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The European Parliament approved a free-trade agreement with Vietnam after winning concessions from Hanoi that may show the way for ratification of a bigger commercial deal between Europe and South America.

The European Union assembly on Wednesday in Strasbourg, France, endorsed an accord that will scrap almost all tariffs on goods traded with Vietnam. The two-way commerce, ranging from cars and pharmaceuticals to footwear and rice, was worth almost 50 billion euros ($55 billion) in 2018.

To ensure majority support for the pact in the 705-seat EU Parliament, leading members secured concrete commitments from the Vietnamese government to bolster labor rights in the country. That campaign helped to win over assembly members concerned about respect for fundamental freedoms in Vietnam, a one-party, communist state.

Vietnam will eliminate 99% of its import duties over 10 years and the EU will do the same over seven years under the deal, which is due to take effect around July once EU governments and Hanoi go through the formality of giving the final green light. The accord also curbs non-tariff barriers and opens up public procurement.

Asian Initiative

Reached by negotiators in 2015, the agreement has been delayed in part by a European court case over the role of national parliaments in the EU in approving bloc-wide pacts covering trade and investment.

The EU is reacting to a stalled 2007 trade initiative involving the 10-member Association of Southeast Asian Nations by seeking commercial deals with individual ASEAN countries. The bloc, which already secured an agreement with Singapore, says bilateral accords can serve as building blocks to an EU-ASEAN pact.

More generally, the EU is sidestepping stalled World Trade Organization efforts to open markets and countering U.S. protectionism under President Donald Trump through deals with nations around the globe. The bloc last year reached a major agreement with the Mercosur group of Argentina, Brazil, Paraguay and Uruguay following groundbreaking free-trade pacts with Canada and Japan.

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The EU-Mercosur accord, whose approval process in Europe won’t start for about another year, faces a rough ride as a result of a political anger in the bloc over Brazilian President Jair Bolsonaro’s alleged backsliding on environmental protection including in the Amazon region.

In that context, the labor-rights pledges made by the Vietnamese government may serve as a model for the way the bloc addresses opposition in Europe to the Mercosur pact.

‘Success Story’

Bernd Lange, chairman of the EU Parliament’s trade committee, said it used leverage offered by the draft market-opening pact to gain Vietnamese commitments to respect three core International Labour Organization conventions and to upgrade the country’s labor code. Lange also cited the creation of a group to monitor enactment of the agreement.

“It’s a democratic success story,” Lange, a German Socialist, told reporters.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Richard Bravo, Nikos Chrysoloras

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