Korean Companies See Promising Exports of Apparel and Footwear to Europe Following Vietnam-EU FTA Implementation

EU-Vietnam FTA to Take Effect on August 1

[Asia Economy Reporter Hwang Yoon-joo] With the EU-Vietnam Free Trade Agreement (EVFTA) between the European Union (EU) and Vietnam coming into effect on the 1st, exports from Korean companies operating in Vietnam to the EU are expected to gain momentum.

According to the "Impact and Implications for Korean Companies Following the Enforcement of the EU-Vietnam FTA" report released on the 5th by the Korea International Trade Association's International Trade and Commerce Research Institute, Vietnam is expected to enhance its role and status in the global value chain following the enforcement of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in January 2019 and the EVFTA on the 1st.

The report stated, "The EU has agreed to eliminate tariffs on 99-100% of import items within 7 years, and Vietnam within 10 years, based on import value, indicating a high level of market opening," adding, "The agreement also includes Vietnam's institutional reforms, reduction of non-tariff barriers, protection of intellectual property rights, and strengthening of labor and environmental protection obligations, which will play a significant role in modernizing Vietnam's economy and expanding foreign investment."

In particular, Korean textile and apparel companies operating in Vietnam are expected to benefit from this FTA. If they import Korean fabrics that meet the Korea-EU FTA conditions and produce garments in Vietnam for export to the EU, these garments will be recognized as originating from Vietnam and thus eligible for preferential tariff benefits. In contrast, China, which does not have an FTA with the EU, cannot offer preferential tariff benefits for garments produced with Chinese fabrics.

Currently, the EU relies on China for more than 30% of its clothing imports but applies tariffs of up to 12%. With the elimination of tariffs between the EU and Vietnam, there is a high possibility that Vietnamese clothing will replace Chinese products. Alongside this, demand for high-quality Korean yarns and other raw materials required in the garment manufacturing process is also expected to increase. Tariffs on Vietnamese consumer goods such as shoes and bags will also be significantly reduced, raising expectations for expanded EU exports by companies operating in Vietnam.

Kim Jung-kyun, Senior Researcher at the Korea International Trade Association, said, "Vietnam has established an FTA network with 52 countries through proactive market opening policies, positioning itself as an FTA hub in the ASEAN region," adding, "Korean companies operating in Vietnam should actively utilize the FTAs Vietnam has signed and, in the mid to long term, develop strategies to expand trade and investment in Vietnam and reorganize supply chains."

This content was produced with the assistance of AI translation services.