Communist Review - Over the past time, the successful negotiation and conclusion of several free trade agreements with Vietnam's major partners has brought numerous opportunities for economic growth and diversification of import-export markets, on the one hand, has created a driving force for national renovation, enhanced competitiveness and promoted economic development, improved people's lives, on the other hand.

Amid changing global economic and political landscape, while the economic and social life of most countries was hit by the COVID-19 viral pandemic, Vietnam has persisted in implementing major policies on international economic integration stipulated by Resolution No. 06-NQ/TW dated November 5, 2016, of the 4^th Plenum of the 12^th Party Central Committee on “effective implementation of the international economic integration process and firm maintenance of socio-political stability as Vietnam joins new-generation free trade agreements so that the national interest should reign supreme”.

By active and proactive collaboration, Vietnam is constantly expanding international economic relations and strategic partnerships with major economies in the world. This not only helps strengthen foreign relations, expand global partner networks, promote cultural exchange and friendship, but also enables socio-economic development. As of July 2021, Vietnam has concluded 15 free trade agreements (FTAs), opening up opportunities for businesses to expand markets and connect to global value chains and production networks. Notably, the fact that Vietnam is one of the few countries in the Asia-Pacific region to implement three new-generation FTAs (1), in which, the CPTPP Agreement ended negotiations when Vietnam was the Chairman of the Asia-Pacific Economic Cooperation (APEC), as well as the recent signing of the Regional Comprehensive Economic Partnership (RCEP), have demonstrated the efforts and determination of the Party and the State of Vietnam in reforming the economy to participate more deeply in regional and global value chains.

Achievements

Regarding the export of goods, FTAs ​​promote export and import growth. According to statistics issued by the General Department of Vietnam Customs, Vietnam's total import - export turnover reached over 545 billion USD in 2020. Only the first two quarters of 2021 recorded a turnover of over 10 billion USD of 5 export items and over 1 billion USD of 25 items.

The signing and implementation of FTAs ​​with partners, such as the Association of Southeast Asian Nations (ASEAN), China, Korea, Japan, India, Australia, and New Zealand,... has increased the Vietnam export to these markets. Compared with the first year when joining the ASEAN Free Trade Area (AFTA) in 1996, Vietnam's export turnover to ASEAN countries has increased more than 9 times (from 5.9 billion USD in 1996 to more than 53 billion USD in 2020). Similarly, Vietnam's export turnover to ASEAN's FTA market also achieved a higher growth rate compared with one recorded before FTA came into effect, in which, exports from Vietnam to China reached the highest rate (15 times higher) after more than 15 years; followed by Korea (a 6 times increase); India (a 5.2 times increase); Japan (a 3 times increase)...

For the European Union (EU), after 11 months since the EVFTA entered into force (from the beginning of August 2020 to the end of June 2021), Vietnam's export turnover to the EU market reached 35 billion USD (up 11.4% over the same period). Particularly in the first half of 2021, the two-way trade turnover between Vietnam and the EU attained 27.67 billion USD (up 18.4% over the same period in 2020). It is obvious that among ASEAN countries, Vietnam has risen to become the largest exporter to the EU. In particular, agricultural, forestry, and fishery products meet better and better regulations and technical standards of the EU market (2). In addition, many industrial items have experienced a relatively high growth rate in exports to the EU market in the 11 months since the EVFTA came into effect (3).

For countries that are members of the CPTPP Agreement, after two years of it coming into effect, in 2020, export turnover to the two countries that have ratified the Agreement in the Americas (Canada and Mexico) has grown strongly, by 45% and 41% respectively over the same period in 2018. Despite the difficulties caused by the COVID-19 pandemic, in the first 6 months of 2021, export turnover to Vietnam's CPTPP partners in the Americas obtained positive growth. As a result, the total two-way trade turnover reached 6.32 billion USD (up 35.7% over the same period in 2020), of which, Vietnam's exports to these countries were 5.48 billion USD (up 46.8%), imports reached 833.3 million USD (down 9.2%).

Besides, in the first 6 months of 2021, after the UK - Vietnam FTA came into effect, the total import- export turnover reached 3.29 billion USD (up 28% over the same period in 2020). Many items registered the highest growth in exports to the UK within 6 months since the UKVFTA came into force (4). With some partners in the Eurasian Economic Union (EAEU), exports in the first half of 2021 also increased by 14.9% over the same period in 2020, of which exports from Vietnam were estimated at 1.66 billion USD (up 31.3%); Imports from EAEU countries reached more than 1 billion USD (slightly down 4.5%) compared to the same period of 2020.

Thus, although the outbreak of COVID-19 pandemic has harmed global trade activities and limited traditional market access to Vietnamese products, the country's exports still achieved positive growth since businesses have seized the opportunity to boost exports to alternative markets, especially to FTA markets. This shows that the promotion of negotiations and the conclusion of FTAs ​​have helped diversify export markets, reducing the country’s dependence on a single market.

In particular, with the new generation FTAs, the requirements are very high, the benefits obtained are however higher than the old generation FTAs ​​that Vietnam has signed before. The timely and drastic implementation of FTAs ​​by ministries and sectors from early days also contributes to mitigating difficulties for the economy and business community hit by the pandemic.

In terms of attracting investment capital, effective FTAs ​​play a major role in attracting investment from Vietnam’s FTAs. Among 139 countries and territories with effective investment projects in Vietnam, signatories to FTAs with Vietnam occupy the first places, such as Korea (ranked first) with a total registered capital of over 70.6 billion USD (accounting for 18.4% of total investment capital); Japan (ranked second) with nearly 60.3 billion USD (accounting for 15.7% of total investment capital); followed by Singapore, China...

Regarding the impact by industry, for the industrial sector, FTAs ​​enables structure shifts of exports in a positive direction, increases the export of processed food products, reduce the proportion of raw and semi-processed products; increases the proportion of processed products, reduce the proportion of agricultural, forestry and fishery products; increases the proportion of FDI sector and private sector, and reduce the export proportion of the state economic sector. The structure of exports continued to improve in a positive direction as outlined in the Import and Export Strategy for the period 2011-2020, with a vision to 2030, with an increase in the proportion of process manufacturing products (from 82.9% in 2018 to 84.3% in 2019).

For other fields, such as agriculture, the participation in FTAs ​​contributes to promoting trade growth and diversifying markets and export products, facilitating the development of domestic production, creating jobs, improving income for farmers, introducing advanced technologies, enhancing productivity, quality, and competitiveness of agricultural, forestry and fishery products and improving the management system of technical standards and food safety, restructuring the domestic production and better utilizing the comparative advantage of agricultural, forestry and fishery products.

In terms of public governance, commitments stipulated by FTAs, especially new-generation FTAs ​​that set very high standards of transparency and ethical conduct for public governance… will enable a legally binding framework in the region (on trade policy, investment, intellectual property, e-commerce, dispute settlement,...) and a fair trade environment.

 Some challenges and limitations

Exploiting FTAs ​​has also revealed challenges and limitations that need to be overcome.

First of all, the global economic - political environment is unstable and unpredictable. The COVID-19 pandemic has hit all corners of the global, regional and national economies, shifting or even disrupting global supply chains; Protectionism has increased in many countries, while multilateral institutions, especially the World Trade Organization (WTO) have faced numerous obstacles in the process of reforming and managing;... These are big challenges facing Vietnam as the country is deepening international integration into the world and the region. Due consideration should be given to the implementation of FTAs ​​to ensure national interests.

Secondly, challenges come from competitive pressure on domestic products and businesses in the “home” market, especially in the Achilles' heel of Vietnam. Despite improvement, the competitiveness of Vietnam's economy, businesses and products is still weak compared to other countries, including countries in the region. There are few leading economic sectors and businesses that can dominate regional and global markets and motivate other industries and businesses to grow. Some products have begun to face competitive challenges, the growth rate of export turnover tends to decrease, the export structure is not diversified. Vietnam focuses only on agricultural, aquatic, textiles and footwear products, etc. The improvement of the competitiveness of products, enterprises, and the economy also depends on different factors, such as institutional and administrative reform, economic policies, the quality of human resources, the level of technological development. Therefore, only when these factors are given a particular priority, the competitiveness will be enhanced. In addition, human resources in many Vietnamese enterprises are unqualified, thus reducing the competitiveness against international rivals.

Thirdly, although public and corporate governance has made progress, it has not really met practical requirements in the new situation. Amid a rapidly changing world over the past time, public authorities and businesses are still confused in making predictions, causing inefficiency in the process of implementing policies and tasks set by the Party and State.

Fourthly, the lack of coherence between sectors has resulted in poor coordination among ministries, branches, central agencies and localities, enterprises. Many problems that have arisen in the course of interdisciplinary collaboration have not been promptly handled, especially in increasing investment efficiency, enhancing competitiveness, and synchronously developing market economy factors. International economic integration itself is an interdisciplinary issue. However, the issues of international economic integration and FTAs ​​are still implemented separately by ministries, branches, and localities, leading to the “mismatch” between them.

Fifthly, the ongoing FTAs bring countless challenges to deal with. It is noted that FDI firms take full advantage of preferential trade benefits better than domestic ones and big businesses seize opportunities offered by FTAs ​​better than small and medium enterprises.

Sixthly, the ability to identify, evaluate and make accurate predictions in order to promptly tackle problems arising during the implementation of FTAs ​​is still weak. The early warning system in the fields that Vietnam has deeply integrated into the world economy is not really effective.

Seventhly, during the development process, bottlenecks in institutions, infrastructure, human resources among others are unplugged, hindering national growth. Many new commitments on labor - union, environment, state-owned enterprises, government procurement, investment,… require new appropriate management institutions. Without good domestic preparations, including the building of new management institutions that are coherent from the central to local levels, it is difficult to ensure comprehensive and effective exploitation of FTAs.

Main solutions in the coming time

The results achieved in the process of international integration over the past time are only the first step. It is obvious that the competitiveness of the domestic economy and industries needs to be strongly improved in the coming time. It is challenging for local businesses to survive the international and domestic competition. Therefore, in order to gain benefits from FTAs, expand and diversify export markets, it is essential to focus on the following solutions:

First and foremost, it is crucial to formulate a new strategy on international economic integration through FTAs ​​for the current period; besides, focus on effectively implementing the FTAs ​​that Vietnam has joined, especially the new generation FTAs… to improve the balance of trade, stabilize the market in a long run and enhance the economic performance of the country.

Second, for markets without an FTA, it is important to select and limit “the access” to partners whose product structure directly competes with Vietnamese products. Amid the unpredictable COVID-19 pandemic disrupting the regional supply chain and the world economy, it is needful to consider expanding the export market with potential and large-scale partners that offer the complementary structure of products and do not directly compete for domestic products in order to diversify export destinations and reduce dependence on certain markets.

Third, due consideration should be given to developing and improving the legal system and policies to fully implement the commitments to international economic integration according to the set roadmap. In amending and supplementing current legal documents, it is necessary to ensure uniformity, efficiency, maintain a stable business and investment environment that does not harm the interests of existing and new investors. 

Fourth, it is necessary to promote the communication about Vietnam FTAs’ commitments in each specific field and industry so that businesses can grasp specific regulations related to their fields in the markets of FTA partner countries

Fifth, there should be close coordination from the central to local levels in reforming and simplifying administrative procedures, and perfecting the one-stop-shops for business licensing reform in favor of domestic and foreign investors, thereby, shortening the licensing time, cutting administrative costs, formalities of import and export, customs clearance and so forth, creating favorable conditions for investment and business as well as export - import.

Sixth, ministries and sectors should actively consult with associations, the Vietnam Chamber of Commerce and Industry (VCCI) to understand the difficulties and recommendations of businesses. Work hand in hand with businesses to find effective measures to solve problems that arise; support enterprises in the process of integration and implementation of commitments on international economic integration; listen to opinions and feedbacks of businesses on policymaking and obstacles during the international economic integration and in the process of negotiating and implementing FTAs, encourage and support businesses and individuals to conduct research, transfer, innovate technologies to improve the competitiveness of enterprises and products, promote international cooperation in the field of innovation, thus enabling the national technological innovation.

Seventh, it is crucial to raise awareness of the business community about international economic integration. Vietnamese enterprises need to well understand and make the most of the benefits gained from international economic integration; protect themselves in international commercial disputes through a clear understanding of market requirements; build strong brands, improve product reputation and quality to meet the requirements of export markets, especially the quarantine regulations stipulated by major and fastidious markets, focus on developing high-quality human resources.

It is noted that the effective implementation of FTAs ​​is one of the solutions to realize three strategic breakthroughs proposed by the 13^th Party Congress. All commitments, especially in the new generation FTAs, are consistent with the policy of the Party and State on harmonizing institutions, ensuring the consistency and synchronization of the policy and legal system, thereby, creating an open and flexible mechanism to facilitate business and investment activities. The effective use of market opening opportunities will certainly contribute to creating the necessary resources for national industrialization and modernization. Therefore, joint efforts made by ministries, branches, and localities to enhance effective implementation of FTAs ​​in the coming time constitute an ideal solution to implement the Resolution of the 13th Party Congress.

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(1) They are respectively: Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), European Union - Vietnam Free Trade Agreement (EVFTA), UK - Vietnam Free Trade Agreement (UKVFTA)

(2) Seafood products reached 894 million USD (up 14%); vegetables and fruits reached 137 million USD (up 7.4%); rice reached 13.7 million USD (up 13.9%), of which, for some commodities, such as rice, the preferential utilization rate was 100% - that means the total export increases thanks to the implementation of EVFTA

(3) For example, iron and steel increased by 346.8% over the same period in 2020; followed by plastic materials with an increase of 293.7%; rubber products increased by 67.3%; computers, electronic products, and components by 40.7%;...

(4) Iron and steel increased by 770.4% over the same period in 2020; followed by products from iron and steel with an increase of 186%; rattan, bamboo, sedge, and carpet increased by 105.6%; toys, sports equipment, and parts by 94.4%; means of transport and spare parts increased by 91.6%;...

This article was published in the Communist Review No. 975 (October 2021)