Leveraging EVFTA to Boost Export Growth

9:06:10 AM | 1/6/2021

The EU - Vietnam Free Trade Agreement (EVFTA), which took effect on August 1, 2020, has gradually lifted tariff barriers and opened the door for Vietnamese goods to quickly and effectively penetrate the EU market.

Although the COVID-19 pandemic is still complicatedly developing in many countries around the world, Vietnam's import and export performance in the first four months of 2021 still recorded the highest growth in 10 years. According to the Ministry of Industry and Trade, the merchandise export value reached US$103.9 billion in the four-month period, an increase of 28.3% year on year. In particular, the April export value soared 44.9% from a year ago. The trade surplus amounted to US$1.29 billion in the January-April period.

After nearly nine months of EVFTA enforcement, the door for Vietnamese goods to enter the EU has really opened. According to the Ministry of Industry and Trade, in the first five months of enactment, from August to December 2020, Vietnam's export shipments to the EU rose by 3.8%. In the first four months of 2021, the value expanded by 18.1% to US$12.55 billion.

According to the Ministry of Industry and Trade, Vietnamese enterprises have quickly approached and grasped EVFTA opportunities to bring the trade surplus in the first two months to US$4 billion, 36.3% higher than the same period of 2020. Highest-growing exports to the EU in the first five months of EVFTA being in effect are plastic materials, rubber products, computers, electronic devices and components, iron and steel, and chemicals.

From August 1, 2020 to April 4, 2021, relevant agencies granted more than 127,296 certificates of origin (C/O) Form EUR.1 for over US$4.78 billion to 27 EU countries. In addition, exporters to the EU also self-certified origin for nearly 3,585 shipments valued more than US$10.88 million, enjoying preferential tariffs under the EVFTA. C/O Form EUR.1 is mainly granted to footwear, seafood, apparel, agricultural products, cereals and electronic devices.

With a trade value of about US$41.3 billion, the EU is currently one of Vietnam's largest trading partners and Vietnam is the 16th largest trading partner of the EU. On the other hand, ASEAN is also the EU's third-largest trading partner outside of Europe after the United States and China.

The EU's main exports to Vietnam are high-tech products, including machinery, electrical equipment, aircraft, vehicles and pharmaceuticals, while Vietnam’s key exports to the EU are telephones, electronic products, footwear, apparels, coffee, rice, seafood and furniture.

Seafood exports climbed over 6% year on year to US$2.39 billion in the first four months of the year. The EVFTA is the largest catalyst and stimulator to Vietnam's export growth of 16% to this market.

Experts predict that the EVFTA will boost Vietnam's export value to the EU by 42.7% in 2025 and 44.37% in 2030, as compared to the non-EVFTA scenario.

By single market, Italy and Germany are two main EU members with very close trade and investment cooperation relations with Vietnam. Germany is currently Vietnam's largest EU trading partner, with a fourfold bilateral trade growth in 10 years. In the first two months of 2021, Vietnam exported more than US$1 billion to Germany and imported US$527.8 million of goods from this market, taking a surplus of US$515.8 million. Vietnam’s top 10 exports to Germany in the first two months of 2021 accounted for US$846.7 million, or 81% of its total export value to this market. Three exports brought home over US$100 million.

Besides, the Nordic market tends to strongly increase imports from Vietnam. Ms. Nguyen Thi Hoang Thuy, Vietnam Trade Counselor in Sweden and Northern Europe, said that Nordic countries continue to focus their resources on post-COVID-19 economic recovery and pent-up consumer demand for goods and services expected to boom. Many forecasts showed that trade growth of Nordic countries will be 5% in 2021, with Iceland soaring 17%.

While the world is being heavily undermined by the COVID-19 pandemic and other pandemic consequences such as shortages of empty containers, increases in shipping rates, and the congestion incident in the Suez Canal, Vietnam has made long strides in trade performance with the EU since the beginning of the year, driven by important industries such as electronics, apparels, footwear, machinery and equipment and agricultural products.

Vietnam-EU trade is expected to boom in the near future when the EVFTA is enforced in a more comprehensive and effective manner. The EVFTA will facilitate Vietnamese exports to penetrate partner markets with preferential tariffs.

By Huong Ly, Vietnam Business Forum