What does Brexit have to do with Vietnam? It seems a strange question, but there are several ways that Britain's planned divorce from the European Union would be likely to affect the Southeast Asian nation.
These effects can be put in three broad categories. First, Vietnam has finished negotiating a trade agreement with the EU, but Brussels appears too preoccupied to ratify the agreement until it has tied up Brexit once and for all. Second, if Britain is out of the EU, then some European products would become more expensive, so British consumers would look for cheaper alternatives, such as from Vietnam. And third, Britain has been looking for new trade agreements to join if it is no longer in the EU bloc, and that includes joining a major agreement already signed by Vietnam.
That agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, formerly known as the TPP, includes nations around the Asia Pacific and used to include the United States until President Donald Trump pulled the country out in 2017. When Britain first suggested the idea of joining the TPP, in 2018, it was met with a lot of raised eyebrows -- Britain is not a Pacific power, after all. However, the idea subsequently received support from Japan, the TPP member with the biggest gross domestic product, which said it would welcome Britain with open arms. Vietnam is the TPP member with the lowest GDP per capita.
It makes sense that Vietnam would want to do more trade with Britain, Frederick Burke, who is the managing partner of Baker & McKenzie, a law firm in Ho Chi Minh City, said at a company conference last month.
“It’s a good market, it’s a good opportunity,” he said.
Brexit would mean that some European products would no longer have preferential access to the British market, so Vietnam could step in and compete with those products. For instance some British business interests in Vietnam believe Vietnamese tennis shoes and garments would become competitive against Romanian products, Burke said.
“The UK is not the same as the American economy but it’s about a third of that, and so it’s very substantial, second biggest economy in Europe,” he said. “So it’s a very good opportunity for Vietnam.”
Finally, the third impact may not be quite as favorable to Vietnam. Efforts to finalize the EU-Vietnam Free Trade Agreement, or EVFTA, have dragged on for years. The same can be said of Brexit, which was approved in a British referendum in 2016 but has yet to happen. Brussels is far more preoccupied with Brexit than with the Vietnam agreement, so it appears that Hanoi will have to wait.
Most recently, analysts expected the vote on the pact with Vietnam to happen this coming January -- then again, Brexit has also been pushed to the same month. And if Brexit does not end up taking place in January, it does not look like the Vietnam vote will take place either.
“Things could be delayed eventually with the delay of the Brexit, which has been extended to the end of January,” Alain Cany, who is the country chairman of Jardine Matheson Vietnam, a conglomerate that covers areas from restaurants to engineering, as well as a former chairman of the European Chamber of Commerce in Vietnam, said. “So it [EVFTA ratification] might be postponed.”