Master thesis International Trade Policy and Law: An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports

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This thesis aims at analysing EVFTA’s NTMs on garment and textile exports to the EU, providing insights into current situation of application of EVFTA’s NTMs on garment and textile exports, analysing impacts of EVFTA’s NTMs on garment and textile exports using the gravity model, pointing out opportunities and challenges for garment and textile industry from EVFTA’s NTMs using the SWOT matrix, and finally making suggestions for the government and businesses in the sector on the way forward.

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Nội dung Text: Master thesis International Trade Policy and Law: An analysis of the european union– vietnam free trade agreement s nontariff measures on garment and textile and the suggestions for VietNam’s exports

MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY ……..o0o…….. MASTER THESIS AN ANALYSIS OF THE EUROPEAN UNION– VIETNAM FREE TRADE AGREEMENT'S NON- TARIFF MEASURES ON GARMENT AND TEXTILE AND THE SUGGESTIONS FOR VIETNAM’S EXPORTS Specialization: International Trade Policy and Law DANG THI HUYEN Hanoi – 2022
MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS AN ANALYSIS OF THE EUROPEAN UNION– VIETNAM FREE TRADE AGREEMENT'S NON- TARIFF MEASURES ON GARMENT AND TEXTILE AND THE SUGGESTIONS FOR VIETNAM’S EXPORTS Specialization: International Trade Policy and Law Code: 8310106 FULL NAME: DANG THI HUYEN SUPERVISOR: DR. HOANG NGOC THUAN Hanoi – 2022
i DECLARATION OF ORIGINALITY I declare that this thesis has been composed solely by myself and that it has not been submitted, in whole or in part, in any previous application for a degree. Where other people’s works are used, this has been properly acknowledged and referenced in accordance with regulations of the Foreign Trade University. Hanoi, 15 October 2022 Dang Thi Huyen
ii ACKNOWLEDGEMENTS First, I would like to send sincere thanks to my supervisor, Dr. Hoang Ngoc Thuan for his enormous support and concrete guidance on scientific research methodologies to help me complete this thesis. I am very grateful for his prompt action and patience in reviewing every single line of my thesis, from the very first draft to this final version. Special thanks also go to all teachers at the Graduate Department of the Foreign Trade University, especially to A/Prof. Dr. Tang Van Nghia and Ms. Cao Thi Hong Vinh. Without their timely encouragement and support, I might not have completed the full master’s programme in international trade policy and law. I would like to take this opportunity to thank colleagues at the British Embassy Hanoi and the United Nations Development Programme in Vietnam, MITPL7 classmates, and especially two dearest friends, Ms. Dinh Thi Bich Xuan, Deputy Director at the VCCI Office for Sustainable Business Development and Dr. Nguyen Phuong Mai, Lecturer at the VNU-International School for always standing by my side, cheering me on whenever I am depressed with work-life balance. Finally, I wish to thank stakeholders and partners at the Ministry of Industry and Trade, the Vietnam Chamber of Commerce and Industry, the Central Institute for Economic Management, and the Vietnam Textile and Apparel Association for valuable expertise advice, constructive suggestions, and provision of data and substantial inputs for this thesis.
iii LIST OF ACRONYMS AND ABBREVIATIONS ASEAN Association of Southeast Asia Nations AVE Ad valorem equivalent BREXIT The withdrawal of the United Kingdom from the European Union CEPII Centre d’Études Prospectives and d’Informations Internationales CGE Computable General Equilibrium CIEM Central Institute for Economic Management CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership EU European Union EVFTA European Union-Vietnam Free Trade Agreement EVIPA European Union-Vietnam Investment Protection Agreement FDI Foreign Direct Investment GATT General Agreement on Tariffs and Trade GDP Gross Domestic Production GDVC General Department of Viet Nam Customs GSP Generalized System of Preferences IMF International Monetary Fund ITC International Trade Centre MAST Multi-Agency Support Team MoIT Ministry of Industry and Trade of Vietnam NTB Non-tariff Barrier NTM Non-tariff Measure OECD Organisation for Economic Cooperation and Development PSR Product Specific Rule RCEP Regional Comprehensive Economic Partnership ROO Rule of Origin RVC Regional Value Content SPS Sanitary and phytosanitary
iv SWOT Strength, Weakness, Opportunity, Threat TBT Technical Barrier to Trade UNCTAD United Nations Conference on Trade and Development UNESCAP United Nations Economic and Social Commission for Asia and the Pacific VCCI Vietnam Chamber of Commerce and Industry VFTAP Vietnam Free Trade Agreement Portal VITAS Vietnam Textile and Apparel Association WB World Bank WTO World Trade Organisation IJEPA Indonesia-Japan Economic Partnership Agreement
v TABLE OF CONTENTS DECLARATION OF ORIGINALITY ................................................................... i ACKNOWLEDGEMENTS ..................................................................................... ii LIST OF ACRONYMS AND ABBREVIATIONS .............................................. iii TABLE OF CONTENTS ..........................................................................................v LIST OF FIGURES ............................................................................................... vii LIST OF TABLES ................................................................................................ viii SUMMARY OF THESIS RESEARCH RESULTS ............................................. ix INTRODUCTION .....................................................................................................1 CHAPTER 1: THEORETICAL BACKGROUND ON FTAs AND NTMs ......10 1.1 Definition, classification, main content, and effects of FTAs ....................10 1.1.1 Definition of FTAs ...................................................................... 10 1.1.2 Classification of FTAs ................................................................ 11 1.1.3 Main contents of FTAs ............................................................... 13 1.1.4 Effects of FTAs ........................................................................... 13 1.2 Definition, classification, and effects of NTMs ...........................................15 1.2.1 Definition of NTMs ..................................................................... 15 1.2.2 Classification of NTMs ............................................................... 17 1.2.3 Effects of NTMs .......................................................................... 22 1.3 Overview of EVFTA and its NTMs .............................................................23 1.3.1 Overview of EVFTA .................................................................... 23 1.3.2 EVFTA’s NTMs .......................................................................... 26 1.3.3. EVFTA’s opportunities and challenges .................................... 32 CHAPTER 2: ANALYSIS OF THE CURRENT SITUATION OF APPLICATION OF EVFTA’S NTMS ON VIETNAM’S GARMENT AND TEXTILE EXPORTS .............................................................................................34 2.1 Overview of EU-Vietnam trade and current situation of Vietnam garment and textile exports to the EU ..............................................................34 2.1.1 Overview of EU-Vietnam trade .................................................. 34
vi 2.1.2 Current situation of Vietnam’s garment and textile exports to the EU ................................................................................................... 38 2.2 Current situation of application of EVFTA’s NTMs on Vietnam’s garment and textile exports ...............................................................................45 2.2.1 Application of EVFTA’s NTMs on Vietnam’s garment and textile exports ........................................................................................ 45 2.2.2 Application of CPTPP and RCEP’s NTMs on Vietnam’s garment and textile exports.................................................................. 47 2.3 Impacts of EVFTA’s NTMs on Vietnam’s garment and textile exports: empirical analysis ................................................................................................52 2.3.1 Gravity equation model ............................................................... 52 2.3.2 Data description .......................................................................... 55 2.3.3 Empirical strategy ....................................................................... 57 2.3.4 Results and discussions ............................................................... 58 2.4 Opportunities and challenges from EVFTA’s NTMs for Vietnam’s garment and textile exports: a SWOT analysis ...............................................63 2.4.1 Strengths ...................................................................................... 64 2.4.2 Weaknesses .................................................................................. 65 2.4.3 Opportunities ............................................................................... 66 2.4.4 Challenges ................................................................................... 68 CHAPTER 3: SUGGESTIONS FOR VIETNAM’S EXPORTS ........................71 3.1 Lessons learned from Indonesia ..................................................................71 3.2 Suggestions for Vietnamese Government ...................................................76 3.3 Suggestions for Vietnamese businesses .......................................................78 CONCLUSION ........................................................................................................82 REFERENCES ........................................................................................................85 ANNEX ....................................................................................................................96
vii LIST OF FIGURES Figure 2.1. Vietnam’s trade in goods with EU vs. World from 2010 - 2020 .................34 Figure 2.2. Exports/imports from Vietnam to the EU from 2010-2020 (Unit: $bil) ....35 Figure 2.3. Exports/imports from Vietnam to the EU in 2021 (Unit: $bil) ....................36 Figure 2.4. Key import and export markets of Vietnam in 2021 (Unit: $bil).................36 Figure 2.5. Most traded products between EU and Vietnam in 2020 (Unit: € billion).37 Figure 2.6. Garment and textile exports of Vietnam 2010-2021 (Unit: $bil) .................38 Figure 2.7. Export value of top 10 exported goods of Vietnam in 2021 compared to 2020 (Unit: $bil) .................................................................................................................39 Figure 2.8. Top garment and textile exporting countries 2016-2020 (Unit: $bil) ..........39 Figure 2.9. Market shares of garment and textile exports to EU in 2020 (Unit: $bil) ..40 Figure 2.10. Vietnam’s garment and textile exports to the EU in 2010 and 2020 by member country (Unit: $bil) ..............................................................................................41 Figure 2.11. Exports of Vietnam’s garment and textile materials to the EU from 2015 to 2020 by HS code (Unit: $) .............................................................................................42 Figure 2.12. Exports of Vietnam’s garment and textile materials to the EU from 2015 to 2020 by country (Unit: $) ..............................................................................................43 Figure 2.13. Vietnam’s garment and textile exports to the EU 27 member countries in 2021 .....................................................................................................................................44 Figure 2.14. SWOT analysis of opportunities and challenges for Vietnam garment and textile exports from EVFTA’s NTMs ...............................................................................63 Figure 2.15. Average monthly salary of garment and textile workers in some countries (Unit: $/month) ...................................................................................................................65 Figure 2.16. Forecast of demands of 5 largest exporting countries of Vietnam’s garment and textile products in 2022 (Unit: $bil) ............................................................68 Figure 3.1. Gross Domestic Production of garment and apparel of Indonesia 2014-2021 (Unit: US $bil) ....................................................................................................................73 Figure 3.2. Indonesia’s textile and clothing export to Japan 2008-2019 (Unit: US $ thousand) .............................................................................................................................76
viii LIST OF TABLES Table 1.1. Classification of non-tariff measures by chapter .....................................19 Table 1.2. Key contents of EVFTA compared to CPTPP and RCEP .......................23 Table 1.3. Schedule and percentage of export tariff removal of EU and Vietnam under EVFTA ............................................................................................................25 Table 2.1. Description of the variables in the gravity equation ................................57 Table 2.2. Summary statistics of variables in the gravity model ..............................58 Table 2.3. Estimation results .....................................................................................60
ix SUMMARY OF THESIS RESEARCH RESULTS The overall objective of this thesis is to analyse the current situation of application of the European Union-Vietnam Free Trade Agreement (EVFTA)’s Non- tariff Measures (NTMs) on garment and textile exports to the European Union (EU), pointing out opportunities and challenges, and making suggestions for the government and businesses in the sector on the way forward. To this end, a thorough research is conducted to find answers to five key research questions on issues relating to the theoretical background on free trade agreements (FTAs) and NTMs, main contents of EVFTA’s NTMs, the current situation of application of EVFTA’s NTMs on Vietnam’s garment and textile exports to the EU, opportunities and challenges for Vietnam's garment and textile businesses, and measures to be implemented by the Government and businesses to take advantage of opportunities and to minimize adverse effects of EVFTA’s NTMs. The research uses both quantitative and qualitative methods to analyse effects of EVFTA’s NTMs on Vietnam’s garment and textile exports to the EU. Specifically, the gravity model is used to link trade flows to economic masses and distances with most important NTMs in EVFTA including technical barriers to trade (TBTs), sanitary and phytosanitary measures (SPSs) and rules of origin (ROOs) with data collected from the General Department of Vietnam Customs (GDVC), the Ministry of Industry and Trade of Vietnam (MoIT), the Vietnam Textile and Apparel Association (VITAS), the Centre d’Études Prospectives and d’Informations Internationales (CEPII), the Organization for Economic Cooperation and Development (OECD), and the United Nations Conference on Trade and Development (UNCTAD). In addition to the gravity model for quantitative results, the qualitative approach taken for this thesis comprises an extensive desk study of available literature in the public domain, followed by in-depth interviews with key stakeholders and top experts in the field from the Ministry of Industry and Trade (MoIT), the Vietnam Chamber of Commerce and Industry (VCCI), the Vietnam Textile and Apparel Association (VITAS), the Central Institute for Economic Management (CIEM), and the Research Centre for Employment Relations (ERC). A group discussion following the SWOT
x approach (on strengths, weaknesses, opportunities, and threats) was conducted with representatives from garment and textile companies as part of a workshop on responsible business conduct in the apparel and footwear industry organized by VCCI. Based on results of desk study, in-depth interviews and group discussions, the thesis then uses collective and synthetic methods to analyse impacts of EVFTA’s NTMs on garment and textile exports to make suggestions for the Government and businesses in the sector. Research results confirm that EVFTA’s NTMs create both opportunities and challenges for Vietnam’s garment and textile exports to the EU. Vietnamese businesses have enjoyed great benefits in terms of improved competitive advantage thanks to preferential tariff treatments under EVFTA. They also have more opportunities to expand the EU market share, attracting FDI on domestic supporting industries, and upgrading modern and environmental-friendly technologies in garment and textile industry. However, Vietnamese garment and textile businesses are also facing a number of challenges caused by EVFTA’s NTMs especially requirements on TBTs, SPSs, and ROOs. Among these, meeting ROOs requirements seems the most challenging one as most of raw materials for Vietnam’s garment and textile industry are imported from non-signatory countries. To solve this issue, it is recommended that the Government should issue long-term strategies and directions on investment in raw material production to meet ROOs requirements in new-generation FTAs, facilitating localisation of raw materials, encouraging changes from the Cut-Made-Trim (CMT) processing to higher value-added processes in the value chain, promoting trademarks based on advanced technologies, improving quality assurance, protection of labour rights and environment in compliance with international standards. Meanwhile, Vietnamese garment and textile businesses should take initiative in enhancing competition capacity through strengthening qualification and skills of workers, diversifying products, and improving marketing and promotion. The long-term goal for the industry should be changing from price competition to non-price competition where the value of Vietnamese garment and textile products increases to a higher level in the global supply chain.
1 INTRODUCTION 1. Research rationale Participation in FTAs is one keyway of boosting trade and economic development. Traditional FTAs only aim at removal of tariffs and other restrictions on goods traded between countries. As trade liberalization becomes more and more extensive, new-generation FTAs have expanded their scope to include provisions on opening of services markets and other areas including NTMs, investment, competition policy, government procurement, intellectual property rights, e- commerce. Understanding opportunities and challenges of extended areas in these new-generation FTAs, especially NTMs is essential for any nation to ensure sustainable trade and economic growth in the changing world today. It is estimated that the number of NTMs has risen significantly while their trade costs are more than double that of ordinary customs tariffs. Therefore, NTMs have become a key concern for both traders and trade policy makers (UNCTAD, 2019). Vietnam has implemented comprehensive economic reforms since the renovation in 1986 with a focus on market-oriented institutional reforms, macroeconomic stabilisation, and pro-active integration. Thanks to these reforms, Vietnam’s economic growth is ranked among one of the highest in Southeast Asia region. As its international economic rankings are increasing, Vietnam becomes a reliable destination for foreign investors. This is even more crucial in the context of Covid-19 outbreak when many countries tend to diversify their supply network in the global value chain to minimize risk of disruption caused by the pandemic. As a result, Vietnam remains one of the fastest growing global economies despite the pandemic with 2.58% GDP growth for 2021 (World Bank, 2022). According to WTO’s statistics, Vietnam’s exports-imports have surged 170-fold since the beginning of the renovation in 1986, 37-fold since joining the Association of Southeast Asian Nations (ASEAN) in 1995, and four-fold since becoming an official WTO member in 2007 (WTO, 2020). With the Regional Comprehensive Economic Partnership (RCEP) agreement became effective on 1 January 2022, Vietnam is among the countries most open to
2 trade with 15 signed FTAs. The country has built a network of strategic partnerships with 15 countries and comprehensive partnerships with 10 countries, including 5 permanent members of the UN Security Council (VCCI-WTO centre, 2021). Trade openness, measured by trade as percentage of GDP, increasing rapidly from 143.8 per cent in 2007 to 196.1 per cent in 2018 (UNCTAD, 2019). The European Union-Vietnam Free Trade Agreement (EVFTA) entered into force on 1 August 2020. After more than one year of enforcement, the agreement has proved to be a driving force for EU-Vietnam trade, contributing to economic development of both sides. According to the Ministry of Industry and Trade, despite Covid-19 pandemic’s negative impacts on global trade, EU-Vietnam bilateral trade in goods reached $63.6 billion in 2021, an increase of 14.8% compared to 2020. This is a spotlight amid the global pandemic as observed by the European Chamber of Commerce in Vietnam (EUROCHARM, 2021). As key export products from Vietnam to the EU, garment and textile enjoy great benefits from the agreement with 77,3% of tariff lines reduced within 5 years and the rest removed after 7 years (MoIT, 2020). In addition to tariff benefits, EVFTA enables Vietnamese garment and textile businesses to access to high- quality equipment and materials from EU in compliance with international standards. However, at the same time, Vietnamese businesses also face challenges in market access to the EU set out by NTMs including but not limited to TBTs, SPSs, and ROOs. Therefore, it is essential to conduct a thorough research on EVFTA’s NTMs on garment and textile exports to inform policy makers and businesses of benefits and challenges for effective policies and business strategies. As analysed in the literature review in the following part, most of relevant research works on EVFTA’s impacts were conducted before EVFTA became effective. In addition, there are only a few of research works on EVFTA’s impacts on garment and textile. Accordingly, the most recent paper on EVFTA’s opportunities and challenges for Vietnam’s garment and textile exports was released in March 2020. As a result, some policy recommendations are no longer valid in the new context of Vietnam, especially given adverse impacts of COVID-19 pandemic.
3 Thus, the thesis fills these gaps with analysis of most updated data and statistics with a focus on the last one year of EVFTA implementation. 2. Literature review There are quite a few of national and international papers on impacts of EVFTA on bilateral trade in goods in general, and on garment and textile industry in Vietnam in particular. At the national level, before the agreement officially entered into force in 2020, some scholars analysed its potential effects using both quantitative and qualitative measures. Under the EU-Vietnam Multilateral Trade Assistance Phase III (MULTRAP III), a report on “The Free Trade Agreement between Vietnam and the European Union: Quantitative & Qualitative Impact Analysis” not only assessed impacts of EVFTA on investment environment and economic growth in general but also on specific sectors (Philip, et.al., 2011). Subsequently, under the same project, another report was published to provide comprehensive and long-term impacts of EVFTA on the whole Vietnam economy. Using the general equilibrium and partial equilibrium analysis models, the report pointed out EVFTA’s trade benefits to Vietnam and challenges that Vietnam might face (Paul Baker, et.al., 2014). Later, in 2017, Paul Baker and his partners continued to examine the potential impact of the agreement but using the Computable General Equilibrium (CGE) model. Simulation results still confirm their previous estimates that Vietnam is expected to gain significantly from bilateral trade liberalisation with the EU. Vietnam is benefited from opportunities for improved integration into GVCs, notably due to the cumulation allowance in origin assessment, the reduction in trade facilitation frictions and border administration costs, improved NTMs and enhanced recognition of mutual standards, reduction of tariffed lines and improved conditions for investment (Paul Baker, et.al., 2017). EVFTA’s impacts on Vietnam’s garment and textile is also a topic of a few of master and doctoral theses. In her thesis on “Impacts of EVFTA on Vietnam’s garment and textile trade”, Le Thi Thu Trang (2015) also used quantitative and qualitative methods to analyse potential impacts of EVFTA to Vietnam’s garment and textile trade. The gravity model quantified the impacts on import and export of
4 Vietnam’s garment and textile. However, bilateral trade and trade policies prior to and after EVFTA entering into force were not analysed in detail. The doctoral thesis of Vu Thanh Huong (2017) on “EVFTA: impacts on bilateral trade in goods and implications for Vietnam” looked at the agreement’s impacts on bilateral trade in general and in two selected sectors including the garment and textile sector, and the pharmaceutical sector. In a report commissioned for the EU-funded MULTRAP project on “Effective implementation of EVFTA in garment and textile sector”, Nguyen Anh Duong analyses opportunities and challenges for Vietnam’s exports to the EU stemming from both tariff commitments to non-tariff measures in EVFTA. Several recommendations on regulatory reform to improve business environment as well as to create incentives for production of input materials are made to the government. Technical transformation and innovation are key to improve quality of garment and textile products to enter high-quality standard markets like EU (Nguyen Anh Duong, 2017). In their article published on the Textile and Apparel Journal in March 2020, Vuong Duc Anh and Hoang Han analysed potential impacts of the EVFTA on Vietnam garment and textile, making recommendations for businesses in the sector (Vuong Duc Anh and Hoang Han, 2020). However, as the research was conducted before the agreement entered into force, some recommendations need updating to reflect recent developments in Vietnam-EU trade, including impacts of COVID-19 pandemic. At international level, potential impacts of EVFTA, especially on bilateral trade are assessed by the European Commission and a few of its members. The European Commission conducted a comprehensive assessment of the expected economic impact of the trade agreement between the EU and Vietnam, building on a quantification of economy-wide effects grounded on the use of a computable general equilibrium (CGE) model. The assessment was complemented with qualitative analyses of the parts of the agreement that do not directly translate into specific and immediate changes in bilateral trade costs. The CGE model-based
5 simulation confirms that the importance of the economic gains from the agreement is likely to be different for the two parties. EVFTA is due to deliver a €6 billion increase in economic welfare in Vietnam by 2035 (relative to a situation without the agreement in place). In the case of the EU, the welfare gain would reach €1.9 billion, mostly reflecting improvements in the terms of trade. For both Vietnam and the EU, these are net welfare gains already taking into account the tariff revenue losses. By 2035 the boost given to bilateral trade flows compared to the situation without the FTA is considerable for the two parties. EU exports to Vietnam are due to increase by around 29% while Vietnam exports to the EU are expected to grow by around 18%. When it comes to total trade flows the percentage changes are considerably more important for Vietnam given the greater contribution of the bilateral trade to its total trade. In absolute terms Vietnamese exports of goods and services to the EU increase by €15 billion while EU exports to Vietnam augment by €8.3 billion. Notably, it is estimated that EVFTA will increase Vietnam exports to the EU of "wearing apparel" (up €5 billion) and “textile” (up €929 million) (European Commission, 2018). The UK Department for International Trade commissioned an impact assessment of EVFTA’s on the UK in 2019. Also using the CGE model, the report estimates that UK businesses will benefit from reduced tariffs and NTMs on both exports to and imports from Vietnam. As a result, UK goods and services will be more price competitive in Vietnam. UK producers will be able to import a greater choice of intermediate goods and services at a lower cost (Baker and Vanzetti, 2019). As these estimates are based on the authors’ interpretation of the EVFTA text and their judgment on the additional market access offered under the agreement, they are subject to a degree of uncertainty. In May 2020, the World Bank published a report on “Vietnam: Deepening International Integration and Implementing the EVFTA” exploring the issues globalisation and the integration of Vietnam into the global economy, particularly through implementation of the EVFTA. The report shows that Vietnam has a much higher number of legal documents, procedures, and forms related to NTMs than
6 comparator countries. This results in higher trade costs on business. Using ad valorem equivalents, which quantify the effect of NTMs in much the same way as the effect of a tariff measure, it is calculated that Vietnam’s ad valorem equivalent of SPS measures is 16.6%, almost twice as much of ASEAN average percentage (World Bank, 2020). At the same time, a few papers are published on NTMs faced by Vietnam after becoming membership of international treaties including EVFTA, CPTPP and RCEP. Some studies also analyse NTMs in ASEAN and Vietnam, making recommendations on how to ensure transparency of NTMs in compliance with the ASEAN Trade in Goods Agreement (ATIGA) (UNCTAD, 2019). A series of reports on NTMs in Asia-Pacific have examined the links between NTMs and sustainable development, the impact of NTMs in Asia and the Pacific, and how to best navigate NTMs towards sustainable development (UNESCAP, 2019a). Interestingly, one report in the series provides detailed, qualitative impact analysis on NTMs and directly addresses key stakeholders from the private sector perspective (UNESCAP, 2019b). In the context of Covid-19 pandemic, recent studies have focused on analysing benefits and challenges of NTMs towards sustainable development (UNCTAD, 2021). In brief, it is observed that the above-mentioned studies mostly focus on assessing impacts of EVFTA on bilateral trade or on tariff benefits of the agreement on Vietnam garment and textile export. While potential impacts of EVFTA’s NTMs are referred to in some papers, such impacts are neither analysed in detail nor quantified in a comprehensive manner. At the same time, there is no detailed analysis of EVFTA’s NTMs on Vietnam’s exports in general nor on Vietnam’s garment and textile exports in particular. Noticeably, some recommendations in these studies are no longer valid due to rapid changes of global economy and recent fluctuation caused by Covid-19 pandemic. Therefore, this thesis will inherit relevant results of research papers on impacts of EVFTA’s NTMs, providing thorough analysis of effects of these NTMs on Vietnam’s garment and textile exports, and making recommendations for the Government and businesses in garment and textile
7 industry. Also, for the first time main NTMs of three new-generation FTAs of Vietnam, i.e., EVFTA, CPTPP, and RCEP, will be analysed to form backdrop for policy recommendations on long-term development strategies on how to take advantage of opportunities and to minimize challenges from these NTMs to ensure sustainable development of the garment and textile industry in the context of post- pandemic economic recovery. 3. Research objectives Generally, this thesis aims at analysing EVFTA’s NTMs on garment and textile exports to the EU, providing insights into current situation of application of EVFTA’s NTMs on garment and textile exports, analysing impacts of EVFTA’s NTMs on garment and textile exports using the gravity model, pointing out opportunities and challenges for garment and textile industry from EVFTA’s NTMs using the SWOT matrix, and finally making suggestions for the government and businesses in the sector on the way forward. Specifically, the thesis first synthesizes theoretical background on FTAs and NTMs, providing overview of EVFTA and its NTMs with a focus on SPSs, TBTs and ROOs. The paper then reviews the EU-Vietnam trade and the current situation of Vietnam’s garment and textile exports to the EU in 5 years from 2017 to 2021, analysing the application of EVFTA’s NTMs on Vietnam’s garment and textile exports in comparison with other new-generation FTAs recently joined by Vietnam including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). Finally, the thesis analyses impacts of EVFTA’s NTMs on Vietnam’s garment and textile exports, featuring strengths, weaknesses, opportunities and challenges for Vietnam’s garment and textile exports, and making suggestions on trade policy and regulatory reform for the Government and businesses. 4. Research questions To achieve the above-mentioned research objectives, five research questions are examined throughout the paper as follows: (i) What are main contents of EVFTA’s NTMs?
8 (ii) What is the current situation of application of EVFTA’s NTMs on Vietnam’s garment and textile exports to the EU? (iii) What are opportunities and challenges for Vietnam's garment and textile businesses? (iv) What measures should be implemented by the Government and businesses to take advantage of opportunities and to minimize adverse effects of EVFTA’s NTMs on garment and textile exports to the EU? 5. Scope of research Subject of research are EVFTA’s NTMs on garment and textile exports. In terms of content scope, the thesis just focuses on three most important NTMs in EVFTA, namely SPSs, TBTs and ROOs, and their potential effects on Vietnam’s garment and textile exports. Accordingly, other NTMs such as anti-dumping, safeguards, subsidies, etc., are not analysed. In terms of timing scope, the thesis reviews the EU-Vietnam trade in general and Vietnam’s garment and textile exports to the EU in 5 years from 2017 to 2021 as basis for further analysis of the current situation of application of EVFTA’s NTMs on garment and textile. This means relevant data and statistics of EU still include those from 28 full members including the United Kingdom (UK) from 2017- 2020 but without UK in 2021 after UK officially left the EU. 6. Research methodologies Both quantitative and qualitative approaches are used to analyse impacts of EVFTA’s NTMs on Vietnam’s garment and textile exports to the EU. Accordingly, in order to quantify the impacts of NTMs on Vietnam’s garment and textile exports, a standard gravity equation is adopted linking trade flows to economic masses and distances with TBTs, SPSs, and ROOs. Data in the model are collected from Vietnamese national customs offices for export values and NTBs, from the CEPII for distance, and from the OECD for GDP. Trade data are collected from the VITAS’ database while NTMs data are compiled in a multi-agency project led by UNCTAD.