ASEAN’s Response to the EU-Vietnam Free Trade Agreement: Opportunities and Challenges
The landmark signing of the European Union-Vietnam Free Trade Agreement (EVFTA) in June 2019 signaled a new era of economic cooperation between the EU and the Association of Southeast Asian Nations (ASEAN). With the deal poised to generate considerable impact on both Vietnam and the broader ASEAN region, this paper delves into the opportunities and challenges arising from this development. Drawing on a wealth of academic literature, this analysis highlights the multifaceted nature of ASEAN’s response to the EVFTA and the implications for regional trade dynamics.
Foremost among the opportunities presented by the EVFTA is the potential for increased trade and investment between the EU and ASEAN. The agreement eliminates tariffs on 99% of goods traded between the two parties, thereby fostering a more favorable environment for commerce (Felbermayr et al., 2020). This development has the potential to create a positive spillover effect for the entire ASEAN bloc, as regional value chains become more integrated with European markets (Bersick, 2019).
Moreover, the EVFTA is expected to catalyze improvements in labor and environmental standards across the ASEAN region. As part of the deal, Vietnam has agreed to adopt and implement numerous international standards pertaining to workers’ rights, environmental protection, and sustainable development (Davies, 2020). By extension, other ASEAN nations may be encouraged to follow suit, in anticipation of future trade agreements with the EU (Mayer, 2021).
However, the EVFTA also presents several challenges for ASEAN. One potential concern is the diversion of European investment from other ASEAN countries to Vietnam, as investors capitalize on the preferential access to both markets (Lopez-Gonzalez, 2020). This reallocation of resources could create imbalances within the region and intensify competition among ASEAN member states.
Another challenge lies in the harmonization of trade policies and regulations among ASEAN countries. The EVFTA may prompt other member states to seek similar agreements with the EU, which could lead to a patchwork of trade rules and standards across the region (Thuzar, 2019). To address this issue, ASEAN may need to pursue a more cohesive approach to trade negotiations and policy development.
In conclusion, the EU-Vietnam Free Trade Agreement presents a complex array of opportunities and challenges for ASEAN. While the deal has the potential to enhance trade relations, labor standards, and environmental protections, it also raises concerns about investment diversion and the harmonization of trade policies. As the region navigates the evolving landscape of international trade, ASEAN’s response to the EVFTA will be instrumental in shaping its future economic trajectory.
References:
Bersick, S. (2019). The European Union and ASEAN: Trade and Investment Patterns and Future Prospects. Asia Europe Journal, 17(2), 173-187.
Davies, K. (2020). The EU-Vietnam Free Trade Agreement: The Long Road to a Landmark Deal. Asia Policy, 15(1), 1-26.
Felbermayr, G., Kimura, F., Okubo, T., & Steininger, M. (2020). Quantifying the EU-Japan Economic Partnership Agreement and the EU-Vietnam Free Trade Agreement. The World Economy, 43(9), 2253-2275.
Lopez-Gonzalez, J. (2020). Global Value Chains and the Preferential Trade Agreements: How Deep is the Integration? World Trade Review, 19(2), 290-309.
Mayer, J. (2021). Sustainability Provisions in EU Free Trade Agreements: Assessing Their Potential Impact on ASEAN Member States. Journal of World Trade, 55(1), 123-148.
Thuzar, M. (2019). ASEAN’s Evolving Approach to Trade Policy: From Free Trade Area to Regional Comprehensive Economic Partnership. Asian Survey, 59(5), 793-815.