2035 STUDY AFFECTING VIETNAMESE FREE TRADE AGREEMENTS (FTA) PARTICIPATING IN THE YOUNG LABOR FORCE Nguyen Thi Hong Tam Department of Business Administration Ho Chi Minh City University of Technology ([.]
STUDY AFFECTING VIETNAMESE FREE TRADE AGREEMENTS (FTA) PARTICIPATING IN THE YOUNG LABOR FORCE Nguyen Thi Hong Tam Department of Business Administration - Ho Chi Minh City University of Technology (HUTECH) Teachers instructions: Dr Phan Quan Viet ABSTRACT Vietnam’s positive apparel export development since the 1990s can be explained by market access particularly to Japan, the EU and the US becoming more favourably in the 1990s and 2000s which culminated in Vietnam’s WTO entry in 2007 Currently, Vietnam faces preferential market access to Japan where it has enjoyed duty-free market access since 2009 in the context of the JapanVietnam Economic Partnership Agreement (EPA), to Korea through the Korea- Vietnam FTA, to the Eurasian Economic Union (EAEU), to Chile, and to the EU (see below) In the US market Vietnam’s apparel exports face MFN tariffs This would have been changed through TPP that would have provided duty free access but TPP is currently on hold Vietnam is also a member of regional trade arrangements, most importantly ASEAN that it joined in 1995 As a member of ASEAN Vietnam is part of the ASEAN-China Free Trade Agreement (ACFTA) and the ASEAN agreement with Japan, Korea, India, and Australia and New Zealand Other important factors in Vietnam’s export devel Keyworks: Free trade agreements, affected ,labor force, Vietnam’s export INTRODUCTION AND BACKGROUND Reciprocal trade liberalisation entails reducing or eliminating protective trade barriers on both sides of the agreement Seen from the perspective of the individual country, the FTA grants improved market access to the trade partners markets, but at the same time exposes domestic industries to increased import competition If domestic firms are not able to improve their competitiveness on the domestic market and take advantage of the greater openness on the foreign market, the positive welfare effects of the FTA will be greatly diminished or may even disappear altogether In several respects, institutional and policy changes are needed to facilitate the improvement of domestic firms’ competitiveness EU’s FTAs contain provisions, which may affect firms’ ability to compete directly In recent FTAs, requirements to observe minimum labor and environmental standards are written under the common headline of sustainable development The preferential nature of the FTAs necessitates the establishment of RoO, which may be rather complex and costly to comply with And potentially severe trade restrictions remain in the form of TBT and SPS regulations These issues will be discussed in more detail below 2035 METHODOLOGY The research presented in this book uses an approach qualitative in the process of information collection and analysis and conduct follow these three steps: (1) Review and explore recent research on the author.The impact of EVFTA as well as other agreements and research international experience, especially from countries that have FTA with the EU; (2) Assess the readiness of government and business through interviews business consulting and document research; (3) Determine the distance policies and institutions; Identify the necessary changes to maximize benefit and limit adverse effects of FTA THEORETICAL BASIS Sustainable development provisions While the human rights dimension within the EVFTA therefore can be seen as reaffirming the provisions already laid down in the PCA and underlining their importance in the area of trade and investment, the chapter on TSD in the EVFTA extends and specifies the issues raised under the PCA The EC describes the aims of the chapter on TSD as two-fold On the one hand, it aims to ‚promot[e] mutual supportiveness between trade and investment, labour, and environmental policies‛ and on the other hand it wants to ‚ensur[e] that increased trade and investment not come at the expenses of workers’ and environmental protection ” but rather support it‛ (EC 2016: 8) Whereas Article and of the chapter set out the ‚context, objectives and scope‛ and the ‚right to regulate and levels of protection‛, Article contains a declaration of the commitment to international, multilateral labor standards Both parties are obliged to ‚make continued and sustained efforts towards ratifying […] the fundamental ILO conventions‛ and therefore, to respect, promote and effectively implement the principles concerning the fundamental rights at work Article 4-8 are devoted to environmental aspects The parties agree to engage in dialogue, share information and experiences and cooperate in certain aspects To fulfill the comprehensive aim of the chapter, namely to ‚enhance the contribution of trade and investment to the goal of sustainable development in its economic, social and environmental dimensions‛ the agreement identifies five essential tasks: a) Recognize the beneficial role that decent work has for efficiency, innovation and productivity and enhance greater policy coherence between trade policies and labor policies b) Facilitate and promote trade and investment in environmental goods and services c) Facilitate trade and investment in goods and services of 2036 particular relevance for climate change including the deployment of best available technologies d) Encourage the development of and participation in voluntary initiatives that contribute to the achievement and maintenance of high levels of environmental and labor protection and complement domestic regulatory measures e) Promote corporate social responsibility The ensuing articles 10 to 13 contain further stipulations regarding measures and their implementation Article 10 obliges the parties to uphold their recent levels of protection and not to encourage trade or investment by weakening the levels of protection afforded CONSEQUENCE: SUSTAINABILITY CHAPTER In 2015, the European Commission (EC) proposed a new trade and investment strategy for the European Union The strategy, named ‚Trade for All Towards a more responsible trade and investment policy‛, should not only benefit consumers, workers, citizens and SMEs in the EU but also in developing countries The latter should be realized by drawing a link between trade and sustainable development That means, that trade liberalization, which is the unchanged goal of EU’s international trade relations, has to go ‚hand in hand with social justice, respect for human rights, high labor and environmental standards, and health and safety protection‛ (EC 2015: 22) In this context, provisions relating to sustainable development have become the norm in recent EU FTAs In so-called ‘new generation’ FTAs Trade and Sustainable Development (TSD) chapters explicitly address labor and environmental issues (Harrison et al 2016) Typically, the EU approach to trade and sustainability includes the following key elements: (i) human rights, (ii) social issues and labor rights, (iii) and environmental sustainability Firstly, we will provide an overview of the general EU approach with respect to these issues (drawing on Bilal/Ramdoo 2016) and then, secondly, discuss in detail the provisions under the EVFTA Finally, we will discuss the EU approach the light of its enforceability and in comparison to other FTAs The General EU Approach to Trade and Sustainable Development Other provisions also engage countries in agreeing not to use social policies as protectionist trade measures There are generally no sanctions-based enforcement mechanisms However, there are consultative mechanisms ” Consultative Committees in case of EPAs and Domestic Advisory Groups (DAGs) in case of EVFTA ” that allow for monitoring by stakeholders and civil society Most clauses are of a best endeavor nature, but nevertheless provide for an implementation mechanism that rests upon cooperation between partner countries Research 12 Secondly, labor ‘rights’ are covered, which essentially endorses legal commitments to respect core labor standards as ‘rights’ These relate both to national labor law and international labor standards The latter include in particular the 1998 Declaration of the International Labor Organization (ILO) on the Four Core Labor Standards In contrast to other recent EU FTAs (i.e EPAs), EVFTA requires the partner countries to ‚make continued and sustained efforts of ratifying‛ (TSD chapter, Article 3) the fundamental ILO conventions Besides an obligation to enforce labor laws, labor ‘rights’ provisions also require countries not to reduce their levels of protection, and to encourage countries to even raise their levels of protection, subject to a proviso that this must not be done for protectionist 2037 purposes Importantly, and contrary to established US practices which foresee the possibility of sanctions and submit the labor rights chapter to standard dispute settlement procedures as well as demands that certain standards are met prior to the FTA coming into force (De Ville et al 2016), the EU has so far adopted an approach that is confined to dialogue and capacity building (see also below) (iii) Environmental sustainability Substantive environmental provisions have been introduced in most EU agreements at the same time as social standards and labor rights under sustainable development clauses in 2006 Environmental provisions fall into two broad categories: (a) Provisions that seek to protect or enhance the environment Parties are required to enforce existing domestic environmental laws and regulations and are required not to weaken their environmental regimes in order to attract investment Countries’ ‘right to regulate’ is affirmed, which means that the agreement does not ‘impose’ standards Countries also recognize and agree to support and comply with Multilateral Environmental Agreements (MEA) to which the parties are members (b) Environmental cooperation, where parties agree to cooperate on a list of agreed areas but without taking binding commitments to regulate trade through environmental standards The provisions are framed in best-endeavor terms, meant to enhance cooperation So far there are no particular mechanisms to trigger sanctions in case parties not respect their commitments The EU approach to environmental sustainability is therefore similar to that used to foster social standards and labor conditions It is based on ‘persuasion’ rather than ‘coercion’, therefore relying on soft mechanisms of enforcement However, environmental provisions may be possibly subsumed under the non-execution clause (see PCA-EVFTA) Provisions on Trade and Sustainable Development within the EVFTA The agreement with Vietnam is considered as the most ambitious and comprehensive that the EU has concluded so far with a developing country This is even more emphasized with regard to the sustainable development provisions of the agreement (EC 2016: 7) In 2016, the EC published a working document regarding human rights and sustainable development in EU-Vietnam relations with specific reference to the EVFTA It argued that ‚when 2038 considering the impact of trade policies on human rights issues and ways to address them, the EU’s overall relations with the country concerned should be taken into account‛In other words, both before and after the application of the liberalization scenario, the sum of net exports or the foreign balance (E-M, black), the private balance (I-S, dark gray) and the public balance (G-T, light gray) is zero Note that the public balance is the negative of the public deficit Following convention, the balances are defined as difference between injection and leakage, thus determining a net borrowing flow of the institutional sector 10 Figure shows the changes in these balances, normalized by pre- and post-liberalization GDP Since the pre- and post-liberalization sum of the balances is zero, the sum of these changes will be zero as well The change in net exports relative to GDP is slightly negative (-0.04%) as the initially negative trade balance deteriorates by a minor degree The change in the private balance relative to GDP is -0.30% and the change in the public balance 0.34% Thus, lost tariff revenue creates a public deficit as this revenues loss is not compensated by other tax income despite the higher economic activity in Vietnam As household incomes increase, higher private savings are available to finance most of the higher public deficit Until recently, the discussion on the EVFTA in Vietnam has been overshadowed by the prospect of TPP The public debate on and perceived importance of the EVFTA has increased since the conclusion of the TPP became unlikely Other potential benefits, such as improved market access to government procurement, crossborder services and investments in the EU play a comparatively small role in the expectations of potential benefits The interviewees have nonetheless mentioned several key challenges in order to benefit from the EVFTA A major concern is the utilization of preferential tariffs due to strict RoO as well as limited possibilities (e.g due to specific value chain dynamics), capacities and capabilities to comply with their requirements The interviewees have pointed out, however, that huge differences in capacities and capabilities exist between and within sectors, with larger companies and more export-oriented sectors generally having less problems to fulfill RoO REFERENCES [1] Ahn, Dukgeun (2010), Legal and Institutional Issues of Korea-EU FTA: New Model for PostNAFTA FTAs, Seoul National University Policy Brief, October 2010 Baker, Paul, David Vanzetti, and Phạm Thị Lan Hương 2039 [2] Basu, Kaushik (1999), Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards, Journal of Economic Literature vol 17(3): 1083-1119 [3] Bernasconi-Osterwalder, Nathalie, Aaron Cosbey, Lise Johnson and Damon Vis-Dunbar (2012) : Investment Treaties & Why they Matter to Sustainable Development: Questions & Answers, International Institute for Sustainable Development (IISD), Winnipeg, Canada [4] Borrman, Axel and Matthias Busse (2007): The Institutional Challenge of the ACP/EU Economic Partnership Agreements, Development Policy [5] AFTEX (2010): Vietnam’s Garment and Textile Industry, ASEAN Federation of Textile Industries ASC (n.d.a): Species sheet Pangasius Aquaculture Stewardship Utrecht,http://www.ascaqua.org/upload/Speciessheets_ENG_pangasius_web.pdf (27.04.2017) 2040 Council, ... and underlining their importance in the area of trade and investment, the chapter on TSD in the EVFTA extends and specifies the issues raised under the PCA The EC describes the aims of the chapter... international labor standards The latter include in particular the 1998 Declaration of the International Labor Organization (ILO) on the Four Core Labor Standards In contrast to other recent EU FTAs (i.e... trade or investment by weakening the levels of protection afforded CONSEQUENCE: SUSTAINABILITY CHAPTER In 2015, the European Commission (EC) proposed a new trade and investment strategy for the