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Part 3: Vietnam-Japan FTA: Vietnamese enterprises have not exploited the advantages

15:39 | 12/10/2018

VCN- Nearly nine years have passed since the official Vietnam-Japan Economic Partnership Agreement (VJEPA) officially came into force, but in recent years, the trade balance between Vietnam and Japan has continuously followed import direction from Japan. The exploitation and utilization of VJEPA was not seen as expected.

part 3 vietnam japan fta vietnamese enterprises have not exploited the advantages
Although export of wood and wood products to the Japanese market has grown quite well, businesses have not really taken advantage of opportunities from the Vietnam-Japan FTA. Picture: Nguyen Thanh.

Trade balance reversed

The VJEPA Agreement was signed on 25 December 2008 and came into effect on 1 October 2009. This is the first bilateral FTA in Vietnam, both Vietnam and Japan gives more preferential treatment than the previous ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP).

According to the statistics of the General Department of Customs (Ministry of Finance), in the past years, Japan has always been among the four largest trade partners in more than 200 countries importing and exporting goods with Vietnam. In total in 2017, the total import and export value between Vietnam and Japan officially reached 33.84 billion US dollars, up 13.8% over the results in 2016. In particular, the export of goods of Vietnamese enterprises to Japan reached $ 16.86 billion, up 14.9% over 2016, accounting for 7.8% of total export turnover of Vietnam to all trading partners in 2017. In the opposite direction imports from Japan to Vietnam reached 16.98 billion USD, an increase of 12.7% compared to 2016, accounting for 8% of total import value of the country.

Statistics of the General Department of Customs also noted that in the period 2011-2014, Vietnam always had a surplus trade balance in the exchange of goods with Japan, in the last 3 years (from year 2015-2017), the balance of trade in goods reversed to the deficit status. Specifically, Vietnam's trade surplus to Japan in 2011-2014 was $ 380 million, $ 1.45 billion, $ 2.02 billion and $ 1.77 billion respectively. By 2015, 2016 and 2017, the trade balance shifted to Vietnam's deficit with $ 228 million, $ 393 million and $ 119 million, respectively.

Vietnam's exports to Japan mainly focus on commodities such as textiles, seafood, transportation and spare parts; machinery, equipment, tools and spare parts; timber and wood products ... In the opposite direction, Vietnam imports most of the commodities such as: machinery, equipment, tools and spare parts; computers, electronic products and components; steel, plastic products ...

Recognizing the process of utilizing the VJEPA Agreement over time, some experts said that the benefits Vietnamese enterprises gained from the implementation of the VJEPA Agreement in particular as well as the participation of FTAs in general has not reflected potential domestic trade. Although the trade relations between Vietnam and Japan always achieve high growth results, Vietnamese companies have not exploited these advantages.

Regarding the preferential C / O rates for Vietnamese exports to Japan, the Import and Export Department and the E-Commerce and Economy Department (Ministry of Industry and Trade): In the first half of this year, nearly US $ 9 billion worth of exports to Japan, Vietnam granted C / O preferential (C / O form AJ and VJ) for goods worth over US $ 3.2 billion. The preferential rates of two FTAs (VJEPA and AJCEP) are 37%. Some groups have seen good FTA preferences including vegetables (70%), seafood (62%), plastic and plastic products (88%) and shoes (96%).

Attempt to meet the market

According to the General Department of Customs, up to the first half of 2018, in spite of the fact that the trade balance between Vietnam and Japan changes in the direction of trade surplus, there has not been any creation of a breakthrough change. Specifically, exports to Japan reached over 8.88 billion US dollars, while imports reached 8.87 billion US dollars. Thus, Vietnam also only slightly exceeded exports with over US $ 8.1 million.

From the perspective of Customs, Ms. Tran Kim Ha, Deputy Director of Budget Estimation and Management Department, Taxation Department, General Department of Customs assessed: FTAs in general, VJEPA and AJCEP in particular strongly impact on customs revenue. For example, with the AJCEP, in 2018, Vietnam committed to eliminate tariffs on 62.2% of tariff lines, focusing on commodities such as plastics, chemicals, machinery, equipment, spare parts, computers, electronic products, components, yarn of all kinds, raw materials for textile and garment, footwear, pharmaceutical products.

Textile is one of the key export items to Japan during the past. Talking to reporters Customs, Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (Vitas) acknowledged: Each FTA has different shapes, structures and requirements. Enterprises must meet to clearly see the benefits, make good use of opportunities. For example, with the VJEPA Agreement, the Japanese side requires textile exports to meet the rules of origin from the onward fabric. At present, there are many business leaders that have not really put an emphasis on the research to take advantage of the opportunity to promote export from the FTA, but still keep waiting for the market, waiting for customers to come. That's a weakness. "In the face of the demands of the FTAs, in order to overcome the challenge, the business community needs to have strategic solutions to build up the linkage chain, addressing supply shortages in the garment sector," Giang stressed.

According to Le An Hai, Deputy Director General of the Ministry of Industry and Trade, former Deputy Director General of the Asia-Africa Department (Ministry of Industry and Trade), to make full use of the advantages of FTA, to further exploit the Japanese market, enterprises need to invest properly to improve their business capacity, monitor the quality standards of export goods. Besides, enterprises need to step up trade promotion.

Some experts said that if exporters want to make good use of FTA, promote export growth to Japan, they must base on careful study of FTA content, implementing an export marketing strategy. Paying attention to the smallest detail is the first thing to take into account. According to the Vietnam Trade Office in Japan, businesses wanting to sell products in Japan, firstly they must know the origin and quality of that product. Businesses should only come to Japan to sell products when the firm grasp of the product from the smallest detail.

VJEPA is the first bilateral FTA since Vietnam's accession to the WTO. The VJEPA has comprehensive content covering trade in goods, trade in services, investment, improvement of the business environment and movement of natural persons.

As of April 1, 2015, Japan eliminated tariffs on 923 agricultural products from Vietnam. By 2019, 338 additional agricultural tariff lines will be removed. As for industrial products of Vietnam, most of them enjoy the tax rate of 0% as soon as the Agreement takes effect, such as electronic components, machinery, equipment, telephone, computers, plastic products, paper ...

In the final year of the tariff reduction schedule (2026): Japan commits to eliminate tariffs on 96.45% of the total tariff lines on products originating in Vietnam, with a focus on groups Agriculture, fisheries, textiles, footwear, furniture, electronic components ... Meanwhile, Vietnam committed to eliminate tariffs on 90.64% of tariff lines.

By Thanh Nguyễn/Bui Diep