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Viet Nam eyes more FTA involvement

VNS | 17 November 2004

Viet Nam eyes more FTA involvement

HA NOI - Viet Nam will start its first round of free trade agreement (FTA) negotiations with Japan and South Korea next year, as well as prepare for negotiations with Australia and New Zealand in the near future, said a Ministry of Trade official on Monday.

Viet Nam became a member of the Association of South East Asian Nations (ASEAN) in 1995, and joined an FTA with ASEAN, known as AFTA in 1996. While developed ASEAN members like Thailand and Singapore started applying tariff reductions in 1993 and effectively reduced rates to 0-5 per cent in 2003, Viet Nam received a three-year phase-in period and special treatment as a new ASEAN member. It began implementing massive tariffs cuts in 1996 and should finish in 2006.

Tran Dong Phuong, deputy director of the MoT’s Multilateral Policies Department, said Viet Nam, through ASEAN, is looking to sign FTAs with China, Japan, South Korea, Australia, New Zealand and the European Union. The MoT reported it has recently established a research body on free trade agreements (FTAs) to devise a national strategy for future involvement in free trade deals with countries and trade blocs. The task force, headed by Deputy Trade Minister Luong Van Tu, will comprise deputies from various ministries and will report its findings to the Prime Minister, the MoT said.

FTA negotiations with China are already underway, the MoT’s Phuong said. In late 2002, ASEAN and China signed a framework agreement, ASEAN-China Comprehensive Economic Co-operation, at the 8th ASEAN Summit in Phnom Penh, paving the way for negotiations for the establishment of the world’s largest FTA by 2010.

The average duty within the ASEAN-China FTA, if realised, will be as low as 0-5 per cent. The free trade area could possess 40 per cent of the world’s foreign exchange reserves and more than US$2 trillion in gross domestic product, 10 per cent of the world’s total. ASEAN-China trade is expected to reach $100 billion next year.

The ASEAN-China FTA is part of a larger China initiative, following the 1997 Asian crisis, to create a pan-Asian free trade area that would include the ASEAN+3 countries (China, Japan and South Korea).The proposed pan-Asian free trade zone would provide a counterbalance to the EU and North American Free Trade Area (NAFTA), and would include a mutual currency support mechanism, arguably rivalling the IMF.

ASEAN’s negotiations with Japan started last year after Prime Minister Junichiro Koizumi secured a pact with ASEAN leaders in 2002 to work on a framework for a free trade deal. Japan is one of the biggest investors in the region and is striving to make sure it does not lag behind China. China accounts for 5 per cent of ASEAN exports, which is less than Japan’s 10-15 per cent share, according to ASEAN figures. With an FTA, ASEAN exports to Japan would likely rise to $20.6 billion by 2020.

However, Viet Nam has experienced some early difficulties in finalising talks with Japan. In Vietnamese Foreign Minister Nguyen Dy Nien’s meeting with Japanese Foreign Minister Yoriko Kawaguchi last December, Kawaguchi said Japan wanted to deepen the discussion, with the recently signed bilateral investment deal serving as a basis.

But the Kyodo news agency cited a Japanese official as saying, "It may be too early to talk about an FTA because Viet Nam has yet to enter the WTO." Japan has only concluded FTA talks with Singapore; it remains in negotiations with other ASEAN members.

Last month, EU Trade Commissioner Pascal Lamy said the EU and ASEAN have yet to find a common voice over the FTA issue.

"We want to tackle the most difficult issues first, without which FTA risks remaining mere paper," Lamy said. "We differ from ASEAN members, who launch FTA negotiations first and then back load the more contentious regulatory barriers. Time will tell which approach produces better results."

 source: VNS