Solutions to promote export of garments of x20 joint stock company to the european market under the implementation of the vietnam european union free trade agreement (EV FTA)

Research purposes - Systematize theoretical bases on export and export business efficiency - Assessment of conditions in the Vietnam - European Union Free Trade Agreement FTA EV-- Analyz

The process of economic integration among countries in the world is currently takingplace extensively, where export is a factor playing an important role in that integrationprocess Export creates the main source of capital for imports, contributing torestructuring the economy and promoting production Export also contributes to creatingjobs and improving people's lives, increasing national income, thereby increasing GDPand domestic consumption

Garments are one of the key products of Vietnam Business activities in the marketeconomy often contain many opportunities as well as risks, especially in export activities.How can one be successful in the garment product business in the EU market? That is anissue that export business entities are interested in Besides, what are the barriers that EUenterprises need to overcome in order to penetrate and develop in the EU market?

X20 Joint Stock Company - formerly known as Garment Company 20 – was a unitspecializing in production of garments for the military It has then expanded production

to the field of knitting, weaving recently, due to the need of change in production andbusiness models By diversifying business lines, the company has completed themechanism to switch to exporting garments Export is now the main activity that rendersprofits to the company, therefore increasing the efficiency of the export business is a vitaltask of the company Moreover, Vietnam is in the process of comprehensive renovation

in every aspects, especially in terms of economy and politics In the current context,export promotion is being encouraged more strongly than ever Vietnam is consideredone of the countries with the fastest integration speed in the world From 2001 to thepresent, Vietnam has signed a Bilateral Trade Agreement with the United States (BTA),joined the World Trade Organization (WTO), and signed trade agreements as a member

of ASEAN with Japan, China, Korea, Australia, New Zealand, and India Notably, thenewly signed Vietnam - Europe Free Trade Agreement (EV-FTA) in early 2020 hasopened up a lot of opportunities and incentives for many export items of many industries,including garments

Recognizing the significant role of export in production activities of the company, I havechosen the topic "Solutions to promote export of garments of X20 Joint Stock Company

to the European market under the implementation of the Vietnam-European Union FreeTrade Agreement (EV-FTA) ” In the article, I have given some theories about exportactivities such as concepts, roles, influencing factors After a period of direct contactwith production - export activities of the company, I have realized a number ofadvantages and limitations in exporting activities of the company, from which I have also

provided analysis and some solutions to help the company overcome the limitations, and

at the same time take full advantage of the strength to grow continually and sustainablyunder the signing EV-FTA agreement

1 The urgency of the topic

Currently, the process of international economic integration is taking place extensively.Since signing the Trade Agreements, Vietnam has more opportunities to exchange anddevelop economy with countries around the world Vietnam's economy has beengradually changing, and one of the basic activities to promote the integration process isexport Export activities contribute to restructuring the economy, promoting productionand development, creating conditions for other industries to develop

In fact, in recent years, Vietnam has affirmed its position in the garment industry, beingone of the export industries that brought the major source of foreign exchange in thecountry's industrialization process However, with the growing development of thegarment industry, domestic enterprises engaged in textile and garment export activitiesalso revealed many shortcomings

X20 Joint Stock Company is a garment exporting enterprise During my internship at thecompany, I realized that there were still limitations in the company's export performance.Since then I have chosen the topic "Solutions to promote export of garments of X20 JointStock Company to the European market in the context of the implementation of theVietnam-European Union Free Trade Agreement (EV-FTA ) ”, to provide an analysis ofthe new export context of our country at present, as well as to make several proposals toovercome the limitations and contribute to improving the export efficiency of enterprises

2 Research purposes

- Systematize theoretical bases on export and export business efficiency

- Assessment of conditions in the Vietnam - European Union Free Trade Agreement FTA)

(EV Analyzing and assessing the status of garment export activities of X20 Joint Stock Company

- Proposing several solutions to improve the export business efficiency of the company shortly

3 Subject of the study

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Export activities of X20 Joint Stock Company

4 Scope of research

Scope of space: X20 Joint Stock Company

Time range: Research data for the years 2015-2019

Chapter 1: General theories of garment export

1.1 Export overview

1.1.1 Concept and characteristics of export

“Export of goods is the sale of goods and services to another country on the basis ofusing currency as a means of payment, with the goal of profit The currency here may be

a foreign currency for one country or many countries” The purpose of this activity is toacquire a foreign currency based on the exploitation of comparative advantages of eachcountry, when the exchange of goods between countries is beneficial, the countries areactively involved in expanding this activity

Since export is a part of international trade, it also has characteristics and relates to otherinternational trade activities such as international insurance, international payments,international transportation, etc Export activities are not the same as domestic trading inthe characteristics of the participation of foreign partners, the goods serving theconsumption demand outside the territory Export activities take place in all fields, in allconditions of the economy, from exporting consumer goods to production materials,machinery and high-tech equipment All of these activities are aimed at benefiting thenation in general and the participating businesses in particular Export activities takeplace widely in space and time It can take place in a very short time but can last foryears, can take place within a country or many different countries

1.1.2 The role of export

Export activities bring many benefits to the nation It not only benefits businesses butalso contributes to boosting domestic production by accumulating foreign currencyearnings for the country, promoting the creativity of economic units through internationalcompetition Import and export business is also a means to exploit the advantages ofnature, geographical position, human resources and other resources In addition, exportactivities also promote international cooperation between countries and accelerate theprocess of global economic integration

- For the national economy

Export is one of the factors creating momentum, promoting the growth and economicdevelopment of each country Most theories about economic growth and developmentconfirm and specify that for growth and development, each country needs four

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conditions: human resources, resources, capital, and technology But most developingcountries (like Vietnam) lack capital and technology So the question that must beanswered is how to get capital and technology? Exports create a source of capital forimports to serve the industrialization and modernization of the country For everydeveloping country, the most appropriate step must be to industrialize and modernize thecountry to get rid of poverty and backward development However, the industrializationprocess requires a large amount of capital to import advanced equipment technology Toobtain imported capital, the former countries have used the following main sources ofmobilized capital:

+ Foreign investment, borrowing from aid sources

+ Revenues from tourism activities, foreign currency collection services in the country+ Income from export activities

The importance of foreign investment is undeniable, but raising this source is not easy

To use this source of capital, the borrowing countries will suffer disadvantages, facemany unfavorable conditions, and will have to make commitments with the lendingorganizations/countries in the future Exporting, therefore, is an activity that creates avery important source of capital

+ Export creates a premise for import, deciding the scale of the growth rate of import activities

In some countries, one of the main causes of underdevelopment is due to the lack ofcapital potential, so the external capital is essential, but all opportunities for investment,debt, and aid of foreign countries are only advantageous when investors and lenders seethe ability to produce and export - the only source of capital to pay debts into reality.+ Export promotes economic restructuring, production development

Under the impact of exports, the world's production and consumption structures havechanged drastically Exports move countries' economic structures from agriculture toindustry and services There are two perspectives on the impact of exports on productionand economic restructuring:

Firstly, only export the surplus products compared to the domestic demand In the case of

an outdated economy and production retardation, not enough to consume, if onlypassively waiting for a surplus of production, exports are limited in small scale and

growing slowly, Therefore, manufacturing industries will not have opportunities todevelop.

Second, base on the world market to produce and export This view has a positive impact

on economic restructuring to boost exports:

+ Exports create a premise for industries to develop together

This can be for example, when developing the export garment industry, other sectorssuch as cotton, spinning, dyeing, etc will have favorable conditions for development.The raw materials produced locally will be much cheaper than imported, moreover thisproves the position of the garment industry, paving the way for export products ofuniform quality

+ Export facilitates expanding product market, contributing to stabilizing production, creating advantages thanks to scale

When bringing Vietnamese products to other markets and being known by consumers, itwill increase demand and boost the production of such products When the item has acertain number of customers, the production line will also be operated continuously andthe scale can be expanded to meet the requirements of customers

+ Export facilitates the expansion of the supply of inputs for production and the

expansion of a country's consumer market

When manufacturing a product, businesses must consult and search for similar items andmodels to estimate what materials to enter to improve quality and product design Whendoing this activity, raw materials will be richer gradually with each item This allows acountry to consume all the goods in quantities that are many times greater than thecountry's production capacity, even those that they cannot produce

+ Export contributes to promoting specialization, increasing the production efficiency of each country, aiming to develop strongly in width and depth

In today's modernized globalized economy, each product is researched and tested in thefirst country, manufactured in the second, assembled in a third country, and consumed inthe second Those investments and products were eventually paid in the fifth country.Thus, the goods produced in each country and consumed in one country show theopposite effect of specialization on exports

With the important feature that the currency is used as a means of payment, exportscontribute to increasing a country's foreign currency reserves Especially for developing

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countries, where currencies are not convertible, foreign currencies earned from exportsplay an important role in regulating the supply of foreign currencies and stabilizingproduction, thereby contributing to economic growth and development.

+ Exports have a positive impact on creating jobs and improving people's lives

In terms of jobs, exports attract millions of workers through the production of exports Onthe other hand, exports create foreign currencies to import consumer goods to meet theincreasingly diverse and abundant needs of the people Therefore, consumers will be able

to use many products with better quality as well as higher usability

+ Export is the basis for expanding and promoting the development of external economicrelations Export and external economic relations, diplomacy has mutual interaction,interdependence Export activities are a solid foundation to build external economicrelations in the future, thereby leading to other development relationships such asinternational tourism, international insurance, international credit, etc On the contrary,the development of these industries back impacts on export activities as the infrastructurefor export development It can be said that exports in particular and international tradeactivities, in general, will lead to changes in the consumption of goods in the economy intwo ways:

+ Allow more consumer goods than manufactured goods

+ Bringing beneficial changes in accordance with the characteristics of production.However, depending on the specific conditions of each country, the effects of exports oncountries are different

+ Export creates favorable conditions for businesses to expand the market

Thanks to exports, the name of the business are known not only to domestic customersbut also to foreign markets Export creates foreign currency sources for businesses,increasing reserves thereby improving the ability to import, replace, supplement, upgrademachinery, equipment, raw materials to serve the development process

+ Exports promote the creative dynamism of import and export officers as well as

participating units

Exports require businesses to always innovate and improve their business administration,actively seek and develop aspects of their ability to export markets where they canpenetrate It also helps businesses extend the life and life of a product The inevitableexport is leading to competition and mutual monitoring among units participating inexport at home and abroad This is one of the reasons forcing exporters to improve thequality of exports, businesses must pay more attention to lowering the price of products,thereby saving the top factors, or in other words, saving resources Producing exportshelps businesses attract more workers to create a stable income for the lives of officialsand employees and increase profits Enterprises carrying out export activities have theopportunity to expand business and business relations with many foreign partners based

on mutual benefits

+ Export helps businesses improve product quality

When looking for export directions to international markets, your products must firstmeet standards, meet international requirements, as well as satisfy partners Therefore,businesses will always have to explore, research, and try to improve their products withgood quality to be able to sell at the best prices

1.1.3 Different forms of export

The export of goods is carried out in many different forms, this is based on thecharacteristics of goods ownership before export, based on the current source of exportgoods Foreign trade enterprises usually conduct some of the following export forms:

- Direct export

A direct export is a way of exporting goods in which foreign trade enterprises investcapital by themselves to buy products from domestic producers and then sell theseproducts to customers in foreign countries (possibly through several processing stages).Under this form of export, foreign trade enterprises that want to have goods for exportmust have the capital to collect goods from localities and domestic productionestablishments When an enterprise invests capital to purchase goods, it will belong to theenterprise This form does not go through any intermediary organization, can directlymeet together to discuss and discuss to lead to a contract or do not need to meet inperson, but through offers, emails, fax, electricity, phone, etc can also form a contract ofsale When participating in direct export, several jobs must be well prepared, such as

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thorough research on customers, types of goods to be traded, transaction conditions to beexchanged, clear objectives, and requirements of Work Select qualified people toparticipate in the transaction, considering the number of goods and services necessary forthe transaction to be effective.

- Export at site

This is the form of business that exports in its own country to collect foreign currencies,through the delivery of goods to businesses operating in its territory as directed by theforeign side, or it may also be sold through export processing zones or export processingenterprises operating within its territory The characteristics of this form of export are thatthe signed contract is a foreign trade contract, goods and supplies are the objects of saleand purchase of the contract of exportation out of the territory of Vietnam, enterprisesmust fully implement the customs procedures for on-the-spot export such as the opening

of on-spot import and export customs declarations and other procedures for a tax refund

- Entrusted export

This is a form of business in which the import/export unit acts as an intermediary instead

of the production unit, which signs the export contract, carries out the necessaryprocedures for export, thus the manufacturer and thereby enjoy a certain amount ofmoney called a trust fee The feature of this type is that the trustee does not need to investcapital, does not need to apply for quotas, the value of goods that the entrusted signs acontract will only be included in the export turnover but not in the business collection.Normally, enterprises that do not have the necessary information about foreign markets,

or have a small business scale, limited resources or face many barriers from the state willapply this form of export Businesses can be indirectly exported (entrusted) throughexport trade companies, professional exporters, consolidating organizations andexporting, or through another company to export according to their marketing channel

- Commercial convection

Convection trade is one of the export transaction methods in export combined closelywith imports, the seller is also the buyer, the amount of exchange with each other hasequivalent value In this mode of export, the objective is to obtain an equivalent amount

of goods Because of this feature, this method also has other names such as associatedimport and export, or barter

- Exporting goods according to a protocol

This is a form of exporting goods (usually to assign debt) that is signed under a protocolbetween the two governments This is one of the export forms that businesses savemoney on market research: find customers without payment risks This form of exportaccounts for a very small proportion Usually, in the former socialist countries and somecountries, there is a close relationship and only in some state enterprises.

- International processing

This is a business method in which one party calls the processor of raw materials or finished products of another party (called the processing party) to process the finishedproduct and deliver it to the ordering party and after that receives remuneration (calledprocessing fee) This is one of the export forms that are developing strongly and manycountries are paying attention to its benefits For outsourcing party: This method helpsthem take advantage of cheap prices, raw materials, and labor of the processing country.For processors: This method helps them to create jobs for domestic workers or importnew equipment or technology to their country to build a national industry like SouthKorea, Thailand, Singapore, etc

semi Temporary import for resemi export

This is a form of export abroad of goods that have been previously imported, unprocessed

in the country of re-export through re-export contracts including import and export toearn a larger amount of foreign currencies originally spent This contract always attractsexporting, re-exporting, and importing countries So people call the re-export transaction

a tripartite transaction or a triangle transaction Re-export can take the following forms:Re-export in the true sense, in which the goods go from the exporting country to the re-exporting country, and then re-export from the re-exporting country to the importingcountry Opposite to the movement of goods is the movement of money originating fromthe importing country to the re-exporting country and quickly being transferred to theexporting country The re-export business requires a keen sense of the market situationand prices, and the accuracy and rigidity of trading activities Therefore, when theenterprise conducts export in this mode, it is necessary to have highly qualified staffs.1.1.4 Export process

When conducting export, businesses must comply with all procedures in the exportprocess to ensure the number of goods intact during transportation as well as the deliverytime commitment The steps in the normal export process will take place as follows:

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- Applying for a license: Exports bring benefits to the country so they are often focusedand encouraged by the countries However, there are several special items such asweapons, explosives, poisons, scarce materials, and essential goods that affect thestructure of the economy, restricting exports or imports For goods subject to exportrestrictions, permits must be obtained from competent authorities if exported.

- Certificate of payment: To ensure solvency, the exporter must urge the importer tofulfill the obligation to pay or confirm the payment as evidence and commitment for thecontract performance This obligation may proceed before or in parallel with theobligation to apply for an export license Only after obtaining an export license andpayment confirmation are they eligible to enter into export contracts in the stages ofproduction, processing, and collection of goods

- Preparing export goods: After applying for payment confirmation, the exportingcompany prepares export goods to ensure the delivery schedule on time The companymust prepare materials for the production process according to the export shipments,organize production, processing, processing, inspection, and packaging following therequirements of the contract Or the company can contact other production and businessunits to place orders for export to ensure the quality of goods and delivery schedules

- Buy insurance and transport (if any): The two parties agree on the location, time ofdelivery, and payment of freight and insurance In some export contracts, one has tofulfill the obligation to buy insurance by contacting an insurance company to collectinformation and get an application form, fill out the application and send it to Theinsurance company, then the professional staff on the exporting company will enter into

an insurance purchase contract with the insurance company

- Doing customs procedures: Buying a customs declaration (goods export declaration) ->Customs declaration enclosed with a set of goods documents made by the exporter ->Bring the declaration to the customs clearance gate of the goods submitted and ask for theseal to accept the declaration -> Register time and schedule for goods inspectionpreparation -> Submit the dossier together with the customs office to sign the minutesand sign the customs clearance declaration form

- Delivery of goods on the means of transport: For export goods, the exporter mustgather goods under the provisions of the place specified in the terms and conditions ofdelivery according to the carrier's notice After delivery to the transport means, theremust be a certification with the owner of the vehicle or transport agent If the goods aredelivered directly to the shipping line, the ship mate's receipt shall be obtained; if it is

delivered to the agent, the agent's receipt and the receipt of the bill of exchange will be used for the bill of lading as payment voucher.

- Making payment procedures: Exporters must prepare fully and properly the set ofdocuments as prescribed or committed Typically, the set of documents includes thefollowing basic documents: Commercial invoice; Packing slips; Commercial bill oflading; Certificates of quantity and quality, issued by the manufacturer or a competentauthority; Certificate of Origin; Delivery notice, shipping receipt

- Resolve complaints (if any): After completing the delivery procedures to customers If there is a complaint, the exporter must resolve the complaint

1.2 Some theoretical issues about exporting garment products

1.2.1 Characteristics of the garment industry

The garment industry is born with the mission to satisfy the needs of human clothingbecause the characteristics of dress are extremely diverse, the clothing products arecreated with rich, beautiful designs to meet the need to dress up for all walks of life It isalso a thirsty industry in many positions and at various levels The working environment

in the garment industry allows workers to interact with many people, expose to a variety

of machines, materials, and materials, therefore, it is imperative for workers to have goodadaptive capacity at the same time, workers must always be ready for high teamworkspirit Besides, the garment is both concerned about quality and demand for production,

so this job creates a lot of pressure for workers, requiring garment workers to havestrength, good health, highly focused work spirit This is also a sector with high labordemand, so the industry easily solves and attracts jobs for workers including those whocome from rural areas, thereby contributing to stability and promoting social progress ,improving production relations, ensuring and moving towards a more equitabledistribution of income, while also ensuring more jobs for society, reducingunemployment in urban areas, and increasing working time in the countryside

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The Garment industry has many stages and is divided into sections: design, sourcing ofraw materials, tailoring, distribution, and marketing According to FPT's “Textile IndustryReport”: “The textile value chain is influenced by buyers, the creation of the final productmust go through many stages and production activities are usually conducted in manycountries In particular, manufacturers with famous brands, large traders, and retailers play akey role in establishing production networks and shaping mass sales".

Global textile and apparel value chain is divided into 5 basic stages:

(1) Supply raw products: Natural cotton, fiber,

(2) Production of input products: Threads, yarns, and fabrics are undertaken by weaving and dyeing companies

(3) Sample design and production of finished products: Made by garment companies.(4) Export: Commercial enterprises carry out this stage

(5) Marketing and distribution

* About production methods

Vietnamese garment enterprises are still mainly subcontractors to garment contractors inthe region, the production methods can be divided into the following four modes:

CMT (Cut Make Trim - pure machining)

FOB (Free on Broad - buying raw materials, semi-finished products)

The total value generated from the two modes of CMT and FOB of Vietnam accounts formore than 95% of the total export value, of which CMT accounts for 75.3% and FOB is21.2%

ODM (Original Design Manufacturing - active in raw materials, design, manufacturing offinished products) only accounts for about 2% -3% of Vietnam's garment export value.The main reason is due to the limited human resource level, lack of market information.OBM (Original Brand Manufacturing): This is the method by which the manufacturerdesigns and signs of domestic and foreign trade contracts under its own brand OBMmainly distributes commodity channels in the domestic market and neighboringcountries

1.2.2 The role of garment export

The impact of commodity export activities has been confirmed in many aspects andaspects, from micro to macro perspective Particularly for the research subject, thegarment industry, some of the roles of the export of the garment industry may be listedbelow:

Firstly, boosting export and expanding export markets of garment products will create asource of income and accumulate for the State a large foreign currency capital source forthe import of modern machinery and raw materials to develop products to serve the cause

of industrialization - modernization of the country At the same time, it also helps eachenterprise have the basis to modernize its production When exporting garment products,our country will have the opportunity to have access to many major economies, as well asthe opportunity to renew its products according to the needs of consumers around theworld

Secondly, merchandise exports in general and garment exports, in particular, areconsidered as a factor to promote economic growth and development, expand productionscale, and restructure the economy, leading to a variety of other related industriesdeveloped The export promotion of the garment industry will help the State and garmententerprises themselves to make the best use of available resources and inherentadvantages of the country as well as enterprises Therefore, when the garment industrypromotes export forces it to adjust its production mechanism, which requires more rawmaterials, which will lead to the development of adjacent industries such as fabricproduction, fabric dyeing, machine manufacturing, etc

Third, carrying out activities to boost the export of the garment industry to help the Statesolve employment problems, improve people's living standards, and lift the country out ofpoverty and backwardness

Fourthly, thanks to the activity of promoting export of garment products, Vietnamesegarment enterprises have the opportunity to participate more deeply in the global valuechain, thereby creating greater added value for production in the garment industry

Thus, promoting exports and expanding export markets of garment products play animportant role not only for garment enterprises but also for the national economy.Therefore, it is considered a strategic development direction to contribute to themodernization of our country's industry

1.2.3 Factors affecting garment export

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The export situation is not immutable There are periods of strong export growth butthere are times when the situation of exported goods encounters many obstacles, thisdepends on a lot of influencing factors Those conditions specifically stem from externalfactors to internal factors such as:

- Tariffs: Tariffs are government revenues levied on goods and services for profit Forexports, tariffs affect the competitiveness of goods in the market because tariffs will drive

up the prices of goods Particularly for garments, the tariff is a strong factor affecting theability of enterprises to export goods With this item, the value on a product that is highlytaxed and subject to many taxes will push the price up and consumption will decrease.Therefore, most countries that want to boost exports have preferential policies forbusinesses

- Quotas: For the garment industry, quotas are always a problem Quota restricts thenumber of garments exported and limits the category of goods to a market This is aprotection measure of countries to protect the domestic garment industry and control thenumber of garments imported into their country The abolition of garment industry quotasallows garment exporting enterprises to compete fairly, but it also increases the level ofcompetition in this industry Competition helps existing businesses to constantly investand develop to improve the quality of their exported products At the same time, thecompetition also contributes to eliminating weak and incompetent businesses

- Export subsidies: Export subsidies are a measure applied by the State to supportenterprises' export activities by providing support for product input costs to reduce theoutput costs of export products

- Exchange rate: The exchange rate affects exports quite a lot This is the exchange ratebetween currencies of countries or is understood as the price of one national currency inthe form of currency of another country For example, in early June 2019, the exchangerate of the Japanese Yen (JPY, ¥) and US Dollar (USD, $) is 108 That means 1 USDollar will be equivalent to the value of 108 Japanese Yen, of USD USA and Vietnam is

1 USD = 23400 VND When exporting, the exchange rate affects the demand for theCompany's products, if the currency of each country drops against the currency of othercountries, the price of its exports on the world's market becomes cheaper than the goods

of other countries This reduction helps the country's exports attract customers around theworld and increases the country's export volume Conversely, if a country's currencyappreciates relative to the currencies of other countries, the price of that country's goodsbecomes more expensive than that of other countries' exports, reducing its ability toconsume leading to restrictions on the country's export of goods

- Fashion trends of the world: It can be said that fashion is one of the industries with themost and fastest changes in a short time Fashion models and trends in fashion productsoften change each season If an enterprise wants to keep up with the changing fashion ofthe world, it needs experts who are really sensitive to fashion trends to be able to designproducts that are ahead of the trend and suitable for consumers' tastes However, this isnot simple when the launch of a new product needs to go through many trials and take alot of time as well as require skilled, high-quality facilities However, if the companydoes not want to innovate its product lines, the number of export products of the businesswill be at an average level, it is difficult to increase the revenue.

- Source of raw materials and accessories for garments: This is a problem that currentlyVietnamese garment enterprises are still having to deal with when most of the rawmaterials and materials still have to be imported The quality of exported goods hascertain material characteristics that domestic raw material conditions cannot fully meet.When producing a product for export, the source of imported materials is behind scheduledue to subjective/objective factors, which will also cause great damage to the business.Not to mention, when importing raw materials, the price will be a factor that businessescan negotiate but hard to change

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Chapter 2: General introduction of the European market and the Free Trade Agreement (EV - FTA)

2.1 Overview of the European economy and market for garments

The EU market consists of 27 countries, with a population of 450 million and annualGDP of about US $ 16,000 billion, showing the vastness and attractiveness to Vietnam inpromoting export acceleration through this market Currently, the markets of theEuropean Union (EU) - members of the Vietnam - EU Free Trade Agreement (EVFTA)are the main import and export markets of Vietnam in the EU Because the EU has a percapita income of US $ 36,000 per year, which is three times higher than China's percapita income of US $ 10,000, this market is very fastidious, requiring Vietnam's exportgoods to meet the standards of EU countries can take advantage of EVFTA's opportunity.Several factors make it difficult for exporters to access the EU market in developingcountries:

Firstly, due to the diversity of this market and it will become more unpredictableaccording to global investment trends Exporters in developing countries often do notoffer different opportunities and require different approaches The EU regulates thatproducts should be inspected from the place of production and there are quick alarmsystems between member countries, and the inspection of border products will beabolished

Second, the EU market stands out because of fierce competition, forcing companies tobring more benefits to their customers than their competitors Exporters in developingcountries cannot rely on low labor costs to compete High quality, continuous productinnovation, always creating a good image of the company and the most economicalservices are just as important as offering competitive prices

Third, concerns about health and safety for workers as well as the environment, all ofthese have driven the need for international certifications, trademarks, and standards.These are either required by law or required by the market itself In terms of productsafety, CE labeling is an important prerequisite for the widespread distribution of theseproducts in the EU market In terms of food safety, processing companies must adhere tostrict hygiene standards In addition to requiring companies to adopt environmentalmanagement systems (a series of ISO 14000 standards), compliance with the AS 8000(Social Accountability 8000) standard will become increasingly important in the comingyears.

Fourthly, the rising income and high intellectuals make people here pay more attention tohigh-quality products, especially showing their individuality, consumers want them to bethe center Therefore, EU consumers have the preferences and habits of using well-known brand products in the world, even though they know that the product is muchmore expensive than normal brands They believe that these brands will be associatedwith quality and safety for users Therefore, in many cases, although products are veryexpensive, they still buy and do not like to switch to other non-famous products, despitebeing much cheaper Other factors are also of great interest such as the retrieval ofproduct information and the social responsibility of products and suppliers It is best forVietnamese enterprises to have a professional information officer to grasp and updateinformation on the rather complex regulations of this sector, and to adapt to the tastes ofinternal consumers to work penetration and consumption of goods achieved high results.Thus, exporting to the EU market is not an easy task For example, the thriving adoption

of the internet as a marketing and change tool in distribution systems The relationshipbetween buyer and seller gradually becomes the relationship between production andcontracting These are strengthening the links of information exchange and cooperationwhere trust, quality, and adherence to international standards are conditions for success

In short, the current situation and developments in the EU market pose a number ofchallenges for businesses and trade promotion organizations in developing countries

2.2 Bilateral relations between Vietnam and Europe

The EU is a region accounting for a large proportion of the trade relations betweenVietnam and Europe Vietnam - EU trade relations have developed very quickly andeffectively, from 2000 to 2017, the trade turnover between Vietnam and the EU increasedmore than 13.7 times, from 4.1 billion USD in 2000 to USD 56.45 billion in 2019; inwhich Vietnam's exports to the EU increased by 14.8 times (from 2.8 billion USD to

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41.54 billion USD) and imports into Vietnam from the EU increased by 11.4 times (1.3billion USD to 14, 90 billion USD).

The EU is a world leader in apparel imports, accounting for 49% of the total import value

of the world The EU's annual import demand is around the US $ 110 billion for made garments and textiles EU countries are tending to shift import sources todeveloping countries to take advantage of cheap labor resources of developing countries,including Vietnam Trade share of 43% within the bloc and 17% of imports fromdeveloping countries are gradually adjusted towards increasing the share of imports fromAsian countries - the largest apparel manufacturing region, accounting for weight 60% ofthe volume of garments exported worldwide EU countries are the largest apparel importmarket in Vietnam with a growth rate of over 23% / year In the EU, Germany is thelargest garment importer of Vietnam, accounting for 47% of total export value, followed

ready-by France (14%), Netherlands (12%), Italy (9%) accounting for 8% Export turnover tothe EU market has started to rise sharply since Vietnam joined the WTO and signedinternational agreements to facilitate economic development The main products thatmakeup 70% of turnover value are familiar products, making it easy to profit such asJackets (51.7%), sweater and knitting (3.9%), casual pants (5%), T-shirt, and Polo shirt(3.4%) Products with complex technical requirements and high quality, Vietnam has notbeen able to produce or produce at a very small rate

Thus, the EU market is a market with large consumption Besides, the competition is alsovery high Therefore, if Vietnamese products want to compete in this large market, theymust constantly innovate their quality and improve their code to meet the strictrequirements of this market

In 2019, import-export turnover between Vietnam and the EU reached over the US $56.45 billion, up 1.11% over the same period in 2018, of which exports reached over the

US $ 41.54 billion (down 0.81%) and imports reached 14.90 billion USD (up 6.84%)

Table: Vietnam's export turnover to European countries

Statistics of import-export turnover of Vietnam

2019 41.546.6 -0,81 14.906,3 7,30 56.452,9 1,21

(Nguồn: Tổng Cục Hải quan)

The main exporting countries of Vietnam in the EU market have focused on traditional markets such as the Netherlands, Germany, the UK, France, Italy, Spain, Belgium, and

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Poland Lan For the Austrian market, exports to this market are mainly due to the export

of mobile phones

About export:

In 2019, Vietnam's exports to the EU reached the US $ 41.54 billion, down 0.81%

compared to 2018

Some of Vietnam's main export products to the EU

(Unit: million USD)

Some key Vietnamese products are imported from the EU

(Unit: million USD)

22

(Nguồn: Tổng Cục Hải quan)

In 2019, the EU has 2,375 projects (an increase of 182 projects compared to 2018) from

27/28 valid EU countries in Vietnam with a total registered capital of US $ 25.49 billion

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7.03% of the total registered investment capital of other countries In which, theNetherlands ranked first with 344 projects and 10.05 billion USD, accounting for 39.43%

of total EU investment capital in Vietnam (increasing 26 projects and 692.76 millionUSD of investment capital) United Kingdom ranked second with 380 projects and 3.72billion USD of total investment capital, accounting for 14.58% of total investment capital(increasing 29 projects and 210.10 million USD of investment capital) 563 projects and3.60 billion USD of total investment capital, accounting for 14.13% of total investmentcapital (increasing 23 projects but decreasing 72.07 million USD of investment capital)

In general, European investors have a technological advantage, so they have activelycontributed to creating some new industries and new products with high technologycontent Some major EU corporations are operating effectively in Vietnam such as BP(UK), Shell Group (Netherlands), Total Elf Fina (France Belgium), Daimler Chrysler(Germany), Siemen, Alcatel Comvik (Sweden) The investment trend of the EU is mainlyfocused on high-tech industries, but recently the region has tended to develop morefocused on service industries (post and telecommunications, finance, and literature).room for rent, retail)

- Investing Vietnam into the EU

Regarding the investment of Vietnamese enterprises to the EU, in general, Vietnam'sinvestment into the EU is not much, mainly focusing on some countries such as theNetherlands, Czech, and Germany As of the end of December 31, 2018, Vietnam has 78investment projects in 10 EU countries (England, Poland, Belgium, Portugal, Germany,Netherlands, France, Czech Republic, Spain, and Slovakia) with a total registered capital

of about 320.20 million USD Of which, mainly to Germany with 29 projects with a totalregistered capital of 120.3 million USD, to England and British Virgin Islands (20projects worth 144.5 million USD), to France (10 projects worth 5.4 million USD), toSlovakia (2 projects worth 36.4 million USD)

2.2.1 The situation of supply-demand for garment products on the market (The need tostrengthen Vietnam's garment products into the European market)

According to statistics, in the first 11 months of 2019, Vietnam's garment export turnover

to the EU market reached the US $ 3.9 billion, up 5% over the same period in 2018 Inparticular, the export turnover of Vietnam's garment and textile items such as shirts,underwear, gloves, swimwear, vest clothes, etc to this market increased sharply, whileexports of pants and t-shirts increased, exports of jackets decreased In 2019, exports tomember markets such as the Netherlands, Belgium, and Italy increased, exports to

Germany, England and Poland increased slowly and decreased exports to Spain.However, the European market has always hidden a lot of potential for development,especially in the context of signing the EV-FTA Free Trade Agreement, businesses will

be more motivated to plan invasion strategies Enter the market the best way Reasons tostrengthen garment products in the European Union include:

+ Huge market for garments

In 2018 EU imports of apparel from all suppliers (both inside and outside the bloc)reached 168.5 billion euros ($ 186.8 billion), while Vietnamese garments in this market.only accounted for 2.16% of this figure Therefore, Vietnamese garment exportingenterprises still have many opportunities to expand their market share in the EU market.Vietnam's market share of garments in the EU market is still low compared to the exportcapacity of the whole industry The EU consists of 28 member markets (including theUK), but each market has different customs, customs, and consumer characteristics oftextiles Typically orders in the EU are small in number, many seasons should changedesigns continuously so businesses are afraid to make small orders Meanwhile, in thehigh-end segment, branded goods, most of the supply is provided by major EUcompanies, Vietnam's textile and garment industry has not participated in this valuechain Besides, many businesses do not have direct access to customers, because retailbusinesses in major markets such as the EU all have distribution systems and brands,which Vietnamese businesses mainly depend on It depends on intermediaries Therefore,

if the above-mentioned factors are overcome, it is certain that Vietnam's garment exports

to the EU market will prosper shortly

+ Cumulative rules of origin will support Vietnam's garment export to the EU marketOne of the intrinsic weaknesses of the textile and apparel industry is that it has not beenproactive in raw materials, especially fabrics In the first 11 months of 2019, garmentexports reached USD 29.8 billion, but fabric imports reached USD 12.2 billion With thenewly signed EVFTA, which is expected to be valid and effective in early 2020, textileexports to the EU will receive a tax reduction, but only if they meet the rules of origin

"from fabric onwards", ie from fabric production to apparel must be done in Vietnam orimported from EU countries A major fulcrum to solve the problem of fabric shortage and

to enjoy preferences is to increase the use of imported fabrics in Korea (the country thathas an FTA with the EU) to cut sewing in Vietnam However, fabric imported fromSouth Korea accounts for a very modest proportion of 15.5%

+ The demand for sustainable garments in Europe has increased

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Although there are no statistics on sustainable garment consumption, this market inEurope is growing steadily Awareness and initiatives on sustainability in Europe aredeveloping at multiple levels at the same time among consumers, manufacturers,retailers, governments, and non-governmental organizations It is estimated that one-third

of consumers in Europe's largest markets consider sustainability when shopping forgarments Despite the increasing demand for garments, European consumers are notalways willing to pay more for this product portfolio, although this is slowly changing.The EU imports a lot of knitted goods, sportswear, long pants & shorts, underwear, t-shirts, jackets of which sportswear imports increased sharply Between 2013 and 2018,imports of sporting goods increased by an average of 10.34% per year, while otherapparel categories increased by 4% to 9.6% per year The growth in imports of sportinggoods is driven by its function and the increasing trend of Europeans participating insports for health reasons This data shows that sportswear manufacturers have anopportunity to increase exports of sporting goods to the EU market in the coming years.Besides, other types of products emerging in the EU include smart clothing Theseinclude technology products that can be worn on the body, as an accessory or as part of amaterial used in clothing Examples of wearable technology include fitness trackingbands, such as Fitbit, Runtastic, Mio, and Misfit; smart sports bra; smartwatches, likeApple Watch; smart glasses, like Google Glass and Sony's SmartEyeGlass; wearabledevices and outerwear, such as jackets with integrated LED lights According to TMR,the European wearable technology market is estimated to grow at an average rate of42.1% per year between 2014-2019 and is estimated to reach 2.3 billion Euro in 2019.Smart clothing segment accounts for a low proportion, but with the popularity oftechnology, this market will surely grow rapidly shortly

+ Apparel market in Western Europe gradually becomes a large consumer market and develops better than the Central and Eastern European markets

The leading import markets for garments in the EU are Germany, France, the UnitedKingdom, Spain, and the Netherlands While Eastern European markets are growing at amuch higher rate than markets in Western Europe Poland is an impressive growth marketfor imports from developing countries and has become one of the major consumermarkets Germany remained the largest importer in the EU in 2018, followed by France,the United Kingdom, Spain, the Netherlands, and Italy These 6 member markets accountfor nearly 72% of all EU apparel imports Over the past five years, Spain is the marketwith the highest import growth rate in this group, with the average annual growth ofimport of garments of 8.3% The Netherlands increased by an average of 7.5% per year,while Germany increased by 5.1% The fastest-growing EU markets for apparel imports

include Poland, Croatia, Hungary, and Romania, each growing on average from 14.9% to18.6% Despite the rapid growth, these 4 member markets account for only 6.7% of the

EU apparel import market Most notably, Poland, accounting for 4.1% of total EUapparel imports and is the 8th largest import market for apparel in the EU If the samegrowth rate is maintained in 2019, Poland will overtake Belgium to become the 7thlargest importer of apparel in Europe in 2019 Poland becomes a potential import marketfor exporters garment exports to the EU

This data shows an increasing opportunity for suppliers from other developing countries

to increase apparel exports to the EU, especially as the trend of apparel productionleaving China is expected to be high continue in the coming years Manufacturing inChina is becoming increasingly expensive due to labor shortages and trade tensions withthe United States The Chinese government has also released new environmentalstandards that are expected to force more than 80,000 Chinese factories to close Thedecline in Chinese exports is affecting the global supply chain As a result, many garmentmanufacturers are moving their businesses to countries and territories in Asia such asMyanmar, Cambodia, Vietnam, Pakistan, and Bangladesh Despite this, China remainsone of the world's largest suppliers of apparel

Thus, in the short term, the positive impact of EVFTA on Vietnam's garment exportactivities is not significant Moreover, according to the commitment in the Agreement,the number of categories of goods with tax reduction to 0% is not much Currently, theaverage import tax rate applicable to Vietnamese textiles and garments into the EU is9.6% and there will be 42.5% of tariff lines applicable to textiles and garments will bereduced to 0% when EVFTA takes effect

However, in the long term, EVFTA will have a positive impact when the remaining tarifflines will be reduced to 0% after 3 - 7 years, helping Vietnam textile and garment to bemore competitive with products from Bangladesh and Cambodia Therefore, to maximizethe benefits from EVFTA, the Vietnamese textile and apparel industry needs to focus ondeveloping the textile industry and supporting industries of the garment industry toprovide closed materials, improve the competitiveness of garment products Vietnam.2.2.2 Opportunities and difficulties when exporting to the European market

Before exporting to the European market, businesses have evaluated the opportunitiesthat can help businesses boost exports and accompany obstacles, especially whenexporting to a market with consumption As big as Europe, the two biggest reasonscurrently directly affecting the export situation are:

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+ Competitive price

The pricing of a product on the market should be carefully considered after comparingthe conditions of production and distribution of products, the EU is a market with arelatively high product price due to increasing production Therefore, Vietnameseenterprises have an advantage when exporting garments to this market In addition,Vietnam's garment products can be exported to the EU in large quantities due to theabsence of any quotas from the EU market, so the price competitiveness is very high.However, due to the equal income and high living standards of the people, pricecompetition is not necessarily the optimal measure when entering the EU market The percapita income of EU people is quite high, and the proportion of apparel spending in totalresidential income is large In addition, EU consumers tend to spend more on high-enditems with diverse requirements on styles, designs, and high quality

However, not so that Vietnam's products have no place in the EU market, in the EuropeanUnion countries, the French market is growing imports of garments at 13% in the pasttwo years Therefore, Vietnamese businesses need to increase investment in researchingconsumer trends to overcome barriers and boost the export of garments to the Frenchmarket In order to export well, businesses have to be creative and creative, always havenew models, follow the changes of customers from EU countries to be able to adaptquickly

2.2.3 Distribution systems in the market

The most important aspect of the consolidation process that has a major impact on trade

is the harmonization of rules in EU member states Because of the integration thatallowed the free movement of capital, goods, services, and people, the borders betweenmember states were removed Goods manufactured or imported into a Member State mayalso be transferred to the other Member States without restriction The premise for thisfree movement is the unification of legal rules and regulations regarding domesticallyproduced or imported goods Despite being an alliance, not all legal regulations havebeen harmonized The adjustment of laws and legal institutions is currently beingprioritized in areas such as environmental pollution, health, quality safety, and education.The EU distribution channel system is basically the same as the distribution channelsystem of a country, including retail and wholesale network However, this system is one

of the most complex distribution channels in the world today, with the participation ofmany components: transnational companies, stores, supermarkets, Independent retailcompanies, etc, which stand out is the role of transnational companies (TNC) Thesecompanies often develop horizontally, including banks or financial companies, factories,trading companies, supermarkets, and shops The TNCs organize their consumptionnetwork in a very orderly manner, focusing on the production, purchase, and distribution

of goods to the retail network Therefore, they always have a close relationship withforeign contractors to ensure a stable supply of goods and keep a good reputation with theretail network

With the presence of these transnational companies (or corporations), the EU distributionsystem becomes a coherent and long-standing combination The two most common forms

of distribution channels on the EU market are group and non-group In a groupdistribution channel, a group's manufacturers or importers only supply goods to its group

of stores and supermarkets, but not to outside retailers In contrast, in a non-conglomeratedistribution channel, the manufacturers and importers of a corporation cansimultaneously supply goods to the retail systems of many corporations and otherindependent retail companies Usually, independent supermarkets or retail companies onthe EU market do not buy directly from foreign exporters, but often through

"wholesalers" which are major EU shopping centers These relationships are notcoincidental but mainly because of credit relationship constraints, or the purchase ofshares of each other, so they are often quite stable and long-term Moreover, from theperspective of EU distributors, such a relationship also ensures the stability of the sourceand quality of goods, so that they can keep their trust with customers, which is the goal ofoil products EU businesses are always looking for This type of linkage within the EU

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distribution system has created tight chains linked together by economic contracts, which

is not easy to reach and become one of those links Vietnamese exporters are used todoing small businesses under separate contracts Most importers in the EU market have alarge customer base with a variety of buying methods In the European market,distributors are usually designers, because more than anyone, they are the most thorough

in the needs and conditions to satisfy the tastes of customers Industry experts estimatethat 70% of the profits (on a garment product from the beginning to the end of the valuechain) belong to these retail distributors This is the most lucrative link, held by largecompanies in the world and they often create barriers to entry, so it is difficult for newcountries to join the value chain The companies in this stage do not directly produceproducts, only perform distribution activities to the final consumers but they play animportant role in the direction and impact of the world goods chain because they controlclearly understand the needs of consumers, provide fashion trends for product designersand hold sales systems, distribution channels across the globe

2.1.3 Several major European regulations on apparel imports

Although the EU has a coordinating system that facilitates free trade between membercountries, there are still different regulations in member countries related to the strategyand standards of this group when deciding to import The following are the mostcommon policies being applied to Vietnam's garment products

2.2.3.1 Quality management

Vietnamese enterprises need to pay special attention to controlling from raw materials toproduction and export, avoiding the use of prohibited materials to ensure the quality ofexported products and their reputation A very important issue is that Vietnameseenterprises need to grasp specific market regulations for each type of export goods.Meanwhile, the distribution and priority of supply of products are not balanced whensewing products of medium and low quality mainly serve domestic demand In entrustedprocessing, customers are responsible for providing the business with the essentials forproduction such as materials, designs, management and technology, quality management,time and barrier requirements as well as technical The increasing pressure of technicalbarriers makes enterprises need to quickly improve the management system, includingchemical management, to meet the environmental requirements of the State and foreigncustomers However, compliance with these conditions is largely passive at the request ofthe importer, and at the same time, there is still no clue to systematically manage andupdate standard requirements at the import market It is worth noting that Vietnamcurrently does not have standards and regulations such as Technical specifications of

garment products, regulations on labeling of garment products, ecological standards forsewing products, and environment requirements for garment products, this is an issue thatneeds to be overcome soon EU law has been applied directly to importers anddistributors, importers have requested and obliged manufacturers and exporters to followthe terms of the contract, which is the problem that Vietnam's garment export enterprisesare still quite passive today.

2.2.3.2 Environmental standards

Regulations related to the environment of products are considered very important factorsand will be increasingly focused and invested shortly In addition to governments'regulations, EU consumers are well aware of the environmental issues of their products,making their products' environmental compliance a factor of Vietnamese's successexporters when putting products into the EU market (these regulations are even stricter in

EU countries in the North, Scandinavian countries, Germany, the Netherlands )

The concept of sustainable development has been adopted by most European Unionmember countries after meetings on climate change and environmental protection.Accordingly, economic development must be accompanied by the issue of environmentalprotection In recent years, environmental issues such as cleaner production, product lifecycle assessment have become an important tool for businesses that want to demonstratethat their production ability meets environmental standards surname According to EUregulations, standards are assessed for product processing and refining processes, thereare regulations on wastewater and air, which do not allow the use of chloride whencleaning products, maximum allowable limits for heavy metals left in the final product,limits for colorants and formaldehyde Information from the intra-European region showsthat the countries in this group are researching and developing clean production lines andchains without affecting the environment, which may be a problem that Vietnam needs to

be careful about if the companies want to be valued more than its domestic andinternational competitors, it is important to consider

2.2.3.3 Packaging

Vietnamese garment enterprises need to pay special attention to packaging whenexporting products to the EU Product packaging must ensure the requirements to protectthe goods during transport withstand weather conditions, against changes in temperature,against theft, etc Some importers have also made requirements related to the packagingfor environmental protection reasons, usually, the packaging used less PVC material,even this material is banned for use in many countries Vietnamese exporters need to

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carefully study this issue to comply with the strict requirements of the EU market The

EU has issued Directive 94/62 / EC on "Packaging and packaging waste" to prevent thecreation of packaging waste, reuse, and recycling of bags and to reduce disposal and finaldisposal, the same as the waste The directive also regulates the maximum level of heavymetals contained in packaging and describes the specific requirements in the manufactureand packaging of components used in industry, commerce, offices, shops, services,households, or anywhere else, regardless of what ingredients are used

2.2.3.4 Labeling

On the consumer side, the demand for environmental products is increasing Consumersrequire products that are easily identifiable and labeled in accordance with the law Thehallmark for environmental products is known as an eco-label, those signs indicate thatthe product has less environmental impact than similar products Ecological labels arevoluntary but can be seen as a tool to compete quite effectively There are 4 types oftrademarks applied to common garments in the EU market today:

- Ecolabel, applied to bed sheets and t-shirts (knitted T-shirts, plain t-shirts, round neckshirts, short and long sleeves, designed for outdoor wear); embroidery and printedproducts

- OKO-Tex brand, which will not test the entire product processing process, but onlyfocus on the final product This type of brand is currently most commonly used inGermany

- SKAL-EKO brand, this testing system is applied to the entire production line of the enterprise, and also requires the final product, including product packaging

- SG brand, this is a test label for hazardous substances This label not only applies togarments but also many different types of goods SG regulates the limits for dangeroussubstances in the final product such as formaldehyde, pentachlorophenol (PC), chlorifiedphenol (non-PCP), arsenic, cadmium, nickel, lead, mercury, etc

The labeling of goods must ensure information to consumers about the products they buy.Information on the label must include origin, fiber composition, flammability, method ofwashing, measurements of length, bust, and hips Voluntary information such as models,colorfastness, effects of detergents, safe ironing temperatures, etc Recently, the EU hasintroduced a new regulation, regulation 1007/2011 of European Union regarding relevantlabeling and component labeling of apparel products, replacing Directive 2008/12 / EC

on naming of materials, Directive 96/73 / EC on methods of determination forquantitative analysis of multi-component mixtures.

2.2.3.5 Provisions on goods origin

Several checks are performed to ensure imported products meet the standards set by themarket The methods are generally based on other international standards Traceability ofproducts is also in place Accordingly, a finished product must be traceable through thegoods supply chain As such, detailed documentation and rigorous testing procedures arerequired throughout the relevant manufacturing process A new feature of the EU's rules

of origin policy is that the country of origin will be reviewed on a regional rather thannational basis Specifically, previously considering and assessing the origin of garmentsexported to the European Union (EU) countries is based on raw materials produced inthat country, then come here if applicable The new policy, the review will extend to theregional level ASEAN countries can buy each other's raw materials to produce finishedtextile and garment products, then export them to the EU market and these countries arestill considered to originate from Vietnam

2.3 Overview of Vietnam - Europe Free Trade Agreement (FTA)

June 30, 2019, in the witness of Prime Minister Nguyen Xuan Phuc, Minister of Industryand Trade Tran Tuan Anh representing Vietnam and Trade Commissioner CeciliaMalmstrom, Minister of Romania in charge of the business, commerce, and business.Stefan-Radu Oprea, representing the EU, has officially signed a free trade agreementbetween Vietnam and the European Union - EU (EVFTA) However, the two sides stillhave to go one step further to put 2 agreements into implementation, submitting to theNational Assembly of Vietnam and the European Parliament for ratification of the twoagreements For Vietnam, the Ministry of Industry and Trade will be responsible forpreparing the EVFTA approval dossier, the Ministry of Planning and Investment will beresponsible for the EVIPA approval dossier The process of ratification of the Agreementwill comply with the process prescribed in the Treaty Law, the Government will applyfor approval to the President and the President will decide to submit to the NationalAssembly for approval With the EU, the approval process differs between EVFTA andEVIPA Specifically, with EVFTA, only the European Parliament needs to approve it totake effect immediately The EU called it "provisional" because then, in principle,EVFTA must still be ratified by the Parliament of 28 EU member countries EVIPA isdifferent, this agreement must be ratified by the European Parliament and the Parliament

of all 28 member countries to take effect

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On January 21, 2020, the International Trade Commission (INTA) voted to ratify the twoagreements under which the EVFTA Agreement received 29 votes in favor and 26 votes

in favor of EVIPA This is the highest vote rate when compared to some recent FTAsbetween the EU and partners The European Parliament (EP) is expected to vote in theplenary session on February 12, 2020 The two Agreements are expected to be approved

by the National Assembly of Vietnam in the meeting in May 2020 and will come intoeffect in early July

The EVFTA and IPA agreements have been started and concluded in the context of thebilateral development of Vietnam - European Union relations, especially in the field ofeconomics and trade The EU is currently one of Vietnam's leading trading partners with

a two-way turnover of US $ 56.45 billion in 2019, of which exports reach US $ 41.5billion, imports from the EU reach 14.9 billion USD EVFTA is a comprehensive, high-quality, and guaranteed benefit agreement for both Vietnam and the EU, which has alsonoted the development gap between the two sides

EVFTA is a high-quality agreement, balancing the interests for both Vietnam and the EU,and following the provisions of the World Trade Organization (WTO) The content of theAgreement spreads quite fully and comprehensively to all sectors of the economy.Previously considered sensitive issues, Vietnam faced when exporting goods to the EUmarket, but now it is raised for the two sides to negotiate and discuss to find a solution.The negotiating team closely coordinated to comply with the negotiated and directedplans, consistent with the provisions of domestic law, and at the same time ensuring thebalance of interests, taking into account the specific conditions of each side

The Agreement consists of 17 Chapters, 2 Protocols and several memoranda ofunderstanding attached to the main contents: trade in goods (including general provisionsand market-opening commitments), rules of origin, customs and trade facilitation, foodsafety and hygiene measures (SPS), technical barriers to trade (TBT), trade in services(including general provisions and market access commitments) investment, traderemedies, competition, state-owned enterprises, government procurement, intellectualproperty, trade and Sustainable development, cooperation and capacity building, legalissues physical-institutional

First, regulations and tariff commitments The tariff rules expressed by EVFTA inChapter 2 include commitments related to Vietnam's market-opening for EU goods andvice versa This chapter sets out specific commitments, including the elimination oftariffs by tariff lines, with a specific annual schedule from the time of entry into force ofEVFTA; and issues related to the import and export of goods between Vietnam and the

EU EVFTA stipulates tariff commitments with two groups: (i) Commitments on importduties; (ii) Commitments on export duties (within the scope of this study, the paperfocuses on clarifying the implications of import duty commitments).

According to EVFTA's regulations, for Vietnam's exports, right after the Agreementcomes into effect, the EU eliminates import duties on about 85.6% of tariff lines,equivalent to 70.3% of export turnover of Vietnam to the EU After 7 years from the date

of entry into force of the Agreement, the EU will eliminate import duties on 99.2% oftariff lines, equivalent to 99.7% of Vietnam's exports For the remaining 0.3% of exports,the EU commits to giving Vietnam tariff quotas with import duties within the quota of0% For important products such as textiles and garments, the EU committed toabolishing all import duties on Vietnamese products within 7 years from the date of entryinto force of the Agreement

Second, rules of origin rules The rules of origin set out by EVFTA in Article 38, Chapter

4, including the commitment on the issue of EVFTA's rules of origin, are the basicconditions for goods to enjoy tariff preferences under EVFTA [1 ] The rules of EVFTAare very strict Therefore, Vietnamese businesses need to know the regulations for eachitem and the schedule for tax reduction in the agreement To gain access to the EU,Vietnam's textile and apparel products must ensure the dual-origin transformation rule.Specifically, for a Vietnamese textile and garment product to enjoy tariff preferences, atleast those goods must be manufactured in Vietnam (the fabric must be manufactured inVietnam and the sewing and cutting stage will also be in Vietnam)

Third, customs regulations Customs and trade facilitation provisions are addressed inchapter 5 of the EVFTA, including commitments on regulatory measures for imports,exports, and transshipment between Vietnam and the EU These commitments directlyaffect customs procedures and specialized inspection procedures for import and exportgoods

Fourth, commitments on transparency and business support The commitments inEVFTA on transparency and business support are essential issues that Vietnam isimplementing, such as: Committing to publicize documents, regulations, procedures,administrative information on customs and measures to manage import and export goods;Commitment to maintain the mechanism of handling complaints and grievances aboutadministrative decisions in customs procedures for enterprises when they disagree withthese decisions; Commit to set up and operate information answering points, answerquestions for businesses; Commit to having periodic consultations with business

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representatives on practical issues arising, consultation on procedures and legaldocuments to be promulgated.

Fifth, regulations on environmental protection The environmental commitments andobligations of EVFTA are divided into 5 groups: (1) Domestic environmental laws andpolicies; (2) International commitment to the environment; (3) Public and transparent; (4)Obligations for specific environmental aspects; and (5) Mechanism for consultation anddispute resolution To implement these commitments, Vietnam and the EU agreed tostrengthen the implementation of the Agreement on Technical Barriers to Trade (TBT)and the WTO Agreement on Sanitary and Phytosanitary Measures (SPS)

Sixth, regulations on competition policy In EVFTA, Vietnam and the EU commit tomaintaining a competition legal system to handle acts of restraint of competition,protecting consumers and markets that meet the following requirements: competitionmust at least include agreements on restraint of competition, abuse of market dominanceand economic concentration resulting in anti-competitive consequences; Competition lawenforcement entities must have sufficient tools and authority to effectively handlecompetition restriction acts

2.3.1 Benefits of EVFTA agreement

Impact on macroeconomics

EVFTA will contribute to Vietnam's economic growth - The annual welfare growth isestimated at 1.5 billion in 2020 when the tariff reduction is almost completed - GDP isexpected to increase from 2% to 2.5 % - The number of people out of poverty is expected

to increase soon In particular, in 2020, the number of people out of poverty in Vietnamwill increase significantly to 95.7 thousand people In particular, the number of people inrural areas out of poverty will be higher than those in urban areas In terms of macro,EVFTA contributes to Vietnam's GDP increasing at an average of 2.18-3.25% (2019-2023); 4.57-5.30% (2024-2028) and 7.07-7.72% (2029-2033)