FTAs deliver boost to exports

Export growth

Since it joined the World Trade Organization (WTO) in 2007, Vietnam has signed 14 FTAs and negotiated three others, opening markets to exports and providing opportunities for the country to integrate more deeply into global production and value chains.

According to the Ministry of Industry and Trade, in recent years, Vietnam has been doing a good job of taking advantage of FTAs’ market opening commitments to boost exports. Export values to all markets with which Vietnam has signed FTAs have increased significantly, with those to Chile, India, the Republic of Korea (RoK), and China achieving sharp growth.

Vietnam has adapted its exports with a mutually complimentary commodity structure to its FTA partner countries, including Japan, the RoK, Australia, New Zealand, and the Eurasian Economic Union. In the first 11 months of 2019, exports to Japan, the RoK, ASEAN (the Association of Southeast Asian Nations), Russia, and New Zealand increased 7.6, 10.1, 2.5, 9.1, and 6.8 percent over the same period in 2018, respectively. Exports to CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) markets also experienced high growth. Vietnam has taken advantage of the agreement’s commitments to promote exports and diversify export markets. In the first 11 months of 2019, exports to Canada reached US$3.5 billion and those to Mexico totaled US$2.7 billion, up 27.2 and 29.5 percent from the same period in 2018, respectively.

Exports using certificates of origin (C/O) according to FTAs totaled US$46.2 billion in value in 2018, accounting for 39 percent of the country’s foreign trade with FTA markets in the same year. The rate related to trade with the RoK reached 60 percent, while that associated with trade with Japan was 37.8 percent. The growing use of C/Os shows that Vietnamese exporters have increasingly taken advantage of tariff preferences in FTA markets.

Domestic enterprises did a particularly good job in taking advantage of FTAs, which contributed to their 18.1 percent export growth in the first 11 months of 2019, more than double the country’s average (7.8 percent) and almost five times that of foreign invested enterprises (3.8 percent).

Although they represent almost 70 percent of Vietnam’s foreign trade value, foreign invested enterprises reached a modest export growth, with their phone and phone component exports, for example, only growing some five percent compared to the same period in 2018. Meanwhile, domestic businesses achieved higher export growths: Their textile, footwear, and non-wood furniture exports grew 10.4, 13.5 and 46.4 percent, respectively. Countries that signed an FTA with Vietnam have relatively high demand for these goods.

Ministry of Industry and Trade role

The above-mentioned achievements are attributed to strenuous, efficient efforts by the government, ministries, sectors, localities and the business community in implementing and taking advantage of FTAs. The Ministry of Industry and Trade has helped businesses make use of FTA-based market and tariff incentives and preferences to increase exports to FTA markets. The ministry strengthened export promotion, focusing on expanding markets in developing countries, potential markets and newly emerging markets while simplifying and modernizing C/O granting formalities, classifying businesses in preferential C/O granting, promoting internet-based C/O issuance, and facilitating self-certification of origin.

Economist Pham Tat Thang, former Director of the Vietnam Industry and Trade Information Center under the Ministry of Industry and Trade said most of Vietnam’s key exports are essential consumer goods, therefore, Vietnam will maintain its export growth, especially to FTA markets.