The unlikely partnership between Vietnam and the EU

In moves that signify their strong desire to strengthen bilateral cooperation, the European Union and Vietnam have reached milestone agreements in recent months. On 30 June 2019, they signed a free trade agreement (FTA) and an investment protection agreement (IPA). Over a month later, on August 5, they inked a new defence agreement. In many respects, these accords – and together with them, the enhanced partnership – between the European grouping and the Southeast Asian nation are remarkable.

The EU has long and widely been regarded as a ‘normative power’ because it is founded on – and promotes – liberal and democratic values, such as democracy, liberty and human rights. By contrast, Vietnam is an authoritarian country, with its economic and political system almost antithetical to that championed by the EU and its member states. In fact, the communist country is far more divergent from the EU than many of its regional peers, such as Indonesia, Malaysia and the Philippines, which, unlike Vietnam, are multi-party countries and regularly hold democratic elections. Yet, such notable political divergences between the EU and Vietnam do not appear to greatly hinder their cooperation.

Three important agreements

The EU opened trade talks toward a region-to-region FTA with ASEAN (Association of Southeast Asian Nations) in 2007. But, after seven rounds of negotiations without any significant progress, such talks were abandoned two years later. A key reason for the collapse was that the EU wanted to exclude Cambodia, Laos and Myanmar, arguing that their levels of economic development did not justify their immediate participation. At that time, the EU also maintained that, due to Myanmar’s political situation, notably its human rights record, this country could not be involved. By contrast, as a matter of regional solidarity, ASEAN insisted on a region-to-region agreement, which included all of its ten members. As it still regarded FTAs with individual ASEAN members as stepping stones toward a broader agreement with the grouping, the EU started talks with Singapore and Malaysia in 2010 and with Vietnam in 2011. It also opened negotiations with Thailand in 2013, the Philippines and Myanmar in 2015 and Indonesia in 2016. Yet, until now it has reached breakthroughs with only Singapore and Vietnam.

In October 2018, Singapore and the EU signed an FTA and an IPA and in February 2019, these two agreements received the backing of the European Parliament. The EU-Singapore FTA, known as the EUSFTA, will enter into force (expectedly towards the end of this year) once Singapore concludes its own internal procedures and both sides complete the final formalities.

Vietnam and the EU concluded their talks in December 2015. Just as with the EU-Singapore agreement, the formal conclusion of the EU-Vietnam FTA (EVFTA) was delayed by a legal process on the division of competencies between the EU and its member states. Following the Court of Justice of the EU Opinion 2/15, issued in May 2017, the result of the EU’s negotiations with Vietnam was adjusted to create an FTA and an IPA. In October 2018, the European Commission submitted them to the European Council for approval. On 25 June 2019, the Council approved the pacts and, five days later, Brussels and Hanoi signed them. It took three and a half years after the talks had been concluded for the two sides to sign these agreements also because the EU was concerned about Vietnam’s human rights record. Some in the European Parliament are still critical of the situation. Yet, despite such an opposition, it is not a matter of if, but rather when, the legislative bodies of the EU and its members ratify them this year. It is possible that the trade and investment agreements will be ratified this year, paving the way for them to come into effect at some point in 2020.

Singapore is a heavily trade-dependent economy and the EU’s largest trading partner in ASEAN. Thus, it is understandable that the city state became the first in the region to reach an FTA with the EU. It is quite surprising, though, that Vietnam is the second ASEAN member to have struck a similar deal, especially when considering the fact that the EU’s trade talks with Malaysia, Thailand, Indonesia and the Philippines havestalled or made little progress.

What is even more remarkable is that the FTA with Vietnam is seen by the EU as “the most ambitious free trade deal [that the EU has] ever concluded with a developing country.” Indeed, the EVFTA, which will eliminate virtually all tariffs on goods traded between the grouping and Vietnam, is more than a trade pact. Billed as “the next generation” bilateral deal, it also contains important provisions on labour rights and environmental and intellectual property protections.

A joint press statement by EU Trade Commissioner Cecilia Malmström and Vietnam’s Minister of Industry and Trade Tran Tuan Anh on the occasion of the signing of the FTA and the IPA between the two sides said, these two “agreements mark a milestone in [their] strong partnership” as they will “reinforce [their] trade and investment ties.”

The statement also stated that beyond their economic benefits, the agreements aim to promote cooperation between the two sides in other areas. According to that joint declaration, the FTA and the IPA “are an integral part of the framework established by the EU-Viet Nam Partnership and Cooperation Framework Agreement, which governs [their] overall bilateral relations in various areas,” including peace and security.

Such a broad framework led Brussels and Hanoi to step up their security and defence cooperation early this month. On 5 August, Federica Mogherini, High Representative of the European Union for Foreign Affairs and Security Policy and Vice-President of the European Commission, made a trip to Vietnam, her first to the country, and during her stay in Vietnam the two sides signed a Framework Participation Agreement (FPA). This defence agreement is of both symbolic and strategic significance. By joining the FPA, Vietnam becomes the first in Southeast Asia – and the fourth in the wider region (after South Korea, New Zealand and Australia) – to take part in the operations and missions under the EU’s Common Security and Defence Policy (CSDP), such as the EU’s crisis management activities. The significance of the signing of this agreement and the enhanced cooperation between the two parties was also reflected by the fact that during her trip, Mogherini held talks with Vietnam’s Deputy Prime Minister and Foreign Affairs Minister Pham Binh Minh and Defence Minister Ngo Xuan Lich. She was also received by Prime Minister Nguyen Xuan Phuc and National Assembly Chairwoman Nguyen Thi Kim Ngan – two of the country’s three most important politicians.

All of this raises the question as to why the EU-Vietnam relationship has developed so well despite the fact the EU and Vietnam differ and disagree over political issues, such as human rights. The answer to this is that the two sides have greater economic and strategic interests to forge closer ties.

Economic benefits

Economically, it is widely believed that these trade and investment deals will bring substantial benefits to the two sides. Jean-Claude Juncker said, on the day his Commission formally presented the EU-Vietnam trade and investment agreements for signature and conclusion, that these agreements will “bring unprecedented advantages and benefits for European and Vietnamese companies, workers and consumers.” The EVFTA, in the view of Mauro Petriccione, the EU’s chief negotiator, is a great opportunity for European exporters because “Vietnam has a vibrant economy of more than 90 million consumers, a growing middle class and a young, dynamic workforce” and is “one of the fastest growing countries” in the ASEAN region. Given such huge opportunities and benefits, in early 2019, a group of European business associations wrote a joint letter to European Council President Donald Tusk urging the Council to consider and approve the EVFTA and calling on “the Council and all member states to dedicate the resources necessary to complete this review expeditiously so that the agreement can be approved in early 2019.”

The FTA with the EU, the world’s biggest trading bloc, is also seen as hugely beneficial to Vietnam, an export-led economy. According to Vietnam’s General Statistics Office (GSO), trade in goods between the two sides in 2018 was $56.3 billion with Vietnam exporting $42.5 billion worth of products to the EU, its second biggest export market (after the United States), and importing $13.8 billion worth from it. Studies by Vietnam’s Planning and Investment Ministry show the EVFTA will boost Vietnam’s exports to the EU by 20.0% by 2020. 42.7% by 2025 and 44.37% by 2030. According to this official data, the trade deal could also increase Vietnam’s GDP by 2.18%-3.25% annually by 2023 and by 4.57%-5.30% annually between 2024 and 2028.

Whether the IPA and notably the FTA will bring such great benefits to the EU and Vietnam is open to debate. What is unquestionable is that the leaders and officials of both sides are very upbeat about these two agreements. That’s why, it is not surprising that, in their joint statement on 30 June, the EU’s Trade Commissioner and Vietnam’s Minister of Industry and Trade “hope for a swift ratification of the agreements … in the coming months, in order to allow our businesses, workers, farmers and consumers to reap their benefits as soon as possible.” In receiving Ms Federica Mogherini on 5 August, Vietnamese Prime Minister Nguyen Xuan Phuc again called on “the European Parliament [to] soon ratify the pacts so that both sides can realise their cooperation opportunities.”

Shared views on the South China Sea

Besides huge economic interests, the EU and Vietnam share strong convergence on the South China Sea (SCS) issue. Their convergence on this key geopolitical matter is another important factor behind their flourishing partnership. Tensions in the resources-rich, strategically important and hotly-disputed sea, called East Sea in Vietnam, have flared up in recent years. This is mainly due to China’s ongoing, controversial and aggressive activities, including reclamation, construction and militarization of disputed outposts, in what is one of the world’s most important sea-lanes, and continued ignoring of a landmark ruling by a United Nations Convention on the Law of the Sea (UNCLOS) tribunal. The award issued by the Hague-based court in July 2016 unanimously invalidated many of its claims actions in the SCS in a case brought by the Philippines. These included its findings that “there was no legal basis for China to claim historic rights to resources” within its so-called “nine-dash line,” which covers almost all the 3.5-million-square-kilometer sea.

The SCS tensions have attracted attention, apprehension and reaction from the EU. In remarks before the G-7 summit in Canada in June 2018, Donald Tusk said, “We must […] demonstrate unity regarding the ongoing land reclamation and militarisation in the South China Sea, as the international law must apply to all countries, big and small, on land and at sea.” Though Tusk did not mention China by name, his remarks were pointedly aimed at China’s maritime actions. In a strategic communication mapping out 10 proposals for dealing with Beijing issued in March this year, the European Commission said, “China’s maritime claims in the [SCS] and the refusal to accept the binding arbitration rulings issued under the [UNCLOS] affect the international legal order and make it harder to resolve tensions affecting sea-lanes of communication vital to the EU’s economic interests.”

The EU’s collective SCS posture has been stressed by some of its key members. For instance, a joint statement by France, Germany and the United Kingdom (E3) on 29 August expressed concern over the current situation in the area and called for all of its coastal states to take measures to reduce tensions. Though they did not mention China or any other countries, the E3 were, undoubtedly, cognisant of China’s coercive and aggressive actions in recent months, including sending a survey ship, escorted by armed maritime vessels, to areas within Vietnam’s legal exclusive economic zone (EEZ). The statement also said, as parties of the UNCLOS, France, Germany and the UK “underline their interest in the universal application of the Convention” and “recall in this regard the Arbitration Award rendered under UNCLOS on 12 July 2016.”

The increasing interest in the SCS by the EU as a whole and some of its main members has been definitely welcomed by Vietnam, which has increasingly become wary of China’s maritime expansionism. Like the EU, Vietnam has long, strongly and consistently advocated for a peaceful and international law-based approach to the SCS issue. In their talks with China’s leaders as well as their own statements and joint declarations with leaders of Vietnam’s main partners – such as the United States, IndiaJapanAustraliaSouth KoreaIndonesiaSingapore and the United Kingdom, Vietnamese leaders have always called for such a solution.

The shared views of the EU and Vietnam on the issue were perfectly and explicitly expressed by Mogherini during her press conference with Pham Binh Minh on 5 August, in which she reassured Minh that the EU “fully shares your positions and your concerns when it comes to the situation and the increasing tensions in the South China Sea.” The EU’s High Representative also told Vietnam’s top diplomat, “these tensions and this militarisation is definitely not conducive to a peaceful environment.” What’s more, she emphasised, Vietnam “can count on the European Union to always defend not only the need to decrease tensions, but also and first of all, the need to have full respect for international law, including the [UNCLOS].” Though she named neither China nor its maritime activities, including its current violations of Vietnam’s EEZ, Mogherini was, without doubt, mindful of all these.

Conclusion

The EU’s latest moves with Vietnam have probably surprised many people. Leading to suggestions  that it is shifting away from it normative position or indeed given credence those that have in the past questioned the EU’s normative credentials and labelling it a ‘realist power’ that puts interests before values. For most certainly Vietnam fares worse than its regional peers in democracy, human rights and other areas, such as freedom of press. While the EU has criticised the human rights or political situations in Cambodia, Myanmar, Thailand and the Philippines and, consequently, adopted a relatively tougher posture vis-à-vis these countries, it is apparently less critical of Vietnam. Faced with criticisms of their dealings with the Vietnamese government, EU officials often say that they do not overlook Hanoi’s human rights record and that the EU’s FTA and IPA with Vietnam are also aimed at improving the latter’s human rights situation. European Commission President Jean-Claude Juncker stressed those agreements “promote a rules- and values-based trade policy with strong and clear commitments on sustainable development and human rights.” Similarly, Cecilia Malmström stated, “Through our agreements [with Vietnam], we also help spread European high standards and create possibilities for in-depth discussions on human rights and the protection of citizens.”

Whether the EU’s enhanced partnership with Vietnam will make Vietnam freer – or less authoritarian – time will tell. What is clear is that both sides have strong economic, strategic and security interests to widen and deepen their cooperation.

About the GPI

The Global Policy Institute is a research institute on international affairs. It is based in the City of London, and draws on both a rich pool of international thinkers, academics as well as policy and business professionals. The Institute gives non-partisan guidance to policymakers and decision takers in business, government, and NGOs.

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