Vietnam and Italy have deepened cooperation since the establishment of bilateral  diplomatic ties 45 years ago

Italy and Vietnam celebrated their 45th year of formal diplomatic relations in 2018, but that milestone will almost surely be overshadowed by the ratification of an economic agreement that will effectively end taxation of imports between the two, which is expected to arrive soon.

“It’s almost ready. Now, it’s on to the processing for… administration in Brussels,” the European Union’s headquarters, the Italian Chamber of Commerce in Vietnam, or ICHAM, President Michele D’Ercole said.

Draft language of the trade pact is currently awaiting approval by the European Council. D’Ercole and other observers for the deal expected, immediate ratification to occur last year. He remains confident that the agreement is imminent, however.

The accord, formally known as the European Union-Vietnam Vietnam Free Trade Agreement or often just EVFTA, has been described as a potentially seismic shift for the economic relationship between the union’s member states and Vietnam, particularly for a provision within it that would reduce trade tariffs on at over two thirds of goods traded to zero.

Upon signing, taxes on 65 percent of European exports to Vietnam will be eliminated. The remainder would be phased out over the coming decade. Vietnam-made goods traveling to the European Union will be completely tariff-free seven years after signing, and 71 percent would be exempted immediately. With specific regards to Italy, the USD5 billion trade relationship between the two countries is expected to grow enormously by retiring taxes to key industries like pharmaceuticals, D’Erocole said. Italy is the fourth largest exporter of medicines in the union, and Vietnamese consumers represent a large share of their clientele.

It would be inaccurate to see the now-cancelled US-led Trans Pacific Partnership as a causal article to creating the EVFTA, but the D’Ercole opined that the two agreements characterize an openness that Vietnam has had with other nations since the economic reforms of the ‘90s. D’Ercole cited Vietnam’s formalizing economic relations with former Soviet states as well as joining an ASEAN-EU agreement last year as examples.

“Vietnam is very open and has many agreements,” he said. Among the chamber’s members are legacy Italian firms like Piaggo and Ducati. These are important actors in the USD1.2 billion worth of Italian goods that arrive in Vietnam, but the import stream has greater representation from perhaps less exciting products like industrial machinery; at USD700 million last year, it was the Italy’s top export to Vietnam.

Italy established formal relations with Vietnam in 1973 shortly before the country was reunified. The European nation has maintained a partnership with Italy since the American War, when then-Italian ambassador Giovanni D’Orlandi worked with a Polish diplomat to appeal directly to North Vietnam for a peaceful resolution in 1966. According to Stanford University international relations professor James Hershberg, the envoys had secured commitments from Hanoi leadership to begin peace negotiations that would have brought an early end to the war. Their efforts were foiled when then U.S. president Lyndon Johnson began a bombing campaign on the Vietnam capital.

Cooperation between the countries has steadily increased in modern times. In 2005, former Vietnam President Tran Duc Luong hosted then-Italian President Ferdinando Casini in a state visit in 2005 calling for “multi-faceted” relations. D’Ercole arrived in Vietnam two years after to work as a general manager in Dong Nai with Rino Mastratto Group, a leather supplier and manufacturer. ICham was founded a year later in 2008. D’Ercole was elected chairman in 2012.

D’Ercole said he expects EVFTA ratification will increase the volume of ICHAM’S existing business support operations. He anticipates that the chamber will be called on to ask specific regulatory compliance questions, like how to comply with UN-authored labor codes and the 2015 Paris Agreement environmental regulations. If the accord is ratified, Vietnam’s business practice standards would in these respects exceed those of the US, which has declined to observe both of these regulations.

Image by Vy Lam

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