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How does CPTPP open the "doors" of Canada, Mexico and Peru?

14:29 | 27/03/2019

VCN - Among the 11 countries participating in the Comprehensive and Trans-Pacific Partnership Agreement (CPTPP), Canada, Mexico and Peru are the first 3 countries to have free trade agreements (FTA) with Vietnam, promising to open more trade opportunities.

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Wood and wood products are one of the many products that have opportunities to boost the export thanks to CPTPP. Photo: Nguyen Thanh

Seafood get a huge deal

According to the information provided by the European-American Market Department (Ministry of Industry and Trade): In 11 countries participating in CPTPP, Canada, Mexico and Peru are 3 countries that have committed to reduce the large tariff rates for Vietnamese goods when the CPTPP Agreement comes into effect. Specifically, the rate of tariff reduction for Vietnamese goods in Canada is 95%, Peru is 81% and Mexico is 77%.

For Canada, the elimination of import tax for 95% of tariff lines as soon as CPTPP takes effect, accounting for 78% of Vietnam's export turnover, brings a lot of opportunities for Vietnam to boost exports, typically seafood.

The European-American Market Department analyzed: 100% of seafood export turnover is entitled to 0% export tax from January 14, 2019. Many types of Vietnamese aquatic products currently occupy a very high market share in this market such as: basa (accounting for nearly 100% of Canada's imported catfish market); shrimp including frozen shrimp and processed shrimp ranked first among shrimp exporting countries to Canada and accounted for nearly 1/3 of the import market share; frozen big eye yellow tuna, accounted for 89% market share...

Canada's most-favored-nation (MFN) tax for these items is 4-5%, and according to the commitment of CPTPP, the tax rate for these items decreases to 0% immediately after the CPTPP Agreement comes into effect. This is an opportunity for Vietnam to continue to maintain the market share and diversify categories of exports into this market.

The Department of European-American Market reports: Vietnamese seafood products are now available in most major Canadian supermarkets but they were sold through distributors, not directly. Currently, large Canadian companies tend to buy directly from manufacturers to cut costs (Costco, Metro...), so it should support Vietnamese seafood enterprises to introduce and access to major Canadian retailers.

Besides Canada, Mexico is also a potential market for Vietnamese seafood products. 3 years after CPTPP takes into effect, fisheries (frozen fish, shrimp) are those entitled to 0% tax rate.

Every year, Mexico imports about $US 351 million of frozen fish. Mexico is an easy market with a large population, strong consumption, a decisive price factor. For frozen fish, Vietnam is currently the second largest exporter after China.

For shrimp, Mexico currently has a ban on shrimp imports from some Asian countries, including Vietnam. When the ban is removed, certainly with the strength in price and quality, Vietnam has many opportunities to dominate the market when the current tax rate for this group is about 20%.

Textile and wood products have many opportunities

Besides seafood, textiles, footwear, furniture... are other typical items that have many opportunities to boost exports to three markets Canada, Mexico and Peru thanks to CPTPP.

According to the Department of European-American Market: Peru is evaluated as a potential market and a relatively suitable market for the level and scale as well as Vietnam's approach, because 75% of import-export companies in Peru are small and medium, easy to penetrate.

The CPTPP Agreement that came into effect in 2019, and Peru promises to create new impetus for the two countries' trade relations. Peru is committed to eliminating 81% of tariff lines as soon as it becomes effective, equivalent to 62% of imports from Vietnam and will eliminate tariffs on 99.4% of tariff lines by the 17th year. This is also the first time that the two countries have FTA relations and Vietnam needs to grasp the opportunities to boost the export of some goods that Vietnam has advantages such as textiles and footwear.

For exported textile and footwear to the Peruvian market, the tax rate is reduced according to the schedule, and to 0% in the 16th year. Peru imports about $US 350 million of footwear every year, mainly leatherette shoes or with plastic components. With CPTPP, footwear products originating from Vietnam, already known in Peru, will have the same competitive advantage as those of China and Brazil.

In the Canadian market, textile products also have an opportunity to boost exports. Currently, Vietnam's export of textiles to Canada accounts for only about 7% of Canada's total imports. Import duties on Canada will be reduced from 17% -18% to 0% as soon as the CPTPP comes into effect (about 50% of exports) or after 3 years if the yarn origin rules are met.

“The difference in import tax will be the driving force for textile export to the Canadian market. Therefore, it is necessary to strengthen the promotion of Vietnamese products in the form of organizing textile business delegations to Canada, introducing production capacity (including supply of raw materials and accessories) and contact directly with each major Canadian partner,” are the Department of European-American Market’s recommendations.

Along with fisheries, textiles and clothing, wood products are also identified as having potential to promote the above markets thanks to CPTPP. Specifically, for Canada, import tax on wooden furniture will fall immediately from 9.5% to 0% (except for wooden chairs used in houses to be at 0% after 6 years). Vietnam is the largest exporter of bedroom furniture to Canada (accounting for nearly 30% of the market share).

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The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) took effect in Vietnam from January 14, with ...

According to the Department of European-American Market: Exporting wood products to Canada should focus on materials that can withstand the effects of climate change and weather. The color and quality of delivered goods must be consistent with the designs, any changes must be notified. A failure or breakage during transportation should be quickly handled.

In the Peruvian market, outdoor furniture to Peru will enjoy 0% tax rate as soon as the CPTPP Agreement comes into effect, opening up a great opportunity to boost exports to this potential market...

By Thanh Nguyen/Kieu Oanh