The EU and Vietnam already have strong trading links. The EU is the fourth-largest importer to the Southeast Asian country and was its No.1 export partner in 2013, according to 2015 data from the EC’s directorate-general for trade. The same data shows that in 2014, the EU imported €44 million’s ($49 million) worth of automotive products while exporting €187 million’s ($208 million) worth to Vietnam.

Vietnam’s young and increasingly affluent population could be a ready market going forward. The country’s auto industry has seen robust growth in domestic sales in recent times. Deliveries jumped 61% year-on-year to 20,349 units in July (a 9% increase on the previous month), according to statistics from the Vietnam Automobile Manufacturers’ Assn.

“This finely balanced agreement will boost trade with one of Asia’s most dynamic economies,” says EU Trade Commissioner Cecilia Malmstrom, who finalized the deal. “It sets a new, better and modern model for FTAs between the EU and developing countries, and establishes a good standard for the trade relationship between the EU and Southeast Asia as a whole.

“Vietnam is a growing economy and once this agreement is up and running, it will provide significant new opportunities for companies on both sides.”

For Peter Cooke, a professor of automotive management at the U.K.’s Buckingham University, this agreement is another step down the road marked globalization. He believes it also should lead to more effective ways to assemble vehicles: “Countries such as Vietnam used to focus on automotive component production. Now they are more interested in automotive subassembly, where vehicles are assembled closer to the end market.”

Cooke suggests the trade pact could damage the relationship between Vietnam and China. In the context of its slowing economy, China might resent the growing trade links between the EU and Vietnam that the agreement reflects.

While a VAMA spokesperson says the Vietnamese industry group is not commenting on the deal, concerns have been raised in local media. Reports have warned the abolition of tariffs under an EU deal and the tariff reduction forecast under the ASEAN agreement on trade in goods, due to take full effect in 2018, could jeopardize the growth of local manufacturing, making it cheaper to import a foreign car than to assemble locally.

Besides Vietname, the ASEAN bloc comprises Malaysia, the Philippines, Singapore, Brunei, Cambodia, Laos, Myanmar and two of Vietnam’s major auto competitors, Thailand and Indonesia.

Officials are drafting a legal text for presentation to the European Parliament, the EU Council of Ministers and Vietnam’s national assembly for ratification, possibly in 2016.

– with Lee Adendorff and Mandy Kovacs