CPTPP creates breakthroughs in exports to Canada

09:02 | 02/07/2019 Trade

(VEN) - The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that took effect in January 2019 has created impetus for Vietnam’s exports to its fellow Pacific Rim countries. Exports to Canada, in particular, have registered breakthroughs.

cptpp creates breakthroughs in exports to canada
Opportunities abound for Vietnam to increase textile and garment exports to Canada

Highest-level market opening commitment

Ministry of Industry and Trade (MoIT) data show that in the first four months of 2019, Vietnam exported US$1.18 billion worth of goods to Canada, an increase of 43.4 percent compared with the same period last year. Major exports to this market included textiles and garments, seafood, footwear, timber, wood and agricultural products. Textile and garment exports were up 22.6 percent; footwear up 41.4 percent; handbags, suitcases, headwear and umbrellas up 21.5 percent.

Trade with Canada in the first four months brought Vietnam a surplus of US$896.14 million, up 73.4 percent compared with the same period last year.

Vietnam currently has great advantages in bilateral trade with Canada. In 2018, Vietnam exported US$4 billion worth of goods to this market and recorded a trade surplus of US$2.4 billion. Among CPTPP member states, Canada’s market opening commitment is at the highest level. Specifically, Canada pledged to eliminate 95 percent of tariff lines for its imports as soon as the agreement took effect, reducing the average Most Favored Nation (MFN) tariff applied to 78 percent of Vietnam’s export value from 17 percent to zero.

Over the past decade (2008-2018), trade between Vietnam and Canada has grown 412 percent. From 2000-2018, the growth was 2,300 percent. Bilateral trade is forecast to grow an average 20 percent annually in the coming years.

Still much room

According to Do Thi Thu Huong, Vietnamese Trade Counselor in Canada, although Vietnamese products currently account for less than one percent of goods imported by Canada, made-in-Vietnam textiles, garments, leather, footwear, seafood and furniture sell very well in this market. The export of food and farm produce such as coffee, pepper, cashew nuts, fruit and vegetables has also increased. Meanwhile, Vietnam has high demand for Canadian high-tech products, machinery, bio-products, chemicals and materials for production and animal husbandry.

Vietnamese seafood products have carved out niches in the Canadian market. Vietnamese basa fish currently accounts for 100 percent of pangasius products imported by Canada. One third of frozen and processed shrimp imports by Canada are from Vietnam. Eight percent of big-eye and yellow-fin tuna imports by Canada are from Vietnam. Canada’s MFN tariffs applied to these products have been reduced to zero since the CPTPP took effect, promising Vietnam opportunities to maintain and diversify exports to this market.

Although the Canadian clothing market has a small capacity, many world-leading textile and garment distributors are headquartered in Canada and their distribution networks cover the US and other countries. Textiles and garments currently account for about seven percent of Canadian imports. Canada pledged to reduce the import tariff applied to textiles and garments from 17-18 percent to zero as soon as the CPTPP took effect or three years later if the products meet the yarn forward rule of origin. Do Thi Thu Huong believes the import tariff gap will help Vietnam promote textile and garment exports to Canada. Therefore, in her opinion, Vietnam should send business delegations to Canada to introduce their manufacturing capacity and meet major partners in this market.

Wooden furniture is also one of Vietnam’s advantages in the Canadian market. Vietnam is the largest exporter of bedroom furniture to Canada, with a market share of 30 percent. Currently, US$166 million worth of Vietnamese wood products are sold in the Canadian market. “To be exportable to Canada, wood products should be made of materials that are resistant to climate change. There must be no changes in color and quality of products when they reach Canadian importers. If any, the changes must be reported before the products reach the importers. Any breaks that occur during the transportation process must be dealt with as quickly as possible,” Do Thi Thu Huong said.

Apart from a 37-million population, Canada has a community of 250,000 Vietnamese expats, promising opportunities

for Vietnamese processed food products to access this market.

Ca Huong