Trade barriers warned for EU-bound Vietnamese exports

Vietnamese exporters have so far upbeat about growing shipment to the European Union (EU) when the EU-Vietnam Free Trade Agreement (EVFTA) is due to take effect next year, but experts warned them to firstly prepare carefully to deal with trade barriers before expecting to gain from the market.

Trade remedies are forecast to arise against Vietnamese exports under EVFTA.

Vietnam’s exports to the EU are expected to surge by 20% in 2020, 42.7% by 2025 and 44.37% by 2030 thanks to the historic trade deal, which took ten years of preparation and eight years of negotiations.

However, the EVFTA is considered the new and modern free trade agreement with the strictest requirements and highest commitments, it obviously will bring tough challenges to Vietnam, especially as 96% of the country’s enterprises are small and medium-sized with limited labor resources and management skills.

It is forecast that the sectors of mechanics, retail, agriculture and seafood will face strong barriers as requirements on quality, safety and origin in this market are very high. Furthermore, the rising protectionism will make these requirements and standards even harder to be met.

Pham Binh An, director of Ho Chi Minh City International Integration Support Center, warned that trade remedies such as anti-dumping, anti-subsidy and safeguard measures could arise against Vietnamese exports under the deal.

Sharing the same view, Vu Xuan Phong, former vice chairman of the Vietnam International Arbitration Center, warned that it will be a major challenge as a majority of Vietnamese firms has yet to start any in-depth research on the free trade agreement.

Phong cited recent data from the Provincial Competitiveness Index Report that only 1.55% of Vietnamese enterprises surveyed had in-depth knowledge of the EVFTA while more than 65% of enterprises had only heard of it briefly.

“This is a worrying sign if we look to make the most of the pact in the coming days,” Phong stressed, adding that to effectively integrate into the EU market and capitalize on the EVFTA, Vietnamese enterprises should be well-prepared in terms of knowledge and skills and should consider potential risks.

Nguyen Thao Hien, deputy head of Ministry of Industry and Trade’s European-American Markets Department, said that the elimination of bilateral tariffs and customs duties as well as the reduction of non-tariff barriers affecting cross-border exchanges of goods and services are expected to boost bilateral trade. However, the EU has set strict criteria for product quality to protect consumers’ health, including high technical standards and regulations on packaging and labeling.

Full awareness of regulations

Vietnamese enterprises must be fully aware of the commitments made by Vietnam in the trade agreement, Hien said, advising the firms to comply with regulations on exports to the EU market, map out a business plan for the medium- and long-term periods, raise their competitiveness and build trademarks.

“Enterprises must adhere to rules of origin, especially as traceability regulations for importing countries have become increasingly stringent,” Hien noted, adding that they should also meet food safety and hygiene standards and management procedures set by the EU, as well as corporate social responsibility and transparency of information on labor and the working environment.

Vietnamese manufacturers should shift to advanced production and processing systems as the use of modern methods will ensure strict control of goods’ authenticity, quality and origin, she suggested.

As for legal perspective, Chau Viet Bac, deputy secretary general of the Vietnam International Arbitration Center, said that commercial arbitration can resolve conflicts between the government and investors or between enterprises and enterprises in trade deals.

Thanks to a simple and fast process, commercial arbitration has become effective for businesses that encounter problems in signing contracts, while helping facilitate access to the European market, Bac said.