(VOVworld) – Late last month, Vietnam signed a free trade agreement with the Eurasian economic union (EAEU) after two years of negotiations. The move is expected to offer major opportunities for Vietnam’s important export commodities such as agricultural and industrial goods like textiles, footwear, furniture, and some processed products.

PM Nguyen Tan Dung (R) signs the FTA between Vietnam and the Eurasia Economic Union. (Photo: VNA)

The Eurasian Economic Union is an economic organization linking Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan. Although it’s newly established, it plays a key role in creating a single economic space.

Chairman of the Board of the Eurasia Economic Commission Viktor Khristenko, said this was a comprehensive agreement with a thorough scope, high level of commitment, and guarantees benefit balance, taking into account the specific conditions of each party.

He noted that the deal will help Vietnamese businesses access a huge market, and enjoy more privileges and advantages in customs tariffs.

Overall, Vietnam and EAEU members are expected, for each level of market opening in goods, to reduce tariffs on 90% of all goods traded between the two sides, equivalent to over 90% of bilateral trade.

For Vietnam, the signing continues to affirm its active role in developing comprehensive cooperation relations with the Union.

PM Nguyen Tan Dung (first right) and other leaders sign a Free Trade Area agreement between Vietnam and the Eurasian Economic Union in Kazakhstan's Burabay District on May 29th.

Economically, Vietnam aims to gain fundamental benefits through improving the competitiveness of locally-made products, generating opportunities to boost trade, services, investment, diversify its export-import markets, and reduce dependence on one market.

Prime Minister Nguyen Tan Dung said “the agreement represents the Union’s strategic vision to develop cooperation with the Asia – Pacific dynamic, a driver of global economic growth. The FTA will contribute to boosting economic growth in each country, fostering bilateral trade, service and investment relations, and expand regional cooperation. As an active member of ASEAN, Vietnam will do its best to assist the EAEU in extending its affiliation with the ASEAN Community, a 600 million-strong single market with a GDP of about 2.5 trillion USD.”

An important part of the agreement is that the Union will apply the tax rate of 0% for all seafood products in Vietnam as soon as the deal takes effect. This is the most practical evidence for Vietnam’s efforts to expand the export market.

Vu Huy Hoang, Minister of Industry and Trade, said “pursuant to commitments, as soon as the agreement takes effect, many particular Vietnamese products, especially seafood and some kinds of farm produce, will be imposed with a tax rate of 0%. Textiles, footwear, furniture, and several processing items will get preferential treatment from the Union in a favorable roadmap for Vietnam to implement the agreement. On the contrary, Vietnam has agreed to open the market for the Union’s roadmap for some livestock products, industrial commodities including machinery, equipment, wheat, milk and dairy products that the EAEU member countries are strong in and Vietnam is in high demand.”

According to economists, these goods will generally not compete with Vietnamese goods which in return contribute to further diversification of the domestic consumer market.

Once the agreement takes effect, Vietnam’s exports to the Union are estimated to increase by up to 20% annually.

By 2020 exports and imports of both sides will reach at least 10 billion USD.