EVFTA could signal difficulties for Vietnamese trade remedies

This upsurge in activity could potentially create a number of difficulties for the nation’s trade remedy investigation agency as they are hindered by limited resources, said Le Trieu Dung, director general of Trade Remedies Authority of Vietnam under the Ministry of Industry.

Amid the country’s wide-ranging involvement in several free trade agreements (FTAs) such as ASEAN, ASEAN +, and most recently the EVFTA, trade remedies have played an increasingly active role in the economy in addition to domestic manufacturing industries and businesses, helping to achieve the goal of improving the efficiency of the nation’s international economic integration process.

For FTAs that will implement high levels of tariff reduction such as the EVFTA, the competitive pressure on Vietnamese enterprises and EU businesses in some fields is poised to be higher, resulting in increased demands for the use of trade remedy tools.

Trade remedies, including anti-dumping, anti-subsidy, and safeguard measures, are allowed to be part of FTAs by the WTO as a means of stamping out unfair competition practices that occur in international trade, such as dumping and subsidies for imported goods. This takes place alongside preventing the sudden increase of imported goods which has the potential to cause serious damage to domestic manufacturing industries.

Indeed, they represent a legally important tool that serves to protect domestic industries and enterprises, especially following the removal of tariff barriers in accordance with international commitments.

The implementation of the EVFTA requires businesses to have a thorough grasp of the commitments stated within the Agreement, including the provisions on trade remedies, and to be prepared to capitalise on the benefits from the trade deal whilst simultaneously protecting their own legitimate interests.

According to Dung, the great benefits brought about by the EVFTA could result in an increase in businesses seeking to defraud their origin or evade trade protection in order to benefit in an illegal manner. In this context, trade remedies should focus on alerting and preventing illegal activities, he noted.

With the need to protect the interests of legal trading, the content of trade remedies stipulates that the EVFTA is based on the provisions set out by the WTO and other progressive principles consistent with the legal system of Vietnamese trade protection. This therefore serves as a legal foundation for the national economy and domestic industries as a way of ensuring their participation in the trade pact is effective.

These regulations help to create a more stable and favourable business environment that can be enjoyed by exporters.

The EVFTA will trigger firms to abide by the principle of applying a lower tax rate, meaning that anti-dumping or anti-subsidy duties can only be sufficient in eliminating damage, in contrast to the WTO who are not required to use this principle, Dung added.

Most notably under the EVFTA commitment, both sides will not apply anti-dumping and anti-subsidy measures if it does not fall in line with the common interests of the two parties. In practice, besides considering the situation of the manufacturing industry, the investigating country should also consider the situation and viewpoints of importers, industry associations, and consumer representative organisations, he said.

The EVFTA also helps to provide a stringent bilateral safeguard mechanism that ensures that tariff reductions under the Agreement do not lead to "shocks" that negatively affect domestic manufacturing industries.

Specifically, the EVFTA Agreement stipulates that a bilateral safeguard mechanism will be implemented for a transition period of 10 years, therefore creating a legal basis to ensure the rights of both parties when using legitimate safeguard tools to protect local firms if there is any damage due to tariff reductions set out in the agreement.

The increasing trend of protectionism and trade conflicts can be considered to have complicated developments, especially in terms of the relationship that between major economies have with one another. By the end of March, there had been approximately 160 trade remedy cases initiated by 19 countries and territories regarding investigations into Vietnamese exports. The countries which initiated the most investigations were the United States, Turkey, India, and the EU.