New impulse for Vietnam-EU relations

Sunday, 2017-07-02 09:01:17
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Vietnam's vegetable and fruit exports to the EU still remain limited.
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NDO – Trade ties between Vietnam and the European Union (EU) have grown rapidly in recent times, with Vietnam always recording a significant trade surplus with this vast market. However, the EU is a market with strict requirements in terms of quality and safety standards, which not all Vietnamese businesses are capable of satisfying. Hence, the official visit made to the EU by Prime Minister Nguyen Xuan Phuc from July 4-12 is expected to create a new impulse for strengthening Vietnam-EU trade relations in an extensive fashion.

Huge potential

According to the European Market Department under the Ministry of Industry and Trade (MOIT), the EU accounts for a large proportion in trade ties between Vietnam and Europe. Notably, Vietnam-EU trade revenues increased 11 times, from US$4.1 billion in 2000 to over US$45 billion in 2016. In the first five months of 2017, two-way trade reached US$19.6 billion, representing an over-13.6% increase year on year, with Vietnam exporting US$14.8 billion worth of goods to the EU (up 11.7%) and importing more than US$4.8 billion worth of commodities from the market (up 20.6%).

The majority of Vietnamese exports to the EU are made up of traditional key products, including garments, footwear, coffee, seafood and computers, among others. In addition, mobile phones and accessories registered over US$10.9 billion in export revenue last year despite them only being exported to the EU since 2011. These groups of items make up about 75% of Vietnam’s total export revenues to the EU market. However, there are many opinions stating that the expansion and renovation of export items to this market still remain limited and export efficiency is yet to be as high as first anticipated.

Acknowledging shortcomings in Vietnam-EU relations, Director of the European Market Department, Dang Hoang Hai, said that in spite of the rapidly growing trade ties between Vietnam and the EU, Vietnam’s export activities have only focused on Germany, France, the UK, the Netherlands and Italy – the five largest markets of Vietnam at the EU in terms of both exports and imports, which account for 68% of the country’s total trade value with EU countries. As Vietnam’s exports have yet to focus on the remaining markets of the EU, there remains huge potential for the country to accelerate exports to these markets in the near future, particularly as the Vietnam-EU Free Trade Agreement (EVFTA) takes effect.

According to Miriam Garcia - Ferrer, First Counselor of the EU Delegation in Vietnam, businesses should pay special attention to complying with standards set by the EU, as the majority of Vietnamese enterprises only export low-value raw products, such as coffee, tea, seafood and fruits, to the EU, while grain and dairy products, vegetables and meat still account for a small proportion.

Therefore, Miriam Garcia - Ferrer suggested that companies need to focus on developing trademarks for their products as Vietnam is yet to be regarded as a country with a source of high-quality commodities. Scheduled to take effect in 2018, the EVFTA is considered a new-generation agreement, which will open up numerous opportunities for Vietnam, particularly in boosting trade exchange with the EU. However, whether big opportunities brought about by the EVFTA will be fully tapped into or not depends on the efforts made by the Vietnamese Government as well as the business community.

Making use of opportunities

As an expert on the relationship between Europe and Asia, especially Southeast Asia, Professor David Camroux from the Centre for International Research and Studies (CERI) at Sciences Po, Paris, noted that the EVFTA will contribute to further enhancing economic and trade relations between Vietnam and other EU countries, in addition to its current ties with France and Germany.

However, Vietnam needs to show its strong economic reforms, improve environmental standards and strengthen the rights of labourers, he noted. As for the EU, Vietnam is no longer considered a developing country, but has become a “big tiger” in Asia, which forces the EU to pay more attention in its economic and trade ties with Vietnam as the EVFTA has been considered a positive step forward, Camroux said.

As recommended by a representative from the MOIT’s Import-Export Department, in order to make use of the advantages brought about by the EVFTA, it is necessary for Vietnamese enterprises to seriously abide by rules of origin for goods, which is one of the key factors reflecting countries’ import-export policies. On the one side, the rule of origin helps to raise competitiveness and facilitate trade development toward groups of items prioritised for exports; on the other side, it is also acts as a barrier to market access incentives and a tool for differing treatment in trade agreements.

According to Truong Dinh Tuyen, former Minister of Trade (now the MOIT), EVFTA is opening up opportunities for companies, which export goods to the EU, because this market is considered larger than the US and Japanese markets, regarding both scale and value. However, it is also a very demanding market, and Vietnamese businesses will be faced with a large number of obstacles, from accessing the market to safeguarding the market, competing in and finally dominating the market. Therefore, Vietnamese firms should apply suitable market penetration policies and avoid excessive focus on only one market or one specific product.

MOIT Deputy Minister Tran Quoc Khanh noted that in an effort to facilitate Vietnamese enterprises’ exports to the EU market, the ministry has been directing its trade missions and relevant units to strengthen the implementation of measures to boost the exports of key commodities and expand markets, focusing on tapping into Vietnam’s export advantages. At the same time, the MOIT has devised a project to facilitate Vietnamese companies’ direct participation in the overseas distribution networks, which has been approved by the Prime Minister.

Alongside long-term strategies, Vietnamese businesses need to take advantage of commitments and incentives from the signed agreements, in order to accelerate their exports to such a demanding yet potential market.