Vietnamese enterprises always have the advantage of "homefield" in the competition from FTA

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Nguyen Thi Thu Trang, Director, Centre for WTO and Integration, Vietnam Chamber of Commerce and Industry (VCCI)

In 2020, under the impact of the Covid-19 pandemic, what are the opportunities and challenges for the implementation of FTAs ​​?

Perhaps never before has international trade faced such great challenges as in 2020. While the trend of trade protectionism from 2018-2019 continued to escalate, the Covid-19 pandemic broke out and spread out of control, disrupting both production chains and global trade flows at the same time. As an open economy, with the import-export ratio twice GDP, Vietnam is greatly affected by this difficult context.

However, in such circumstances, Vietnam's export and import results in the first 11 months of 2020 can be seen as very positive. The value of exported goods reached US$254.97 billion, up 5.5%, while import turnover was US$ 234.91 billion, up by 1.7%, resulting in a trade surplus of more thanUS$ 20 billion - the largest ever.

Clearly, there is no doubt about the benefits of FTAs ​​with preferential tariff opportunities for Vietnam's exports and imports with FTA partners, increasing opportunities for price competition for these goods. In addition, there has been a reduction of unreasonable non-tariff barriers, more unity and transparency in procedures, facilitating trade flows.

However, the challenges in taking advantage of opportunities from FTAs ​​are also many, of which the limitations in the ability to increase the localisation rate to meet the FTA preferential rules of origin and the capacity to satisfy meeting strict technical barriers, food hygiene and safety from FTA partners. However, these are challenges in themselves, not because anew FTA arises or because the FTA is more serious or severe.

How do you evaluate the work of improving understanding to take advantage of FTAs ​​of the regulator and the business community in 2020?

If we have to talk about the most prominent point in efforts to increase the effectiveness of the implementation of FTAs ​​by 2020, it is the communication of commitments to businesses. Specifically, there is the dissemination of communication about FTAs between Vietnam and the European Union (EVFTA) - the largest new generation FTA to take effect in 2020. According to our observations at VCCI, there is no FTA but ministries, branches and business associations have many communication activities, in various forms (seminars, training courses, live or online, TV reports, topics on press), with such more in-depth topics.

According to a recent VCCI survey, the percentage of enterprises that know relatively or well about EVFTA commitments related to their business activities is 30%, the highest among FTAs ​​(while EVFTA has just recently in effect, while other FTAs ​​will be valid for at least oneyear, more than 10 years or more).

In your opinion, how have State agencies' activities to support FTA implementation have changed and should continue to change?

In my opinion, three important issues that businesses expect from State agencies in the implementation of FTA are: Quickly issue legal documents guiding the implementation of commitments; organise the implementation of commitments in practice and flexibly overcome arising shortcomings; disseminating and propagating commitments so businesses can understand and apply. Further are activities to support enterprises to improve their competitiveness and the business investment environment, and reform the administration to reduce costs and create the best conditions for businesses to feel secure in business.

For the EVFTA in particular and FTAs ​​to be implemented in 2020 in general, State agencies' direct support activities related to FTAs have been relatively improved compared to the past. For example, with the CPTPP, enterprises have to wait 6-7 months to get special preferential import and export tariff under the agreement, with the EVFTA, this is only twomonths. Or with the CPTPP, the problems of the rules of origin are solved relatively in time, but with the EVFTA, the processing speed and resolution have been significantly faster.

However, many businesses have not taken advantage of the opportunity because they have not received the necessary support, so State agencies must offermore effective support.

Are concerns that Vietnamese enterprises may "lose at home" with FTAs ​​valid?

Considering strictly, with the FTAs ​​already in effect, the possibility of enterprises "losing at home" is not great. The reason is that even inthe ATIGA - FTA between ASEAN countries, which has completed its opening schedule in 2018, businesses can compete fairly, not as much as we worry. With the ACFTA - FTA between ASEAN and China, or VKFTA - FTA between Vietnam and South Korea, although we face difficulties in the early stage, we can still keep a certain market share in the domestic market. As for other FTAs, such as the EVFTA with EU, VCFTA with Chilethe complementary commodity structure between Vietnam and its partner also helps to reduce this risk.

However, coming here with RCEP - Regional Comprehensive Partnership Agreement between ASEAN and fivepartner countries, including China, the situation may be different, the risk of "losing at home" seems more complex. RCEP creates an additional priority route for these countries' goods to penetrate the Vietnamese market, but most of the goods from these countries are similar to Vietnam, directly competing with Vietnamese goods. But there are reasons we should not be too pessimistic. For example, the level of openness in Vietnam's RCEP to partners is much lower than the existing FTAs ​​. Like the import, most of them are intermediate goods, for export production, not for domestic consumption.

However, face-to-face competition from RCEP and previous FTAs ​​ is inevitable. Enterprises of course have no other way but to increase their efforts to improve competitiveness, make the most of FTA commitments to have reasonable inputs. I believe domestic enterprises always have a “home field” advantage in this competition. The remaining issue is the actions of businesses to exploit this advantage and make efforts to increase their competitiveness in a sure and sustainable way.