On July 25, 2023, Vietnam’s Minister of Industry and Trade, Nguyen Hong Dien, and Israel’s Minister of Economy and Industry, Nir Barkat, signed the Vietnam-Israel Free Trade Agreement (VIFTA). The agreement was signed at the Office of the Prime Minister of Israel, in the presence of the Prime Minister of the State of Israel, Benjamin Netanyahu, and the Deputy Prime Minister of the Socialist Republic of Vietnam, Tran Luu Quang.
Israel is a sovereign nation in the Middle East, located on the southeast coast of the Mediterranean Sea and the northern coast of the Red Sea. Despite its relatively small geographical area, Israel has made significant advancements in technology and scientific research, comparable to leading developed countries in the world.
With the newly signed VIFTA, Vietnamese businesses will have the opportunity to boost their exports to Israel. Conversely, Vietnam will gain easier access to preferential tax treatment for high-tech products and goods from Israel.
The economic structures of Vietnam and Israel complement each other and are not competitive, making bilateral cooperation highly advantageous. The import and export of goods between the two countries will fill in the gaps in each other’s economies, fostering their development in the years to come.
Through this cooperation, Vietnam and Israel are expected to achieve substantial advancements in investment, services, digital transformation, and technology.
The VIFTA is expected to serve as a lever to strengthen the cooperative relationship between Vietnam and Israel. The negotiations for the agreement took place amid the steadily improving bilateral ties, particularly in the economic and trade domains.
Israel is the first country in Western Asia with which Vietnam has signed an FTA, while Vietnam is the first country in Southeast Asia with which Israel has signed an FTA.
The signing of VIFTA marks the result of relentless efforts from both nations over a period of 7 years and 12 rounds of negotiations, commemorating 30 years of diplomatic relations. Israel is currently one of Vietnam’s major partners in trade, investment, and labor in Western Asia.
The implementation of VIFTA will contribute to reducing production and business costs, enhancing the competitiveness of Vietnamese goods in neighboring markets such as the Middle East, North Africa, and Southern Europe.
Conversely, alongside Vietnam’s population of over 100 million people, Israeli goods and technology will have opportunities to access markets in Southeast Asia, the Asia-Pacific region, and other major economies participating in the 16 FTAs that Vietnam has joined.
The agreement consists of 15 chapters and several appendices covering fundamental areas such as trade in goods, services and investments, rules of origin, technical barriers to trade (TBT), sanitary and phytosanitary measures (SPS), customs, trade remedy, government procurement, and legal and institutional matters.
With the agreements reached in all chapters, particularly the strong commitments from both sides to increase the overall rate of trade liberalization to 92.7% of tariff lines by the end of Israel’s commitment period and 85.8% for Vietnam, the representatives of Vietnam and Israel expect that bilateral trade will experience remarkable growth, reaching $3 billion and beyond in the near future.
However, signing new trade agreements also entails certain risks, especially in the area of Trade Remedy. As preferential tax benefits are applied, Vietnamese companies may tend to expand their production and exportation to the preferential market like Israel, which could lead to Israel investigating allegations of dumping against imported products from Vietnam.
Conversely, Vietnam also needs to be cautious if high-tech products from Israel flood the Vietnamese market, dominating it and potentially impacting the interests and development capacity of Vietnamese companies in the technology sector.