(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports(Luận văn thạc sĩ) An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports
THEORETICAL BACKGROUND ON FTAs AND NTMs
Definition, classification, main content, and effects of FTAs
Free trade agreements (FTAs) are pacts among two or more nations aimed at lowering barriers to cross-border trade, enabling goods and services to move more freely with little or no tariffs, quotas, subsidies, or prohibitions.
Article XXIV of the General Agreement on Tariffs and Trade (GATT 1947) first defines the Free Trade Area (FTA) as a framework designed to facilitate trade among the constituent territories while not imposing new barriers on the trade of other contracting parties with those territories Accordingly, the provisions of the Agreement shall not prevent the formation of a customs union or of a free-trade area or the adoption of an interim agreement necessary for the formation of such arrangements This provision has formed the backdrop for both traditional and new-generation FTAs today.
Based on GATT’s early ideas, economists describe free trade agreements (FTAs) as preferential pacts that remove trade barriers among signatories while allowing each country to set its own commercial and pricing policies toward non-members Definitions of FTAs vary mainly in scope and the level of preferential treatment: some define FTAs as zero-tariff regimes with zero tariff lines for members, while others see them as reducing tariff lines without necessarily reaching zero Other scholars extend the definition to removing not only tariffs but also quantity limitations and administrative barriers, and a broader view even calls for eliminating all trade barriers by member countries, a stance that historically leads to deeper economic integration in the form of free trade areas.
As the international trade has increasingly changed, the definition of FTA is expanded to cover issues beyond commitments in GATT/WTO In addition to
New-generation free trade agreements promote free trade by reducing tariff and non-tariff barriers while adding commitments on trade facilitation, government procurement, competition, labour standards, and environmental protection They are described as “new-generation FTAs” because they combine near-zero tariff lines and strong enforcement mechanisms with commitments in non-traditional areas such as labour, environment, transparency, investment dispute resolution, and procurement, delivering a comprehensive framework beyond the traditional goods-and-services agenda (Le Quang Thuan, 2019).
Classification of free trade agreements (FTAs) shapes negotiation strategies, motivations, and the content and implementation of commitments, along with the economic impact on member countries (Vu Thanh Huong, 2017) FTAs are commonly categorized by the number and development level of participating states into bilateral, regional, mixed, and multilateral agreements Bilateral FTAs, signed between two signatories, are generally easier to negotiate and bind only two parties Regional FTAs involve at least three members in close geographic proximity, aiming to boost regional trade, strengthen neighborhood links, and enhance a country’s standing in the international arena Mixed FTAs involve an economic union with a country, several countries, or another economic union, and though negotiations are more complex, their share is growing; some scholars view mixed FTAs as effectively special bilateral agreements since bloc members often negotiate collectively rather than individually Multilateral FTAs are signed by many nations, commonly understood to involve a large portion of WTO members.
Huong highlights that bilateral, regional or mixed FTAs have certain advantages compared to multilateral FTAs for several reasons First, negotiation is
Free trade agreements (FTAs) can make negotiations easier and quicker, and countries can flexibly select negotiation areas to match their specific needs These agreements provide preferential treatments at higher levels and with a broader scope of application, and countries can choose their negotiating partners Under these FTAs, the preferential treatments will enjoy immunities under WTO rules As multilateral FTA negotiations face challenges, joining other types of FTAs is a sensible preparatory step; however, an increase in bilateral and regional FTAs may push countries away from WTO negotiations and hinder international economic integration.
FTAs are classified by the economic development of their signatories into North-North, North-South, and South-South blocs, where “North” denotes developed economies and “South” denotes developing ones North-North FTAs mainly liberalize trade in goods, services, and resources and tend to create parity among members with similar development levels during negotiation and implementation, while facing less intense competition than other FTA types However, low-income countries within South-South blocs—sharing similar relative factor endowments, being economically smaller, and incurring higher transport costs—have limited opportunities to reap gains from trade through comparative advantage and scale economies, a dynamic highlighted by Behar and Crivillé (2010).
North-South FTAs and South-South FTAs typically cover more than mere tariff removal; for developing countries, North-South agreements tend to be more beneficial because they spur institutional reform, economic restructuring, and allow them to leverage their comparative advantage through access to larger, developed markets Because North-South deals integrate economies with different factor endowments and offer greater market access, they are more likely to generate efficiency gains, suggesting that Southern countries may be better served by North-South arrangements than by intra-Southern pacts (Behar & Crivillé, 2010) However, such FTAs also carry risks of trade diversion, and developing countries often face negotiation disadvantages that can lead to accepting demanding terms.
Thirteen developed countries seek to retain markets, while gaps in economic development prevent developing nations from meeting the reciprocal principles required in negotiations Moreover, new-generation FTAs address implementation challenges for developing countries, covering commitments in areas such as government procurement, competition policy, and environmental and labor standards.
Traditional free trade agreements (FTAs) historically focused on trade in goods, but new-generation FTAs expand to a broader set of issues, including services, investment, and sustainable development In goods, FTAs typically pursue tariff removal for improved market access, trade facilitation, and reductions in non-tariff barriers such as technical barriers to trade (TBTs) and sanitary and phytosanitary measures (SPSs), alongside safeguards and rules of origin (ROOs) Tariff removal commitments are usually more extensive and scheduled over shorter timelines than WTO terms, often covering at least 90% of trade value and tariff lines within ten years, with flexible schedules that benefit least-developed and other developing countries Beyond tariff liberalisation, FTAs also commit to trade facilitation through enhanced customs cooperation, faster release and clearance of goods, pre-arrival processing, and the promotion of e-commerce On TBTs and SPSs, members go beyond WTO obligations by prioritising mutual recognition, standards harmonisation, transparency, and technical assistance Most FTAs include separate provisions on trade in services aligned with GATS commitments to reduce discrimination in services trade, while additional chapters address investment, government procurement, intellectual property, competition policy, and sustainable development, along with labour and environment provisions.
Free trade agreements (FTAs) span multiple facets of the economy, producing deep and sometimes intricate effects on government policy, manufacturers, consumers, and workers They shape outcomes through core channels—trade, investment, the movement of labor, and finance—altering tariffs, regulatory norms, and supply chains to influence productivity, competitiveness, and living standards Academics analyze how FTAs affect market access, sectoral growth, and the distribution of benefits across industries and regions, while policymakers weigh trade-offs between openness and protection Understanding these relationships helps businesses and governments anticipate opportunities and manage risks associated with deeper integration into global markets.
Free trade agreements (FTAs) generate a range of direct and indirect, positive and negative, static and dynamic effects on the economy Directly, FTAs alter domestic and global prices, trade conditions, trade turnover, consumption, production, and investment (Plummer et al., 2020; Krugman et al., 2012) They also produce indirect impacts on key economic outcomes such as economic growth, resource allocation, competition, productivity, costs, employment, poverty, wages, inequality, social welfare, and environmental quality (Were, 2015).
Free trade agreements (FTAs) are often described as a "second-best" option because they generate both positive and negative effects These effects vary by perspective and context (Turner et al., 2008) For example, FTAs increase imports, expanding consumer access to a broader range of goods at lower prices; however, this can pressure domestic manufacturers that compete with foreign products Another dimension is heightened competition from FTAs, which may appear detrimental in the short term but can stimulate reform and restructuring by domestic businesses, potentially boosting long-term competitiveness and sustainable development.
Analyzing the effects of free trade agreements (FTAs) inherently involves examining the forms of economic integration they create, making it essential to assess both static and dynamic impacts to understand short-term domestic market responses to one-off policy changes as well as medium- and long-term adjustments driven by cumulative policies and resources (Vu Thanh Huong, 2017) Static effects of FTAs are traditionally analyzed using the customs union framework proposed by Viner, which assesses changes in trade turnover among member countries through trade creation and trade diversion Trade creation occurs when low-cost imports from a fellow member replace higher-cost domestic production due to the free trade area, while trade diversion happens when trade shifts from cheaper outside producers to comparatively higher-cost producers within the customs union.
Trade diversion resulting from internal preferential treatments undermines global resource allocation, moving production away from comparative advantage and eroding the gains of free trade agreements (FTAs) for both signatory and non-signatory economies The dynamic effects of FTAs, realized in the mid-to-long term, reflect how economies adapt to policy changes to implement these agreements and pursue deeper economic integration beyond tariff removal These dynamics involve addressing behind-the-border barriers (Balassa, 1961) and are characterized by productivity gains from economies of scale, heightened competition, better production specialization and efficiency, and increased investment creation and diversion.
Definition, classification, and effects of NTMs
Tariffs have long been viewed as the most visible trade barrier, but their dominance is diminishing as non-tariff measures (NTMs) take on a larger role in today’s global trade environment NTMs describe a broad range of policies and regulations that influence trade beyond tariff rates, whereas non-tariff barriers (NTBs) refer to specific restrictions that directly hinder imports and exports The difference between NTMs and NTBs can be subtle and these terms are sometimes used interchangeably, yet recognizing that NTMs encompass regulatory tools like product standards, licensing requirements, and administrative procedures helps explain how trade is managed even as tariff levels decline.
According to the OECD, non-tariff barriers (NTBs) encompass all measures other than tariffs that restrict or distort trade flows In contrast to tariffs, which have quantitative databases to measure incidence, levels of protection, and changes over time, NTBs are more difficult to identify and quantify, making it challenging to assess their real impact on trade (OECD, 2005).
The International Trade Centre (ITC) defines non-tariff measures (NTMs) as policy measures, other than ordinary customs tariffs, that can affect international trade in goods by changing the quantities traded, the prices, or both These measures consist of mandatory requirements, rules, or regulations legally set by the government of the exporting, importing, or transit country NTMs are a neutral concept and do not necessarily imply a particular direction of impact, whereas non-tariff barriers (NTBs) imply a negative impact on trade.
Support Team (MAST) and the Group of Eminent Persons on Non-Tariff Barriers (GNTB) propose that NTBs are a subset of NTMs that have a 'protectionist or discriminatory intent'
Agreeing with the ITC, the ASEAN Secretariat believes that NTMs are distinct from NTBs NTMs constitute a broad category that includes a wide range of measures, from quantitative restrictions to technical regulations, as well as standards and customs rules, among others NTBs are a subset of NTMs and are defined as measures that may have trade-inhibiting effects (ASEAN Secretariat, 2015).
According to a 2019 UNESCAP report, non-tariff barriers (NTBs) are policies that impose adverse trade effects due to discriminatory or protectionist intent, with the determination often hinging on the regulation’s underlying motive Non-tariff measures (NTMs) are typically meant to serve public interest—protecting health and safety, morals, or the lifecycle of humans, animals, or plants; advancing foreign policy or national security; implementing monetary policy goals; safeguarding cultural treasures; and conserving natural resources or wildlife Whether an NTM qualifies as an NTB is contentious, as trading partners may disagree about discriminatory or protectionist aims Technically, NTMs are not NTBs unless challenged through the WTO dispute settlement process, though many technical NTMs are viewed as discriminatory or more trade-restrictive than necessary and can be used as trade policy tools; in contrast, non-technical NTMs are largely NTBs Governments can strategically frame almost any NTM category as an NTB NTBs can be targeted for removal, while other NTMs—when subject to regulatory review—may continue or be replaced by more efficient policy measures (UNESCAP, 2019).
Meanwhile, the OECD believe that NTBs and NTMs are interchangeable terms Accordingly, the term “non-tariff measures” (NTMs), which has become
17 standard usage in APEC, is used here in preference to non-tariff barriers (NTBs), which is used more frequently in the WTO context (OECD, 2006)
The broadly accepted definition of non-tariff measures (NTMs) was established in 2006 by UNCTAD’s Group of Eminent Persons on Non-tariff Barriers (NTBs) and the Multi-Agency Support Team (MAST) Under this definition, NTMs are policy measures other than ordinary customs tariffs that can potentially affect international trade in goods by changing quantities traded, prices, or both Only mandatory government regulations are considered NTMs; other provisions that may create trade barriers, such as standards and related procedures, are not NTMs NTMs are neutral, with no a priori assessment of their legality or overall impact on trade or welfare.
The International Classification of Non-tariff Measures (ICNTM) is the most widely recognized framework for classifying NTMs, officially endorsed by the United Nations Statistics Division in 2012 The latest version of the ICNTM is currently updated to reflect evolving trade policies and regulatory practices, providing a standardized reference for researchers, policymakers, and trade practitioners seeking consistent NTMs data across countries and sectors.
The 2019 taxonomy provides a comprehensive classification of all measures currently considered relevant in international trade It builds on UNCTAD’s earlier Coding System of Trade Control Measures, expanding and refining the framework to capture evolving non-tariff barriers Developed by the Multi-Agency Support Team (MAST), a coalition of international organizations, the taxonomy supports analysis and policy dialogue for trade facilitation The MAST group operates on behalf of the Group of Eminent Persons on Non-tariff Barriers, established by the UNCTAD Secretary-General to address non-tariff barriers and promote transparent trade practices.
In 2006, the final proposal of the MAST group was revised by UNCTAD and all relevant divisions of the WTO Secretariat, and then field-tested for data collection by the International Trade Centre and UNCTAD This collaborative testing laid the groundwork for the 2012 version of the publication.
18 evolving one, adaptable to the reality of international trade and data collection needs (UNCTAD, 2019)
To address the growing complexities of international trade, the MAST group, together with other experts and government officials, refined the 2012 version during 2015–2018 The revision updated existing chapters A to I and P and advanced the definition and taxonomy for chapters J to O, which previously lacked a disaggregated taxonomy To coordinate these efforts, the MAST group created six open working groups to address six key areas.
(a) General issues: chapters A to I and chapter P; working group chaired by UNCTAD;
(b) Post-sales services and distribution restrictions: chapters J and K; working group chaired by the World Bank;
(c) Subsidies: chapter L; working group chaired by WTO;
(d) Government procurement: chapter M; working group chaired by OECD; (e) Intellectual property: chapter N; working group chaired by UNCTAD; (f) Rules of origin: chapter O; working group chaired by the International Trade Centre
This classification encompasses both technical measures, such as sanitary and environmental protection requirements, and traditional commercial policy instruments It includes quotas, price controls, export restrictions, and contingent trade-protective measures, as well as other behind-the-border measures such as competition- and trade-related investment measures and restrictions on government procurement or distribution.
This classification does not assess the legitimacy, adequacy, necessity, or discriminatory nature of any policy intervention used in international trade; instead, it acknowledges these interventions and presents the information in a standardized database format By delivering transparent, reliable, and comparable data, it helps readers understand the phenomenon and enables exporters worldwide to access information, much like tariffs provide access to essential pricing details Transparent information also supports analysis, reduces uncertainty, and informs policy and business decisions.
19 needed for any negotiations that could lead to harmonization and mutual recognition and thus enhance trade
Classification develops a tree-like structure where measures are divided into chapters based on their scope and design, with each chapter further differentiated into subgroups to enable finer classification of trade regulations The International Classification of Non-tariff Measures consists of 16 chapters (A to P), and each chapter is divided into groupings with up to three levels of depth (one, two, and three digits) following the same logic as the Harmonized System (HS) for product classification Within each subgroup, measures are listed by number, with the digit 9 reserved for cases not listed within that subgroup Although a few chapters reach the three-digit level of disaggregation, most stop at two digits These chapters reflect the importing country’s requirements concerning its imports, with the exception of measures imposed on exports by the exporting country (chapter P).
Table 1.1 Classification of non-tariff measures by chapter
C Pre-shipment inspection and other formalities
E Non-automatic import licensing, quotas, prohibitions, quantity-control measures, and other restrictions not including sanitary and phytosanitary measures or measures relating to technical barriers to trade
F Price-control measures, including additional taxes and charges
K Restrictions on post-sales services
L Subsidies and other forms of support
Chapter A addresses sanitary and phytosanitary measures, detailing restrictions on substances, safeguards for food safety, and actions to prevent the spread of diseases or pests; it also covers conformity-assessment procedures for food safety, including certification, testing, inspection, and quarantine.
Chapter B compiles technical measures, also known as technical barriers to trade, addressing product characteristics such as technical specifications and quality requirements, as well as related processes, production methods, and packaging and labeling in relation to environmental protection, consumer safety, and national security Like sanitary and phytosanitary measures, Chapter B also covers conformity-assessment procedures tied to technical requirements, including certification, testing, and inspection.
Chapter C, the last chapter in the technical measures section, classifies the measures related to pre-shipment inspections and other customs formalities
Overview of EVFTA and its NTMs
EVFTA is a new-generation free trade agreement between Vietnam and the 28 European Union member states, designed to deepen trade and investment across multiple sectors Negotiation rounds were officially concluded in December 2015, marking a milestone in Vietnam‑EU economic cooperation The agreement was ratified by the European Parliament in February 2020 and by Vietnam’s National Assembly in June 2020, and it entered into force on August 1, 2020.
As a new-generation FTA, the EVFTA delivers broad, high-level commitments across key areas, including trade in goods with modern rules of origin and streamlined customs and trade facilitation, TBTs and SPSs, trade remedies, trade in services, investment treatment and investor-state dispute settlement (ISDS) between the State and foreign investors, competition policy and the regulation of state-owned enterprises, government procurement, intellectual property, and a strong framework for trade and sustainable development, all supported by solid legal and institutional provisions and ongoing collaboration and capacity development.
The following Table illustrates the key contents of EVFTA compared to CPTPP and RCEP, two other new-generation FTAs of Vietnam
Table 1.2 Key contents of EVFTA compared to CPTPP and RCEP
Customs procedures and trade facilitation x x x
Temporary entry for business persons x x x
Small and medium-sized enterprise x
EVFTA's most prominent feature is the removal of tariff barriers to promote trade in goods and market access between the EU and Vietnam Both sides commit to eliminating tariffs as soon as the agreement takes effect for imported goods In particular, the EU pledges to eliminate tariffs on Vietnam’s goods that cover 85.6% of tariff lines, which accounts for about 70.3% of Vietnam’s export turnover to the EU.
Under the EVFTA, the EU commits to removing 99.2% of tariff lines, representing about 99.7% of Vietnam’s export turnover to the EU The remaining 0.3% of export turnover will be covered by tariff-rate quotas with 0% import duties inside the quota limits In textiles, duties on 42.5% of tariff lines will be eliminated as soon as the EVFTA takes effect, while duties on the remaining lines will be phased out on a 3-to-7-year schedule.
Under the Vietnam–EU Free Trade Agreement (EVFTA), Vietnam commits to eliminating tariffs on EU goods that represent 48.5% of tariff lines, accounting for 64.5% of EU exports to Vietnam Within seven years of the EVFTA entering into force, Vietnam will remove 91.8% of tariff lines, equivalent to 97.1% of EU exports to Vietnam.
10 years since EVFTA comes into effect, Vietnam commits to removal about 98.3%
Twenty-five tariff lines account for 99.8% of the EU's export turnover to Vietnam, while about 1.7% of the remaining tariff lines will see Vietnam commit to establishing tariff-rate quotas in line with WTO commitments or applying a special elimination roadmap.
Vietnam and the EU commit not to impose export tariffs or fees, except for reserved cases, with Vietnam’s reservation on export duties applying specifically to goods exported from Vietnam to the EU Vietnam will maintain export tariffs for 57 tariff lines, including sand, shale, granite, and crude oil, and among these, the tariff lines with high export tariffs are set to be reduced to 20% within five years For all other products, Vietnam agrees to eliminate export tariffs on a maximum schedule of 15 years.
Schedule and percentage of export tariff removal of EU and Vietnam under EVFTA are illustrated in the Table below
Table 1.3 Schedule and percentage of export tariff removal of EU and
Schedule of export tariff removal
As soon as EVFTA enters into force
Not subject to tariff removal 1.7 0.2 0.8 0.3
EVFTA’s ambitious tariff-removal commitments are expected to significantly boost bilateral trade between Vietnam and the EU, especially in sectors where each party has a competitive advantage The Ministry of Planning and Investment (MPI) notes that strict implementation of tariff removals and non-tariff measures (NTMs) under EVFTA could support Vietnam’s economic growth across the short, medium, and long term MPI projects GDP growth averaging 2.18–3.25% in the first five years of enforcement, 4.57–5.30% in the second five years, and 7.07–7.72% in the third five years, with exports benefiting in tandem with these gains.
EVFTA is expected to contribute to an increase of Vietnam’s exports to the EU of 42.7% and 44.37% in 2025 and 2030 respectively compared to the scenario without the agreement
Under EVFTA, 42.5% of tariff lines for garments and textiles will be eliminated as soon as the agreement takes effect, with the remaining lines phased out within 3 to 7 years Within five years of implementation, tariffs on 77.3% of Vietnam's garment and textile exports to the EU will be removed, and the remaining 22.7% will follow after seven years This tariff liberalization is expected to substantially boost Vietnam's garment and textile exports to the EU in the early years, with stable growth over the long term The MPI projects a 67% increase in Vietnam’s garment and textile exports to the EU by 2025 compared with a scenario without the agreement, along with productivity gains of about 6% for the textile sector and 14% for the garment sector by 2030.
Beyond tariff removal to boost bilateral trade, EVFTA delivers significant breakthroughs in reducing non-tariff measures that affect goods trade between Vietnam and the European Union, with the most important NTMs including TBTs, SPSs, and ROOs These NTM commitments are expected to influence bilateral trade by covering a wide range of NTMs used in international trade by both sides, and they are crafted at higher, more comprehensive levels than any prior FTA between Vietnam and the EU, aiming to ensure transparency, harmonization, and mutual recognition.
As a result, trade costs will be reduced to facilitate bilateral trade However, unlike commitments on tariff elimination, it is difficult to quantify benefits of commitments on NTMs in EVFTA
As defined by UNCTAD, technical barriers to trade (TBTs) are measures referring to technical regulations and procedures of assessment of conformity with
Technical regulations are documents that define product characteristics or related production processes and methods, together with the administrative provisions that make compliance mandatory, and they may also address terminology, symbols, packaging, labeling, or related requirements for a product, process, or production method (with sanitary and phytosanitary measures excluded from this context) A conformity-assessment procedure covers the range of steps used to determine whether the relevant requirements in technical regulations or standards have been met, including sampling, testing, and inspection, as well as evaluation, verification, and assurance of conformity, plus registration, accreditation, or approval, or any combination of these processes (UNCTAD, 2019).
TBTs are specified in Chapter 5 of the EVFTA and the provisions are designed to go beyond the WTO TBT Agreement to ensure that technical regulations, standards, and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade Regarding technical regulations, Vietnam agrees to assess the available regulatory and non-regulatory alternatives to proposed technical regulations and to undertake a regulatory impact assessment as recommended by the TBT Committee Vietnam also commits to reviewing its technical regulations to increase their convergence with relevant international standards and to use standards developed by international standards-setting bodies as a basis for Vietnam's technical regulations The agreement further requires Vietnam to regularly review its national and regional standards that are not based on relevant international standards, with a view to increasing their convergence with international standards Importantly, Vietnam agrees to consider the supplier's declaration of conformity as an assurance of conformity among the options for showing conformity with its technical regulations Finally, the agreement commits Vietnam to ensure that economic operators can choose among conformity assessment options.
28 assessment facilities to avoid possible conflicts of interest between accreditation bodies and conformity assessment bodies by ensuring their independence
Under the agreement, all technical regulations and mandatory conformity assessment procedures will be publicly available on official websites and free of charge, ensuring transparency The arrangement also enables economic operators of the other Party to participate in formal public consultations during the development of technical regulations Vietnam commits to preventing conflicts of interest between market surveillance and conformity assessment functions, as well as between market surveillance bodies and the economic operators subject to their oversight.
Sanitary and Phytosanitary Measures (SPS) are protective measures designed to safeguard human and animal life from risks associated with food additives, contaminants, toxins, or disease-causing organisms, while also protecting plant and animal health from pests and diseases; they aim to prevent or limit the entry, establishment, and spread of pests and to preserve biodiversity, including safeguards for the health of fish, wild fauna, forests, and wild flora (UNCTAD, 2019).
Vietnam and the European Union agreed to base future sanitary and phytosanitary (SPS) measures on the WTO SPS Agreement as the main framework and to align with standards developed by international standard bodies They aim to make SPS requirements more operational and transparent to facilitate bilateral trade, addressing long-standing issues such as the lack of an agreed health status for certain animal diseases, notably BSE In this regard, the parties also agreed to adopt the international health status framework established by the World Organisation for Animal Health (OIE), as noted by the European Commission in 2018.
ANALYSIS OF THE CURRENT SITUATION OF
Overview of EU-Vietnam trade and current situation of Vietnam
2.1.1 Overview of EU-Vietnam trade
Since establishment of diplomatic relationship in November 1990, Vietnam-
EU-Vietnam relations have expanded across all sectors, with trade serving as the key driver for broader bilateral cooperation that yields mutual benefits The European Union offers a large market with about 447 million people and a GDP per capita of $34,148 (World Bank, 2020), making it a major platform for growth Trade between Vietnam and the EU is characterized by complementarity rather than competition, reinforcing the potential for increased imports and exports Today, the EU ranks as Vietnam's third-largest export market (after the United States and China) and the fifth-largest import partner, while Vietnam stands as the EU's 15th-largest trade partner globally and fifth-largest in Asia.
MoIT statistics show that Vietnam–EU trade has significantly expanded over the past decade, with bilateral turnover rising more than 12-fold from $4.1 billion in 2000 to nearly $50 billion in 2020 Vietnam’s exports to the EU surged about 13-fold, from $2.8 billion to $35.1 billion in 2020 In the EU market, Vietnam’s key export partners remain traditional economies such as the Netherlands, Germany, France, Italy, Austria, Belgium, Spain, Poland, and Sweden.
Figure 2.1 Vietnam’s trade in goods with EU vs World from 2010 - 2020
Figure 2 illustrates Vietnam’s exports to and imports from the European Union from 2010 to 2020, showing that Vietnam consistently runs a trade surplus with the EU throughout this period The data indicate that Vietnam’s export value to the EU generally exceeded its imports, reflecting a favorable bilateral trade balance In 2020, overall bilateral trade slowed due to the COVID-19 pandemic.
Vietnam is expected to resume expansionary momentum in the post-COVID era, with the EVFTA in place, but the EU market for Vietnamese exports will be smaller due to the UK's departure from the EU, since the United Kingdom had been Vietnam's third-largest export market within the EU-28.
Figure 2.2 Exports/imports from Vietnam to the EU from 2010-2020
In 2021, despite Vietnam being severely hit by the fourth wave of the COVID-19 pandemic, especially in the southern export hubs, bilateral trade still grew, with total turnover reaching $56.95 billion, up 14.8% from 2020 Exports amounted to $40.06 billion, up 14.1%, while imports rose to $16.89 billion, up 14.3% year on year The trade surplus in 2021 stood at $23.17 billion.
Figure 2.3 Exports/imports from Vietnam to the EU in 2021 (Unit: $bil)
EU remains an important export market of Vietnam after US and China in
2021 It is forecast that Vietnam’s exports to the EU in 2022 will be higher than in
2021 as Vietnamese businesses are more aware of preferential treatments from EVFTA
Figure 2.4 Key import and export markets of Vietnam in 2021 (Unit: $bil)
EU exports to Vietnam are dominated by high-tech products, including electrical machinery and equipment, aircraft, vehicles, and pharmaceutical products, while Vietnam’s exports to the EU center on telephone sets, electronic products, footwear, textiles and clothing, and goods like coffee, rice, seafood, and furniture This bilateral trade pattern highlights complementarities between the EU’s advanced manufacturing sector and Vietnam’s growing output of consumer electronics, footwear and textiles, and agrifood products, creating diverse opportunities for both markets.
Figure 2.5 Most traded products between EU and Vietnam in 2020
As noted in Chapter 1, the EVFTA became effective in August 2020 with commitments to remove 100% of tariff lines, a move expected to significantly boost Vietnam’s exports to the EU, especially in competitive sectors such as garment and textile, footwear, agricultural and aquatic products, and furniture MoIT projects that by 2035 Vietnam’s exports to the EU will grow by about 18%, equivalent to €8 billion European demand is anticipated to rise for agricultural and aquatic products, tropical and organic produce, non-seasonal vegetables and fruits, and key Vietnamese industrial products including garment and textile, footwear, and furniture.
The EU market is demanding, with stringent regulations and high technical standards for imported goods The EVFTA brings both opportunities and challenges for Vietnamese companies to enhance production capacity, increase competitiveness, achieve sustainable exports, and advance to higher steps in the global value chain.
2.1.2 Current situation of Vietnam ’s garment and textile exports to the EU
Vietnam's garment and textile industry is a leading sector with high export value, accounting for roughly 12-16% of the country's annual export turnover Over the decade from 2010 to 2020, Vietnam's garment and textile exports more than tripled, rising from $11.2 billion to $35.07 billion In 2021, despite the challenges posed by the COVID-19 pandemic, Vietnam's garment and textile exports remained robust, reaching $32.75 billion.
Figure 2.6 Garment and textile exports of Vietnam 2010-2021 (Unit: $bil)
For many years, the export value of garment and textile products has consistently ranked among Vietnam's top ten exports, behind smartphones and accessories, electronics and accessories, and machinery and equipment.
Figure 2.7 Export value of top 10 exported goods of Vietnam in 2021 compared to 2020 (Unit: $bil)
Vietnam has consistently ranked among the world’s top five exporters of garment and textile products for many years, with its main markets including the United States, the European Union, Japan, and South Korea.
Figure 2.8 Top garment and textile exporting countries 2016-2020 (Unit: $bil)
Among the top 5 export markets of Vietnam garment and textile products,
EU garment and textile market is the world’s largest, importing about $250 billion annually, which accounts for roughly 34% of global garment and textile imports, with EU demand growing at around 3% per year The EU also ranks second in global garment and textile exports, behind China, accounting for about 24% of world export value Within intra-EU trade, roughly 40% of garment and textile imports come from EU member countries, while the remaining 60% are sourced from non-EU nations, primarily developing economies The leading suppliers to the EU are China, Turkey, and Bangladesh, together accounting for about 36% of EU garment and textile imports, with a total value of around $100 billion (VITAS 2020).
Figure 2.9 Market shares of garment and textile exports to EU in 2020
Vietnam's garment and textile exports to the EU market account for about 11% of the country's total export value, with an annual growth rate of 7–10% (MoIT, 2020) The accompanying figure indicates that Vietnam’s garment and textile exports to the EU have increased nearly fourfold, highlighting the EU market's significant and expanding role in Vietnam's apparel sector.
Textile exports to the EU grew from $11.4 billion in 2010 to $40.09 billion in 2020, reflecting strong decade-long growth Among EU member states, the five largest markets—Germany, the Netherlands, France, Spain, and Belgium—account for nearly 70% of total export value.
Figure 2.10 Vietnam’s garment and textile exports to the EU in 2010 and 2020 by member country (Unit: $bil)
By HS code, it is observed that Vietnam’s exports of HS57 to 63 to the EU has been around 11% of total exports to the EU Under the impacts of Covid-19, while exports of HS57 to 62 saw a slight decrease, exports of HS63 still increased 147% This might be a result of EVFTA’s preferential tariff treatments Figure 11 below illustrates exports of Vietnam’s garment and textile materials of HS57 – HS63 to the EU from 2015 to 2020
Figure 2.11 Exports of Vietnam’s garment and textile materials to the EU from 2015 to 2020 by HS code (Unit: $)
By country, Vietnam’s exports of HS57 to 63 mainly go to Germany (22%),
UK (14%), Netherlands (15%), France (18%) in 2020 This proportion was shifted after UK officially left EU on 1 January 2021 Statistics also showed growth of export of HS63 630790 Made-up Textile Articles despite Covid-19
Figure 2.12 Exports of Vietnam’s garment and textile materials to the EU from 2015 to 2020 by country (Unit: $)
Current situation of application of EVFTA’s NTMs on Vietnam’s
2.2.1 A pplication of EVFTA’s NTMs on Vietnam’s garment and textile exports
Vietnam’s garment and textile exports must comply with commitments on ROOs and other technical and non-technical NTMs in EVFTA Among these, ROOs provisions are the most challenging requirements
Under the EVFTA, the Rules of Origin (ROOs) that apply to Vietnamese exports, including garments and textiles, follow the GSP framework but feature newer, more complex provisions on determining origin, acquiring originating status, origin self-declaration, and origin verification Consequently, Vietnamese garment and textile exporters must navigate stricter ROOs rules in addition to the general ROOs benefits In particular, EVFTA imposes ROOs provisions such as cumulation of origin, transit and splitting in a third country, limits on the share of non-originating materials, and product-specific rules (PSR) that directly affect Vietnamese garment and textile shipments.
Under Article 3 of Protocol 1 of the EVFTA, cumulation of origin applies to fabrics that originate in the Republic of Korea, on the condition that Vietnam and Korea issue a written notification to the EU regarding the use of cumulation and maintain administrative cooperation to verify the origin status of the products This arrangement enables Vietnamese garment and textile businesses to use Korean raw materials, since Korea has FTAs with both the EU and Vietnam The Ministry of Industry and Trade issued Circular 11/2020/TT-BCT to guide the implementation of ROO commitments under the EVFTA On 23 December 2020, Vietnam and South Korea notified the European Union of the undertaking referred to in Article 3(10)(b), thereby fulfilling the two conditions of Article 3(10) and making the cumulation for fabrics originating in South Korea in Vietnam under Article 3(7) EVFTA Origin Protocol applicable as of that date In accordance with Article 3(9) EVFTA Origin Protocol, the origin of fabrics originating in South Korea will be declared for Vietnamese producers by origin declarations issued by approved exporters, in line with the EU–Korea FTA (European Commission, 2021).
EVFTA permits splitting consignments at a third country without changing their origin, provided valid proof of origin is submitted In such cases, the importing country's customs authorities may require proof of origin to be submitted under customs supervision of the third country, using documents such as the bill of lading, commercial invoice, sales contract, and a certification of non-alteration of origin issued by customs in the third country This new EVFTA provision facilitates Vietnamese garment and textile exports to EU markets by enabling consignment splitting at a third country when the required proof of origin is provided.
Under EVFTA rules, a small de minimis (tolerance) for non-originating materials is allowed, enabling flexibility in determining origin Specifically, garment and textile products can still be qualified as made in Vietnam with only 8-10% de minimis fabrics, and up to 20-30% for high-tech fabrics.
EVFTA sets out specific 'insufficient working or processing' steps that do not confer the status of originating products, unlike many other FTAs Whether these operations are performed alone or in combination, they do not qualify for originating status Article 6 of Protocol 1 lists these operations; for example, ironing or pressing textiles and textile articles is considered insufficient working or processing and therefore does not qualify for origin-based preferential treatment.
EVFTA outlines product-specific rules (PSR) in two annexes: (i) a guiding PSR for all products, with application to agricultural products, textiles, and oil and gasoline; and (ii) PSR for all 97 chapters In textiles, these PSR provisions apply.
Under the EVFTA, the fabric-forward rule requires that materials be wholly obtained from Vietnam or the EU, with cutting and sewing performed in signatory countries This creates a significant challenge for Vietnamese garment and textile companies, which largely rely on raw materials imported from non-EU nations As a response, attention is turning to cumulation of origin rules for raw materials from Korea to help mitigate the impact on Vietnamese producers.
47 might be a flexible solution to the problem of origin for Vietnamese garment and textile export to the EU
During the first two years after the EVFTA took effect, Vietnamese exports to the EU continued to enjoy preferential treatment under the Generalized System of Preferences (GSP) scheme Consequently, Vietnamese garment and textile businesses should assess whether to apply EVFTA preferences or GSP preferences, choosing the option with the lower tariff rate and the most suitable Rules of Origin (ROOs) commitments for their production through August 1, 2022.
At the same time, they should be well prepared for transferring to new ROOs commitments after that
Beyond ROOs, Vietnam’s garment and textile products must comply with additional NTMs, including technical standards, product safety, and labeling for user instructions and country of origin, as well as disclosures on chemicals used, the names and labeling of textile fibres, packaging and packaging waste, design considerations, and protective equipment requirements Because the industry uses a wide range of chemicals, there are strict standards on the chemical content in fabrics, fibres, clothing, and accessories to ensure safety and compliance across the supply chain.
Vietnamese businesses must comply with ISO 14001 environmental management standards to meet quality and sustainability expectations At the same time, the EU imposes strict requirements on material processing and the treatment of toxic waste generated across the textile supply chain—from raw material cultivation and fabric manufacturing to weaving, dyeing, and printing Export packaging must protect goods during transport from damage due to mechanical shocks, temperature, and climate conditions Labels should provide detailed information on fiber and yarn content to support accurate product specification and compliance with traceability standards.
2.2.2 Application of CPTPP and RCEP’s NTMs on Vietnam’s garment and textile exports
2.2.2.1 Application of CPTPP’s NTMs on Vietnam’s garment and textile exports
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is an FTA between Australia, Brunei Darussalam, Canada,
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) unites eleven economies—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam The agreement entered into force for Vietnam on 14 January 2019, and, once in force for all signatories, the CPTPP has eliminated more than 98 per cent of tariffs among the eleven member countries, reinforcing trade ties among Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.
CPTPP includes a dedicated chapter on textile and apparel goods, with rules of origin (ROOs) regarded as one of the most challenging non-tariff measures, similar to the EVFTA Beyond general ROOs provisions, the agreement applies textile- and apparel-specific rules designed to promote regional supply and investment chains and increase the value of these goods A key requirement is that fibres and yarns be wholly obtained in CPTPP member areas, supporting local production and value addition within the region The provision on short-supply materials is applied flexibly, allowing the use of certain fibres and yarns not readily available in the CPTPP area.
Under the CPTPP, an importer can claim preferential tariff treatment by submitting a Certification of Origin completed by the importer, exporter, or producer Unlike some FTAs, CPTPP does not require a prescribed form for the certificate of origin, but the certificate must be in writing (including electronic) and meet a set of minimum data requirements The CPTPP Rules of Origin (ROOs) are the agreed criteria that ensure only goods that satisfy the CPTPP origin rules receive the tariff preferences published in the importing Party’s Tariff Elimination Schedule, preventing non-member countries from obtaining CPTPP benefits If imports into a CPTPP Party fail to meet the ROOs, they may be assessed at the MFN rate rather than CPTPP preferential duties.
Goods qualify as CPTPP originating if they are wholly obtained or produced entirely within the territory of one or more CPTPP Parties as defined in Article 3.3; or produced entirely in those territories exclusively from originating materials; or produced entirely in those territories using non-originating materials, provided the goods meet all applicable requirements in Annex 3-D.
(Product-Specific Rules of Origin); and the goods must also meet the transit and transhipment rules
Wholly obtained or produced goods are those that are exclusively derived in one or more CPTPP Parties, with agricultural products and natural resources serving as typical examples The CPTPP also treats goods that are made entirely from wholly obtained or produced goods as themselves wholly obtained or produced In practice, such goods are produced entirely within the territory of one or more Parties, using materials classified as wholly obtained or produced.
‘wholly obtained or produced’ or ‘originating’ under the Product Specific Rules of Origin will qualify for preferential tariff treatment
Impacts of EVFTA’s NTMs on Vietnam’s garment and textile exports
EVFTA is a comprehensive trade agreement with an explicit goal to reduce NTMs and tariffs, unlocking growth for Vietnam's leading export sectors, notably textiles and garments Since negotiations began, several studies using partial-equilibrium models have explored the agreement’s potential to ease trade frictions, notably Vo et al (2018) who show that EU tariff elimination on Vietnam’s footwear generally raises export value—even under anti-dumping pressures—though item HS 6403 may be hit by higher trade defense, and a reallocation of export portfolios toward higher-tariff-preference products is likely Similarly, Grumiller et al (2018) highlight duty-free market access for Vietnamese apparel into the EU, which would boost exporters’ competitiveness in the long term, provided fabric-forward rules of origin are met and compliance with social and environmental standards is ensured.
Although these studies are useful, they fail to quantify how EVFTA regulations affect sector trade flows and do not explicitly separate non-tariff measures from the more visible changes in tariff rates This gap makes it harder to assess the relative impact of NTMs versus tariff adjustments under the agreement and highlights the need for analyses that isolate non-tariff measures to better understand trade dynamics.
Measuring the impact of standard ad valorem tariffs is straightforward, but non-tariff measures (NTMs) are often complex, not easily observed, and there is no universal consensus on how their effects should be measured in empirical research The existing literature on NTMs points to applying gravity models to compare hypothetical trade flows without NTMs with observed trade flows Given the importance of NTM regulations in the context of the EVFTA and the available data, this study aims to quantify NTMs’ impact using a gravity equation, with the model details described in the next section.
At its core, the gravity model of international trade explains how bilateral trade flows between two countries are shaped by the size of their economies—typically measured by GDP—and by trade frictions such as geographic distance and policy instruments that either hinder or facilitate trade In this framework, trade volume is typically captured with a standard multiplicative specification, where bilateral trade rises with the product of the two economies and falls with the barriers between them, a concept first formalized by Tinbergen in 1962.
(1) , where , represent the exporter’s and importer’s GPD at time t, respectively proxies geographical distance stands for trade flows at time t between country i and j
Despite its elegant structure and strong empirical performance in the gravity model of international trade, equation (1) has drawn criticism for weak theoretical foundations (Head & Mayer, 2014) To address this gap, Anderson and van Wincoop (2003) delivered a pivotal theoretical contribution by formalizing the gravity equation through bilateral trade costs and multilateral resistance terms, providing a clear mechanism for how trade costs, relative prices, and global trade frictions shape observed trade flows.
Multilateral resistance captures how bilateral trade depends on trade frictions with all potential partners, not just the two countries in a given pair As Anderson and van Wincoop (2003) explain, "the more resistant to trade with all others a region is, the more it is pushed to trade with a given bilateral partner." In other words, bilateral trade between two countries is shaped by their trade frictions with other partners, and neglecting this factor in the gravity model leads to misspecification and biased estimates Because the concept is so influential, nearly every theoretical gravity model now nests some form of multilateral resistance.
Drawing on Bergstrand et al (2013) and related developments in estimation methods—such as fixed effects and the PPML estimator introduced by Silva & Tenreyro (2006)—the gravity model has emerged as a robust framework for measuring how new trade policies or agreements affect trade flows It is, therefore, a natural choice for examining the impact of EVFTA’s non-tariff measures on Vietnam’s textiles and garment trade.
In line with prior research, this thesis uses an extended gravity model to account for multilateral resistance generated by trade regulations—including tariffs and non-tariff barriers—by employing a multiplicative specification.
This framework models aggregate trade frictions as arising from geographical distance and trade regulations, with a decomposition that assigns each factor its share of the overall distance term The pairwise geographical distance—measured in kilometers between the capitals of country i and country j—captures the spatial separation, while tariffs reflect the level of applied duties and non-tariff measures capture other regulatory obstacles It is expected that the coefficients on these components are negative and statistically significant, indicating that greater distance and stricter trade barriers curb trade After log-linearization, the gravity model is transformed into a linear form in the logarithms, enabling straightforward estimation of how distance and regulation influence trade flows.
(3) where the additive error, , is assumed to be identically and independently distributed
Before turning to the data sources used to estimate the gravity model, this section explains how NTMs are measured The two widely documented indicators for quantifying NTMs are the export coverage ratio (ECR) and the frequency count index (FC) The export coverage ratio measures the share of exports affected by NTMs, while the frequency count index records the number of distinct NTMs applied to a given product at a destination Together, these metrics offer a concise, SEO-friendly way to capture the prevalence and intensity of non-tariff measures in international trade and inform gravity-model analyses.
55 export that is subject to NTMs for exporting country i which sells the products to importing country j at a desired level of product disaggregation:
Let δ_s,t denote whether product s faces NTMs at time t and let X_s,t denote its export value The export-NTM exposure ratio (ECR) sums the export value of all traded products affected by an export NTM in the numerator and divides by the total export value, producing a trade-weighted measure of NTM exposure To avoid zero-value issues, ECR is typically computed as an average over several years at the 6-digit HS level Because ECR is a trade-weighted ratio, its use in gravity-model estimation can introduce endogeneity As an alternative, the frequency count (FC) index counts only the presence or absence of NTMs, ignoring export values, and is not affected by the restraining impact of NTMs on observed exports The FC indicator measures the share of export transactions covered by a selected group of NTMs for country i:
This study uses a binary export indicator that captures whether exports from exporter i of good s to importer j occur at time t, along with a second dummy variable that signals the presence of NTMs applied to tariff line-item s at the same measurement time, to assess trade effects under EVFTA Unlike the ECR, the frequency-count index does not convey the relative value of the affected products In this study, both measures are used to estimate the impact of EVFTA’s NTMs on textile and garment trade.
Data used to estimate the gravity equation were compiled from multiple sources into a unified dataset that covers bilateral exports in the textile and garment sector (HS 57–63) for 2018–2021, the tariffs and non-tariff barriers imposed by the 27 EU member states on Vietnam’s textile and garment products—including changes under the EVFTA—and annual GDP figures.
Export data for Vietnam were sourced from the UN Comtrade databases and the Vietnam Textile and Apparel Association (VITAS) reports for the latest period Since bilateral exports for 2021 are available only at the HS 2-digit level, earlier-year values were aggregated to the appropriate HS2-digit level before merging The non-tariff measures (NTMs) indicators, namely ECR and FC, were calculated for a group of products within HS57–HS63 based on importers’ notifications to the World Trade Organization (WTO) Since 2009, the European Union has reported NTMs to the WTO under the new Multi-Agency Support Team nomenclature, including sanitary and phytosanitary measures (A000), technical barriers to trade (B000), pre-shipment inspection and other formalities (C000), licenses, quotas, prohibitions, and other quantity control measures (E000), finance measures (G000), and anti-competitive measures (H000) Both NTMs indicators were calculated at the HS 2-digit level to be compatible with the trade data.
To avoid omitted variable bias, tariffs on these goods were included in the model specification, and data were drawn from the Trade Analysis and Information System (TRAINS) and the World Integrated Trade Solution (WITS) databases While the liberalization schedule for tariff reductions on Vietnam’s textile and garment imports varies considerably across products, these imports are on track for full liberalization of access within the specified timeline.
Opportunities and challenges from EVFTA’s NTMs for Vietnam’s
To understand opportunities and challenges from EVFTA in general and EVFTA’s NTMs in particular for Vietnam’s garment and textile exports, in-depth interviews were conducted with senior experts from ministries, research institutes, garment and textile businesses, and business associations; a group SWOT discussion with representatives from garment and textile companies formed part of a workshop on responsible business conduct and the apparel and footwear industry organized by VCCI, and the list of questionnaires and participants of these in-depth interviews and group discussions is detailed in the Annexes.
Figure 14 summarizes opportunities and challenges for Vietnam garment and textile exports from EVFTA’s NTMs as shared by experts and businesses in in- depth interviews and group discussions
Figure 2.14 SWOT analysis of opportunities and challenges for Vietnam garment and textile exports from EVFTA’s NTMs
Vietnam’s garment and textile exports are expanding their share of the global market, supported by political stability, rapid social and economic development, and open trade policies This stable, progressive environment strengthens Vietnam’s position in international apparel supply chains, enabling the industry to reach even the most demanding markets worldwide, including major buyers in North America, Europe, and Asia.
Across the EU, US, and Japan, manufacturing equipment is being upgraded with cutting-edge technologies, driving continuous improvements in product quality At the same time, the Vietnamese garment and textile sector is forging long-term partnerships with international importers and retailers, strengthening its position in global markets.
According to VITAS, Vietnam's garment and textile sector comprises about 6,000 businesses, with 85% focused on apparel processing and 15% on textile production Compared with its four biggest competitors—China, India, Indonesia, and Bangladesh—Vietnam offers competitive advantages in low labor costs, favorable terms under the EVFTA and CPTPP, experience in producing high-value products, affordable energy (diesel and electricity), and strong infrastructure These factors position Vietnam as a competitive hub for garment and textile manufacturing in Southeast Asia.
Vietnam's garment and textile industry benefits from a skilled and quick-learning workforce capable of adopting new techniques and delivering high-quality products Nevertheless, the average monthly salary for garment and textile workers in Vietnam is among the lowest in the world, at around $151, which is lower than regional competitors like India, Cambodia, Indonesia, and China, as shown in the figure.
Figure 2.15 Average monthly salary of garment and textile workers in some countries (Unit: $/month)
Vietnam’s garment and textile sector is gradually returning to normal operations, unlike regional competitors that continue to struggle with COVID-19 effects This rebound is driven by the government’s extensive vaccination campaign in 2021, which helped stabilize production, supply chains, and export flows The rapid vaccine rollout reduced illness-related disruptions, enabled safer workplaces, and supported factory reopenings, allowing Vietnam to maintain steady output and attract orders in the competitive regional market.
A large share of Vietnam's garment and textile exports remains in the lower tiers of the value chain, mainly through Cut-Make-Trim (CMT) and Original Equipment Manufacturing (OEM) models Design capabilities in pattern and fashion are underdeveloped, while productivity remains low Domestic textile and supporting industries have not progressed enough to supply high-quality raw materials for the garment sector As a result, the value added in Vietnamese garment products is still limited due to heavy reliance on imported inputs.
Most Vietnamese garment and textile businesses are small and medium-sized, which makes it difficult for them to mobilize capital for production expansion and modernization of equipment and technologies Consequently, economies of scale remain limited, keeping unit costs high and undermining competitiveness in both domestic and export markets Access to affordable financing, favorable credit terms, and targeted policy support is essential for SMEs to invest in newer machinery, automation, and digital systems that boost productivity and product quality By unlocking scalable investment and encouraging collaborative supply chains, the industry can achieve greater efficiency, respond more quickly to demand, and strengthen its growth trajectory in a competitive global landscape.
66 limited Also, due to small scale of production, most of Vietnamese garment and textile businesses are only able to export to certain markets
Many Vietnamese garment and textile companies lack long-term strategic planning With limited marketing and promotional capacity, they struggle to reach wider audiences and introduce their products to potential customers and consumers Additionally, weak production management skills and a shortage of highly skilled workers are common weaknesses that hinder the industry’s competitiveness.
Vietnam's textile and garment sector benefits from the global shift of production from developed to developing economies, gaining access to capital, modern equipment, technology transfer, and management expertise from advanced countries As Vietnam deepens its integration into the world economy, its apparel and textile businesses enjoy expanding access to international markets, a trend driven by Vietnam's 2007 accession to the World Trade Organization and its expanding network of bilateral and multilateral free trade agreements (FTAs).
Expert interviews confirm that EVFTA brings substantial benefits to Vietnam's garment and textile sector Luong Hoang Thai, Director General of the Multilateral Trade Policy Department at the Ministry of Industry and Trade, notes that the agreement eliminated about 77% of tariff lines to 0% as soon as it took effect, opening new export opportunities for Vietnam’s industry The EU remains the world’s largest importer of apparel and textile products, with annual purchases surpassing $100 billion, and it is a major market for Vietnam's garment and textile exports.
Agreeing with Thai’s viewpoint, Nguyen Thi Thu Trang, Director of the Centre for WTO and International Trade under VCCI, says the EU is an attractive potential market for Vietnam’s garment and textile exports Although Vietnam’s garment and textile exports to the EU reached 3.08 billion USD in 2020, they accounted for just over 2% of the EU’s total imports of garment and textile products, indicating that the EU market space remains vast and full of growth potential for Vietnam’s textile sector.
After one year of EVFTA implementation, bilateral trade between Vietnam and the EU has increased, helping to strengthen the economy amid COVID-19 challenges According to Nguyen Anh Duong, Head of Research Division at the Central Institute for Economic Management (CIEM), the EVFTA creates more favorable conditions for Vietnamese exporters, including garment and textile producers, to expand exports to the EU market As one of only two Southeast Asian countries to sign an EU FTA, Vietnam gains competitive advantages in exporting to Europe.
Rules of Origin (ROOs) under the EVFTA pose the biggest challenge for Vietnam's garment and textile sector, especially regarding raw-material sourcing, as analyzed in the following section; at the same time, they may create opportunities to attract both domestic and international investment into the textile and dyeing industry, strengthening Vietnam's supply chains and export competitiveness.
Vietnam faces bottlenecks in raw material supply, creating an opening for government strategies to attract investment in this area As Vu Duc Giang, President of VITAS, notes, the EVFTA and other new FTAs have spurred a shift of FDI into Vietnam’s textile and garment accessories sector European and U.S investors are already backing large projects, including wool spinning plants in Da Lat and weaving facilities in Binh Dinh and Nam Dinh Investors from Russia and the Middle East are also backing multi-million-dollar projects across garment accessories, textiles, and dyeing This trend offers a strategic opportunity to draw more FDI and to upgrade Vietnam’s supplying industries with modern, environmentally friendly technologies.