Vietnam-EU Economic and Trade Ties: Unlocking New Momentum

The European Union (EU) is currently Vietnam’s third-largest export market and fifth-largest import partner, reflecting the strengthening economic ties between the two sides. The main driver of this growth is the Vietnam-EU Free Trade Agreement (EVFTA), which started in August 2020 and opened a new phase of larger and higher-quality trade.

Five years after its implementation, EVFTA has shown significant positive impacts. According to Vietnam Customs, trade between Vietnam and the EU increased from US$48.9 billion before the agreement to nearly US$78 billion, representing an average annual growth rate of 10.1%. Vietnamese exports to the EU grew by an average of 11.7% per year, while imports from the EU rose 6.1% annually.

Vietnam’s textile industry must shift to green, sustainable development to meet EU requirements 

These results show that EVFTA has not only expanded markets but also demonstrates Vietnam’s ability to adapt to global economic changes. Effectively utilizing the agreement will be crucial for Vietnam to generate new momentum in exports, attract investment, and deepen integration into the EU market, which maintains high standards for products, environmental protection, and sustainable development.

According to Deputy Minister of Industry and Trade Phan Thi Thang, the value of EVFTA goes far beyond trade numbers. The agreement acts as a catalyst for institutional reform and for enhancing investment and business conditions, helping Vietnam solidify its role as a leading EU partner in ASEAN and enter the top 10 suppliers to a market of over 450 million people. These accomplishments provide a strong foundation for deeper cooperation, supported by regulatory authorities and business communities on both sides.

From the perspective of European businesses, Vietnam is emerging as a hub for sustainable production and investment. Jean-Jacques Bouflet, Vice President of EuroCham, said that amid a reshaping global supply chain, Vietnam is becoming a key destination for EU trade diversification. EuroCham’s Business Confidence Survey found that 76% of European business leaders view Vietnam as an attractive investment destination, and 80% expect the business environment to improve further over the next five years.

Spain’s Ambassador to Vietnam Carmen Cano de Lasala and Denmark’s Charge d’Affaires Lasse Pedersen Hjortshøj also regarded Vietnam as a leading EU partner in ASEAN and a new driver of growth in the green economy, renewable energy, and the circular economy.

Despite the positive trade picture after five years of EVFTA, significant gaps remain. According to Ngo Chung Khanh, Deputy Director of the Multilateral Trade Policy Department at the Ministry of Industry and Trade, Vietnamese products still hold a modest share in the EU market, ranging from 2% to 4% in key sectors such as textiles, agriculture, and seafood. Despite substantial EVFTA incentives, this share has remained largely unchanged over the past five years. In the seafood sector, export values to the EU have fluctuated from US$950 million in 2020 to US$1.3 billion in 2022, then falling below US$1 billion in 2023, with an estimated US$1.1 billion expected this year. The EU accounts for over 4% of Vietnam’s total exports, while Vietnamese products make up only about 1.4% of total EU imports.

According to Ngo Chung Khanh, EVFTA still offers “significant room for cooperation,” as many tariffs have been reduced to zero. Without the agreement, seafood exports, for example, would face tariffs of 13 to 20%. However, this advantage is shrinking rapidly as the EU continues to expand its free trade network with new partners. The EU has concluded negotiations with Indonesia and is advancing agreements with Malaysia, Thailand, and the Mercosur bloc. “Even a one % difference in tariffs can make a huge difference in competitiveness,” Khanh said.

A new trend shaping global trade is the EU’s green rules. Since the European Green Deal in 2019, the bloc has enforced strict regulations such as the Carbon Border Adjustment Mechanism (CBAM), which taxes high-emission products like steel, cement, and aluminum; the Corporate Sustainability Due Diligence Directive (CS3D), requiring supply chain audits for human rights and environmental compliance; and the EU Deforestation Regulation (EUDR), which bans imports linked to deforestation, including coffee, rubber, and timber. These measures are no longer recommendations but mandatory technical barriers for Vietnam to participate fully in global value chains.

Yet these challenges also create opportunities. Johan van den Ban, CEO of De Heus Vietnam and Asia, said that adapting to green development is not only a matter of compliance but also a measure of competitive capability. Vietnam must accelerate the greening of production, aligning economic growth with social and environmental responsibility, which are essential conditions for businesses to join new value chains. Companies that adapt quickly can access green financing from institutions like the European Investment Bank (EIB), turning costs into strategic investments.

Deputy Minister Phan Thi Thang said that EVFTA not only promotes trade and market diversification but also drives economic restructuring, institutional reform, and an improved investment environment. The agreement is opening opportunities in areas like the green economy, digital economy, energy transition, and sustainable development, where the EU has strengths and which match Vietnam’s priorities.

Seizing these opportunities needs strong commitment from both government and businesses. Future cooperation will focus on three areas: the green economy, including clean manufacturing, sustainable farming, and renewable energy; the digital economy, with collaboration in digital transformation and high-tech development; and green finance, using EU and EIB funding to support ESG goals. Vietnam must actively adapt and join the restructuring of global supply chains.

EVFTA marks a historic shift, moving Vietnam from a regional partner to a key EU supplier. The next phase requires exporters to go beyond tariff benefits, focus on sustainable value, increase market share, and adopt proactive green innovation. Vietnam’s advantage now comes from producing goods responsibly, transparently, and in an environmentally friendly way. With support from EuroCham and European partners, Vietnam-EU relations are entering a deeper, more sustainable stage, with potential for record trade growth.

Vietnam’s strategic position and openness drive its FDI competitiveness Alexander Ziehe, Chairman of the German Business Association (GBA) in Vietnam Vietnam is in a prime location - the center of Southeast Asia. If you look at all the cities around, for example Hanoi, Hong Kong is two hours flight away, Bangkok is two hours away, Shanghai is nearby. That really helps Vietnam to develop as a center for business because it's well connected in the region and globally with all the free trade agreements, such as those with Australia and Europe, on top of the ASEAN business framework. Vietnam has opened up over the last few years with policies that lift attractiveness for FDIs. There have been significant investments in infrastructure, for example, the travel time from Hanoi to Haiphong has been reduced to 1.5 hours. The harbor structure from Ho Chi Minh City to Da Nang to Haiphong, as well as the highways connecting to China, make Vietnam a hotspot that helps close supply chain gaps. Vietnam also has a strong mindset - an openness for FDI projects, reducing restrictions across sectors, and a growing middle class of 100 million consumers that make Vietnam an attractive market itself. The people here are dynamic, entrepreneurial, and adaptive - all key traits to drive new businesses from ideas into action. Each region offers its own strengths: Hanoi is close to the Chinese supply chain, Ho Chi Minh City is well connected to Southeast Asia, and Da Nang is booming as the “Vietnamese Silicon Valley.” This diversity and openness make Vietnam a unique investment destination. FISMA chose Vietnam for its connectivity, competitive price points, open atmosphere, and strong domestic market. Vietnam is also gaining projects as companies diversify from China, using Vietnam to serve ASEAN or even the U.S. market. However, Vietnam remains in regional competition with markets like Thailand and Malaysia, so ongoing administrative reforms, digital transformation, and liberalization of financial tools are essential to maintain competitiveness. With its current drive, Vietnam is well-positioned to stay ahead in the regional race for investment. Nestlé reaffirms strong confidence in Vietnam’s investment environment Binu Jacob, CEO of Nestlé Vietnam Nestlé Vietnam has announced an increase in its operational capital in the country, with an investment of nearly VND1.9 trillion (US$73.4 million) to expand its Tri An factory in Dong Nai province - one of the group’s most advanced coffee processing facilities worldwide. With this new capital injection, total investment in the plant for the 2024-2025 period will exceed VND4.3 trillion, raising Nestlé Vietnam’s total accumulated investment to nearly VND20.2 trillion. The expansion reflects Nestlé’s strong confidence in Vietnam’s development potential and underscores the company’s long-term commitment to accompanying the country on its growth journey. Nestlé Vietnam will continue investing in human capital, technological innovation, digital transformation, and green growth, contributing to Vietnam’s comprehensive and sustainable development in this new phase. Since 2011, Nestlé’s NESCAFÉ Plan has supported more than 21,000 coffee farming households in adopting internationally recognized sustainable farming practices. These efforts have helped reduce water use by 40-60%, cut chemical fertilizer use by around 20%, and increase farmers’ incomes by 30-150% through crop diversification. The program has also significantly reduced carbon emissions per kilogram of green coffee harvested. In addition, more than 467,000 farmers have received training, and over 86 million disease and drought-resistant coffee seedlings have been distributed, helping rejuvenate coffee plantations and improve the quality of Vietnamese coffee beans. Syre chooses Vietnam to lead the circular textile revolution Dennis Nobelius, CEO of Syre Syre has announced Vietnam as the selected location for its first gigascale recycling plant, following the signing of an agreement with Gia Lai province and the investment registration license, with a planned investment of US$1 billion. Vietnam was chosen due to its strategic positioning within the textile supply chain, with a long history of a vibrant textile industry and access to know-how. Vietnam’s strong focus on circular economy, its textile manufacturing base, and growing commitment to sustainability make it an ideal location to become a global hub for circular textiles. With strong commitment from Vietnamese government, we see great potential in Vietnam and encourage the country to take the leading role in the transformation of the textile sector into a more innovative, high-tech, and circular industry.

Huong Ly  (Vietnam Business Forum)