Free trade deals yield bumper export year

Effective use of Vietnam’s various free trade agreements (FTAs), especially of new-generation high-standard ones, has yielded a bumper year for exporters.

Increase recorded in markets

The value of 2022 import-export turnover, estimated at about US$750 billion, and the record trade surplus of more than US$11 billion, is being attributed largely to implementation of new-generation trade agreements Vietnam has signed in recent years. In fact, the FTAs have created opportunities to add value to key exported consumer goods.

According to To Hoai Nam, Secretary General of the Vietnam Association of Small and Medium Enterprises, after the shock of the COVID-19 pandemic, 2021 and 2022 exports to members of the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) show that businesses and industries have grasped the opportunities offered by the deal.

General Department of Vietnam Customs data show that roughly 50,000 small and medium-sized enterprises participate in exporting to CPTPP markets, reflecting the deal’s value for the participation of small and medium-sized enterprises in exports.

Since activation of the EU-Vietnam Free Trade Agreement (EVFTA) in August 2020, Vietnam’s exports have also grown by over 22.3 percent in the first 10 months of 2022 with a turnover of goods reaching more than US$39.4 billion. A series of key products, such as textiles, footwear, furniture and electronics have all attained high growth rates. The group of agricultural, forestry and fishery products also experienced growth, with some products (rice, seafood) which previously struggled to penetrate the EU market able to take advantage of EVFTA tax quota commitments to boost exports.

Almost two years since coming into force, and despite being significantly affected by the COVID-19 pandemic, the new-generation FTA between Vietnam and the UK (UKVFTA) has yielded a 15.4 percent growth of exports to the UK market.

The Regional Comprehensive Economic Partnership (RCEP) trade deal that entered into force on January 1, 2022, while not a new-generation agreement, has also yielded opportunities for Vietnam, especially in agriculture. The markets of the 10-nation Asia-Pacific trade agreement accounts for 40 percent of the Vietnam’s export turnover of agricultural, forestry and fishery products, and the terms of the deal provide agricultural enterprises with greater opportunities to expand exports, especially of advantageous products such as rice, coffee, pepper, cashew, seafood, timber and wood. RCEP operates under open regulations on the origin of goods, helping businesses take better advantage of incentives from partners. It also offers opportunities for manufacturers to import input materials, diversify supply sources and grades of quality at cheaper prices.

Preserving achievements

Despite the varied opportunities and advantages of these free trade agreements, exporters are expected to face challenges in accessing and expanding their markets in 2023.

Nguyen Tien Chuong, President of the Dong Nai Export Association, identifies inflation and increased costs as responsible for these business difficulties. Nguyen explains that consumption markets have slowed, many importers are cancelling or delaying the receipt of goods, leading to increased costs for storage and logistics. In addition, limited resources challenge small and medium-sized enterprises. In order to improve competitiveness, Nguyen urges support of enterprises in technological innovation, backed by capital and human resources. Absent these two factors, enterprises are hard pressed to grasp export opportunities.

According to Vu Chi Mai, Energy Consultant of the German Agency for International Cooperation (GIZ), “with an open economy like Vietnam, when participating in new generation FTAs of high standards such as CPTPP and EVFTA, especially to be able to export sustainably to the EU, the enterprises must consider producing goods with clean energy sources associated with environmental standards.”

International trade experts point to the increasing emphasis by Vietnam’s FTA partners on the agreements’ commitments to the environment, green transition, labor conditions and sustainable development. Therefore, Vietnamese enterprises are being advised to comply with the green production process in order to export products with clearly indicated origin, ensuring standards, environmental considerations, efficient use of resources, protection of the ecological environment and fair settlement of social problems and thereby helping Vietnam achieve sustainable exports.

Source: Vietnam Economic News