In international trade relations, written agreements between governments of countries to open markets, remove barriers, and promote trade play a very important role in helping businesses navigate and participate in trade more conveniently and efficiently.

In 1995, Vietnam joined ASEAN and with it the CEPT/AFTA Scheme (later changed to the ATIGA Agreement). This was a big milestone and could be regarded as the beginning of Vietnam’s international economic integration process. The CEPT/AFTA Scheme and other later agreements were based on World Trade Organization (WTO) agreements, which provided many strict and detailed regulations on tariff reduction, removal of non-tariff barriers, the origin of goods, technical barriers (TBT, SPS), trade remedies, asset allocation, protection of intellectual property rights, dispute settlement mechanism, etc…


The comprehensive content above makes the difference between the free trade agreement (FTA) and the trade agreements that Vietnam has signed before. In 2018, we signed another trade agreement with Cuba, despite it having the same basic contents as above, it is not considered a free trade agreement.


Some recently signed agreements (CPTPP, EVFTA, UKVFTA) are called “new generation” free trade agreements, in order to emphasize a deeper level of commitment (for example, to completely cut import taxes, bring import taxes to 0% instead of only reducing to 5%), a broader scope of commitments (eg. increasing the number of items included in tax cuts). In addition, these agreements also cover issues that previous free trade agreements have not gone into depth, such as e-commerce, government procurement, and sustainable development.


In free trade agreements, the origin of goods is a very important content to ensure that the benefits of agreement members are not shared outside. In other words, only the signatory countries to the agreement will benefit from the tariff reductions of that agreement. The diagram below shows the names of the types of certificates of origin associated with each such agreement.


Besides, Vietnam also has border trade agreements with two neighbouring countries, Laos and Cambodia. These agreements offer even higher incentives than free trade agreements. To ensure that these incentives are only available to businesses of the two countries, a corresponding certificate of origin is also required (C/O Form X and Form S).


So what is the role of the WTO? The WTO is a global institution, whose members include 164 economies representing 98% of world trade. The goal of the WTO is to promote free trade around the world through rounds of negotiations. However, it is also because the WTO has such a large number of members, the interests of different countries and groups of countries are varied and not easily reconciled, so the negotiation process in the WTO has been deadlocked since the Doha Development Round (launched in 2001) until now. This was also the time when we witnessed the “boom” of FTAs, when some countries or groups of countries could not wait for a common solution from the WTO and wanted to promote trade in a narrower scope.


FTAs can be considered a microcosm of the WTO, within a certain geographical area or group of countries. If the WTO represents the trend of globalism, the FTA is representative of regionalism.


Contrary to the above two trends is protectionism, when a country wants to put up more barriers to limit trade activities.


With 16 years of experience as a WTO member and 16 signed FTAs in hand, can you see how Vietnam is integrating into the international economy?


Translated by Pham Phuong Anh – Pham Linh