Feb 09, 2018 / 17:15

Domestic exporters need to be on their toes for Vietnam-EAEU FTA

Domestic exporters will continue to benefit from reduced tariffs as thousands of Vietnamese export goods to the Eurasian Economic Union will enjoy a tax rate of 0% in 2018 under a free trade agreement signed between the two sides.

About 900 Vietnamese enterprises are exporting to the Eurasian Economic Union
About 900 Vietnamese enterprises are exporting to the Eurasian Economic Union
Under the Vietnam-Eurasian Economic Union Free Trade Agreement (Vietnam-EAEU FTA), which took effect in October 2016, 5,535 tariff lines will be reduced to 0% this year for goods such as milk, dairy products, automobile and spare parts, iron, and steel and related products.
According to experts, Vietnamese firms will enjoy export market advantages but will also have to face rising competition in the domestic market.
Nguyen Van Sua, vice chairman of Vietnam Steel Association, said that Vietnam currently exports steel mainly to traditional ASEAN markets. Exports to the European market, especially the Eurasian Economic Union, are modest. The tax reductions under the FTA will obviously create a major opportunity for local steel exporters. However, it will not be easy for them to seize the opportunity if they do not actively explore the market.
According to Sua, some Vietnamese steel producers such Hoa Phat, Hoa Sen, Vnsteel, Ton Phuong Nam, and Nam Kim have so far invested into improving quality, cut prices, and strove for exports, however, most domestic firms are still small in size with limited production capacity, technology, and financial status, which reduce their competitiveness.
To seize the opportunity, Sua suggested the Government to support domestic firms to enlarge the export market, targeting countries that Vietnam signed FTAs with to capitalize on the tax reduction instead of just focusing on traditional markets.
Besides, he said, local firms should be aware of tariff line reductions, regulations, and trade defense measures imposed by importing countries to take suitable actions in time.
Nguyen Khanh Ngoc, deputy director of the European-American Market Department under the Ministry of Industry and Trade, said that to optimize the advantages of the FTA, Vietnamese businesses should actively explore market information and grasp the needs of member states in the bloc.
At the same time, it is necessary to rapidly improve product quality, meeting the requirements of partners to take advantage before EAEU signs free trade agreements with other countries, he said, adding that Vietnam was the first country to sign an FTA with the entity. As a result, the two sides have great incentives to promote bilateral trade.
Deputy Minister of Industry and Trade, Hoang Quoc Vuong, said that the Vietnam-EAEU FTA opens up great opportunities for enterprises in investment, trade, as well as import and export. Vietnamese enterprises have the opportunity to access a market of 183 million people, with a total GDP of nearly US$2.2 trillion.
Statistics of the General Department of Customs show that after more than one year of implementation of the Vietnam-EAEU FTA, two-way trade between Vietnam and the EAEU has seen positive growth.
Specifically, in 2016, the import-export turnover between Vietnam and the Eurasian Economic Union reached US$3.04 billion, up 23% over 2015. Of this, Vietnam’s exports reached $1.77 billion, an increase of 10 %. In the first six months of 2017, trade between the two sides continued to grow, reaching $1.7 billion and up 21% over the same period in 2016.
Currently, there are about 900 Vietnamese enterprises exporting to the EAEU, with about 200 enterprises having a large turnover and accounting for 90% of total exports. Exports goods are mainly focused on seafood, coffee, rubber, tea, rice, cashew nuts, pepper, textiles and footwear, wood, and confectionery.