Tran Hung Khuong, owner of an automobile shop in HCM City's Tan Binh District, said people could now save up to VND15 billion by buying a Rolls-Royce Wraith directly imported from the UK, thanks to the Vietnam-UK Free Trade Agreement (UKVFTA).
|Under the EUVFTA, which took effect on August 1, 2020, the EU immediately removed import duties on 85.6 per cent of tariff lines equivalent to 70o .3 per cent of Vietnam's exports. Photo vneconomy.vn|
The saving is a result of the drastic cut in import tariffs on vehicles, he said.
Earlier a Rolls-Royce imported from the EU cost 266,200 pounds (VND8.3 billion). On top, buyers had to pay around VND30.5 billion in various types of taxes like the 70 per cent import tax, 150 per cent special consumption tax and a 10 per cent VAT.
The UKVFTA took effect on December 31, 2020.
It was negotiated based on the commitments under the EU-Vietnam FTA with necessary adjustments to ensure it conforms with the Vietnam-UK bilateral trade framework.
As it inherits the EUVFTA, the UKVFTA is expected to create a comprehensive, long-term and stable economic and trade co-operation framework between the two countries at a time when they have agreed to keep bilateral relations at the strategic partnership level.
Under the EUVFTA, which took effect on August 1, 2020, the EU immediately removed import duties on 85.6 per cent of tariff lines equivalent to 70.3 per cent of Vietnam's exports.
After a seven-year period 99.2 per cent of tariff lines, equivalent to 99.7 per cent of Vietnam's exports, will be eliminated.
For its part, Vietnam cut 48.5 per cent of tariff lines, equivalent to 64.5 per cent of the EU's exports, to zero per cent as soon the agreement took effect. After seven years 91.8 per cent of EU tariff lines will be eliminated.
Under the UKVFTA, the UK has eliminated 65 per cent of tariffs and will increase it to 99 per cent within seven years. Vietnam has removed 48.5 per cent of tariffs, and this will rise to 92 or 98 per cent after six years.
Thus, the import tax on vehicles is now down to zero, the special consumption tax levied on a Rolls-Royce has decreased to VND12.450 billion and VAT to VND2.075 billion.
"In the next five years the market for vehicles imported from the EU and the UK will see great change, enabling local consumers to buy luxury vehicles," Khuong said.
Many market observers concurred with Khuong pointing out the UKVFTA would enable Vietnamese consumers to buy not just cars but also other luxury products at reasonable prices, including famous fashion brands like Burberry, Alexander McQueen, Karen Millen, Coast, Missguided, and Warehouse.
In the past, these products attracted a 30 per cent import tax, which made them expensive in the Vietnamese market. But the import tax is now gone.
A member of the Ho Chi Minh City Association of Mechanical Engineering said import of machinery and equipment from the EU and UK would surely increase since taxes on them have been cut to zero.
"This is good news."
UK Trade Secretary Elizabeth Truss said the trade deal would allow trade in goods and services to continue to flourish.
Minister of Industry and Trade Tran Tuan Anh said the UKVFTA would ensure trade between Vietnam and the UK is not interrupted after the latter's transition period in the Brexit process ends.
Vietnam would have greater opportunity to export to the UK thanks to commitments to market opening and quotas for some of its most competitive exports like agricultural and fisheries products.
While the continuing COVID-19 pandemic is causing great difficulties to businesses, the UKVFTA is expected to mitigate them somewhat.
It would also contribute significantly to promoting the bilateral relationship in a more comprehensive and broader manner, and create a solid base for Vietnam and the UK to strengthen the strategic partnership they have just established, Anh said.
Experts agreed with Anh, saying that there is ample room for increasing exports of Vietnamese products to the UK since they now account for less than 1 per cent of the country's imports of nearly $700 billion in 2019.
Amid the COVID-19 pandemic, the UK's demand for agricultural products, food, electronic products, personal protective equipment, and laboratory equipment are increasing, and the UKVFTA will offer Vietnam the opportunity to export these items.
Competition: yes or no
According to the General Customs Office, Vietnam's imports from the UK are diverse, ranging from materials, machinery, tools, components, and chemicals to automobiles, seafood, garment accessories, and fabric.
A Ministry of Industry and Trade official said the exports by the two countries to each other would be complementary and not competitive.
Diep Thanh Kiet, vice chairman of the Vietnam Leather Footwear and Handbag Association, said the signing of the UKVFTA would open up the two countries' markets.
Imports from the UK would not compete with domestic products or those from neighbouring countries after the import tariffs are cut to zero thanks to the UKVFTA since a majority of the former are in the high-end market segment.
This is also the reason why while the UKVFTA offers Vietnamese enterprises a big opportunity to export to the UK, imports from that country would not flood the Vietnamese market, analysts said.
In 2019 Vietnam imported over US$857 million worth of goods from the UK and exported $5.8 billion worth.
The lower import tariffs under the UKVFTA might increase imports of some products from the UK but this would not change much the balance of trade, they said.
But admittedly there would be some pressure in certain sectors in which the UK has strengths in such as financial services, pharmaceuticals and chemicals, they said.
A trade ministry official said the Vietnamese industries that would benefit most from the deal are fisheries, textiles and garments, furniture, fruits and vegetables, and leather shoes.
The Ministry of Planning and Investment expects garment exports to the UK to increase by 67 per cent a year until 2025 because of the trade deal.
Rice is expected to become one of Vietnam's biggest export items to the UK.
Truss said the deal represents the beginning of a new phase in the trade relationship between the two countries since not only does it liberalise goods and services trade, it also incorporates many other important elements such as working towards clean growth and sustainable development.
This would help Vietnam have a comparative advantage over rivals like China, India, Thailand, Malaysia, Indonesia, Malaysia, and the Philippines, which have yet to signed FTAs with the UK, she said.
But she also sounded a warning, saying since the UK has very high-quality standards and requirements for imported products, Vietnam needs to improve product quality and ensure consistency to sell there. VNS
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