The EU and Vietnam established diplomatic ties 20 years ago, but their relationship has so far been muted. The EU is now keen to win more allies in Asia, while Vietnam is keen to improve its access to the EU's lucrative market.

Vietnamese Prime Minister Nguyen Tan Dung and the head of the EU's executive, Jose Manuel Barroso, 'agreed that this new agreement would be the framework for the development of an equal, long-term and stable partnership,' a statement released in Brussels said.

The so-called EU-Vietnam Partnership and Cooperation Agreement (PCA) lays out the ground rules for future relationships between the two sides, covering areas ranging from democracy and human rights to climate change and trade.

Business flows between the two sides topped 11 billion euros (15 billion dollars) in 2009, but trade is still restricted by a broad range of tariffs and barriers on both sides.

Dung and Barroso therefore agreed to launch talks on a free trade agreement as soon as technical experts on both sides have finished assessing the feasibility of such a move, the statement said.

Finally, the two sides signed an agreement clarifying the legal status of air transport carriers between them, in a move which EU officials hope will lead to a boost in flights to and from Vietnam.

The PCA now has to win the approval of Vietnamese and EU legislators before it can be signed.

Dung and Barroso were both set to attend the biennial Asia-Europe Meeting (ASEM) summit in Brussels later on Monday.

Deutsche Presse Agentur - October 4, 2010