Free-Trade negotiations between Vietnam and the European Union began Tuesday. This is incredibly exciting news for many reasons cited below. Before diving into the details of this potentia free-trade pact, I was reminded of my conversation with local Vietnamese business owners a couple years ago.
We were discussing the clothing industry in Vietnam. The gentleman before me was the owner of a growing clothing factory with business deals in Japan, Europe and America. Immediately within minutes of our conversation, I knew this was a man intimately knowledgeable about his industry from every possible detail. Our conversation lasted hours, but the one detail that struck me most was about quotas. He spoke fiercely and excitedly about the production capacity of his factory, that he was capable of cranking out more goods than was allowed by restrictive trading laws.
One of his biggest markets is Europe. But there were many rules both locally and globally that limited his export capabilities. As CEO, he had to constantly search for business deals and selling rights, sometimes even buying these rights from other businessman or government officials. In any case, I immediately wondered how his company would have performed in a free-trade market between the EU-VN.
The Wall Street Journal reports that EU officials want a “privileged trade and investment relationship” with Vietnam. Of course they do! Vietnam is a booming country with 86 million people and a $100 billion economy that is capable of buying European cars, wine, cheese and pharmaceuticals.
What’s in it for Vietnam? The free-trade deal with EU will enable Vietnam a chance to attract manufacturers away from China and establishing a “launching pad” into the EU’s $15 trillion economy.
The EU recently signed deals wtih South Korea, Peru, and Colombia. Similarly, The U.S. has negotiated trade treaties with South Korea and Colombia. However, trade experts say that an EU-Vietnam deal would be much larger.
How large is this Vietnamese market? Vietnam is a large exporter of textiles, shoes, seafood, coffee and rice. According to experts, establishing a free-trade deal with the EU could help attract manufacturing that has become too expensive in China.
The wildly optimistic WSJ article closes on a more cautious but still hopeful tone. Though Vietnam’s economy has fared relatively well in this global economic crisis, much of Vietnam’s growth was due to costly stimulus programs that depended on loans abroad. Moreover, the global economic crisis has led to decreased foreign direct investment and exports, resulting in increased trade deficit and forcing the government to devalue its currency.
A successful free-trade agreenment between Vietnam and the EU can provide the remedy for Vietnam’s slow export market. In any case, the success of this agreement will mark another milestone in Vietnam’s ascension as a dominant player in the Asian market. For factory owners like the gentleman mentioned earlier, this could be a very big break.
From the Wall Street Journal: Economy
Related article: Not enough rice export deals for Vietnam
Too bad the workers will still have to work just as hard and for minimal pay even if there wasn't a free trade
free trade!! this will definitely create a boom!