Poland gives EU unlikely Vietnamese trade boost

Trade between Poland and Vietnam passed $3 billion last year, but may be set to grow even more as the EU signs a trade deal with the communist-ruled nation. Poland’s large Vietnamese population could provide the bridge.

With Poland growing at a rate of over 4%, while its neighbors show tepid GDP expansion, several Asian countries including China have been eyeing investments in the Eastern European country. South Koreans lead the way in Warsaw real estate, for example.

But Poland has another Asian partner on its doorstep, in the shape of its 50,000-strong Vietnamese community. Could it be the foundation for blossoming trade between the two nations as the EU signs a free trade agreement with the Southeast Asian country? Some certainly believe so.

“Vietnam is one of the most promising markets for Polish companies in South-East Asia,” Piotr Harasimowicz, chief representative officer of the Polish Investment and Trade Agency in Ho Chi Minh City, told DW.

EU inks Vietnam trade deal

In January, MEPs gave initial backing to a free trade agreement with Vietnam. Vietnamese exports of goods and services to the EU will increase by €15 billion ($16.4 billion) while EU exports to Vietnam augment by €8.3 billion by 2035.

The international trade committee of the European Parliament supported the agreement, opening the way to a vote in the full parliament when it meets this week. The EU-Vietnam agreement is the EU’s second deal with a member of the Association of Southeast Asian Nations (ASEAN), after Singapore.

The EU-Vietnam Free Trade Agreement (EVFTA), which is most likely to come into force in March, will eliminate almost 99% of custom duties between the EU and Vietnam. As much as 65% of duties on EU exports to Vietnam will be eliminated while the remaining will be gradually phased out over a period of 10 years. Also, 71% of duties will be eliminated on Vietnam exports to the EU, with the remaining to go over a period of seven years.

Sectors such as the pharmaceutical, agri-food, machinery and automotive industries will benefit most from the bilateral trade liberalization, Harasimowicz said. Almost half of the pharmaceutical products from the EU, including Poland, will be exempt from 8% customs duties as soon as the agreement comes into force, the rest after seven years.

In turn, customs duties on beef will be eliminated after three years, for dairy products after a maximum of five years and for processed food after seven years. Quite heavily burdened (tariffs reaching 48-50%), trade in wines and spirits will not be taxable after seven years from the implementation of the agreement.

Participation in tenders matters

In addition, EVFTA opens the Vietnamese public procurement market for all EU companies. According to the agreement, European entrepreneurs will be able to participate in tenders organized by the central administration (including infrastructure investments), the cities of Hanoi and Ho Chi Minh, as well as the largest state-owned enterprises, Harasimowicz says. The agreement also provides easier access to the Vietnamese postal market, banking and insurance services, as well as those related to maritime transport.

Harasimowicz said latest data from the agency showed bilateral trade between Poland and Vietnam surpassed $3 billion in 2019 and had recorded double-digit growth during the last couple of years. The key sectors of cooperation are agri-food, pharmaceuticals, cosmetics, green technologies and wastewater treatment.

Harasimowicz said potential areas were software/IT, heavy industries such as mining, shipbuilding, machinery and equipment for agricultural production, and food processing. Vietnam mainly exports electronics and equipment, footwear, textiles and agricultural goods such as coffee, pepper, coconut and cashews.