EVFTA Boosts Agricultural Exports

Two months after the EVFTA agreement came into effect, the export value of many agricultural products of Vietnam to the EU has surged, laying the foundation for a strong boost in the future.

Rise in both export price and output

Given the positive impacts of the EU - Vietnam Free Trade Agreement (EVFTA), commodities such as rice, shrimp, coconut, dragon fruit, coffee and passion fruit have gained easier access to the Europe market with unprecedented preferential tax rates.

According to data from the Ministry of Industry and Trade, in just August 2020, the first month EVFTA was in effect, the export value of agricultural, forest and aquatic products to the EU reached US$350 million, an increase of 17% over July 2020. Notably, the export value of Vietnamese fruits and vegetables to the EU was estimated at US$14.7 million in August 2020, up 25.2% against the previous month.

In only the first month of EVFTA enforcement, authorized organizations issued more than 7,200 certificates of origin (C/O), Form EUR.1, for US$277 million worth of goods shipped to EU countries. Many shipments have arrived at the EU market, cleared customs and enjoyed preferential treatments.

The export prices of agricultural products to Europe also picked up significantly. For example, Vietnam's rice export price improved after the EVFTA came into effect with an increase of US$80-200 per ton as compared to the end of July 2020.

All agricultural shipments are subject to traceability and Global GAP standards. Fruit processors and packagers are applying ISO and HACCP food safety management systems (HACCP) to meet EU requirements.

Currently, the EU is the fourth export market for Vietnamese fruits and vegetables. This existing foundation plus EVFTA-committed import tax exemptions and reductions are empowering the competitiveness of Vietnamese fruits against its competitors.

Opportunities in 2020

To uphold this performance till the end of this year, the Government, the Ministry of Industry and Trade and relevant ministries and agencies will continue to raise awareness of commitments in trade in goods, trade in services, investment, planned tax exemption/reduction on goods and market access commitments as per EVFTA, to improve the knowledge and understanding of people and businesses about this pact.

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said, EVFTA is the most eagerly awaited agreement in the past time. The EU is a major importer, with the second largest purchasing power in the world, and a key market for Vietnamese exports for many years. In Asia, Vietnam is one of a few countries to have a trade agreement with the EU (the others include South Korea, Japan and Singapore).

“In the long run, to realize great EVFTA opportunities, businesses need to have complete and accurate understanding of specific commitments relating to their business activities. Then, they will effectively prepare and utilize EVFTA commitments,” he added.

Ms. Nguyen Thi Thu Trang, Director of the Center for WTO and Integration under VCCI, said that results of EVFTA enforcement in the first month are indicative for businesses to be more confident to take advantage of EVFTA commitments, especially exports to the UK in the remaining months of this year because this market gives EVFTA treatments to Vietnamese goods till the end of 2020.

Regarding communication contents to businesses, Mr. Andreas Stoffers, Director of the Friedrich Naumann Foundation (FNF) in Vietnam, said, for a long time, the media has often regarded EVFTA as an opportunity to boost exports and to attract FDI. These advantages are obvious. Importantly, the message conveyed to enterprises is easy to understand, for them to take appropriate actions to gain the most benefits.

Saying that the Netherlands - the gateway to the EU market - will bring a lot of opportunities for Vietnamese fruits and vegetables, Mr. Vu Ba Phu, Director of the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade, said, enormous opportunities for fruits and vegetables are concentrated in cooperation ties with Dutch traders who import a lot from developing countries. For a long time, the Netherlands has been considered a leading transit location for fruits and vegetables in Europe and the world.

Safety-based production

For fruits and vegetables, although the EU is a potential market, its imports from Vietnam account for a very small share, only about 0.08% of the EU’s total EU imports. The EU is a demanding market which imposes very strict requirements and technical barriers on pesticide residues and prohibited substances. Therefore, safety-based production is a must for businesses, he said.

Mr. Mathijs van den Broek, Member of the Executive Board of the Dutch Business Association in Vietnam (DBAV), said, EU importers often look for reliable suppliers in strategic areas for fruit and vegetables can be reliably supplied to consumers at any time of the year. Exotic tropical fruits will appeal to EU consumers. This will be a strength for tropical exporters like Vietnam.

When vegetables and fruits exported to the EU violate food hygiene and safety regulations, they will be returned, thus causing damage not only to exporters but also to the Vietnamese fruit and vegetable industry. In addition, deep downstream processing will help make use of vegetables, tubers and fruits as raw inputs for processing which will maximize the value of harvested products and help farmers increase their incomes because their products are sold out.

Recommending many useful solutions for businesses, Mr. Dang Phuc Nguyen, General Secretary of the Vietnam Fruit and Vegetable Association, said, to utilize EVFTA tax incentives, businesses must build a safe materials zone and build post-harvest preservation and processing systems. In addition, they need to focus on other important factors such as social responsibility, labor and environment standards; pay more attention to market research on products for each country and each region. In this regard, the government also needs to support them, especially through trade counselors in the EU.

By Huong Ly, Vietnam Business Forum