Vietnamese business and investment environment and enhance its attraction.