Vietnam rice exports will enjoy a zero percent tariff to the European Union from 2018.
The free trade agreement between Vietnam and the EU (EVFTA), which comes into effect in 2018, will allow the country to export 100,000 tons of rice each year to the EU, quadruple the current figure.
Many countries around the world have applied measures to restrict rice imports and even refused to open their rice markets during FTA negotiations, but the EU has spared some space for Vietnamese rice.
The EU has approved an import quota of 100,000 tons of rice per year for Vietnam with a zero percent tax rate once the agreement takes effect. Broken rice will be exempt from import duties for seven years with no limit on quantity.
According to analysts, the commitment will help Vietnamese enterprises save up to €17 million (US$20 million) per year.
Having joined the global rice market 20 years ago, Vietnam is now the world’s third largest rice exporter after India and Thailand. However, Vietnam's market share has fallen in the face of fierce competition from rice export rivals over the last few years.
While other countries focus their attention on rice quality, Vietnam still aims for quantity.
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This is why Vietnam's rice exports to the EU remain modest, said Dang Hoang Hai, head of the European Market Department under the Ministry of Industry and Trade.
Data from the Vietnam Food Association showed that the country exported 18,000 tons of rice to the EU last year, down 10% from 2014 and 25% from 2013.
In 2013, Vietnam accounted for 3% of the EU rice market, while Thailand made up about 18%, Cambodia 22% and India 24%.
“Once the EVFTA comes into force, Vietnam’s rice industry can expect higher import figures,” Hai said.
He added that the EU market has strict requirements for rice import, ranging from quality standards to environmental rules. Europeans also prefer high-quality products like the ones grown in Cambodia, rather than Vietnamese rice.
“Vietnamese farmers don’t favor rice that takes a long time to grow and produces lower yields. They’ve been loyal to output targets, so they can’t produce good rice. Even if the rice is good, it’s impossible to compare it with Cambodian rice,” said agricultural expert Vo Tong Xuan.
The expert said that Cambodia only entered the global rice market five years ago, but its rice has won the world’s best rice award at the annual Rice Trader Conference for three consecutive years.
Last year, a product produced by Vietnam’s Loc Troi Company was also listed in the top three rice products in the world, pushing the price up to US$700 per ton from US$370-380.
Dang Hoang Hai, head of the European Market Department, claimed that to compete with Cambodia as well as other rice suppliers in the EU market, Vietnam should shift its production routines from low-quality rice to high quality, but that won't be easy.