Prime Minister Pham Minh Chinh and Vice President and Prime Minister of the United Arab Emirates (UAE) Mohammed bin Rashid Al Maktoum witnessed the handover ceremony of the CEPA Agreement document. Photo: Cong Thuong Newspaper

First free trade agreement with an Arab country

On October 28, 2024 local time, in Dubai, Prime Minister Pham Minh Chinh and Vice President and Prime Minister of the United Arab Emirates (UAE) Mohammed bin Rashid Al Maktoum witnessed the handover ceremony of the Vietnam - UAE Comprehensive Economic Partnership Agreement (CEPA) signed by Vietnamese Minister of Industry and Trade Nguyen Hong Dien and UAE Minister of State for Economy Thani bin Ahmed Al Zeyoudi.

CEPA is the first free trade agreement that Vietnam has signed with an Arab country, opening a new era in the upgraded and increasingly substantive relationship between Vietnam and the UAE in particular and Arab countries in general.

The CEPA agreement was signed in the context of the strong development of bilateral trade relations between Vietnam and the UAE.

The signing of the Agreement after a record one-year negotiation period with five official negotiation sessions, including three direct sessions at the ministerial level, is a clear demonstration of the commitment to bringing trade and investment cooperation between the two sides to a new level.

The Agreement consists of 18 Chapters, 15 Annexes and 2 bilateral letters with contents including trade in goods, services - investment, rules of origin, technical barriers to trade (TBT), sanitary and phytosanitary measures (SPS), customs, trade defense, government procurement, intellectual property, legal - institutional.

Notably, the two sides agreed to make a strong commitment to trade liberalization with the UAE committing to phase out tariffs on 99% of Vietnam's exports to the UAE while Vietnam also committed to phase out tariffs on 98.5% of the UAE's exports to Vietnam.

The agreement also includes many provisions to facilitate trade and investment, in line with current trends in digital transformation and green development.

Currently, the UAE is one of Vietnam's leading trade and investment partners in the Middle East, an important gateway for Vietnam to access markets in this region as well as other markets in West Asia and Africa. In addition, the economic and trade structures of the two countries are complementary.

Therefore, CEPA is a favorable premise for Vietnam to promote the export of its strengths to the UAE and then to countries in the Middle East, West Asia and Africa; at the same time, it has the opportunity to access advanced technology, capital and quality services of the UAE, contributing to reducing production costs and enhancing the competitiveness of Vietnamese goods.

In return, UAE goods and services will have the opportunity to access the Vietnamese market as well as ASEAN countries through Vietnam's strategic location in the region.

Important trade gateway in the Middle East

Currently, the UAE is Vietnam's largest export market and second largest trading partner (after Kuwait) in West Asia.

Statistics from the General Department of Customs show that in the period 2018-2023, the total trade exchange between the two countries will average about USD 5 billion /year. In terms of trade balance, Vietnam always has a large trade surplus with the UAE market (from USD 3-4 billion /year).

In 2023, total two-way trade will reach nearly USD 4.7 billion, up 5.9% compared to 2022, of which Vietnam's exports will reach more than USD 4 billion, up 4.3% and imports will reach over USD 676 million, up 16%.

In the first 8 months of 2024, total two-way trade reached over USD 4.47 billion, up 45% over the same period in 2023, of which Vietnam's exports reached USD 3.85 billion, up 47.5% and imports reached USD 623.5 million, up 32.5%.

In terms of commodity structure, Vietnam's main export items to the UAE include mobile phones, computers and components, electrical products, household electronics, pepper, seafood, footwear, textiles, cereal products, plastic products, wooden furniture, etc.

Vietnam's main import items from the UAE include raw plastics, liquefied petroleum gas (LPG), petroleum products; animal feed ingredients, base metals, chemicals, etc.

Minister of Industry and Trade Nguyen Hong Dien assessed that the UAE is one of Vietnam's leading important trade, investment and labor cooperation partners in the region.

In the near future, CEPA may bring more investment opportunities to Vietnam from UAE businesses that want to take advantage of and benefit from this Agreement.

In addition, the signing of CEPA with the UAE is expected to be an important lever for Vietnam in taking advantage of trade and investment opportunities in the Middle East. This is a region with many dynamic economies, with large economic scale but has not been noticed by Vietnamese enterprises in the previous period.

The UAE is an important trade gateway in the Middle East, with the potential to connect with many countries in the region. Therefore, through the UAE, Vietnamese products will easily access other major markets in the region such as Saudi Arabia, Qatar and Kuwait as well as some countries in North Africa and West Asia.

Thus, through tariff reductions and expanding cooperation and investment opportunities, CEPA will play an important role in effectively exploiting the potential of the Middle East market.

This is also the first step in the Government's policy of multilateralizing and diversifying relations, not only focusing on developing traditional markets but also prioritizing the development of new relations with countries that, for many reasons, we did not have the conditions to develop in the previous period.