06:00 | 27/04/2021 Cooperation
(VEN) - The UK-Vietnam Free Trade Agreement (UKVFTA) will officially take effect on May 1 and is already boosting Vietnamese exports to the UK and helping improve the competitiveness of Vietnamese goods in this market.
Bilateral trade growth
Importing goods worth about US$700 billion annually, the UK has become a highly attractive market for Vietnamese exports and Vietnam’s third largest European trade partner.
The General Department of Vietnam Customs says bilateral trade in goods topped US$657.35 million in January, a year-on-year hike of 78.57 percent. The Ministry of Industry and Trade described it as impressive growth, particularly in the context of Covid-19.
Vietnam’s shipments to the UK reached US$598.07 million, 84.61 percent higher than the same time last year, and 56.51 percent higher than December 2020. Farm produce exports maintained stable growth in January, with export revenue of seafood surging 18.1 percent to US$19.72 million, and fruits and vegetables rising 148.6 percent to US$1.04 million.
Under the UKVFTA, tariffs levied on Vietnamese shrimp products are being reduced from 10-20 to zero percent, while more than 94 percent of 547 tariff lines on Vietnamese fruits and vegetables will also be zeroed.
Experts say a wide range of Vietnamese fruit like lychee, longan, dragon fruit, pineapple and rambutan will have greater advantages accessing the UK market than those from Brazil, Thailand and Malaysia, which do not have trade agreements with the UK.
Vietnam also saw strong increase in its shipments of telephone and parts (up 371.6 percent to US$252.59 million), machines, equipment and parts (up 109.9 percent to US$74.58 million), and computers and parts (up 91 percent to US$31.82 million), among others.
Meanwhile, Vietnam spent US$59.297 million on imports from the UK in January, up 34.3 percent year-on-year. In 2020, bilateral trade totaled US$5.64 billion, including US$4.96 billion worth of Vietnamese exports.
The UK has become the 25th largest importer of Vietnamese goods, but Vietnam has accounted for only 0.88 percent of the UK’s total import value.
Major Vietnamese exports to the UK include wood furniture, rubber products, textiles and garments, coffee, rice, footwear, fruits, vegetables, and seafood. In 2019, the UK imported almost US$11.9 billion worth of wood furniture, only 3.6 percent of which was provided by Vietnam, 33.5 percent lower than China’s 37.1 percent rate. Although Vietnam has become the world’s third largest rubber producer, the country accounted for only 0.7 percent of the UK’s rubber import value, ranking 26th among rubber exporters to that market. Vietnam has become the largest and fourth biggest coffee exporter to the UK in terms of export volume and value, respectively.
Vietnamese exports to the UK, including wood furniture, textiles, garments, coffee, and footwear, will benefit from a zero (0) percent tax as soon as the UKVFTA takes effect. The tax on Vietnamese fragrant rice, for example will be reduced from 17.4 to 0 percent (referring to tariff quota-based exports). Outstanding rice variety improvements are expected to help expand the Vietnamese rice’s market share in the UK. The UKVFTA will also zero the UK’s footwear import tax lines from 6.7 percent.
How to hook up with UK importers
The UK has world leading sales and distribution systems. In recent years, supermarket groups order products from factories directly to diversify their range of goods and control product quality. Apart from working with such groups, Vietnamese businesses can deal with and sell products directly to customers through e-commerce.
The most efficient way for Vietnamese businesses to quickly enter the UK market is to work with companies and/or distributors in the UK, which have retail sales networks, including supermarkets such as Tesco, Sainsbury’s, Asda and Morrisons. Apart from directly meeting partners, Vietnamese businesses can sign up to become goods suppliers of UK distributors through their websites.
The UKVFTA will offer both opportunities and challenges for Vietnamese exporters. Careful research of customer tastes and shopping practices in the UK is crucial for them to access this discerning market.