Start with EVFTA but do not neglect trade defence

Steel is a typical commodity which has been investigated by the EU for trade remedies. Photo: Phan Tram

The Vietnam-EU Free Trade Agreement (EVFTA) is being reviewed and approved by the National Assembly. It is expected that this agreement may come into effect as early as July 2020.

The EVFTA opens many opportunities to promote the export of goods to the EU market. However, the EU market has appliedtrade remedies such as anti-dumping, anti-subsidy and safeguard measures to support domestic industries when competing withimported goods that Vietnamese businesses need special attention.

Data from the Ministry of Industry and Trade shows the EU has investigated 14 trade remedies, including six cases of tax evasion investigations related to Vietnam's exports, ranking fifth among investigated countries and accounted for 8% of the total number of trade remedies with Vietnamese goods.

Products under investigation include: leather uppers, steel pipes, screws, bicycles, fiber, steel, forklifts, gas lighters, metal rings, fluorescent lights, zinc oxide and MSG. Currently, only safeguard measures against steel are still in effect.

Regarding trade remedies regulations in EVFTA, the Ministry of Industry and Trade stated the content of trade remedies are based on WTO rules and with progressive principles, consistent with the legal system of Vietnam about trade remedies.

There are two basic new points in trade remedies in the EVFTA. First, the EVFTA adds regulations which limit the use of tools to avoid abuse and ensure fairness and transparency. These regulations create a more stable and favourable business environment for exporters.

Second, the EVFTA stipulates the principle of applying lower tax rates, meaning anti-dumping or anti-subsidy duties are only sufficient to eliminate damage (while the WTO is not required to use this rule).

One point that needs attention is under the EVFTA, the two sides will not apply anti-dumping and anti-subsidy measures if this is suitable with the public interest (i.e. besides considering the situation of the domestic industry, the investigating country should also consider the situation and views of importers, industry associations, consumer representative organizations and downstream enterprises).

In addition, the representative of the Ministry of Industry and Trade said the EVFTA also provides for a bilateral defence mechanism to ensure that the tariff reductions under the agreement do not cause "shocks" to domestic manufacturing industries.

The EVFTA provides for a bilateral safeguard mechanism of 10 years, creating a legal basis to ensure the rights of the parties to use legitimate safeguard tools in protecting manufacturing industries if any damage or threat due to tariff reductions from the agreement.

Talking with the Customs Newspaper reporter, Le Trieu Dung, Director of the Vietnam Trade Administration Department (Ministry of Industry and Trade) assessed that, to minimisethe possibility of applying trade remedies measures, there should be an overall andlong-term strategy in developing production chains andincreasing added value for Vietnam's exports.

"In addition to focusing on in-depth development (increasing domestic added value), Vietnam also needs to closely monitor for early warning if our exports to markets increase rapidly," Dung said.

The Ministry of Industry and Trade recognisesthat it is necessary to have a more effective coordination mechanism among concerned agencies in the investigation process such as: Developing, connecting the updated data system on the situation of import and export between the Ministryof Industry and Trade, General Department of Customs (Ministry of Finance); closely monitoring changes in price and import volume of some key products.

At the same time, maintain regular contact between State management agencies and industry associations.It is necessary to strengthen the capacity of enumerators and supplement human resources to ensure the effectiveness of the investigation.