VIETNAM yesterday ratified a significant trade deal with the European Union, which is expected to boost the country’s manufacturing sector and exports, as it recovers from a dip caused by the coronavirus pandemic.

Lawmakers approved the agreement as they met in the National Assembly for the first time since the pandemic began. The deal was signed in Hanoi last June and was ratified by the European Parliament in February.

When it takes effect next month, the EU will lift 85 percent of its tariffs on Vietnamese goods, gradually cutting the rest over the next seven years. Vietnam will lift 49 percent of its import duties on EU exports and phase out the rest over 10 years.

The implementation of the EU-Vietnam Free Trade Agreement (EVFTA) “can’t come at a better time for Vietnam when it’s on the path of economic recovery after several months of closure due to COVID-19,” said economist Pham Chi Lan, former adviser to several of Vietnam’s prime ministers.

Vietnam prioritized public health and safety when the coronavirus started to peak in China. It closed the border with China in January and with the world in February while imposing a social shutdown that lasted until the end of April. The tough measures contained Vietnam’s outbreak to just over 300 cases with no deaths and no local infections have been reported for almost two months.

Still, its economy has dipped because of the illness and containment measures elsewhere, and the manufacturing sector has been hit by restrictions in the movements of goods and people.

The pandemic revealed shortcomings in its manufacturing sector. While Vietnam’s own factories were safe to open, they could not operate because they sourced their materials from China, particularly for major export products in textiles, footwear and electronics.

Following the trend of manufacturing shifting from China to other countries, accelerated first by the China-U.S. trade war then COVID-19, the agreement is expected to raise Vietnam’s competitiveness in attracting investors.

Vietnam is the EU’s second-largest trading partner in Southeast Asia, with the trade turnover reaching US$56 billion last year, according to the national general statistics office.

With Singapore being the only other country in Southeast Asia holding a free trade agreement with the EU, Vietnam will have an edge regionally.

(SD-Agencies)