EU-Vietnam trade deal is better for Ireland than damaging Mercosur

JOHN WHELAN: EU-Vietnam trade deal is better for Ireland than damaging Mercosur

The Vietnam free trade deal signed two days after the EU Mercosur agreement, to much less fanfare, has substantial opportunities for Ireland's exporters and - in particular - the farming sector, who look set to lose some market under the former deal.

The trade and investment deal with Vietnam was signed by EU Commissioner for Trade Cecilia Malmström in Hanoi yesterday.

One the one hand this is a good deal for EU member states, particularly Ireland, but like the Mercosur deal it also sends a clear signal to the US that free trade is the future and to potential exiting member states - such as the UK - and any would-be exitors, that the European trading block is a progressive serious player on global markets.

The significance of the EU-Vietnam deal was not lost on President Donald Trump prior to flying to the G20 summit last week.

He sent a warning that China was "ripe" for new tariffs and suggested that Vietnam, which he called "the single worst abuser of everybody" could be next.

Irish interest in the EU free trade and investment deal with Vietnam is multi-faceted. There is the straight trade deal, which should help our exporters of goods increase from the current €65m of pharmaceuticals, computer components and food.

But, more importantly, there is the long-standing services trade connection which last year amounted to exports of €164m.

This strong services trade is connected with the ESB International division, which - back in 1987 - installed a much-needed power station in a still recovering Vietnam after its war with the US.

The Vietnam government at the time did not have access to foreign currency to pay for the installation, but an innovative management at ESB managed to arrange payment by taking ship loads of the chemical urea as barter, and then selling this on global markets for hard currency.

ESB International has worked on training and consultancy projects in Vietnam over the past 25 years and has opened the doors for many other services exporters to the country.

More recently Bord Bia identified the growth potential of south-east Asia for Irish food exports with the opening of an office in Singapore last year.

The Singapore office is focused on the south-east Asian countries of Vietnam, Indonesia, Malaysia, Philippines, Thailand, Japan and South Korea.

With a population of 93 million people, Vietnam’s dairy industry worth over €5.5bn - one of the largest markets in south-east Asia - is seen as particularly lucrative for Irish dairy producers, as Vietnam imports 80% of its dairy demand.

As income levels have been rising demand for dairy, beef and pork products has been rising rapidly, but imports are mainly coming from New Zealand and the US.

EU-Vietnam trade deal is better for Ireland than damaging Mercosur

The EU–Vietnam free trade deal should enable Irish producers to expand their current very limited foothold in Vietnam.

The trade agreement will eliminate nearly all customs duties on goods traded between the two sides in a progressive way.

But, it will also ensure that traditional Irish and European food and drink products will have current quota restrictions lifted on imports into Vietnam.

In addition, EU companies will also be able to participate in bids for procurement tenders in Vietnam on an equal footing with domestic companies which will be welcomed by our services exporters.

The investment protection elements of the agreement include modern rules on investment protection, enforceable through the new Investment Court System, and ensure that the right of the governments on both sides to regulate in the interest of their citizens is preserved.

The EU investment stock in Vietnam is modest, standing at €6bn in 2017.

The new legal guarantees preventing conflict of interest and increasing transparency should help EU and Irish investors, increasingly worried about negative aspects of China trade and investment regime, to set up an alternative hub to serve the Mekong region.

John Whelan is managing partner of international trade consultancy The Linkage-Partnership

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