Vietnam-EU pacts show trade war reshaping industry

By Hu Weijia Source:Global Times Published: 2019/6/27 22:28:40

The EU and Vietnam reportedly agreed to sign a free trade agreement (FTA) and an investment protection agreement (IPA) on Sunday in Hanoi, a development that can be seen as a response to US trade protectionism.

US President Donald Trump on Wednesday described Vietnam as "the single worst abuser of everybody" and worse even than China, according to The Guardian. Some observers believe the words hinted Trump might impose tariffs on the emerging economy. 

The US is an important export market for most Asia-Pacific countries including Vietnam, but the ongoing trade war had made those economies realize their excessive dependence on the US consumer market is an unsustainable way to develop their export-oriented economies. 

Some economies in the region have sped up the process of diversifying their trade partners. The agreements between Vietnam and the EU are the latest examples.

Vietnam is the EU's second-largest trading partner in Southeast Asia after Singapore, which signed trade and investment agreements with the EU in October, 2018. Asia has been feeling the impact of the trade war since last year, and it thus became more open to trade cooperation and trade agreements with the EU.

China, as the core of the Asian supply chain, led that trend. China and the EU are moving fast to complete a bilateral investment treaty (BIT), with the 21st round of negotiations finishing earlier this month. 

Meanwhile, China-US BIT negotiations have stagnated since the trade war began. The US has played an important role in the Asian supply chain, but the trade war is weakening US influence. Supply chains are being rapidly  reconfigured. Once this process is complete, US influence on Asian economies will be shattered.

The trade war doesn't seem to be going as Trump expected. Many companies have moved work to Vietnam instead of the US after Trump slapped tariffs on Chinese imports in an effort to bring manufacturing jobs back to the US. Even if Trump imposes levies on Vietnamese goods, the FTA and IPA with the EU will dilute the negative effect of US tariffs, helping made-in-Vietnam products enter EU markets with low or no tariffs.

Vietnam is a close neighbor of China. Vietnam's economic growth will be conducive in pushing up exports of Chinese goods to the Southeast Asian country, giving new momentum to bilateral economic cooperation.

The EU's increasingly close ties to Vietnam are an important part of the reorganization of global supply chain. In this process, the US' role is being weakened by its trade protectionism, while China is seeking to further integrate into the global economy.

The author is a reporter with the Global Times. [email protected]

Posted in: EYE ON ECONOMY

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