How Do Enterprises Overcome Trade Technical Barriers?

 

In a recent workshop on “Export and market opportunities with European Union”, Mr Matthias Duehn, Executive Director of EuroCham, said, “The volume of Vietnamese exports into the European market is rather high. However, most of the goods are raw and few products have their own stands in the market with brands. In order to avoid losses, Vietnamese enterprises have to care more about the goods’ quality and invest in their brands.

 

According to economists, Vietnamese exports into the EU have met numerous barriers, and exports are now even more restricted due to recession, followed by increasing protectionism. Most key Vietnamese exports to the EU are levied with anti-dumping tax of 10 percent and not offered Generalized System of Preference (GSP).

 

In addition to the above challenges, the EU has policies subsidizing domestic economic sectors. Mass export to the EU will result in anti-dumping action. Ms Dinh Thi My Loan – Chief of Consulting Committee on trade defence of Vietnamese enterprises - said
“It’s time for Vietnamese enterprises to deeply understand the nature of defence methods so as to minimize the negative impacts in the event of lawsuits on dumping or subsidy, since trade defences are permitted by the WTO. The EU is the target market of many countries, many with more preferential treatment than Vietnam. Vietnam’s rivals include underdeveloped countries levied with 0 percent of tax on most goods and some developed countries with admitted market economy.

 

“There are two main regulations in the EU: TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary Measures). Fish and fishery products, with shells, coffee, rice, groundnut, tea, peppercorn, wood, vegetable and honey are the main agricultural – fishery exports. Among those, coffee, tea, wood and rice do not often face strict technical barriers in the form of hygiene measures, even though importing countries could enact policies on sanitary or not exceeding poison permission. On the contrary, fish and shellfish are subject to strict measures to ensure food hygiene. Vegetables also face SPS measures,” said Ms Dinh Thi My Loan.

 

The top valued Vietnamese exports are fish and fishery products. Trade of these products requires the Government to build up and adjust laws and establish authorized offices to control quality and ensure food hygiene. Manufacturing conditions in factories have to meet food hygiene requirements. Fishery export has increased dramatically in the past 20 years and tended to change in to direction of higher value products via instant goods in supermarkets. There are more than 300 manufacturing places efficiently conditioned to export fish and fishery products to the EU. One important advantage ensuring the high quality of these exports is they can also be consumed domestically.

 

In general, to meet the requirements of sanitary and phytosanitary measures, manufacturers and businessmen have to pay higher prices. When importing markets have higher standards than those in Vietnam, such as the EU’s, export costs increase considerably. For example, the cost of tests to prove there’s no pesticide residue in export freight may be high in comparison with the profit. However, it shouldn’t be concluded that the EU’s standards are “too high”.

 

According to SPS Agreement, WTO members can choose desired prevention level and have the right to apply any necessary methods and measures to protect human health and life, animals and vegetables, if they don’t violate articles in the Agreement. Moreover, SPS indicates that the EU can apply stricter laws compared with corresponding international standards (such as standards on toxins or 3-MPCD in foods) if those methods’ results could be proven through risk analyses.

 

Mr Matthias Duehn estimated that Vietnamese enterprises have to accept the EU requirements on imports in the short-term and take necessary action to ensure Vietnamese exports meet these requirements, unless Vietnam takes the SPS measures of the EU to court under the WTO dispute procedures. In this approach, enterprises need to carefully consider related costs before deciding to export to the EU. In terms of fishery, from Vietnam, the most important impact of the EU’s SPS measures is to see how Vietnamese fisheries need to develop to exploit this large market, in which complying with EU standards is the first priority to enter the market. Therefore, with the desire to sell goods to the EU, Vietnam has no choice but to invest in building fisheries meeting international standards.

 

Nevertheless, according to foreign and domestic economists’ estimation, achieving SPS compliance is very difficult. For example, upgrading fishery branches to meet EU standards requires the cooperation of Government and branches. Production of fishery products meeting EU standards will require changes in shipping, farms, preserving methods, processing plants, laboratory analysis, human resource training in the private sector, administration mechanisms, and the reinforcement of management efficiency and supervisor offices. Costs for these changes haven’t been estimated accurately, but will clearly be high. The benefits are that Vietnam will be able to provide high quality goods not only to the EU, but also to the United States, Japan, Australia and other markets with high food hygiene standards.
Hai Hang