TAPPING FTAS FOR EXPORT ACCELERATION

Deep integration into the world economy and the effect of free trade agreements (FTAs) have created new momentum, opened up vast cooperation opportunities, and helped promote trade and investment connectivity for the business community.

Enterprises have effectively taken advantage of FTAs

Vietnam is one of a few countries that, only 15 years after joining the World Trade Organization (WTO), has negotiated and signed 15 FTAs. As an independent party, Vietnam signed six FTAs ​​with Japan, Chile, South Korea, Eurasian Economic Union (EAEU), the European Union (EU) and with partners in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In particular, in two new-generation FTAs, the EVFTA and the CPTPP, Vietnam is committed to wide-ranging market openings for goods, services, investment and government procurement, as well as sensitive fields such as labor and environment.

Luong Hoang Thai, Director of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, said, boosted by the Vietnam - EU Free Trade Agreement (EVFTA), the two-way trade value between Vietnam and the EU has sustainably grown in both value and volume of both exports and imports.

In the first 11 months of 2021, the bilateral trade value achieved a positive growth, even compared to pre-pandemic performance, totaling US$51.3 billion, up 13.8% over the same period in 2020. Particularly, Vietnam’s exports accounted for US$35.96 billion, up 12.6%, and its imports reached US$15.34 billion, up 16.6%. Vietnam took a trade surplus of US$20.6 billion with the EU, up 9.8%.

Deputy Minister of Industry and Trade Tran Quoc Khanh emphasized that the EVFTA, after more than a year of enforcement, brought in positive results as expected. Vietnam's export shipments certified by EU certificates of origin for the EU market accounted for a fairly high rate, at nearly US$8 billion. This showed that many businesses have paid attention and made good use of tariff reduction incentives in the agreement.

According to the Vietnam Chamber of Commerce and Industry (VCCI), compared with effective FTAs, 30.19% of surveyed companies understand EVFTA commitments, compared with an average of 22.95% in other FTAs.

Regarding the CPTPP, Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department under the Ministry of Industry and Trade, said the 3-year CPTPP enforcement has produced very positive impacts on Vietnam's exports, especially to markets with which Vietnam has not signed any FTA. Merchandise shipments to Canada and Peru expanded 25-30% a year. In 2018-2020, export growth to Mexico always moved at a double-digit pace, averaging 18.8% a year. Key exports included telephones, vehicles, parts and footwear.

According to the Ministry of Industry and Trade, agricultural products, apparels and seafood successfully captured FTA opportunities. With an export value of US$2.2-2.3 billion, the share of seafood exports to the CPTPP rose from 25% in 2018 to nearly 28% in 2021.

The Vietnam - UK Free Trade Agreement (UKVFTA), effective from early 2021, has helped the bilateral trade ties amid volatility caused by Brexit (the withdrawal of the United Kingdom from the European Union). After nearly a year, by the end of October 2021, the two-way trade amounted to nearly US$5.5 billion, with Vietnam’s exports accounting for US$4.735 billion, up 15% year on year. Its imports from the UK are valued at US$706 million, up 25.3%.

In addition to better import and export outcomes, new-generation FTAs with strict commitments are expected to help Vietnam further reform economic institutions and make administrative procedures transparent, thereby building an increasingly favorable trade and investment environment for economic growth and recovery after the COVID-19 pandemic.

Grasping FTA opportunities

Dr. Nguyen Anh Thu, Director of Vietnam Institute of Economic and Policy Research (VEPR), said that one year after the EVFTA came into effect, the Vietnamese legal system has been gradually amended to meet its requirements. However, businesses need to pay special attention to law enforcement, especially in intellectual property, workers' rights and environmental protection.

She suggested that reforms to meet EVFTA requirements will become more difficult and slower while its relative advantages for Vietnam over other countries in the region will reduce faster. Therefore, it is necessary to urgently review, amend and supplement legal documents to be consistent with its commitments.

Giving advice to exporters, she emphasized actively improving production capacity and product quality to get involved in the global supply chain. “With or without an FTA, production and trade trends along the value chain have already been very positive, accounting for a significant part of the global import-export value,” Thu added.

One barrier hindering businesses from taking full advantage of FTAs in 2021 stems from challenges in cost management. Ms. Nguyen Thi Tuyet Mai, Vice President of the Vietnam Textile and Apparel Association (Vitas), said that although Vietnam signed many important FTAs, ​​such as EVFTA and CPTPP that have brought in a lot of orders from and export advantages to other markets, logistics costs have become a barricade that prevents businesses from taking advantage of FTAs ​​in the context of the COVID-19 outbreak.

Specifically, textile and garment producers are constantly slow to deliver goods because seaports and airports limit incoming and outgoing due to the epidemic, leading to difficulties in goods trade. Many companies have to switch to airborne exportation, resulting in higher costs. Moreover, the continued shortage of vacant containers will give rise to higher freights, causing many businesses to suffer losses.

Against this backdrop, she recommended that businesses need to plan shared use and lean operation of warehouses, use only one management platform and consider outsourced services. At the same time, they always need backup plans for force majeure situations.

Experts also expressed their concern that a major barrier against exporters to EVFTA and CPTPP markets is trade remedies such as regulations on pesticide residues in fruit and vegetable products, quarantine regulations and food safety regulations. Therefore, Vietnam needs to increase the capacity to administer and supervise sanitary and phytosanitary (SPS) measures on animals and plants in order to reduce regulatory violations in importing countries.

Mr. Sebastian Paust, First Counselor of the German Embassy in Vietnam, recommended that policymakers need to further promote information disclosure and sharing with the business community, especially small and medium enterprises, to enable them to take full advantage of the agreements. They need to enhance competitiveness, resource quality, academic qualifications, business skills and foreign languages ​​to foster cooperation and export.

Source: VCCI