How should Vietnam cope with a growing global protectionist trend?

13:09 | 04/03/2017 Economy- Society

(VEN) - Trade protection and the use of technical barriers is a looming problem for many countries, not only Vietnam. To pursue sustainable development, Vietnam must therefore increase efforts to improve the business environment in order to attract more investment, enhance its competitiveness, and participate more deeply in global supply chains to achieve higher added value levels.  

how should vietnam cope with a growing global protectionist trend

Dr. Luu Bich Ho, former Director of the Development Strategy Institute under the Ministry of Planning and Investment:

Careful preparations are needed to overcome protection barriers

National protectionism is rising up spreading worldwide. Many countries are feeling losses from globalization and liberalization, so they are reverting to protectionism and isolation to harmonize national interests. This is not something unreasonable, especially in the context of modern equipment gradually replacing humans at work. However, globalization and liberalization will be a major development trend of mankind in the long term.

The Vietnamese government has affirmed its determination not to pursue protectionism as its development depends on the global and regional markets. To cope with the rising protectionist trend, on the one hand, and to remove technical barriers, on the other, Vietnam needs to enhance the competitiveness of the entire economy and of each business by producing quality products at reasonable costs. This is the only way Vietnamese goods can overcome protection barriers and win consumer trust in the competition with foreign products. In addition, Vietnam needs to seek new export markets and new trading partners.

how should vietnam cope with a growing global protectionist trend

Vu Duc Giang, President of the Vietnam Textile and Apparel Association:

Making the most of opportunities offered by new-generation FTAs

The Trans-Pacific Partnership (TPP) is not a magic wand for Vietnamese exports. Apart from this trade deal, Vietnam is involved in more than 10 other free trade agreements (FTAs). Therefore, careful preparations will help Vietnamese businesses promote exports to various markets, including the US.

Domestic businesses need to adapt themselves to market changes to minimize losses. Along with strengthening their position in traditional export markets, they should promote their presence in niche markets in the Near East/Middle East and Africa, while at the same time boosting domestic sales. To make the most of the purchasing power of 90 million consumers in the domestic market, businesses need to diversify their products according to the tastes and incomes of consumers from each area.

There is great potential for Vietnamese textiles and garments to enter the European market. In the 2007-2015 period, Vietnam was one of the top three countries, behind Cambodia and Bangladesh, in terms of the growth of textile and garment exports to Europe. The cooperation with partners from Europe and other countries will help domestic textile and garment companies improve their design capability and manufacturing management skills, increase productivity, and enable a shift from providing outsourcing services for foreign firms to manufacturing products for export FOB (free-on-board), and become original design manufacturers (ODMs) or original brand manufacturers (OBMs). This will yield higher added value for them.

Existing trends of trade protection and the US withdrawal from the TPP require Vietnamese textile and garment companies to enhance the competitiveness and added value of their products in order to benefit the most from new-generation FTAs.

how should vietnam cope with a growing global protectionist trend

Phan Thi Thanh Xuan, Secretary General of the Vietnam Leather, Footwear and Handbags Association:

Improving internal capabilities is urgently required

The FTAs Vietnam has signed will gradually reduce tax rates applied to Vietnamese leather and footwear exports from 3.5-57.4 percent to zero percent. However, technical and non-tariff barriers will be a big challenge for small and medium-sized leather and footwear manufacturers.

This year, China continues to cut investment incentives in the fields of textiles, garments, leather and footwear to concentrate on high-tech sectors. Therefore, some outsourcing orders will possibly be moved to Vietnam. The EU-Vietnam Free Trade Agreement (EVFTA) with attractive tariff preferences, which is expected to take effect in early 2018, will also help Vietnam attract more investors. Therefore, there will be opportunities for Vietnamese leather and footwear businesses to prosper.

However, to overcome non-tariff barriers, especially requirements in terms of product quality, corporate responsibility, and employee benefits, domestic businesses need to urgently improve their capabilities through the development of human resources and the application of new technologies in production, and ameliorate their management skills in order to reduce production costs and enhance competitiveness. Updated information about market changes will allow them to make timely and appropriate adjustments to their manufacturing and trading strategies.

how should vietnam cope with a growing global protectionist trend

Truong Dinh Hoe, Secretary General of the Vietnam Association of Seafood Exporters and Producers:

New policies may affect seafood exports

Newly elected US President Donald Trump will possibly put in place many trade policies unfavorable to Vietnamese seafood exports.

Even before he took office, the US launched continuous anti-dumping investigations against Vietnamese shrimp and tra fish exports and set up a number of trade barriers to protect the US agricultural sector.

how should vietnam cope with a growing global protectionist trend

Nguyen Ton Quyen, Vice President of the Vietnam Timber and Forest Products Association:

Businesses need to carefully study each export market

Trade protection responds to temporary interests for domestic manufacturers and provides jobs for some groups of workers. However, it restricts supplies and reduces the competitiveness of domestic manufacturers and traders. As a result, consumers have to buy goods at higher prices.

To cope with trade barriers, wood businesses have to carefully study the FTAs Vietnam has signed, as well as each export market, and the regulations of importing countries.

how should vietnam cope with a growing global protectionist trend

Le Tien Truong, General Director of the Vietnam National Textile and Garment Group:

Export markets should be diversified

Starting in late 2016, a growing trend of protection of domestic markets has emerged in most large economies in the world.

This has affected consumer habits and ordering practices of importers. Instead of ordering large volumes of goods, importers place short-term orders and require speedy delivery. This is a big challenge to sectors that depend heavily on exports, like textiles and garments. This year, the UK’s official exit from the EU and the US President’s trade protection policy will be major hindrances to Vietnamese textile and garment exports. However, the free trade agreement with the EU, scheduled to go into effect early next year, is expected to take domestic textile and garment companies into a new playing field. They are trying to increase their market share in the EU in an effort to raise the sector’s total export value to US$30 billion in 2017.

Textile and garment businesses should improve the efficiency of their equipment and the effectiveness of their investments, and create suitable products for export to niche markets.

how should vietnam cope with a growing global protectionist trend

Truong Gia Binh, Chairman of the Board of the FPT Group:

Concentrating on sectors and areas with comparative advantages

The world is entering a very complicated period. People talk about national protectionism and populism, rather than globalization and development. In this context, Vietnam should take a more practical look at all issues and focus its attention on areas with comparative advantages, such as information technology.

The government needs to promote a startup spirit in society. Children should be taught to think of startups right in schools. The government needs to put in place decisive policies that encourage businesses and investors to be adventurous in startups.

how should vietnam cope with a growing global protectionist trend

Le Van Quang, General Director of the Minh Phu Seafood Group Joint Stock Company:

Increasing sales by expanding into new markets

There are opportunities for Vietnamese seafood to enter new markets, but the road ahead presents challenges, especially in terms of quality and food safety requirements. Many countries have set up trade barriers to restrict food imports.

To overcome these barriers, Vietnam needs to apply high technology in aquaculture and seafood processing, along with efforts to seek new export markets. Shrimp breeding needs to undergo major changes in all its stages to create high quality products. Quality, safety, and competitive prices will persuade consumers worldwide to buy Vietnamese seafood despite trade barriers.

how should vietnam cope with a growing global protectionist trend

Nguyen Thi Thu Phuong, Deputy Director of the Small and Medium Enterprises Development Support Center 2 (SMEDEC 2):

Adapting to trade protectionism

Statistics from the World Trade Organization show that between October 2014 and October 2015, countries took an average 15 new measures each month to restrict international trade. Among the 2,557 measures taken from late 2008 until the end of 2015, including trade sanctions, only 642 have been lifted.

Obviously, countries keep on taking actions to restrict international trade despite efforts to boost trade liberalization. Therefore, Vietnam has no other option but to adapt itself to trade restrictions or protectionism by the US or other countries.

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