Communist Review - Eurasian Economic Union (EAEU) consists of five member countries (Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia) with traditional economic - political relations with Vietnam. In recent years, bilateral trade relations between Vietnam and EAEU countries have been continuously developed, especially since the Free Trade Agreement (FTA) between Vietnam and the EAEU took effect in 2016.

In 2015, the bilateral trade relationship between Vietnam and the EAEU reached $3.6 billion dollars, increased 6% compared to 2014 (1). However, in general terms, Vietnam’s export turnover to the EAEU only accounts for about 1.1% of the total import volume of the bloc and Vietnam’s import turnover from the EAEU only accounts for about 0.5 % of the bloc’s total exports.

That Vietnam became the first FTA partner signing with the EAEU has offered a huge opportunity for Vietnam’s export market, creating a driving force to open the market, and attracting the attention of businesses from both sides, reducing tariff and non-tariff barriers and being a favorable gateway to promote import and export turnover between Vietnam and EAEU countries. Nearly 90% of tariff is cut down and reduced, 59.3% of which is eradicated right after the agreement took effect. This is a tremendous advantage of Vietnam in the rivalry with other countries in the world when they import products to EAEU’s market. Specifically, under the Agreement, for the textile and garment industry, it is committed to cut 82% of the total number of tariff lines, to completely eliminate 42% with a maximum schedule of 10 years, to completely eliminate 36% as soon as the Agreement takes effect; for the footwear industry, the total number of tax lines will be reduced by 77%, completely eliminated by 73%, with a maximum roadmap of 5 years; for the fishery industry, 95% of the total number of tariff lines will be cut, with a maximum schedule of 10 years, of which 71% of the tariff lines will have the import tax rate to 0% as soon as the Agreement comes into force, 5% of remaining tariff lines are items that Vietnam has no export strength.

Since the FTA between Vietnam and the EAEU (FTA VN - EAEU) took effect in 2016, the trade turnover between the two sides has grown strongly, with an average increase of 30% per year (2). This shows that the Agreement is an important legal framework, creating an open corridor for businesses of both sides to promote trade and investment. According to data from the General Department of Vietnam Customs, on the Vietnamese side, the items that have taken advantage of incentives from the Agreement are mainly textiles, footwear, aquatic products, agricultural products, phones and components. On the EAEU side, the main beneficiaries are freshwater salmon, maize, fertilizers of all kinds, vegetable oil, iron, steel, trucks and some diesel-powered transport vehicles ... In addition, many product lines of Vietnam and EAEU countries are applied with special preferential import tax rates under the Agreement, which is on an increasing trend. In 2016, two-way trade turnover between Vietnam and EAEU reached 3.04 billion dollars, increased 23% compared to 2015. In 2017, import and export turnover between Vietnam and EAEU reached 3.9 billion dollars, increased by 28.3% compared to 2016 (3).

Thus, as taken effect, the Vietnam - EAEU FTA has created conditions for the development of two-way trade between Vietnam and EAEU countries, which has increased more strongly than before (the average annual increase in the period 2011 - 2015 only reached about 5% per year, while in the period 2013 - 2015, bilateral trade tended to decrease). According to forecasts of many experts, the trend of trade growth will continue to be maintained in the coming years, especially along with the roadmap to cut many tariff lines to 0%.

Regarding the rate of taking advantage of the Agreement’s incentives, from the effective date of the Vietnam - EAEU FTA in December 2016 until the end of June 2018, Vietnam has exported over $869 million USD of goods to the EAEU market used EAV-formed Certificate of Origin (C/O) according to FTA VN - EAEU. In the first six months of 2018, Vietnam exported to the EAEU market over US$281 million of goods using the EAV form C/O, accounting for about 23% of the total export turnover to the EAEU market. Some export items with a high rate of using C/O form EAV include textiles and garments accounting for nearly 78%, footwear accounted for 59%, and plastic and plastic products accounted for 87% (4).

In addition, to strengthen bilateral economic cooperation within the framework of the Vietnam - EAEU FTA, the two sides negotiated and signed protocols, specifically, the protocol between the Government of Vietnam and the Government of the Russian Federation on supporting the production of motor vehicles in the territory of Vietnam signed on March 21, 2016 (Automotive Protocol with Russia); the protocol between the Government of Vietnam and the Government of the Republic of Belarus on support for the production of motor vehicles in the territory of Vietnam signed on March 23, 2016 (Automotive Protocol with Belarus); the protocol on the exchange of customs information signed on June 28, 2018.

The implementation of the protocols on the production of means of transport with Russia and Belarus in general and the establishment of joint ventures in particular will contribute to diversifying the transport vehicle market in Vietnam, creating conditions to increase the presence of industrial goods of Russia and Belarus in Vietnam. For the Customs Electronic Information Exchange Protocol, through regular information exchange and transmission mechanisms and right after the customs clearance of goods, the protocol will actively contribute to the fight against combating legal violations in the field of customs, speeding up the customs clearance process, facilitating trade and promoting import and export goods of each country.

Besides the above-mentioned protocols, the two sides are also negotiating a protocol on building an electronic origin verification and certification system, which is expected to conclude soon to support the verification of authenticity of the Certificate of Origin to enjoy preferential treatment under the VN-EAEU FTA.

In 2019, two-way trade turnover between Vietnam and the EAEU reached 10.4 billion USD, increasing 20.78% compared to 2018, accounting for 2% of Vietnam’s total import and export turnover with the world. In which, Vietnam's exports increased by 6.43%, reaching 7.2 billion USD (5).

Particularly, in the first 10 months of 2020, despite facing volatile developments in global trade and the COVID-19 pandemic, bilateral trade turnover between Vietnam and the EAEU still grew impressively with a total two-way turnover of 10.34 billion USD, up 17.98%. In which, export turnover reached 7.18 billion USD, increasing 16.15%; import turnover reached 1.16 billion USD, increasing 22.35% over the same period in 2019 (6). However, the room for Vietnam’s exports to the Eurasian region is still very large, because if calculated on the total import turnover of the EAEU in the first 10 months of 2020, about 1.4 trillion USD, Vietnam’s export turnover will be about 1.4 trillion USD, only accounting for 0.5% market share. It is worth mentioning that Russia is a market that accounts for more than 90% of the total trade turnover between Vietnam and the EAEU, but bilateral trade between Vietnam and Russia accounts for a small proportion of the total import and export turnover of the two countries, only accounting for 0.7% of Russia’s total trade turnover and 0.9% of Vietnam’s total trade turnover.

In the short term, it can be said that Vietnam has achieved higher efficiency than the EAEU since the VN-EAEU FTA took effect. One of the main reasons is that Vietnam’s export flows are relatively diverse, mainly in consumer goods, widely used by people, such as mobile phones, computers, food and garments. All these commodity groups have grown since the first days of the Agreement’s entry into force. On the EAEU side, the reason that export growth is not as high as that of Vietnam is because exports from the EAEU are mainly goods for investment needs, such as oil, oil products, fertilizers, metals, and equipment for cars. These product lines are more difficult to increase export output because there are large contracts, special transportation agreements and customers need to be large corporations and corporations.

Regarding trade in services, service exchange between Vietnam and EAEU countries is still very modest. In addition to transportation and insurance services associated with trade in goods, tourism and education services are currently the most popularly exchanged services.

In the field of investment, Russia ranks 25^th out of 135 countries and territories investing in Vietnam (accumulation by December 20, 2019). According to the Ministry of Planning and Investment, in the first 11 months of 2019, Russia had 13 direct investment projects in Vietnam, with a total registered capital of 3.31 million USD; in which there are 72 indirect investment projects of Russian enterprises with a total registered capital of up to 25.61 million USD. The number of investment projects of Russian enterprises in Vietnam is through capital contribution or share purchase. According to the Consulate General of the Russian Federation in Ho Chi Minh City, up to now, the total investment capital of Russia in Vietnam has reached 2.6 billion USD. The trend of Russian direct investment in Vietnam focuses on the fields of industrial production, transport infrastructure, energy, oil and gas, assembly industry, and high technology. This trend is increasing because this is the potential of Russian and Vietnamese businesses that are calling for investment in these industrial fields. In the opposite direction, Vietnam also had 22 investment projects in Russia with a total of new and increased capital of nearly 3 billion USD. The biggest projects can be mentioned such as Rusvietpetro Joint Venture Company, Hanoi - Moscow Multi-functional Trade-Cultural Center and industrial - agricultural complexes belonging to TH TrueMilk Group. In which, the dairy farming and milk processing projects are worth more than USD 2 billion invested by TH TrueMilk Company in Moscow and Kaluga have become a bright spot in Vietnam’s investment relations with Russia. In addition, Russian investors also want to strengthen investment cooperation in the agricultural sector of Vietnam. This is expected to be a new direction to increase foreign direct investment (FDI) flows from Russia to Vietnam. Accordingly, the cooperation model that will be deployed is to use technology, techniques and varieties of foreign investors to ensure the quality of agricultural products. Vietnam and Kazakhstan have established joint venture enterprises to invest in building factories in each other’s markets, typically the factory producing noodles and flour products of Mareven Food Holdings Company with 100% Vietnamese capital is operating very successfully in Kazakhstan, 80% of the company’s products have been exported to other countries.

For Belarus, Belarus currently has three investment projects in Vietnam with a total capital of 16.25 million USD. Vietnam has an investment project to Belarus in the field of wholesale and retail of IP Hapaco Foreign Trade Company as an investor in the form of 100% FDI capital with a scale of 1.6 million USD. In September 2019, Maz Asia truck factory with a capacity of 3,000 products/year, a joint venture between Vietnam and Belarus in Hung Yen province was opened. Steps to implement a joint venture to produce dairy products in this province have also been signed with a long-term orientation to reach the markets of ASEAN countries, contributing to the benefits of both sides.

As seen that although the COVID-19 pandemic has made goods exchange difficult, the trade turnover between Vietnam and the EAEU has still achieved many positive results. The fields of economy, trade and investment between Vietnam and the EAEU have been opening up many new cooperation trends, such as agriculture, dairy farming, milk processing, forming new value chains in seafood, cooperation in the fields of high technology and informatics.

Advantages and disadvantages of implementing the Vietnam - Eurasian Economic Union Free Trade Agreement

With the results recorded after the Vietnam - EAEU FTA officially took effect, the advantages brought by the Agreement can be mentioned as:

Firstly, the VN-EAEU FTA has strategic significance, creating a legal framework and favorable conditions for the development of economic and trade cooperation relations between Vietnam and the EAEU in general as well as with each member country in particular. This Agreement marked a turning point in Vietnam’s extensive international economic integration.

Secondly, the EAEU is an economic region with substantial growth, a large common market of five member countries, with a population of about 183 million people (in 2018); gross domestic product (GDP) reached 1.9 trillion USD by the end of 2018 and increased by nearly 1% in the first three months of 2019 (7). Although the EAEU was only established in 2015, it is an alliance with great potential for growth. In the future, the EAEU has many prospects for expansion, adding some countries from the Commonwealth of Independent States (CIS). This will be an advantage for countries that have signed FTAs ​​with the EAEU like Vietnam.

Thirdly, EAEU countries are actively promoting the expansion of trade and investment relations with the ASEAN Community in order to strengthen ties with the Asia-Pacific region. Meanwhile, Vietnam is also actively developing supply chains for goods production and consumption in this region, so enhancing economic and trade activities with Vietnam in depth will be the premise for manufacturers and product suppliers of EAEU countries to have the opportunity to participate in product supply chains in the Asia-Pacific region.

Fourthly, the structure of trading products between Vietnam and the EAEU is complementary, not directly competitive, so the traditional adverse effects of opening the Vietnamese market to partners through FTAs are greatly reduced.

However, besides the above advantages, there are still some difficulties when implementing the VN-EAEU FTA.

Firstly, although there has been a good development, the level of taking advantage of incentives from the VN-EAEU FTA is still low, especially the rate of using the EAV-formed Certificate of Origin (C/O/EAV).

Secondly, Vietnam is now the EAEU’s first FTA partner, which will help Vietnamese goods have a more special advantage. However, in the context of the COVID-19 pandemic, Vietnamese businesses also face many challenges, especially in the field of agriculture and fisheries. The main challenge is due to the requirements of TBT (technical barriers to trade), SPS (sanitary and phytosanitary measures). Besides, import processes and procedures are relatively complicated and unclear, inconsistent within the EAEU itself. According to EAEU regulations, if an enterprise is certified by a state management agency to be eligible for export, the EAEU side will accept that enterprise. But in fact, Vietnamese businesses have not yet been accepted because the EAEU side still does not trust Vietnam's inspection and quarantine system.

Thirdly, other barriers can be mentioned such as when Vietnam deals with partners in EAEU, it mainly uses the ruble and the Russian language, the payment mechanism is not convenient...

Fourthly, the trade and investment turnover between Vietnam and EAEU countries are still too low compared to its potential and compared to many other partners of Vietnam. According to economic experts, the export quotas enjoying preferential tariff rates of the EAEU do not fall into the main products of Vietnam.

Solutions to promote trade relations between Vietnam and the Eurasian Economic Union

Firstly, relevant ministries, departments and branches need to continue to accompany the business community through the mechanisms of the Joint Committee, the Intergovernmental Committee, etc., to continue to support and solve the problem in terms of non-tariff barriers, in particular cooperation to electrify customs and administrative procedures; removing obstacles in the issue of certification of origin, negotiating mutual recognition in the field of agriculture; establishing favorable legal frameworks; strengthening the organization of trade promotion activities and trade connections for the Vietnamese business community - EAEU; researching and implementing measures and solutions to enhance cooperation and promote bilateral trade between Vietnam and the EAEU, taking full advantage of the advantages brought by the agreement.

Secondly, it needs to strengthen cooperation in the field of investment, including investment of Vietnam in the EAEU and of the EAEU in Vietnam. In order to promote cooperation in this area, it is necessary to redefine the investment priorities of both sides, which each has advantages.

Thirdly, it needs to promote the role of the system of embassies and trade offices of Vietnam in other countries and trade representative offices of countries in Vietnam in providing up-to-date market information for the business community, helping increase opportunities for import and export of goods, and expand and diversify export markets and products. This is an important bridge for trade promotion, popularizing and introducing Vietnam’s image and products to the world, especially Vietnam’s key export products, such as seafood, fresh vegetables and fruits, electronic goods and components, textiles, furniture and footwear.

Fourthly, it needs to promote cooperation in the fields of tourism, science - technology and education - training. These are the fields that are both a bridge and a great support for strengthening economic cooperation between the two countries. Strengthening training cooperation not only improves the quality of human resources in Vietnam but also provides human resources for joint ventures and enterprises.

Fifthly, the two sides need to develop infrastructure, as well as logistics services, including transshipment ports and cold storage. Although suppliers from Europe, America, and Oceania arrived in Vietnam earlier than Russia and EAEU countries, the long-standing friendship, cooperation and cultural exchange between EAEU countries and Vietnam still exist. The South has had a positive impact on trade growth prospects. In other words, it is necessary to open the shipping route between Vietnam and the EAEU to improve the efficiency of export, import and investment activities between the two sides. The parties must choose the most efficient path to deploy and develop into a regular route.

Sixthly, to increase export output to Asia-European markets, Vietnamese enterprises need to have a strategy, identify products with advantages and demand in the EAEU market, thereby increasing their exports, increasing investment and improving competitiveness. Vietnamese enterprises also need to fully grasp the import tax reduction roadmap related to production and business, actively develop appropriate production and business strategies in the short and long term, take advantage of thoroughly opportunity and ready to compete. Vietnamese businesses need to grasp information about the VN-EAEU FTA to learn and take advantage of incentives to promote business exchanges; at the same time, actively participate in exhibitions and fairs to connect investment.

Seventhly, currently, Vietnam and EAEU countries in general and Russia in particular have a great demand for each other’s agricultural products, so the two sides need to develop trade relations in this field, creating favorable conditions for enterprises to export to the two-sided markets.

Eighthly, to solve difficulties in trade transactions, Vietnam and EAEU countries in general and Russia in particular have established a payment mechanism in local currency (VND/Ruble). The commercial banks of the two sides need to further promote information to businesses and customers about the benefits of local currency payments in order to support liquidity for payments in rubles and VND.

It can be seen that with a population of over 180 million people, accounting for nearly 20% of the land area with an additional economic structure for Vietnam, the EAEU is a potential market for the export of agricultural and aquatic products, textiles and footwear ... of Vietnam, and also a source of machinery and equipment, chemicals, biotechnological products, energy with low cost, high quality for Vietnam. However, Vietnam currently ranks only 24^th among importing countries from the EAEU and 11^th among exporting countries to the EAEU. Both Vietnam and the EAEU attach great importance to and wish to promote the relationship between the two sides. All EAEU countries consider Vietnam to be an important partner in both political and economic aspects. Therefore, promoting cooperation with Vietnam will create favorable conditions for EAEU countries to penetrate the large Association of Southeast Asian Nations (ASEAN) market. For Vietnam, the restoration and development of traditional markets in the Eurasian Economic Union will create conditions for Vietnam to boost exports to the CIS and Eastern European markets. Therefore, the two sides need to make more efforts to overcome shortcomings and remove difficulties in order to take full advantage of the incentives that the Vietnam - EAEU FTA brings about, and then trade and investment will continue to grow more strongly in the near future.

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(1) Tung Bao: "Take advantage of the FTA between Vietnam - EAEU", https://nhandan.com.vn/tin-tuc-tinh-te/tranh-thu-thuan-loi-fta-giua-viet -nam-eaeu-275260, October 15, 2016

(2), (3), (4) Hoang Hoa: “Looking back on two years of implementing the Vietnam - Eurasian Economic Union Free Trade Agreement", https://vn.sputniknews.com/vietnam_russia /201810096350254-viet-nam-thuong-mai-tu-do-lien-minh-king-te-a-au/, October 9, 2018

(5), (6) Trung Hung: "Vietnam - Asia - Europe trade grows positively", https://nhandan.com.vn/nhan-dinh/thuong-mai-viet-nam-khu -vuc-a-au-tang-truong-tich-cuc-627648/, December 10, 2020

(7) Phuong Thao: “VN - EAEU FTA after 3 years: Faith in new opportunities”, https://moit.gov.vn/CmsView-EcoIT-portlet/html/print_cms.jsp?articleId=17368, December 13, 2019

This article was published in the Communist Review No. 966 (May 2021)