Vietnam signs free trade agreement with UK as Sri Lanka controls imports
ECONOMYNEXT – Vietnam said it has signed a free trade agreement with UK moving beyond an existing deal with the European Union, which will come in to effect on December 31 as Sri Lanka is mired import controls after printing money.
The UK Vietnam Free Trade Agreement (UKVFTA) deal was signed by Vietnamese Ambassador to the United Kingdom (UK) Tran Ngoc An and British Ambassador to Viet Nam Gareth Ward.
The two were authorized to sign the deal after a Minister of Industry and Trade Tran Tuan Anh and UK Secretary of State for International Trade Elizabeth Truss signed the agreed minutes after ending negotiations over the UKVFTA earlier on December 11.
UK is exiting the European Union and has to sign its own agreements to preserve access to exports.
“UKVFTA was negotiated based on principles that were inherited from commitments in the EU-Viet Nam Free Trade Agreement (EVFTA) and were amended in accordance with the bilateral trade framework between Viet Nam and the UK,” a Vietnam government news release said
“Currently, the two sides are rushing to complete domestic procedures in accordance with the laws of each party so as to ensure the agreement can be implemented from 23:00 on December 31.”
Vietnam said the FTA with UK “will create a comprehensive, long-term and stable economic-trade cooperation framework between the two countries, thus contributing to deepening their multifaceted cooperation,” soon after a strategic partnership was extended.
Though tariffs are already minimal under the EU-Vietnam existing deal, the new agreement will have a further tariff elimination schedule.
Under tariff elimination plan, British residents will be freed from about 114 million Sterling in trade taxes on Vietnamese goods and Vietnam citizens will be freed from tariff burden of 36 million Sterling from UK made goods.
Vietnam’s free trade agreement with UK comes as Sri Lanka is mired in import controls after printing money. Sri Lanka is practicing modern monetary theory, and has printed over half a trillion rupees (the equivalent of about 3.2 billion US dollars).
Vietnam recently joined the Regional Comprehensive Economic Partnership where which involves free trade between the Association of South East Asian Nations, China, the world most populous nation, Japan, Korea, Australia and New Zealand,
In Sri Lanka there is a strong Mercantilist/Keynesian belief that imports contribute to monetary instability involving currency weakness and balance of payments troubles rather than money and credit.
Sri Lanka’s last administration also controlled imports, after the central bank printed money leading to the rupee collapsing from 131 to 182 to the US dollar in two currency crises.
Its free trade agenda was torpedoed after full independence was given to the central bank to conduct unusually discretionary policy under a ‘flexible’ inflation targeting’, flexible exchange rate targeting, real effective exchange rate targeting, yield curve targeting with ‘operation twists’ involving long bond purchases jettisoning a ‘bills only’ rule, and lending and deposit rate targeting with blunt administative price controls, critics say.
The currency was depreciated under false claim spread by US Mercantilists that East Asian currencies were u’ndervalued’.
The US in December falsely labelled Vietnam a ‘currency manipulator’ after it kept the Dong fixed around 23,000 to the US dollar from over 10 years, while Sri Lanka’s rupee fell from 113 to 182 over a similar period.
After Vietnam opened its economy in 1984 money printing led a series of currency collapses, with the economy imploding from 42 billion US dollars to 6.3 billion dollars until the State Bank of Vietnam was reformed for domestic stability.
The SBV was reformed starting 1989 ending central bank re-financing of commercial bank credit, which was a key trigger of monetary instability.
Several former SBV credit units which were financing agriculture, industry and trade, contributing to monetary instability are now partly foreign owned commercial banks listed in the Ho Chi Minh and Hanoi Stock Exchanges. (Colombo/Dec30/2020)