Trade deal with EU a hit so far

Nguyen Anh Duong, Head of the Department for General Economic Studies

What is your assessment of Vietnam's export growth to the EU after more than two years of EVFTA implementation?

Exports have significantly contributed to Vietnam’s economic recovery and growth over the past two years, and the country’s export growth is attributed to market diversification and increased substantive cooperation with free trade agreement (FTA) partners.

Vietnam earned export value of US$83.4 billion from exporting goods to the EU between August 2020 and December 22, 2022, an average of US$41.7 billion per year, 24 percent higher than the annual average in the 2016-2019 period.

Vietnam’s exports to the EU have improved not only in terms of value but also quality since the EVFTA implementation, reflected in increases in the proportion of final consumer products compared to other markets. In the EU market, Vietnamese enterprises continue to effectively exploit their price and quality advantages, meeting relatively high standards.

As of August 1, 2022, Vietnamese enterprises implemented the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) for more than a year, and are continuing it, which is preparing them and providing experience for them to satisfy and adapt to new-generation trade standards and make better use of EVFTA opportunities. Vietnam and Singapore are the only Southeast Asian exporters having a free trade agreement with the EU, providing Vietnam with an advantage of early market penetration.

Enterprises make good use of EVFTA opportunities to promote exports

Many exports to the EU have grown impressively over the past two years, including iron and steel (up 739 percent), cameras, camcorders and components (up 260 percent), and machinery and equipment (up 82.3 percent). Does this reflect good use by Vietnamese enterprises of EVFTA opportunities?

Vietnamese enterprises have made good use of the EVFTA to increase exports. Apart from iron and steel, camera, camcorder, accessory, machinery and equipment exports, wood and wood pellet exports to the EU have grown rapidly.

This achievement is not only attributed to businesses but also to EVFTA and EU market information support by relevant ministries and sectors. The Ministry of Industry and Trade plays an important role, issuing guiding documents and periodically reviewing and evaluating the agreement’s implementation. Apart from learning about the EVFTA itself, businesses have also been informed about changes in the tastes of EU consumers in the context of COVID-19, making good use of the agreement and sharing experiences in conquering the EU market. They engage in dialogue with the Government and relevant authorities to solve problems, such as working with the EU to lift the yellow card issued for Vietnamese seafood.

The EU is a discerning market, while its Carbon Border Adjustment Mechanism (CBAM), expected to come into force in 2023, is expected to challenge exports. What should Vietnamese enterprises do to overcome those challenges?

Vietnamese enterprises have recorded initial achievements over the past two years of EVFTA implementation, but the double-digit export growth should not be expected to last forever. The production capacity of Vietnamese enterprises is a major matter of concern, presenting them with a choice between exceeding their production capacity or shifting to a higher quality product segment. State management agencies need to research and support businesses in this regard.

Regarding the CBAM mechanism, Vietnamese enterprises need to change their mindset of production organization in order to reach sustainable, green development. They need to study new and planned CBAM-related and sustainable development regulations of the EU.

Enterprises need to increase technology application, reduce emissions and gradually shift to circular production models in order to satisfy the EU’s sustainable development standards.

With the EVFTA advantages, products meeting EU standards can offer better prices and surely satisfy standards of non-EU markets, an added benefit is something enterprises should consider seriously.