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NEWS UPDATES 2 September 2010

Vietnam’s FTAs scrutinized

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Free trade agreements (FTAs) in general have led to higher economic growth, but regional FTAs have had mixed results, experts have said.

"Import and export growth has been at a maximum of around 7 percent under partial compliance with all FTAs signed by Viet Nam," said David Vanzetti of Australian National University.

"Most of the export-import growth came from the ASEAN Free Trade Agreement (AFTA) and the FTAs signed with South Korea," he said. "Growth is expected to rise as much as 16 per cent when Viet Nam fully complies with all FTAs."

Speaking at a conference held in HCM City, Vanzetti said that production activity of most sectors was also expected to increase, largely because of labour and investment requirements of FTAs.

However, the growth of several sectors is expected to decline because of various factors, including anti-dumping laws, and technical barriers and duty-free barriers to trade.

Several sectors have registered high growth while others have encountered challenges from imported goods, according to Vanzetti.

Viet Nam has signed numerous trade agreements, including AFTA, ASEAN – Australia-New Zealand, ASEAN-India, ASEAN-South Korea, ASEAN-China and ASEAN-Japan, and is prepared to sign FTAs with the EU, Turkey and Chile.

In a research study on the impact of FTAs on Viet Nam's economy, Vanzetti and his Australian National University colleague, Ray Trewin, interviewed businesspeople and local experts.

Vanzetti said many sectors, including footwear, leather, seafood, textiles, fruit, rubber and coffee, were optimistic about the effect of FTAs, while other sectors, like the automobile, paper and paper mill industries, were pessimistic.

The research was conducted for MUTRAP, a multilateral trade assistance project carried out by the European Commission and the Vietnamese Ministry of Industry and Trade.

MUTRAP, which is now in its third phase, helped Viet Nam prepare for membership in the World Trade Organisation (WTO), and continues to assist the country in following WTO trade regulations. The peripheral impact of all FTAs on the country's economy by 2015 is expected to be US$945 million a year and edge up to $2.4 billion a year after all trade commitments become final during the 2015-21 period, according to Vanzetti.

The biggest trade benefits would come from FTAs with South Korea, Japan and AFTA, while FTAs with China would have a more long-term effectiveness, he said.

Viet Nam is not expected to benefit much from FTAs with India, Australia and New Zealand because of the current low trade level with those countries.

Vanzelli and his colleagues said that, in the future, Vietnamese trade negotiators should more carefully analyse the possible negative and positive impact of any FTA before signing the final agreement.

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