Implementation of UKVFTA: Exports to the UK have prospered significantly

Textile industry has good opportunities from the UKVFTA. Photo: Nguyen Thanh

Exports increased more than 22%

According to the latest data from the Ministry of Industry and Trade, exports to the UK market in the first three months recorded an increase of 22.1%. New generation FTAs will continue to facilitate Vietnamese goods to enter partner markets with more preferential tariffs along with commitments on facilitation and fewer barriers.

Before the UKVFTA took effect temporarily, in discussions with the press, Head of the Central Economic Commission Tran Tuan Anh (at that time still holding the position of Minister of Industry and Trade) said the UK sector growth for Vietnamese products is still very large because all Vietnamese export products only account for less than 1% of the market share in the UK's total annual import turnover of nearly US$700 billion (2019). Import and export products between Vietnam and UK are complementary rather than competitive.

In-depth analysis of many items with export value of tens of billions of USD each year in Vietnam such as textiles, footwear, wooden products is easy to see, assuming that many of the above growth areas are increasingly being realized; even Vietnamese furniture is evaluated to be quite competitive in this market.

According to the information that the Ministry of Trade and the Embassy of Vietnam in the United Kingdom and Northern Ireland has just announced, Vietnamese wood products exported to the UK are competitive thanks to low cost, good raw materials, and high-quality. Some big companies in the UK wood industry already have production facilities or have signed long-term cooperation contracts with Vietnamese producers. For example, IKEA - the largest retailer of wooden furniture in the UK has an extensive product supply system in Vietnam for many years, helping Vietnamese furniture gain a foothold in the UK market.

In fact, the group of wooden products has a very wide range of consumption. Vietnamese enterprises have only partially met the demand, so the space is still abundant. In order for Vietnamese furniture to expand its market share, many experts say Vietnamese enterprises need to participate more deeply in the global supply chain, to retain existing customers and develop new customers with these new products.

Similar to textiles and garments, although the annual exports reach several tens of billions of USD, the current turnover of Vietnam's textile and garment products exported to the UK market accounts for 2.36% of the total export turnover. According to the UKVFTA, Vietnam's textile and garment products are reduced to 0% import tax (from 12%) as soon as the agreement comes into force or to 0% according to the schedule after 4, 6, 8 years since the agreement takes effect.

Mr. Vu Duc Giang, Chairman of Vietnam Textile and Apparel Association, said together with other FTAs such as the Regional Comprehensive Economic Partnership (RCEP), FTA Vietnam-EU (EVFTA), UKVFTA will create a stronger and mutually reinforcing background for the textile and apparel industry.

Vietnam's textile and garment industry can diversify raw material sources by importing from Japan, South Korea to export to the UK and EU while still enjoying preferential tax rates. This is a strength that many ASEAN countries do not have.

Noteworthy

The UKVFTA is of course not all good. Open opportunities are always accompanied by challenges.

According to the Head of Central Economic Committee Tran Tuan Anh, the technical standards and quality requirements for goods imported from the UK are very high. For example, with agricultural products, although UKVFTA inherits preferences with flexible SPS (sanitary measures and phytosanitary measures) in the EVFTA, Vietnam's agricultural products such as tea, vegetables need to improve uniformity in each batch, harvest and preserve product quality to conquer this fastidious market.

Some economic experts also mentioned commitments to open markets with goods and services for the UK will create certain competitive pressure for the economy, businesses and goods and services in the UK, especially in the British industries with strengths such as financial services, pharmaceuticals, chemical goods.

Mr. Vu Duc Giang said that in order to take advantage of opportunities to open up, businesses need to change the direction of importing raw materials, using materials produced domestically, and promote cooperation. In addition, technical barriers, labor, environment also need to be accessed and complied with in order to enjoy export preferences.

"The EU, UK, China, the United States will be the leading markets and the Association will have specific plans to promote trade and export together with businesses," Chairman of Vietnam Textile and Apparel Association Nam said.

In terms of market access, the Ministry of Trade - Vietnam Embassy in the United Kingdom and Northern Ireland noted that the UK has the most developed distribution and sales channel system in the world.

The market is clearly delineated and has the participation of many companies in the chain. The most important first step for Vietnamese export enterprises is to promote their products and provide full information about their products to customers through highly professional English websites and electronic catalogs. Companies can refer to information about similar products on Alibaba.com.

To quickly enter the market, the most effective way for Vietnamese businesses is to find trading companies or distributors for their products. Distributors are companies that already have a network of retail customers such as a network of supermarkets. Over the years, UK supermarkets and large retail groups gradually turn to direct orders from reputable manufacturers to diversify products, seek creativity, as well as to better control original and quality of the product.

Major British supermarkets such as Tesco, Sainsbury's, Asda and Morrisons provided more information to guide and encourage manufacturing companies to contact them directly. This is also the direction that Vietnamese export enterprises need to pay attention to and carefully consider.