While it’s hard to find genuine success stories in the ongoing fight against Covid-19, Vietnam offers a stark and genuinely impressive example. Incredibly, as of Jun 29th, Vietnam has only recorded 355 cases since the outbreak of the pandemic in Asia, while no patients at all have died as a result of the disease.
As a result of this, Vietnam is currently the only nation in the world that’s poised to grow economically in 2020, while it has been able to kick-start its economy quicker than the vast majority of its rivals.
The recent approval of a free trade deal with the EU will also afford Vietnam the chance to steal a march on other economies. But what’s in this deal, and how will it improve on the existing economic relationship between Vietnam and the US?
What’s in the Newly Ratified Deal?
It was last week that Vietnam ratified a significant trade deal with the EU, which is expected to boost the nation’s thriving manufacturing sector and exports niche.
The deal was initially signed in Hanoi last June, and its implementation in July will provide a timely boost to an economy that has incurred significant losses and supply disruption despite the fact that it’s forecasted to grow by 5% before the end of 2020.
Of course, the reason for both the reported economic decline and the prospective growth for 2020 was the decision of the Vietnam government to prioritise public health and safety when Covid began to peak in China, by closing the border with its neighbour and imposing a social lockdown that ran until last month.
As a result of the deal, the EU will lift 85% of its tariffs on Vietnamese goods, while imposing a plan that will see the remaining 15% removed over the course of the next seven years.
Additionally, Vietnam will lift 49% of its total import duties on EU exports from July, while the region has committed to phasing out the rest within a 10-year period.
Why is This Important in Relation to Vietnam’s Trade Arrangements with the US?
Of course, the EU deal also comes at the ideal time from the perspective of Vietnam’s economic relationship with the US, which has always been tenuous but has recently come under greater threat as a result of America’s trade conflict and China.
Historically, much of the trade between these two nations was governed by the 2007 Trade and Investment Framework Agreement, which monitored Vietnam’s implementation of its WTO accession commitments and helped to coordinate both regional and multilateral issues.
However, the ongoing trade war between the US and China has encouraged the Trump administration to consider targeting neighbouring nations including Vietnam.
One of the main reasons for this is that Vietnam is thought to be one of the primary beneficiaries of the transformation of supply chains between China and the US, and this is something that Trump would like to change by any means necessary.
In May, Tickmill author Arthur Idiatulin reported that the US Treasury Department also included Vietnam in a list of potential currency manipulators, providing Trump with a formal pretext for imposing tariffs on Vietnamese goods if deliberate devaluation is proved.
With this in mind, the deal between Vietnam and the EU could help the former to overcome any potential issues with the US and build an incredibly competitive economy while the rest of the world cope with the socio-economic fallout from the coronavirus pandemic.