Vietnam’s National Assembly has approved a free trade agreement with the EU on June 8 which is expected to help make the country a new investment destination for manufacturers looking to leave China. The EU-Vietnam Free Trade Agreement (EVFTA) has already been ratified by the EU, making Vietnam the second south-east Asian nation to have such a trade treaty with the European bloc after Singapore. The EVFTA creates competitive pressures on goods and services from the EU for Vietnamese businesses, goods and services.

Once the agreement takes effect, 71 per cent of exports from Vietnam to the EU will become duty-free, as will 65 per cent of EU shipments to Vietnam. Of the remaining tariffs, up to 99 per cent will be phased out by Hanoi over 10 years and by Brussels over seven years. The trade deal is expected to make the bloc a bigger buyer of Vietnamese goods, rising from its current share of about 15 per cent. Particularly strong growth is expected for apparel and footwear, which account for roughly 20 per cent of Vietnam’s exports.