Agricultural Product Imports: Technical Barriers Needed

According to WTO entry commitments, tax on agricultural products will be cut. However, this market lacks the management measures to control imported agricultural product quality and support domestic production.

 

Although each year national turn-over of agricultural product exports is about USD 14 to 16 billion, Vietnam is still a country with more agricultural importsthan exports. The Agriculture Department has to spend a big amount of foreign currency to import necessary agricultural products and materials for agricultural production.

 

From the beginning of this year, imported agricultural products rapidly increased, which raised worries among domestic authorities. According to the Ministry of Industry and Trade, except for milk, other imported consumer foods are not necessities and the government does not encourage their import, especially meat and beverages (beer, wine, soft drinks etc), vegetables, fruits and confectionery.  

Along with increasing demand for consumption of fruits and luxury foods, another aspect of this issue is the amount of produce imports from China that compete with domestic products. Vegetables and fruits imported from China, mainly through the frontier, make up 70 % of fresh produce imports. This can be clearly seen in markets everywhere; Chinese vegetables and fruits look good and sell well. Many farmers have to quit planting winter vegetables, as they cannot compete with those from China. Chinese produce has advantages in Vietnam markets, first thanks to their stable price and good appearance. Domestic farmers planting vegetables and fruits end up being less competitive.

 

Chinese groceries are strong in the market due to their many advantages. According to commitments under the ASEAN – China Free Trade Agreement, most fresh fruits and vegetables imported from China to Vietnam have a tariff of zero %. Meanwhile, fresh green groceries are not subject to value added tax. Thus, importers are taking full advantages of tax benefits to bring Chinese agricultural products into Vietnam. Most consignments have C/O form E (certificate of Origin), and so certainly have zero % tax.

 

Not only without tariff, imported groceries are not tightly controlled in terms of quality and food hygiene. Imported goods do not need a food hygiene certificate, confirming they are free of preservatives, pesticides and irritants. Goods coming to port of entry will register with Quarantine agency. Forms required for imports include: declaration form, contracts, quantity form, type form and value form, C/O and quarantine form. There is no requirement of certificate of food hygiene by exporters. Thanks to such open mechanisms, fruits and vegetables are witnessing sharply increasing import volume.

It is obvious that consumers are not being protected when using imported agricultural products. Chinese goods have a reputation for being unsafe, containing preservatives or irritants, and being loose about quarantine. When imported agricultural products are popular in the market, Vietnam becomes consuming countries’ market, which narrows domestic production and influence farmers’ life.

 

Although Vietnam cannot subsidize domestic agricultural products with a taxation barrier, it is necessary to set taxes correctly. According to Mr Pham Quan Dieu from the Institute of Strategy and Agriculture and Rural Development, Vietnamese exports are often threatened by non-tariff barriers of other countries, whereas in the domestic market, there are too few technical standards to limit imports and control imported goods’ quality. With goods which are granted zero % tax, it is still possible for Vietnam to establish technical barriers to protect consumers and domestic production. In the domestic market, imported agricultural products don’t face any technical barriers; authorities mostly give no standards or criteria to control quality. In the context of agricultural products being massively imported at cheap prices, Vietnam can adopt trade defense methods, including antidumping, or subsidy investigation, of which antidumping investigation is most suitable at the moment. It is rather difficult to investigate dumping with agricultural products, but it is necessary. This is responsibility of the Vietnam Competition Authority.

 

Recently, the government has required departments and divisions to devise solutions to limit the unnecessary import of foods and agricultural products. At the same time, the Ministry of Agriculture and Rural Development and Ministry of Health are required to establish technical standards, which will serve as a basis for testing the quality and food hygiene of imported foods.

 

Domestic agricultural products need strengthened
It is admitted that imported agricultural products have competitive advantages, with delicious taste, good appearance and low prices. Meanwhile, domestic products are still in spare production and consumption. Although the Government has policies to foster agricultural production to increase produce harvest and reduce prices, but they are too often incorrectly implemented. Despite the good quality of Vietnamese agricultural products, unstable production and quality and ineffective distribution channels make domestic goods less competitive.

 

In the big agricultural area of the Mekong Delta, a model has developed of farming produce specifically to build up a reputable brand and export products. In the domestic market, as production and selling stages are separate, the market price is high but producers do not benefits from it. Since distributors get most of the profits, farmers have not motivation to produce a steady supply of the product.

 

In spite of good protection with technical barriers, if production is not organized in large scale and at high levels, with more reasonable distribution systems and sales profits reaching farmers, Vietnamese agricultural products will be pushed back even in their home market.