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Second Report Contents

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Chapter 2: Agreements reported for information

Agreement, done at London on 8 December 2020, between the United Kingdom of Great Britain and Northern Ireland and Iceland and the Kingdom of Norway on Trade in Goods (CP 328, 2020)27

36.The Agreement on Trade in Goods between the UK, Iceland and Norway (‘the Trade in Goods Agreement’) was laid on 16 December 2020, and the scrutiny period is scheduled to end on 9 February 2021. It was considered by the International Agreements Committee on 1 February 2021.

37.The Trade in Goods Agreement seeks to provide for substantial continuity of effect of the UK’s existing trade in goods arrangements with Norway and Iceland under the European Economic Area (EEA) Agreement and the relevant EU-Iceland and EU-Norway bilateral agreements. It is designed to be a temporary agreement until a comprehensive Free Trade Agreement can be negotiated. The Parliamentary Report explains:

“The closely intertwined relationship between Iceland, Norway and the EU means that translating our existing trade relationship (within the Single Market and the European Economic Area) into a bilateral arrangement is a complex process. We have agreed with the EEA-EFTA states that our long-term future trade relationship should be through a comprehensive FTA. Our negotiations towards an ambitious and comprehensive agreement began in the summer, and we are on track towards our ambition of having the agreement in force in 2021.”28

38.The Trade in Goods Agreement is part of the wider suite of agreements that the UK has finalised with the EEA/EFTA states, replicating in this instance the terms of the Agreement on Trade in Goods between the United Kingdom of Great Britain and Northern Ireland, Iceland and the Kingdom of Norway (CP89, 2019), deposited in Parliament in April 2019. That agreement was only due to come into force in the case of a ‘no deal’ Brexit, or if the UK had left the EU on terms that would not have allowed its continued participation in predecessor EU-Iceland and/or EU-Norway arrangements during the transition period. It was scrutinised by the EU Internal Market Sub-Committee and drawn to the special attention of the House in May 2019. Readers are therefore invited to refer the EU Committee’s previous report, Scrutiny of international agreements: treaties considered on 14 May 2019, for further analysis and information.29

39.There has been one substantial update affecting trade in goods between the UK and Norway since the publication of the 2019 report—the UK recently signed a UK-Norway Fisheries Framework Agreement. We drew that agreement to the special attention of the House in November 2020, and our report is currently awaiting debate.30

40.We report the Agreement on Trade in Goods between the UK, Iceland and Norway to the House for information.

Free Trade Agreement, done at London on 29 December 2020, between the United Kingdom of Great Britain and Northern Ireland and the Socialist Republic of Viet Nam (CP 367, 2021)31

41.The Free Trade Agreement between the UK and Vietnam (the ‘UK-Vietnam Agreement’) was laid on 8 January 2021, and the scrutiny period is scheduled to end on 22 February 2021. It was considered by the International Agreements Committee on 1 February 2021.

42.As with other Agreements considered by the Committee, the Government has sought to ensure continuity of effect with the underlying EU-Vietnam Free Trade Agreement (‘the EVFTA’),32 but has made minor modifications to suit the new bilateral context. The Government’s Explanatory Memorandum (EM) notes that it considers the UK-Vietnam Agreement an important step towards joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in that it secures preferential arrangements for UK businesses in the Asia-Pacific region.

43.The EU has also signed an investment protection agreement with Vietnam. However, the Parliamentary Report accompanying the UK Agreement explains that “the UK and Vietnam have decided not to incorporate the IPA into the UK-Vietnam FTA”.33 While the IPA is a separate text from the EVFTA, the Government’s explanatory materials do not explain the rationale and consequences of this decision.

44.We call on the Government to set out its reasons for not rolling over the EU-Vietnam Investment Protection Agreement and to explain the consequences of this decision, in particular on the protection of British investor interests in Vietnam.

45.The UK-Vietnam Agreement includes provisions on:

• trade in goods;
• trade in services;
• intellectual property, including geographical indications (GIs); and
• government procurement.

The UK’s trade relationship with Vietnam

46.An overview of UK-Vietnam trade is provided in Box 2.

Box 2: UK trade with Vietnam

Vietnam is the UK’s 39th-largest trading partner, accounting for 0.4% of total UK trade. In 2019, trade in goods and services between the UK and Vietnam was £5.8 billion. Trade in goods The UK imports more goods from Vietnam than it exports, with £0.6 billion worth of exports, compared to £4.6 billion of imports in 2019. Top goods exports to Vietnam were machinery and mechanical appliances, pharmaceutical products and electrical machinery and equipment. Top goods imports from Vietnam were electrical machinery equipment, footwear, and articles of apparel and clothing. Trade in services In 2019, the UK and Vietnam have only a modest trade in services, with the UK exporting £0.2 billion worth of services and importing £0.2 billion. The Parliamentary Report explains that a detailed breakdown of the types of services traded is not available for UK trade with Vietnam.34

47.HMRC has estimated that around 3,100 VAT-registered UK businesses exported goods to and 2,900 imported goods from Vietnam in 2019. The Parliamentary Report explains that these figures are likely to be an underestimate, as they do not include UK companies providing services in Vietnam.

Key divergences from the EU-Vietnam Agreement

48.The UK-Vietnam Agreement diverges from the underlying EU Agreement in the following areas:

• Tariff rate quotas have been adjusted in size to reflect the fact that the UK is a smaller market for imports and exports than the EU. Article 8 of the Agreement provides for a new review clause that commits the Parties to reviewing the tariff rate quotas for rice three years after the Agreement has entered into force. According to the text of the Agreement, this is in recognition of the rice sector’s importance to Vietnam’s economy.35
• The UK-Vietnam Agreement introduces an extended cumulation of origin, allowing both Parties to recognise materials from the EU as originating in the UK or Vietnam in exports to one another. For UK exports to Vietnam, EU processing is also recognised. For Vietnam exports to the UK, products from the Association of Southeast Asian Nations (ASEAN) countries that have undergone further processing in Vietnam can be cumulated. This extended cumulation of origin, however, does not apply to UK goods or materials exported to the EU, which may subsequently be exported to Vietnam. This is because the UK-EU Trade and Cooperation Agreement does not provide for UK content to be recognised as EU content in trade with common trade partners.
• The precursor EU Agreement contains an Entry Price System (EPS), which applies to certain types of fruit and vegetables from Vietnam, ensuring that during the European growing seasons an additional duty is charged if fruits and vegetables imported are below a pre-determined entry price. The EPS is not being immediately applied by the UK Agreement, but the UK reserves the right to apply it in future. We note that neither the Government’s EM nor the Parliamentary Report address the UK’s proposed entry price system within this Agreement.
• Regarding geographical indications (GIs), the Agreement clarifies that cross-border GIs (Irish Whiskey and Irish Cream) will continue to be protected. The Agreement also commits to further protection of Scotch Whisky, which already enjoys separate GI status in Vietnam, and the GI for Scottish Farmed Salmon will continue to be protected in Vietnam under its domestic laws.
• Concerning Bank Equity, side letters constituting an integral part to the EU-Vietnam Agreement commit Vietnam for five years from entry into force of the Agreement to “favourably consider” allowing EU financial institutions to raise foreign ownership to 49% of charter capital in two joint-stock commercial banks of Vietnam. In the UK-Vietnam Agreement, this has been adjusted so Vietnam has agreed to favourably consider a proposal by the UK’s financial institutions to hold up to 49% of charter capital in one joint-stock bank. The Parliamentary Report explains that this change is “not expected to have a material impact on trade flows in the financial services sector”.36

49.We report the Free Trade Agreement between the UK and Vietnam to the House for information.

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