Furniture and forest exports face cloudy future

In 2015, exports jumped by 10.7% to US$6.9 billion, Nguyen Ton Quyen, chair of the association, told a recent conference, adding that he optimistically expects the segment to see annual growth of 15-20% over the next few years.

Mr Quyen said that new free trade pacts such as the Vietnam-EU Free Trade Agreement and the Trans pacific Partnership (TPP) will help boost overseas consignments by slashing tariffs.

However, he failed to support his rather overly sanguine predictions with any hard facts or well-grounded logical reasoning, say many industry analysts.

As it currently stands, most analysts are in general agreement that the growth of the furniture industry in Vietnam is severely limited by the scarcity of raw materials, which must be imported from other countries, principally China.

As long as the industry continues to be dependent on Chinese raw materials, then neither exports to the EU or the US under either of the aforementioned trade pacts would qualify for the reduced tariffs Mr Quyen referred to.

Nor did he address the fact that with both current US presidential nominees opposed to the trade deal, ratification of the TPP appears highly unlikely at this time. Clearly there are no realistic prospects for passage or implementation any time soon.

Lastly, even in markets where import tariffs are low or non-existent, non-tariff barriers (NTBs) can be a major impediment to trade and Mr Quyen failed to address how the segment plans to address these issues.

This is especially true as it relates to Vietnam exports of furniture and forest products to the EU, say analysts, which will undoubtedly face significant NTBs following implementation of the Vietnam-EU free trade pact.

Many of these barriers can easily be readily identified, but it is a great deal more difficult to calculate their precise impact on export returns and what their removal might mean for the furniture and forest industry.

NTBs are defined as government measures, other than tariffs, that distort international trade. Typically, they either protect domestically produced products from the full weight of foreign competition or artificially stimulate exports of those products.

They may include quantitative restrictions, administrative procedures, phytosanitary and technical regulations and standards, price control measures, subsidies, forest management certification and product labelling, and illegal activities.

According to the World Trade Organisation the number of reported NTBs has been steadily growing worldwide.

For the first nine months of 2016, Vietnam exports of furniture and forest products have stayed consistent with the prior year pace having reached US$4.9 billion, roughly the same figure as exports for the same corresponding nine-month period in 2015.

As it stands, the country is now the fourth largest wooden furniture and forest product exporter around the globe, trailing China, Germany and Italy in descending order of magnitude from first to third biggest.