EU is Viet Nam’s top economic and trade partner. In the recent year, the two-way trade turnover increased from US $1.5 billion in 1995 to US $24 billion in 2011.

Viet Nam mainly exports footwear, garment, seafood, wood, electronics and other commodities and imports equipments, medicine and airplanes from the EU.

As of 2011, EU invested in 1,687 projects in Viet Nam with the total registered capital of US $32 billion in terms of industry, processing, hotels, restaurants, tourism, finance and banking. The industry and construction sector accounts for more than 50% of the total projects and 59% of the total investment. 

In the phase from 1996-2011, the EU is the biggest official development assistance (ODA) provider for Viet Nam with the non-refundable aid of more than US $12 billion for such fields as agricultural development, poverty reduction, human resources development, health care, education, administrative reforms, banking, finance and international integration.

PCA: New cooperative frame for Viet Nam-EU relationship

On November, 2007, during his official visit to Vietnam, European Commission (EC) President José Manuel Barroso and Viet Nam’s Prime Minister Nguyen Tan Dung agreed on starting the PCA negotiations. After two years and nine negotiation rounds, the PCA content was agreed on. The PCA was initialed in October, 2010.

The PCA is a frame agreement monitoring the Viet Nam-EU relationship and it replaces the 1995 Viet Nam-EC Frame Cooperation Agreement. The PCA creates a new long-term and comprehensive framework for the Viet Nam-EU relationship. It is compatible with the two sides’ socio-economic development priorities and external policies.

The agreements within the PCA are an important foundation for the two sides to establish specific cooperation mechanisms, contributing to further strengthening the bilateral cooperation and partnership.

The PCA consisting of eight chapters and 65 articles defines basic principles for the relationship and comprehensive cooperation between the EU and Viet Nam in fields such as commerce, investment, justice, peacekeeping and global security.

Prospects for Vietnam-EU relations after signing PCA

Politically, the PCA would help further sharpen the two sides’ fine political relationship. Agreements reached within the PCA in politics, peace and security are the basis for the two sides to boost dialogue and cooperation in settling issues of mutual concern, both bilaterally and on such multilateral forums as the United Nations, ASEM and particularly ASEAN-EU when Viet Nam will become a coordinator of the ASEAN-EU relationship in July, 2012.

With its external policy of being “an active and responsible member in international issues”, Viet Nam will further join hands with foreign partners in solving global issues, including its cooperation with the EU in tackling regional and international issues like climate change, transnational crimes and terrorism, ensuring nuclear security, managing natural resources, environment and maritime security.

In terms of trade and investment, the PCA facilitates the two sides to better tap their comparative advantages and supplement their economic structures. The EU has advanced technologies, especially in mechanics, manufacturing, chemicals, transport, aviation, pharmacy and services with big added value. These are also products increasingly needed by Viet Nam whose production capacity remains limited. Meanwhile, the EU has big demand for a wide range of products, such as raw rubber, handicrafts, footwear, garments, fishery, coffee, tea and pepper which Viet Nam has competitive advantages in.

The potential for Viet Nam to expand its exports to the EU is big, because the two sides’ trade turnover occupies only 0.6% of the EU’s total trade turnover with its foreign partners. The PCA, including a separate chapter on trade and investment, shows the two sides’ wish for the development potential of these sectors.

The PCA allows Viet Nam to access the EU more conveniently. Specifically, the EU pledges to boost consultancy in improving the effectiveness in using benefits that the Generalised System of Preferences can bring to Vietnam. The EU vows to give Viet Nam special treatment packages in its economic and trade relations with Viet Nam. It also heads for soon recognising Viet Nam as a market-based economy.

Besides, the PCA has laid an important basis for the two sides to ignite negotiations of the Viet Nam-EU Free Trade Agreement (FTA). FTA negotiations and signing would usher in many opportunities, removing tariff and non-tariff barriers, and boosting export and economic growth.