Documents considered by the Committee on 15 May 2019 Contents

3EU-Vietnam trade agreement and investment protection agreement

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the International Trade, Committee on Exiting the European Union and the Foreign Affairs Committee

Document details

(a) Proposal for a Council Decision on the signing, on behalf of the EU, of the Free Trade Agreement between the EU and Vietnam; (b) Proposal for a Council Decision on the conclusion of a Free Trade Agreement between the EU and Vietnam; (c) Proposal for a Council Decision on the signing, on behalf of the EU, of the Investment Protection Agreement between the EU and its Member States, of the one part, and Vietnam, of the other part; (d) Proposal for a Council Decision on the conclusion, on behalf of the EU, of the Investment Protection Agreement between the EU and its Member States, of the one part, and Vietnam, of the other part

Legal base

(a) and (b): Articles 91, 100(2), 207 and 218(11) TFEU (in accordance with Opinion 2/15 of the Court of Justice of the EU issued on 16 May 2017), in conjunction with 218(5) (on signing) and 218(6) TFEU (on conclusion)

(c) and (d): Article 207 TFEU (in accordance with Opinion 2/15 of the Court of Justice of the EU issued on 16 May 2017), in conjunction with 218(5) (on signing) and 218(6) TFEU (on conclusion)

Department

International Trade

Document Numbers

(a) (40137), 13312/18 +ADDs 1–12, COM(18) 692; (b) (40136), 13313/18 + ADDs 1–12, COM(18) 691; (c) (40135), 13314/18 + ADDs 1–2, COM(18) 694; (d) (40134), 13315/18 + ADDs 1–2, COM(18) 693

Summary and Committee’s conclusions

3.1In October 2018, the Commission presented two separate agreements that will govern future EU trade and investment relations with Vietnam, in line with the Commission’s new approach to the architecture of free trade agreements (FTAs):

3.2Following consideration of the Government’s Explanatory Memorandum of 5 November 2018 on the proposed FTA and Explanatory Memorandum of 5 November 2018 on the proposed IPA at its meeting on 19 December 2018, the Committee:

The Minister’s letter of 25 February 2019 and the Government’s Impact Assessment of 29 March 2019

3.3The Minister’s letter of 25 February 2019 responds in part to the outstanding queries raised by the Committee on 19 December 2019. On 1 April 2019, the Minister notified the Committee of the publication of the Government’s impact assessment of the proposed EU-Vietnam FTA and externally commissioned analysis. The key points are summarised below.

EU-Vietnam FTA

No deal (non-negotiated) exit from the EU

3.4In response to the Committee’s request for the Minister to share the Government’s intended approach to future trade relations with Vietnam in the event of a no-deal exit, the Minister stresses that as “part of the Government’s priority to ensure continuity of all existing EU FTA agreements”, it would seek to replicate the effects of the EU-Vietnam FTA in a no deal scenario, as it would in a deal scenario. He stresses that the only practical difference is that in a no deal scenario the Government would aim for the replicated bilateral [UK-Vietnam] agreement to “enter into force at the same time as the EU-Vietnam FTA or soon after”, whereas in a deal scenario, it would be replicated at the end of the transition/implementation period “as “the UK would continue to be covered by the EU-Vietnam FTA until this time”.

Negotiated withdrawal from the EU

a) During any transition/implementation period (including possible extension) and/or if the backstop applied as provided for the in draft Withdrawal Agreement

3.5At its meeting on 19 December 2019, the Committee noted that if the EU-Vietnam FTA enters into force during the transition/implementation period, the UK would be bound by the FTA obligations, but sought clarification on whether and how it would secure the benefits (notwithstanding the ‘EU notification’, as set out in the draft Withdrawal Agreement, that the UK is to be treated as a Member State for the purposes of international agreements during the transition/implementation period).

3.6The Minister states that:

3.7In response to the Committee’s question on how the backstop, if applied, will impact the UK’s obligations and benefits under the EU-Vietnam FTA and its ability to negotiate a future trade deal with Vietnam, the Minister states that “the UK would be able to negotiate, sign, ratify and implement its own trade deals, but those elements of that affect the functioning of the backstop would need to be aligned with the EU until we [the UK] moved to the future partnership”.

b) Post-transition/implementation period

3.8In response to the Committee’s questions on when/whether the Government intends to negotiate a new bilateral UK-Vietnam trade agreement and its level of ambition, the Minister:

The Government’s Impact Assessment

3.9In his letter of 25 February 2019, the Minister states that his Department commissioned external analysis on the impacts of the EU-Vietnam FTA on the UK at a macroeconomic and sectoral level compared to the agreement not being in place (i.e. compared to the baseline where the EU-Vietnam FTA is not implemented and the EU28 continue to trade with Vietnam on WTO most favoured nation (MFN) terms and Vietnam trades with the EU28 under the EU’s Generalised System of Preferences (GSP)—a lower tariff rate than the MFN rate). He highlights that it does not consider how impacts on the UK economy may change “under different UK-EU trading relationships” as he considers “this outside the scope of the proposed Council Decision”.

3.10The Government’s impact analysis was formally published on 29 March 2019. It assumes that the EU-Vietnam FTA will enter into force by late 2019, that the effects of the agreement will be replicated bilaterally with Vietnam once the UK leaves the EU without changes to rules of origin and that the EU and UK continue to trade on current terms. It estimates that by 2030 (compared to the baseline of no EU-Vietnam FTA), the proposed FTA would:

EU-Vietnam IPA

3.11At its meeting on 19 December 2019, the Committee noted that the Government’s assessment that the proposed IPA is “unlikely” to enter into force “before the UK leaves the EU” and asked the Minister:

3.12The Minister:

Transparency and scrutiny of trade negotiations

3.13In response to the Committee’s question on what steps the Government intends to take to ensure transparency in, and effective scrutiny of a) the EU—Vietnam FTA and IPA during any implementation/transition period or backstop, and b) the negotiation and conclusion of a future UK-Vietnam trade and investment deals, the Minister states that the Government is “committed to”:

3.14The Committee reiterates that the proposed FTA and IPA will impact future UK trade and investment relations with Vietnam after UK exit in all Brexit scenarios, whether negotiated or non-negotiated.

3.15We draw to the attention of the House the following points raised by the Minister in his latest correspondence with us:

3.16We request the following further information:

3.17Pending satisfactory responses to the areas identified above, we retain the documents under scrutiny and draw the Minister’s update letters and our conclusions to the attention of the Committee on Exiting the EU, the Foreign Affairs Committee and the International Trade Committee.

Full details of the documents

(a) Proposal for a Council Decision on the signing, on behalf of the EU, of the Free Trade Agreement between the EU and Vietnam : (40137), 13312/18 + ADDs 1–12, COM(18) 692; (b) Proposal for a Council Decision on the conclusion of a Free Trade Agreement between the EU and Vietnam: (40136), 13313/18 + ADDs 1–12, COM(18) 691; (c) Proposal for a Council Decision on the signing, on behalf of the EU, of the Investment Protection Agreement between the EU and its Member States, of the one part, and Vietnam, of the other part: (40135), 13314/18 + ADDs 1–2, COM(18) 694; (d) Proposal for a Council Decision on the conclusion, on behalf of the EU, of the Investment Protection Agreement between the EU and its Member States, of the one part, and Vietnam, of the other part : (40134), 13315/18 + ADDs 1–2, COM(18) 693.

Previous Committee Reports

Forty-ninth Report HC 301–xlviii (2017–19), chapter 5 (19 December 2018).


10 Most BITs contain a sunset clause, providing for their provisions to continue in effect for a specified time following termination. Sunset clauses mean that a State will remain bound by its treaty obligations for a period of time notwithstanding a decision to terminate.

11 UK trade policy transparency and scrutiny: Committee’s Sixth Report of Session 2017–19, International Trade Committee, HC 2027, 28 December 2018.

13 See ‘Taxation and Customs Union Common provisions’ for definitions of cumulation.

14 Opinion 1/17. For a summary see the CJEU’s Press Release of 30 April 2019.




Published: 21 May 2019