It made the observation Wednesday while submitting the EU-Vietnam Free Trade Agreement (EVFTA) to the National Assembly for ratification. Lawmakers will discuss the trade pact starting Wednesday and vote on it on May 28.

Industry and Trade Minister Tran Tuan Anh said that the EVFTA, which eliminates 99 percent of import duties for both parties in 10 years, is an opportunity for businesses to recover production with new supply chains to replace old ones disrupted by the pandemic.

Vietnam will be able to diversify its export markets and reduce dependency on a particular group of markets, he added.

EU is the second largest importer globally behind the U.S. and is the second largest export market for Vietnam, also behind the U.S. It has a population of 500 million with a GDP of $15 trillion, or 22 percent of the global GDP.

The government estimates that the trade pact could increase Vietnam’s GDP by 2.18-3.25 percent in the first five years, 4.57-5.3 percent in the next five and 7.07-7.72 percent in following five-year period.

Trade will benefit as exports to the E.U. could surge by 43 percent in 2025 and 44.4 percent in 2030 thanks to increasing sales of agriculture produce, garment and footwear and services such as aviation, finance and insurance, Minister Anh said.

It is estimated that imports from the E.U. will rise by 33.06 percent in 2025 and 36.7 percent in 2030, and the trade pact could prompt non-E.U. markets to increase trade and investment ties with Vietnam.

It is also estimated that the EVFTA will generate 146,000 more jobs each year in Vietnam.

While trade tariff collection will be reduced by VND2.5 trillion ($107 million) because of the trade pact, but domestic tax collection will increased by VND7 trillion ($300 million) in the 2020-2030 period.

But with opportunities come challenges. Vice President Dang Thi Ngoc Thinh said local companies could face competition from an influx of European goods and services.

The trade pact has strict regulations and policies on investment, trade and customs, which will require Vietnam to complete its market economy institutions and carry out further administrative reforms, she said.

She also stressed the need to consider implications of labor-based commitments in the pact that could potentially lead to international labor disputes and negatively impact national security. She did not elaborate.

Nguyen Van Giau, chairman of the External Affairs Committee of the National Assembly, suggested that the government clarify commitments regarding non-tariff measures in pharmaceuticals and medical equipment and allowing European companies to provide medicines in Vietnam.

On Brexit, Minister Anh said that there will be a transition period until the end of this year to negotiate additional agreements with the E.U., and therefore the trade pact will be effective for U.K. until then.

He proposed that the National Assembly allows an extension of this period up to two years. Vietnam and U.K. officials have been discussing the possibility of signing a bilateral trade pact based on the EVFTA, he added.

With the European Parliament having voted in favor of the pact in February, it will become effective a month after Vietnam lawmakers ratify the deal.

The EVFTA is E.U.’s second deal with an ASEAN country, after Singapore, and one of very few it has signed with developing countries.