What to do with the rising protectionist trend in many major markets?

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Shrimp is one of Vietnam’s exports facing many trade remedy lawsuits.Source: Internet.

Increased risk from protectionism

Speaking at a recent trade remedy workshop, Mr. Huynh Minh Vu, deputy director of the Ho Chi Minh City Center for International Integration Support, said that the implementation of new generation FTAs including EVFTA and UKFTA has helped increase export turnover of Vietnam’s goods to these markets.

Specifically, in 2022, Vietnam's export turnover to the EU recorded an increase of nearly 17%, reaching nearly $47 billion, accounting for 13% of Vietnam's total export turnover. Similarly, the export turnover of Vietnam's goods to the UK market also reached over 6 billion USD, an increase of over 5%. However, besides the positive growth in trade turnover, Vietnamese goods also face challenges when countries increase protectionism by increasing the use of technical standards and trade remedies to protect domestic production against increased import pressure.

According to data from the Ministry of Industry and Trade, as of May 2023, Vietnam's export goods were the subject of 228 investigation cases related to trade remedies. Do Thi Sa, Deputy Director of the Information and Warning Center of the Ministry of Industry and Trade, said that not only items with large export turnover such as pangasius, basa fish, shrimp, wood, textiles, footwear, and steel but items with small turnover such as honey, lawn mowers, paper, and tobacco are also being investigated for trade remedies.

With the efforts of the Government, the awareness of the management agencies and the business community about trade remedies is gradually being improved, a number of industries and businesses have identified trade remedy as a normal activity in international trade, thus proactively handling and responding to foreign trade remedy cases.

However, some small businesses, whose understanding of injury prevention is not deep, are still passive when they become the subject of investigation, and do not understand the work to be done while the requirements of foreign agencies are very strict about the time order, procedures and information provided by enterprises.

“Enterprises that do not properly ask and answer the investigation agency's requirements are likely to receive adverse results, as shown by having to pay high taxes when exporting to a market subject to trade remedies, greatly affecting Vietnam's exports", Sa emphasized.

Nguyen Viet Ha, an officer of the Legal Department, Department of Trade Remedies of the Ministry of Industry and Trade also said that, from 2018 to now, the EU and the UK have not initiated any new trade remedy cases with Vietnamese goods, but that does not mean that in the future these markets will not investigate with Vietnamese exports.

“With the implementation of EVFTA and UKFTA, import and export between Vietnam and these markets increased sharply. With such an increase in volume, it is very easy for countries to use trade remedies to protect domestically produced goods," Ha advised.

Advice for businesses

Sharing about the response to foreign trade remedy lawsuits, Nguyen Trang Nhung, an officer of the Foreign Trade Remedies Handling Department, Trade Remedy Department of the Ministry of Industry and Trade, said that the process of dealing with foreign trade remedies.

The case faced great difficulties due to differences in the internalization of regulations, procedures and order of the trade remedy investigation. Although WTO member countries all follow the WTO's frame of reference on trade remedies through anti-dumping, anti-subsidy and countervailing agreements, however, how to internalize the law is the right of the investigating authority, as long as it does not affect or violate the provisions of the WTO. Therefore, each country will have its own regulations.

Besides the differences in regulations, the investigation agency's request to provide information in the language of the host country also causes great difficulties for Vietnamese enterprises. "In just 30 days, businesses have to complete a questionnaire of several hundred pages and have to translate from Vietnamese to the language required by the investigation agency, which is a big challenge for businesses," said Nhung. In addition, there are difficulties due to a limited understanding of trade remedies, especially in industries that have never been subject to trade remedies tax.

To better respond to trade remedy cases in the future, the Ministry of Industry and Trade recommends that businesses be equipped with knowledge about trade remedies. Nhung recommended that, when planning to develop exports in a market, enterprises should find out if that country has ever investigated its export products or has ever investigated with other countries in terms of goods and services or not. In fact, there have been cases where an enterprise exported to a country but did not know that the product was being taxed in that country, leading to the goods having arrived at the port but the importing partner required the exporting enterprise to bear the payment. This tax will only be received.

In addition, businesses also need to regularly monitor and exchange information with associations, management agencies and importers in other countries to capture information early and take measures. Nhung gave an example from the US case of an anti-dumping investigation on honey in 2021. Although the US did not initiate the investigation until May 2021, from February 2021, through information from the importers of the Vietnam Bee Association received the information and reported it to the Ministry of Industry and Trade for support. Thanks to the early preparation, this case achieved good results.

In addition, investigative agencies will ask to extract business and production data for a certain period of time, and even come directly to check the accounting system. Therefore, enterprises also need to build a complete and clear accounting management system to facilitate data extraction.