Non-tariff barriers - challenges for businesses in the EU market

EU businesses find out about goods during a trade promotion event in HCM City. Photo: Nguyen Hue

Strict requirements

According to the Ministry of Industry and Trade, the EU is the second largest export market of Vietnam. In 2019, export turnover to the EU will hit about 41.8 billion USD. With the EVFTA expected to take effect in mid-2020, 85 percent of Vietnam's export tariff lines to the EU will be abolished, equivalent to 70.3 percent of export turnover. The number of tariff lines removed after seven years of this agreement is more than 99 percent, equivalent to 99.7 percent of Vietnam's export turnover. This will be a great opportunity for Vietnam's export enterprises to increase their market share in the EU.

Nguyen Thao Hien, Deputy Director of the European and American Market Department, Ministry of Industry and Trade, said the EU market favours products of good quality, clear origin and high level of safety to ensure food hygiene and safety. Consumption trends of the EU market also tend towards branded products and organic product lines of natural origin that are friendly to the environment. In particular, EU consumers attach great importance to the social responsibility of products.

“When tariff barriers are removed, non-tariff barriers will be a major problem in the EU market. Enterprises not only need meet very stringent environmental, quality, and technical standards, businesses also could face trade remedies for products that pose a risk of trade balance loss. In which preventive measures commonly applied are anti-dumping, anti-subsidy and safeguard measures. This will be a parallel trend with the trend of trade liberalisation,” Hien said

At a recent conference held in HCM City, Vu Xuan Phong, Vice President of Vietnam International Arbitration Center (VIAC), said a wide range of commitments and high levels of incentives (EVFTA) have many incentives about export tax to Europe to create good conditions for businesses. However, the market mechanism has high and strict principles and standards, requiring exporters to grasp requirements of EU businesses. This is also a market with a systematic legal system focusing on protecting the interests of consumers, so export goods must also meet requirements of the market to reach consumers.

A typical example was in 2019 Vietnam's seafood export turnover decreased by US$500 million compared to the original goal. According to the Vietnam Association of Seafood Exporters and Producers (VASEP), one important reason is that the fishery industry was affected by the EU's yellow card for not complying with EC regulations on illegal fishing.

Support businesses to access the market

According to Nguyen Thao Hien, the preparation for EVFTA has been implemented by the Ministry of Industry and Trade since negotiations. To create favourable conditions for enterprises to boost exports, in addition to providing market information, the Ministry of Industry and Trade also propagates and disseminates to enterprises legal issues, because if they do not master regulations on imports into the EU, they cannot be in this market. In addition, foreign businesses regularly monitor market fluctuations and warnings from the EU in the context of trade conflicts, tariff removal barriers, technical barriers and trade defences that increase daily.

Vo Victory, Trade Counselor in Spain, said trade counselors have regularly updated reports on the European-American Market Department on trends and tastes, especially technical requirements of EU market. From there, there will be warnings and suggestions for solutions to associations and industries to inform businesses how they can meet the general requirements for each customer, each specific case and meet requirements of EU countries.

In addition, to support businesses to expand markets, the business often has activities to reach large corporations and distribution chains in other countries to be ready to provide contact information with clues or intermediaries importers when domestic enterprises have demand.

“In order to export well into the EU market, businesses need to persistently contact the deals so that the businesses have a database of business cooperation needs of domestic enterprises. In the near future, the businesses will have activities to gather demand for exporting goods going along with time and localities so that when there are external events or specific requirements from local businesses, they will directly support the connection for enterprises which exploit the market better. Besides businesses need to connect with suppliers because suppliers will set standards and compliance condition for each market. Therefore, buyers will be an important channel to help businesses capture information and meet the requirements so that goods can reach the market,” Thang said.