In recent years, trade relations between Vietnam and four member American countries - Canada, Chile, Mexico and Peru – have made considerable progress. Among them, Vietnam has already established FTA relationships with Canada, Mexico and Peru. With the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam can further enhance merchandise exports while seeking the opportunity to import potential products to these markets.
Canada abolishes duty on 95% of goods
Canada continues to pursue a trade liberalization policy and a relatively open economy. Canada diversifies its investment and trade markets, reduces its dependence on the North American market, especially the United States.
Vietnam currently holds great advantages in bilateral trade with Canada. The CPTPP Agreement, effective from December 2018, is considered a leverage to boost trade with Canada. With the elimination of 95% of tariff lines right after the effective date of the pact, which covers 78% of Vietnam's export value, Canada is presenting many huge opportunities for Vietnam to boost exports.
Seafood is a key export of Vietnam to Canada. 100% of seafood exports are subject to zero duty from January 14. Canada imports US$240 million of seafood products from Vietnam, mainly shrimp, pangasius and frozen tuna, largely sold through distributors, not directly sold to supermarkets.
Wooden furniture exported to Canada is immediately imposed zero tax from 9.5%, except for indoor wooden chair which will be cut to 0% after six years. Vietnam is the largest exporter of bedroom furniture in Canada, accounting for nearly 30% of the market share. Canada spends US$166 million on Vietnamese wooden furniture.
Garments and textiles exported to Canada will have 100% of tax eliminated in the fourth year. When the CPTPP Agreement is approved and comes into effect in the coming time, import duties in Canada will be reduced from 17 -18% to 0% as soon as the deal is brought into force (about 50% of exports) or three years after meeting the yarn forward origin principle.
Tea, pepper and cashew nuts are entitled to zero tax as soon as the agreement is effective, 78% of Vietnam's footwear exports to Canada are given zero tax rate when the pact becomes effective or a 75% reduction from the current level.
77% of taxes are removed by Mexico
Mexico is Vietnam's third largest trading partner in Latin America after Brazil and Argentina. In 2018, Vietnam's export value to this market reached US$2.24 billion. Vietnam's main exports to Mexico are telephones, footwear, computers, textiles and garments.
With CPTPP, Mexico is committed to eradicating 77% of tariff lines right from January 14, equivalent to 36.5% of imports from Vietnam, and will eliminate tariffs on 98% of tariff lines by the 10th year since the pact is effective.
Vietnam can utilize tax preferences in CPTPP to boost exports to Mexico, including pangasius, tuna, rice (900,000 tons a year), apparels and footwear. Mexico spends about US$1.8 billion on imported textiles and garments, and US$1.1 billion on imported footwear a year.
Peru eliminates 81% of taxes
Peru is considered a potential market which is relatively suitable for our level, scale and approach, as 75% of Peruvian importers and exporters are small and medium in size. In addition to easily penetrate into Peru, Vietnamese companies can access its neighboring countries like Ecuador, Colombia, Bolivia and Brazil. Currently, merchandise trade between Vietnam and Peru remains quite modest. In 2018, our exports to this market reached US$250 million.
The CPTPP Agreement, expected to take effect in 2019 in Peru, promises to create new impetus for bilateral trade relations to thrive. Peru is committed to eliminating 81% of duties. This is also the first time that Vietnam and Peru have FTA relations and we need to embrace this opportunity to increase our strong exports to Peru, like outdoor furniture, cashew nuts, tea, pepper, vegetables and fruits, which are tax free right after the agreement comes into effect. Tariffs on apparels and footwear will be slashed gradually to reach zero in the 16th year.
Chile
Chile has been actively open to Vietnamese goods since the Vietnam - Chile Free Trade Agreement officially took effect in 2014. With the CPTPP expected to be adopted by Chile in the second quarter of 2019, Vietnam will have more opportunity to increase exports to this market.
Vietnam - Chile FTA has 1,118 products on the exclusion list. Therefore, with CPTPP, more products will be able to reach this market. Tax cut schedule under CPTPP is also faster than the bilateral FTA. Chile pledged to remove 95.1% of its total tariff lines as soon as CPTPP takes effect and 99.9% will be eradicated in the 8th year. The potential for Vietnamese products in the Chilean market is very huge.
Prioritized exports to Chile include pepper, cashew nuts, tea, coffee, honey, agricultural products, seafood and wooden furniture which are subject to zero tax immediately after the effective date of the pact. Footwear and rubber will have import duties eliminated in the 4th year, while garments and textiles will enjoy this treatment from the 8th year.
In addition, the Vietnam - Chile Chamber of Commerce, established in mid-2018, also provides a new cooperation channel and offers more opportunities for the two business communities to strengthen cooperation, especially when we need to actively embrace every opportunity from CPTPP to increase our merchandise exports.
Huong Ly
Vietnamese
October 2024
Hanoi
