Signing of FTA creates motivation for market diversification

Wednesday, 2020-04-01 18:08:49
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The signing of the EU-Vietnam FTA in June 2019. (Photo: NHAT BAC/ND)
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NDO – Amid complicated market fluctuations, enterprises should take the initiative in studying free trade agreements (FTA) to understand the most beneficial regulations and to expand their market, said Deputy Minister of Industry and Trade Tran Quoc Khanh in an interview granted to Nhan Dan Newspaper.

Q: How does the Ministry of Industry and Trade (MoIT) assess the losses caused by the COVID-19 pandemic to Vietnam’s industries and what solutions are there to support enterprises in dealing with the disease?

A: The MoIT took early action to deal with the pandemic. We sent a warning to provinces during the Lunar New Year about the possibility of disruption of the flow of goods at the Northern borders. The MoIT was also the first ministry to send a report to the Government on February 5 on the impact of the disease on industrial production, trade and import-export activities while proposing a series of solutions to overcome this.

Various solutions have been promptly implemented including restructuring import-export activities, building appropriate delivery procedures to restore trade at Northern border gates, and calling on logistics enterprises to reduce warehousing fees to lower costs for piled-up products. The ministry also called on supermarket chains to distribute excessive agricultural products and encouraged textile and garment companies to produce face masks to serve increasing demand while strengthening supervision over the domestic market.

Thanks to these solutions, after seven days of interruption, the export of vegetables and fruits and import of components were restored, helping to recover the prices of dragon fruit, watermelons and others. In addition, domestic prices of goods have been stable without shortage of goods or price speculation.

Q: What do you think about movements of ‘rescuing’ goods, particularly agricultural products in case of market fluctuations? What do you think about the management role and the support of the State in facilitating enterprises to expand the consumption market?

A: Temporary disruption of the supply chain sometimes occurs for many reasons, not only in Vietnam but in many countries across the world. The situation may be more serious in Vietnam, Thailand, Malaysia and the Philippines as a number of agricultural products including dragon fruit, watermelon, durian, and banana depend excessively on the Chinese market. When China was in trouble, the supply chain was interrupted, causing oversupply. Because fruits are seasonal products, it is difficult to change the market in a short time and simply rely on domestic consumption. Thus, ‘rescue’ movements appear.

The MoIT and the Ministry of Agriculture and Rural Development will still persist in persuading farmers to reduce unplanned production and shift to production in accordance with orders and contracts to diminish risk.

In addition, solutions to mitigate the negative impacts of the disruption of supply chains will be implemented including promoting goods clearance at border gates and risk insurance in agriculture, increasing the storage area of warehouses, and boosting investment in the deep processing of agricultural products.

Q: The EU-Vietnam FTA (EVFTA) will soon take effect, what should Vietnamese enterprises do to effectively take advantage of opportunities from the European market?

A: The negotiation of the EVFTA was concluded and announced in mid-2015. There have been hundreds of seminars and thousands of analyses of both the opportunities and challenges in relation to the deal. Enterprises should read general information, then, conduct deeper research to learn more about the opportunities and challenges in their own business fields. They can also seek help from business associations and the Vietnam Chamber of Commerce and Industry (VCCI).

Q: Besides opportunities, there remain challenges regarding the rigorous requirements of this leading ‘fastidious’ market, how do Vietnamese enterprises and policy agencies work together to meet the set requirements?

A: In fact, European conditions are not much more stringent than our own. Regarding agricultural and food products, our conditions are also very strict, but our enforcement is not implemented as strictly as theirs.

To enter the European market, businesses need to produce and do business more strictly. The cost will be higher to meet strict food safety requirements but the market is immense. To help farmers, maybe we should be more serious about consumption. When 100 million consumers are determined to deny substandard products, agricultural production will have to change. When products have met our rules, the penetration into Europe and America will be not as difficult as people think.

Q: How can we be an independent and self-reliant economy without dependence on any market amid the effectiveness of a number of FTAs, including the EVFTA this summer?

A: Not being dependent on any market is impossible in this era of globalisation. The best approach is to accept economic links as an objective practice but there should be solutions so as not to rely too much on any one market. The signing of FTAs ​​with key markets such as Europe and America is among the solutions to promote trade diversion and market diversification.

Thank you very much!