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Vietnamese textiles and garments benefit the most from the EVFTA Free Trade Agreement

Vietnamese textiles and garments benefit the most from the EVFTA Free Trade Agreement

In 2023, goods exported to the EU will still have import taxes reduced according to the roadmap of the European Union – Vietnam Free Trade Agreement (EVFTA). Products in category B3 enjoy a tax rate of 0%, helping Vietnamese textiles and garments become more competitive in this market.

In the EVFTA Agreement, Vietnam has committed to eliminating tariffs as soon as the Agreement takes effect on 48.5% of tariff lines (accounting for 64.5% of import turnover). After 7 years, Vietnam eliminated import taxes on 91.8% of tariff lines, equivalent to 97.1% of export turnover from the EU.

After 10 years, the tariff elimination rate is about 98.3% of tariff lines (accounting for 99.8% of import turnover). For about 1.7% of the remaining EU tariff lines, Vietnam applies a roadmap to eliminate import taxes over 10 years or applies TRQ according to WTO commitments or no commitments.

With the CPTPP Agreement, Vietnam commits to eliminating import taxes on 66% of tariff lines as soon as the Agreement takes effect and 86.5% of tariff lines after 3 years from the Agreement’s entry into force. The remaining items have a tax reduction roadmap mainly from 5 to 10 years.

Thus, it can be seen that for both Agreements, Vietnam is eliminating import taxes on about 99% of tariff lines of partner countries. However, it should be noted that in the short term, the above industries may face certain disadvantages because while waiting for taxes to be reduced to 0% according to the EVFTA roadmap, Vietnam’s export products to The EU will no longer enjoy GSP tariffs but must switch to higher MFN tariffs.

Looking at the benefits that the EVFTA agreement brings, the industry that stands out the most is the textile and garment industry. Tariffs on all textiles will be brought to 0%. The EU market, the world’s leading importer of textiles and garments and the second largest export market of Vietnam’s textiles and garments, also benefits directly. The agreement has been opening up great opportunities for the garment industry.

However, the EVFTA agreement also has a flexible commitment to cumulative rules of origin. Typically, if the fabric used by an enterprise originates from a country that has an FTA with the EU and Vietnam (such as Korea), the enterprise’s products are also considered of valid origin to enjoy preferential treatment. Tax incentives according to regulations in EVFTA.

If any more countries in the future have an EVFTA agreement with both Vietnam and the EU like the case of Korea, Vietnam will notify the EVFTA Customs Committee and this Committee will decide whether to allow it. cumulative or not.

Most of the raw materials (fabrics) used by Vietnamese textile and garment enterprises originate from China and Taiwan – countries that do not have an FTA agreement with the EU. In addition, garment products must use fabric originating from Korea to take advantage of the benefits from the EVFTA agreement.

In addition, businesses can take advantage of the signing of the EVFTA agreement and import raw materials (especially fabric) originating from Europe, both enjoying tariff incentives and improving value and quality. quantity of the product.

The EU product group commits to eliminating tariffs according to a roadmap that includes the majority of garment products that Vietnam is exporting to the EU. Furthermore, most countries that export textiles and garments to the EU currently do not have FTAs with this country. Therefore, when Vietnamese businesses meet origin requirements, EVFTA opens up huge opportunities for Vietnam’s textile and garment exports and creates advantages for importing businesses.

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