Extensive implementation of the new generation FTA: "The key" to accelerate exports

VCN - New generation Free Trade Agreements (FTAs) after a period of implementation have brought into full play their positive effects, export turnover recorded high growth and set a new record. This is expected to be the "key" to accelerate exports in 2023.
The new generation FTA helps businesses better integrate into the global economy. Photo: T. Binh
The new generation FTA helps businesses better integrate into the global economy. Photo: T. Binh

"Bridge" to speed up exports

Currently, Vietnam has trade relations with 230 countries and territories, including FTAs with 60 economies, thereby creating favorable conditions for Vietnamese enterprises to expand market access and this is an opportunity for Vietnam to connect and participate more deeply in the global value chain and production network. In addition, Vietnam has participated in the negotiation and signed 17 FTAs, of which 3 new generation FTAs are being implemented.

According to the Ministry of Industry and Trade, after more than 3 years of implementing the CPTPP and more than 2 years of implementing the EVFTA, these FTAs have had very positive impacts on Vietnam's export activities, especially from markets where Vietnam Nam has never signed an FTA in the Americas. For example, thanks to the CPTPP, exports of goods to Canada, Mexico and Peru all have a growth rate of 25-30%/year.

With EVFTA, this is one of the few agreements with very high standards with a tariff liberalization rate of basically over 90% within 7 years of implementation. In the initial phase of implementation; although the international context was not entirely favorable, the Covid-19 pandemic complicated developments, and disrupted the supply chain, affecting the global economy and Vietnamese businesses. However, according to the Ministry of Industry and Trade, Vietnam's export growth to the EU reaches about 14% annually. Thanks to the EVFTA, businesses not only focus on large markets, the "gateway" of the EU such as Germany, the Netherlands, France, etc., but also have good access to smaller markets such as in Northern Europe, Eastern Europe or Southern Europe. .

Commenting on this issue, Ms. Nguyen Thao Hien, Deputy Director of the European - American Market Department, Ministry of Industry and Trade assessed that Vietnam's exports to most markets in the EU recorded a significant growth as well as witnessed positive transformation; not only focused on large markets but has been pushed to smaller markets and niche markets. The structure of export products to the EU also tends to expand and diversify when not only key commodities achieve impressive growth rates such as machinery and equipment (43%), footwear (54%).), textiles (44%), but the export turnover of many agricultural, forestry and fishery products is also increasing at a very high rate, notably: coffee (43.4%), seafood (31.6%, vegetables (23.5%), rice (12.2%)…

Because the UK is not a member of the EU, thanks to UKVFTA, many businesses believe that this is a "bridge" for Vietnamese goods to accelerate to the UK, helping the trade balance to continuously have a trade surplus of billions of dollars. The Vietnam Trade Office in the UK also affirmed that if there is no UKVFTA, Vietnam's exports to the UK would hardly have an impressive growth rate, Vietnamese brands and Vietnamese products been so interested by the British as Currently, the growth rate by product group is 12-19%. The competitive advantage of Vietnamese goods in the UK market compared to similar products originating from other countries is much better.

source: VCCI
source: VCCI

The room is still very large

Entering the New Year, exports are forecast to continue to recover as countries gradually control the Covid-19 pandemic. Exports to partner markets in FTAs will continue to be enhanced when businesses have gradually adapted to the commitments of the agreement and preferential import taxes will continue to be eliminated or reduced. In addition, many countries have deployed economic stimulus packages, stimulating consumption demand, thereby increasing the demand for imported goods. According to a representative of the Ministry of Industry and Trade, if Vietnamese enterprises can well exploit the new generation FTA and new markets, Vietnamese enterprises still have a lot of room to expand their exports.

In the CPTPP, Canada is a market that relies heavily on imports with the import volume of this market at about USD 500 billion /year. Canada is a country with a relatively large immigrant population, making it even more convenient to increase the potential for Vietnam's exports, especially consumer goods, food products, etc. Mexico is also a market with similar purchasing power with a population of about 120 million people and an annual import volume of about USD 400 billion. Similarly with the Peruvian market, about 75% of Peru's import-export enterprises are small and medium enterprises, which is consistent with the approach and size of Vietnamese enterprises. With these open possibilities, CPTPP partners in the Americas market can be a "gateway" to help Vietnam penetrate into neighboring markets such as Brazil, Bolivia...

EVFTA has created great opportunities for Vietnam's agricultural, forestry and fishery exports. EVFTA helps to expand export markets with strategic agro-forestry-fishery products and brings advantages thanks to tariff reductions and diversification of input materials for agricultural production. In particular, the EVFTA helps to create opportunities to attract high-quality foreign investment into the agricultural sector in Vietnam, helping to improve product quality and production efficiency in line with the requirements of fastidious markets in the EU and the world.

With UKVFTA, a survey by the Vietnam Confederation of Trade and Industry (VCCI) showed that 18% of businesses said they had learned about and knew about UKVFTA's commitments related to business activities. The utilization of UKVFTA, which is reflected in the use of preferential tariffs, also reached 17.2% in the first year of the Agreement's implementation. According to Ms. Nguyen Thi Thu Trang, Director of the WTO Center under VCCI, this rate of 17.2% is not low compared to other FTAs in the first year, but there is still room to be higher. The reason is that the UK market has an annual import demand of nearly USD 700 billion while the market share of Vietnamese goods in the UK is only 1%.

However, according to experts, although there is still a lot of room and impressive results have been obtained, the commitments and regulations in the new generation FTAs are still relatively new and complicated. Especially, after 2 years of fighting the pandemic with more difficulties from conflicts between the EU and Russia, broken supply chains, etc.; many businesses also reflect that the EU market tend to increase the application of non-tariff barriers, tightening regulations and technical standards on environment/climate, sustainable development, which makes Vietnamese enterprises still confuse and have not taken full advantage of their advantages.

Therefore, the requirement for businesses is to make efforts to innovate themselves, prepare a methodical plan to make the most of market opportunities and great advantages from new generation FTAs. Enterprises need to have a long-term vision and business strategy for each specific product, each target market; promote market diversification, increase products in niche markets and have competitive advantages.

By Bình Nam/Bui Diep

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