Leather, footwear sector takes first hopeful steps under EVFTA

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

How will the EVFTA benefit leather and footwear businesses?

In recent times, Vietnam’s leather and footwear exports to the EU have grown at only 5-6 percent annually, accounting for 28-30 percent of total export turnover to this market. One of the reasons is due to the economic slowdown in the EU, along with the Brexit issue, which has harmed Vietnam’s footwear orders. The agreement is expected to boost Vietnam’s leather and footwear exports.

Under the deal, Vietnam will learn from footwear production technologies of developed countries, such as Germany and Italy, and import materials and accessories for the sector’s middle and high-end segments.

How have domestic firms prepared to satisfy the EVFTA’s rules of origin?

The rules of origin are no big deal for Vietnamese businesses as the domestic leather and footwear sector has benefited from the EU’s Generalized Scheme of Preferences (GSP), which is exclusively for developing economies like Vietnam. In addition, the rules of origin stipulated in the EVFTA are not much different from the EU’s GSP, so domestic leather and footwear businesses can fully meet them.

However, the other side of these incentives is that they could lead to trade frauds and falsification of rules of origin, which will harm not only a single company, but also the entire business community. If a firm falsifies rules of origin, the EU would warn the whole sector.

Businesses must raise their awareness and comply with export regulations, especially new exporters. Those who have succeeded in exporting to the EU should take measures to control products closely as well as partners to avoid the export of goods of unknown origin under Vietnam’s name.

State management agencies should keep a close watch on export statistics, especially seaport transfer, and quickly check signs of violations.

What should the state do to help the leather and footwear sector make the most of opportunities provided by free trade agreements to which Vietnam is a signatory?

Providing information and promoting training are two very important issues. Accordingly, information channels should be diversified to enable businesses to access information as fast as possible. In addition, it is necessary to devise training policies, meeting business demands. Trade promotion programs are also needed to help businesses approach markets and create a network connecting domestic and foreign companies.

What is your forecast for Vietnam’s leather and footwear exports to the EU in 2019?

Leather and footwear exports in the first half of 2019 grew by 10 percent compared to a year ago. Orders from member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), such as Canada and Mexico, increased by 15-20 percent.

Many potential EU customers have come to Vietnam to learn about the sector and place orders. This is a good sign thanks to the signing of the EVFTA, creating a foundation for positive export growth in the remaining months of this year.

The EU is a traditional market, which has long-standing cooperation with Vietnam. Given its strict technical standards, Vietnamese businesses need to comply seriously with all regulations in order to facilitate exports to the EU. In addition, businesses should continue to study EU market demands in order to make the best use of the EVFTA.