Vietnam – EU FTA: Great Opportunities for Potentially Competitive Companies

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Recently, all exports of Vietnam to the European Union (EU) will be given the generalised scheme of preferences (GSP), said Mr Dang Hoang Hai, Director of the European Market Department under the Ministry of Industry and Trade, at the Vietnam – EU Business Forum held by the Ho Chi Minh City Branch of the Vietnam Chamber of Commerce and Industry (VCCI-HCM) and the EU Delegation in Vietnam within the framework of the European Week in Ho Chi Minh City.

Delivering an opening speech to the forum, VCCI – HCM Director Vo Tan Thanh expressed his hope that the forum would provide businesses with an overview of current realities and prospects of Vietnam – EU bilateral trade relations as well as potential opportunities and challenges before Vietnam and the EU likely sign the free trade agreement (FTA). Hence, Vietnamese businesses need to be prepared to overcome challenges and grasp opportunities in the best way.

In 2012, the EU outstripped the United States to become the largest exporter and the second largest trading partner of Vietnam with a total trade turnover of US$29.09 billion, up 19.77 percent over 2011. In particular, Vietnam earned US$20.3 billion from exports to the bloc in the year, up 22.71 percent, and spent US$8.79 billion on imports, up 13.48 percent. In the first quarter of 2013, Vietnam – EU two-way trade turnover grossed over US$6 billion, up 26.18 percent over the same period in 2012, of which Vietnam’s exports were worth US$4.34 billion, up 27.18 percent and its imports valued at US$1.78 billion, up 23.74 percent. On investment, as of January 2013, the EU had 1,810 projects with a total registered capital of US$34.28 billion in Vietnam.

Mr Jean Jacques Bouflet, EU Minister Counsellor in Vietnam, said Vietnam – EU trade relations are not competitive but mutually supplementary. FTA will provide the two sides with opportunities to access goods and service markets on the basis of mutual benefit.

At the forum, Mr Dang Hoang Hai updated information about GSP mechanism in the 2014-2016 period for enterprises. Specifically, on October 31, 2012, the European Parliament and the European Council issued the Regulation No. 978/2012 applying a new scheme of generalised tariff preferences and repealing the current scheme, effective from January 1, 2014. Accordingly all exports from Vietnam will enjoy GSP (from 2009 to 2013, freights provided in the Section XII, including footwear, handbags, umbrellas, etc will not be given GSP. The footwear industry suffers a double negative impact: being imposed anti-dumping duty of 10 percent and given non-GSP).

Speaking of FTA impacts on the business community, he added that “In the future, barriers in the EU are not the opening of this market (tariff barriers, licence, ban) but the barriers are technical standards, hygiene and food safety standards. Therefore, the opportunity or challenge depends on initiative and competitiveness of Vietnamese enterprises.”

Mr Colin Kinghorn, Director for Greater Mekong Subregion and Indonesia of Ipsos Market Consulting & Research Group, stressed: “Vietnam – EU FTA will open up opportunities for potentially competitive companies which are proven by the ability to capture market demands and improve the efficiency of business operations.”

Commenting on FTA impacts on businesses, Mr Truong Dinh Hoe, General Secretary of the Vietnam Association of Seafood Exporters and Processors (VASEP), said, apart from FTA advantages (fewer trade remedy measures; deeper penetration into the market through stronger cooperation with local retailers, better choice of high-quality supplies and advanced technologies from EU at better prices), Vietnamese businesses will also face numerous challenges. Seafood processing companies must meet strict requirements of quality certification standards which are frequently changed and updated in the EU market. They will pay more to comply with Sanitary and Phyto-Sanitary (SPS) regulations and preserve resources when they export to the EU. Therefore, VASEP recommends the EU provide a technical frame and discuss SPS and technical barrier to trade (TBT) issues, including technical training and assistance, knowledge-transfer measures, and public service provision.

My Chau

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