The European Union is Vietnam's second largest trade partner after the United States. Its main exports include footwear, garments and sea food.

ASEAN and EU : Potential for Trade

Trade between the Association of Southeast Asian Nations(ASEAN) and the EU rose by 25 percent between 2004 and 2008 to 175 billion Euros annually. Though ASEAN is EU's largest trade partner after the US and China, initial efforts by the EU to launch negotiations on a free trade agreement with ASEAN as a whole have been unsuccesful.

According to De Gucht, negotiations with ASEAN as a bloc were not feasible because of the different levels of development of the member countries' economies. The European Union, he said, would focus on trade agreements with individual countries instead . De Gucht is also travelling to Singapore on Wednesday to launch further negotiations for free trade agreements.

Anti Dumping Tariffs: China at Loggerheads

Talks on a free trade agreement with Vietnam are however fraught with problems. The EU extended anti-dumping duties on footwear from China and Vietnam in December 2009, saying that the countries were exporting at a much lower price than was customary on local markets.

Anti-dumping duties seem to have become a sensitive issue, with the EU insisting on having ' a very solid case' for levying the tax. Beijing in the meantime has registered a complaint with the World Trade Organization. Vietnam has not issued any official statement on the issue as yet.

Apart from tariff issues, final ratification of the FTA will also depend on how the European Parliament evaluates the human rights' situation in Vietnam and the recent crackdown on democracy activists. The parliament has also been critical of restrictions on the internet in the country.

mg/AFP/Reuters
Editor:Grahame Lucas