Free trade agreements (FTAs) are when two or more countries agree on the terms of trade between them. They determine the value of tariffs and duties that countries impose on imports and exports. In 2007, with Vietnam’s ascension into the World Trade Organization (WTO) – it took a significant step integrating with world trade and subsequently entering into several free trade agreements.

Over the past few years, Vietnam has been active in signing bilateral trade agreements with countries throughout the world. Additionally, due to its membership in the Association of Southeast Asian Nations (ASEAN), Vietnam has become a party to several FTAs that the regional trade bloc has signed.

This can be done in two ways – first, through more diversified sourcing partners through larger trade networks and cheaper imports of intermediate goods from partner countries, which should boost the competitiveness of Vietnam’s exports. Second – through partnership with foreign firms that can transfer the knowledge and technology needed to make the jump into higher value-added production. An example of this is the recently launched VSmart phone manufactured by Vietnamese conglomerate Vingroup.

Vietnam is touted as a low-cost manufacturer with several companies such as Samsung and Nokia setting up shop to manufacture and then export electronics, but the latest example shows how Vietnam can develop its own products from the transfer of know-how technology.

With recent trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam FTA (EVFTA), UK-Vietnam FTA (UKVFTA) in effect, and the upcoming Regional Comprehensive Economic Partnership (RCEP) – Vietnam seems to prioritize international trade integration trade partners outside ASEAN.

Such trade agreements will allow Vietnam to take advantage of the reduced tariffs, both within the ASEAN Economic Community (AEC) and with the EU and US to attract exporting companies to produce in Vietnam and export to partners outside ASEAN.

The EVFTA Report 2018 by the European Chamber of Commerce (EuroCham) in Vietnam revealed that 72 percent of EuroCham members believed that the EVFTA will make Vietnam more competitive and turn it into a hub for European businesses.