Ambassador Franz Jessen, head of the Delegation of the European Union to Vietnam, told reporters before a business luncheon organized by the EU-Vietnam Business Network (EVBN) last week that negotiations have made progress.

He said negotiators at the next round of negotiations in Danang will seek ways to do away with outstanding differences but did not go further about these issues.

However, an official close to the negotiations revealed that geographic indication and government procurement are among the main challenges.

According to another source, Vietnam’s apparel may enjoy FTA’s preferential tariffs in the EU market only if it is made from local materials or those from EU nations.

The ambassador said he is not sure whether negotiations for the FTA would be concluded this year or not though the EU and Vietnam have set an ambitious target to finish talks this year.

At the business luncheon, Jessen said the FTA would cut at least 90% of tariff lines on Vietnamese exports and this promises a great opportunity for Vietnamese businesses to further penetrate into the EU market.

Vietnam exports to the EU represent around 20% of its outbound sales. Only 40% of these exports are tax free or subject to low duties (owing to the EU’s unilateral preferences under GSP) while the remaining 60% are entitled to ordinary import duties (MFN).

Every year, Vietnamese producers could have saved 150 million euros for footwear and 180 million euros for textile products in each of the past three years (2011-2013) if a FTA had been in place. Under the current GSP system, Vietnamese footwear products are subject to import duties of 3.5-4% and textile products to 9.6% in the period before 2014, the ambassador said.

European pharmaceutical producers currently pay import duties of 5% to 8% for their exports to Vietnam. They would have saved nearly 60 million euros for their exports to Vietnam last year if a zero duty had been applied.

As for telecommunication and distribution, Vietnam has already opened the sectors under the ASEAN FTA or other bilateral trade & investment deals. Therefore, Vietnam has no reason to restrict market access for EU investors, he added.

Moreover, the forthcoming FTA will push necessary reforms in Vietnam and contribute to a more stable and predictable environment if it is implemented properly, and this will in return help boost foreign direct investment (FDI) flows, technology transfer and know-how sharing.