With the European-Vietnam Free Trade Agreement (EVFTA) set to come into force on August 1, many of the nation’s key commodities such as seafood and wood products are anticipated to enjoy numerous incentives from the trade pact, according to insiders.
There remains plenty of room for export growth of agro-forestry products to the EU market.
There remains plenty of room for growth in terms of the export of agro-forestry products to the EU market, largely due to European consumers having a high demand for these items, with the import value of these products accounting for 8.4% of the total annual import value.
According to the Vietnam Association of Seafood Exporters and Producers, local seafood exports to the EU are expected to enjoy numerous advantages, largely due to businesses being able to gain access to a market that is a huge consumer of seafood, with the average consumption level reaching 22.03 kilo per person, 5.34 kilo higher than the global average.
Moreover, the EVFTA is anticipated to restructure the market for Vietnamese shrimp products with roughly 50% of tariff lines set to be slashed to 0% after three and seven years from the current base rate to between 0% and 22%.
The EU now makes up the world’s second largest import market for wood furniture. Despite the country being one of the world’s five largest wood processors and exporters, domestic wood exports to the EU remain modest and make up just over 1% of the total annual import amount to this market.
Once the trade deal takes effect, EU importers are poised to prioritise purchasing Vietnamese wood products as they will enjoy significant tax reductions, with the price of local wood products in the EU market set to drastically decrease in a bid to attract a greater number of European consumers.
In line with the EVFTA's commitments more of the nation’s key export items to the EU will witness reductions in tariffs. Most notably, tariffs for 77.3% of export turnover of garments and textiles will be eliminated over the course of the next five years, while the remaining 22.7% of export revenue is set to enjoy tax reductions after seven years.
In addition to enjoying incentives from preferential tariffs, the trade deal can be considered to be a route for Vietnamese textile enterprises to import high-quality machinery whilst gaining access to raw materials that meet EU standards.
There remains bright prospects for the leather and footwear industry to expand into fresh markets due to the positive effects of the EVFTA. Indeed, the EU is currently the second largest export market for Vietnamese footwear, making up approximately 30% of the total export value, with Germany, France, and Belgium being the country’s major markets.
Regarding rice exports, the Ministry of Industry and Trade's Export and Import Department stated that sales to the EU last year witnessed a surge of 92.4% to US$10.9 million in comparison to 2018’s figures.
This trend of consuming rice continues to witness strong growth largely due to the popularity of Asian food within EU member states. According to statistics, each year sees the EU consume roughly 2.5 million tonnes of rice, a statistic that presents a wealth of opportunities for Vietnamese rice to make inroads into the fastidious market.
During an online forum held to discuss trade and industrial co-operation with the EU entitled “EVFTA – Opportunities for Strategic Cooperation towards Sustainable Development” in Ho Chi Minh City on July 31, Jean Jacques Bouflet, vice chairman of the European Chamber of Commerce in Vietnam (EuroCham), said with the EVFTA coming into effect on August 1, 99% of tariff lines will be reduced over the next decade.
The move is predicted to present a window of opportunity for European businesses to enjoy access to the country’s new consumer market due to European goods such as cars and wine being able to fairly compete within the Vietnamese market, the EuroCham vice chairman noted.
In addition, local enterprises will have the opportunity to enjoy tax incentives from the large consumer market, the majority of which contribute to increasing the export of Vietnamese goods such as coffee, seafood, machinery, components, and footwear to 27 EU member countries.
According to the EuroCham representative, the smooth implementation of the trade pact is projected to allow Vietnamese businesses to access European goods and services, benefit from strong export growth, in addition to speeding up technological transfer and the application of international standards in production activities.