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EEU and Vietnam signed an agreement on the creation of a free trade zone
29 May 2015, the EEA member countries and Vietnam signed an agreement on the creation of the first free trade area (FTA) in the history of the Eurasian Union. Despite the significance of this event, from the point of view of the technical component of the document creating the FTA, there are still many questions for further elaboration, and the time for implementation of the tasks set and achievement of the necessary quantitative indicators of trade is of the order of 10-15 years. What is special about this document? What do its components look like? The situation is commented on by Vladimir Mazyrin, Doctor of Economics, head of the Center for the Study of Vietnam and ASEAN of the IFES RAS, an expert of the INF.
- International integration became the main slogan of Vietnam's foreign economic policy. In accordance with this strategy, Vietnam seeks to participate in all formats of free trade that are only accessible to it. In this respect, Vietnam already has vast experience. He has several dozens of similar free trade agreements, the latter was concluded with South Korea on the eve of the establishment of an FTA with the EAEC. In this respect for Russia, this experience is very useful and interesting.
There are certain contradictions here. For example, the participation of Vietnam in the free trade zone with the EU and the Eurasian Economic Union at the same time can be difficult, because technical barriers are different, and it is extremely difficult to adjust their products and certificates for the two sets of requirements. Of course, Vietnam seeks to get preferential access to a new wide market, and this is not only Russia, but also the countries of the Eurasian Union - about 180 million people. Moreover, if with Russia against the background of the other members of the union, the volume of trade is significant enough (although it is ten times inferior to trade with the United States), then with the rest of the member countries of the union, the trade is extremely small.
Vietnam received additional benefits and incentives for trade with a number of EAEU member countries that are not part of the WTO, as their markets Vietnamese goods were subject to higher duties than those determined by the preferential rates of the WTO. The FTA is the format of the WTO +, that is, here the entrance barriers are even lower than in the WTO. Therefore, adding similar partners to Russia in the common market, Vietnam receives a double benefit. The same can be said about the movement of goods in the opposite direction. In this sense, such countries as Kazakhstan have an additional interest in getting a duty-free or preferential access to the Vietnamese market.
- How will the mutual opening of the markets take place?
- In general, the opening of markets has happened: the transition to free trade in goods has begun. By signing the agreement, the parties have already decided on the schedule of liberalization and the coverage of commodity items. There is a formal boundary - the parties must ratify the agreement, and after 60 days after that it will enter into force. In Vietnam, the summer session of the National Assembly has begun, and ratification may occur soon enough, within the next couple of months. As for the member countries of the Eurasian Union, the situation is less clear here, but I don’t see any reason to delay ratification with an interest in creating an FTA.
The speed of liberalization is determined by the principle that works in many FTAs and, in particular, in the mentioned agreement of Vietnam with South Korea. Time is given for the coordination of mutual requirements for certification and the quality of individual goods, temporary exceptions for positions that are recognized as sensitive to remove them in a certain agreed period - from 10 to 15 years.
- What issues remained unresolved during the negotiations on this agreement?
- From the world experience and statements made by the Russian authorized bodies and the Eurasian Economic Commission, it follows that the FTZ being created is a new format of agreements, which is of a complex nature. It provides for not only trade in goods, but also services, mutual investments, movement of labor, exchange of technologies and information. Initially, it was assumed that the relations of the participants in these forms will be codified. However, the signed document agrees exclusively with the trade in goods. As the experts - participants in the talks explain, there was not enough time to agree on the remaining forms of interaction due to the recent accession of two new members - Armenia and Kyrgyzstan - to the EEMP.
Russia and Vietnam separately to this agreement signed protocols on the conditions for the liberalization of trade in services and investments, again leaving behind the exchange of labor. The issue of admitting Vietnamese labor to the Russian market is very sensitive, to solve it, in essence, it is necessary to change the entire migration policy of the Russian Federation, which is unlikely. It is important that the FTA agreement provided for the possibility of joining the rest of the Union member countries to this protocol later. While the agreement is limited, but it will be supplemented and refined in the future.
- What products were on the list of exceptions? What products will be on the Russian market? Is there a demand for these products?
- The range of goods exported by Vietnam to the Russian Federation is unlikely to change significantly, volumes should grow, but not in all positions. Of the 100% of the entire product mix, not only Russian, but also of other member countries of the union, 12% fell into the list of exemptions, respectively, on 88% the duty is zeroed or reduced sharply. Now the weighted average tariff (customs duty) on Vietnamese goods is approximately 10%, and in 2025 there will be 1%. Laid a decent time during which the barriers will be reduced.
Also the principle of quoting is applied. In addition to sensitive goods, which do not reduce duty, there are exempted goods that can only be imported in limited quantities. This is a very interesting device, allowing, on the one hand, to give preferences, and on the other hand, to protect the industries of national production. In this case, the duty-free supply of Vietnamese rice in the amount of 10 thousand tons annually is just one ship lot. Any excess of a given amount will be subject to a normal duty. In the Russian market, such a volume of imports can not change the situation, but it stimulates purchases of basic Vietnamese products.
In the list of such sensitive exceptions, a whole range of goods, including outerwear, coffee and tea, which have a high demand in the Russian market, fell into the list. The SRV also provides for postponing the reduction of customs duties on imports of a number of goods of the member countries of the EAEC. For example, Russia very much sought to reduce duties on car kits, since during the visit of Prime Minister Dmitry Medvedev in April of 2015 in Hanoi, the assembly of an assembly plant in Vietnam of a number of Russian cars was agreed upon. However, we will receive a zero fee for these kits only in 10 years. The current duty is more than 70%, i.е. It is actually prohibitive.
- Will the structure of bilateral Russian-Vietnamese trade change with the conclusion of an FTA?
- Before answering this question, it is necessary to make a very important remark. The current understanding of the structure of mutual supplies has become obsolete. The structure of trade has already changed greatly in the unfavorable for Russia side. Russia ceased to supply machines and equipment to Vietnam in the volumes and proportions that had been before, and almost completely switched over to the raw materials and products of the first industrial redistribution. Vietnam instead of mainly agricultural raw materials and seafood began to supply Russia with high-tech products: two thirds of our imports from Vietnam today is microelectronics.
I hope that the reduction of barriers to Russian manufactured goods will help them to be sold successfully in the Vietnamese market, where their competitors are Japanese, South Korean and Chinese enterprises, which this market has already seized.
- Which Russian and Vietnamese industries may come under attack, if this is possible, and will the governments of the two countries help them?
- I believe that such a scenario is unlikely, because the necessary measures are taken to protect the parties' national interests. Russian experts have expressed fears that if the export of Vietnamese rice or clothing becomes completely free, then the corresponding production in the Russian Federation, for example, rice in the Krasnodar Territory, will become unprofitable. Therefore, reasonable delimitations were made.
Vietnam, in turn, also included such items in the lists of sensitive goods, for example, rolled steel. Ten years ago, Vietnam bought it from Russia in huge batches. Since then, import substitution has gone so far in this product category that Vietnam has turned from a net importer of steel products into an exporter and sells over 1,5 million tons of steel to foreign markets.