FTA Vietnam – EAEU: Expands the export opportunities to Russia

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The textile and garment export to Russia has many advantages of rules of origin. Photo: Nguyen Hue

Officially taking effect since October, 2016, the FTA Vietnam – EAEU is opening opportunities to boost exports to the Eurasia Economic Union markets of which Russia is identified as a key market.

According to Mrs. Tran Duc Hanh, a market research expert, the Russian Federation is not only larger in area but also 4 times more crowed in population and 3,2 times higher in GDP than the other 4 countries in the EAEU. Besides, the export turnover from Vietnam to Russia is 8.6 times as much as the other 4 countries. Moreover, Russia is a longtime trade partner of Vietnam, and goods exported from Vietnam to Russia can be continuously transported to the other 4 countries because 4 major ports in to the region are located in Russia.

In 2015, Vietnam imported over $US 824 million of goods from Russia, accounting for 4% of Vietnam’s total import value, up by 28% against 2014 and exported to Russia nearly $US 2 billion, accounting for 1.1% of Vietnam’s total export value, down by 28% against 2014.

As the statistics in 2015, Vietnam ranked 48th in the export markets and 21st in the import markets of Russia while Russia ranked 24th in the export markets and 21st in the import markets of Vietnam

The major export products of Russia to Vietnam are: oil and gas, iron and steel, fertilizers, machines, equipments, pearls, gemstones, and major import products from Vietnam are machines, equipment, electrical products, automotive, pharmaceutical products and plastic products. Vietnam exported to Russia electrical products, garment, footwear, furniture, seafood, tea, coffee and imported from Russia electrical products, machines, equipments, electrical products and fertilizers.

Analysis on export potentials of some major products, Mrs. Tran Duc Hanh acknowledged that to boost Vietnam’s strong products that are strong products of Russia such as: seafood, wooden products, grains (including rice) should thoroughly analyze under the product groups.

For the sectors that Vietnam has much potential and Russia also has demand for example: silk, bamboo shoots, essential oils, hygiene products, but have not been promoted by export, Businesses can study niche markets. As for sectors that Vietnam has advantages but still has to import much, even import much more than export such as plastic products and products from plastic (deficit of nearly $ US 6.4 billion), vegetable products (deficit of more than $ US 1 billion), Businesses should analyze specifically for each sector to find an effective solution to boost exports.

Besides the advantages mentioned above, exports to Russia also face many difficulties, challenges on payment, distance and transport. Furthermore, the publicity and transparency of information as well as limitations on qualification are also barriers for Vietnam’s businesses

According to Mrs. Bui Kim Thuy, Deputy Head of Origin of goods Division, Import-Export Department, Ministry of Industry and Trade, to take advantages of preferences into the Russian market in particular and EAEU market in general, Enterprises must meet the rules of origin and get the preferential C/O. Vietnam is now the first partner signing the FTA with EAEU. This is also competitive advantage for Vietnam products to this market. As for the rules of origin for some export items to Russia in accordance with commitments in the FTA Vietnam – EAEU, the textile and garment sector has the loosest rule of origin; it only requires the process in Vietnam. Especially, FTA Vietnam – EAEU cleared the unreasonable regulation of tariff calculation on the basis of weight which was applied before the FTA’s effect.

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However, other sectors such as: footwear, plastic products, and electrical products have not been applied the flexible rules of origin. “to enhance the export growth, businesses should proactively research and take the rules of origin of FTAs in comparison to take advantage of the best rule of origin”., Mrs. Thuy noted.