EU-Vietnam FTA May Accelerate Foreign Enterprise’ Moving Out of China

     The EU signed a free trade agreement (FTA) with Vietnam on June 30th. According to the Agreement, 99% of goods traded between the EU and Vietnam will be tariff-free when it comes into effect after the regulatory approval procedures are completed in both sides. 65% of EU’s goods exported to Vietnam will be tariff-free immediately and 71% of Vietnam’s goods exported to the EU will be also tariff-free immediately. Tariffs imposed on the rest of goods will be gradually reduced to zero in the following ten years.   

     This Agreement will greatly arouse the will of investors to set up their own manufacturing operations in Vietnam, which is then expected to accelerate foreign investor’ relocating their factories out of China. Economist Adam McCarty forecast that the FTA between the EU and Vietnam will push enterprises currently having factories in China to relocate to Vietnam. Some foreign media also reported that if EU enterprises are considering lowering their production cost, perhaps Vietnam is their priority choice.