FTAs boost export growth

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Achieve good results

Referring to opportunities from the FTAs, the export growth to markets of the new generation FTAs such as the EU-Vietnam FTA (EVFTA), the UK-Vietnam FTA (UKVFTA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a good example.

According to the Ministry of Industry and Trade, in the first months of the EVFTA implementation (from the beginning of August to the end of December 2020), Vietnam's export turnover to the EU reached US$15.62 billion, up 3.8% over the same period in 2019. In the first three months of 2021, Vietnam's exports to the EU reached US$9.9 billion, up 18% over the same period last year.

Vietnam has completed signing 15 FTAs at the bilateral and regional level (in which 14 FTAs are being implemented, one FTA was signed but has not come into effect), and two FTAs have been under negotiation. Among them, the most prominent are three new generation FTAs including: the CPTPP, the EVFTA and the UKVFTA; and one FTA which is the world's largest FTA in the framework of ASEAN, is the Regional Comprehensive Economic Partnership (RCEP). With 17 FTAs being implemented and negotiated, Vietnam has become the center of global trade flows.

From August 1, 2020 to April 4, 2021, agencies and organizations authorized to issue the Certificate of Origin (C/O) form EUR.1 issued more than 127,296 C/O sets form EUR.1 with turnover of more than US$4.78 billion to 27 EU countries.

Additionally, firms exporting goods to the EU deducted self-certification of product origin for nearly 3,585 shipments with a value of more than US$10.88 million, enjoying tax incentives under the EVFTA.

Talking to Customs News, Tran Thanh Hai, Deputy Director of Import and Export Department (Ministry of Industry and Trade), said items with the C/O form EUR.1 were mainly footwear, seafood, textiles, agricultural products, cereal products, and electronics. Import markets are mostly countries with ports and distribution and transshipment centers in the EU such as Belgium, Germany, Netherlands, and France.

Along with many positive signals from Vietnam's trade exchange with the EU countries, the import-export situation with the UK also showed positive signs. In the first three months of this year, exports to the UK increased by 22.1% over the same period last year.

"Thanks to the commitments to cut tax rates up to 99% according to the roadmap and its continuity, the UKVFTA can maintain the strong trade growth between Vietnam and the UK in the future," said the representative of the Ministry of Industry and Trade.

In addition to the EVFTA and the UKVFTA, the CPTPP, which has been in effect for more than two years (from January 14, 2019), has contributed significantly to the overall export performance. In just two years (2019 and 2020), the trade turnover between Vietnam and the 10 CPTPP countries reached US$77.4 billion and US$78.2 billion, up 3.9% and 5% compared to 2018. In particular, if only the import-export turnover to the two new markets without the FTA, which are Canada and Mexico, is included, in 2020, exports to Canada increased by 12.1%, to Mexico increased by 11.8% compared to 2019. These are two markets just having the FTA with Vietnam that have the highest rate of using C/O form among the members. This result strongly confirms the forecasts of positive growth when Vietnam joined the CPTPP.

Many challenges remain

In addition to the three new-generation FTAs mentioned above, regarding 11 traditional FTAs, the Ministry of Industry and Trade said the most obvious impact on trade was Vietnam's export turnover.

Specifically, Vietnam's total exports to the markets with the FTAs increased significantly, reaching US$123.11 billion in 2019. Meanwhile, in 2004, Vietnam had only two FTA partners, ASEAN and China, with a total export turnover of nearly US$7 billion. In terms of the average export growth rate to the FTA partner markets since the FTA, India achieved an average of 35.7% per year, South Korea reached 29.2% per year, Chile reached 28.9% per year, and China reached 20.9% per year.

Besides the impressive results in trade thanks to the FTAs, according to Nguyen Khanh Ngoc, Deputy Director of Europe - America Market Department (Ministry of Industry and Trade), the FTAs are also increasing competition pressure for the economy and businesses, requiring high standards of compliance to take advantage of opportunities and limit trade disputes.

“The new generation FTAs such as the CPTPP and the EVFTA set strict requirements on quality and standards. Undeniably, joining these FTAs, Vietnam will benefit from tariff reduction (up to 99% of the tariff lines). However, the trend of protection and the application of technical standards, labor, and environmental protection are increasingly high. Non-tariff barriers for imported goods in the markets participating in the FTAs with Vietnam will tend to increase. This is a big challenge for businesses, affecting the ability to take advantage of the tariffs,” said Ngoc.

The scope of Vietnam's FTA partners has been wide and comprehensive. Therefore, in the next 3-5 years, it will reach important milestones of many agreements and gradually liberalization of tariffs on most imported goods with major trading partners. To optimize the positive effects and minimize the negative effects of economic integration on the economy, the Ministry of Industry and Trade will focus on the implementation and effective use of opportunities from the FTAs, especially the CPTPP, the EVFTA, the UKVFTA, and the ASEAN agreements with partners; simultaneously, supporting businesses in early warning of partner countries’ trade remedies.

Realizing that the greatest difficulty of Vietnamese enterprises, especially small and medium sized businesses, is the lack of information, Tran Thanh Hai said enterprises had not fully understood the meaning of commitments in each industry and each item, especially those that they are interested in and producing. The utilization of such preferences is tied to the satisfaction of the goods origin. To meet the conditions related to goods origin, enterprises must change their supply chain, find sources of raw materials that meet the criteria for tariff reduction conditions, or change the production process to meet the criteria of code conversion.

To support businesses, the Ministry of Industry and Trade has cooperated with the World Bank (WB) to establish and operate an FTA portal where firms can find commitments on taxes, rules of origin, services, investment, as well as information about the market, import and export regulations/markets, and social responsibility. In terms of trade promotion, Hai affirmed that the Ministry of Industry and Trade would continuously improve their support forms to help businesses achieve effective promotion and expand their reach to access markets amid the Covid-19 pandemic.