EU - Important Market for Vietnam’s Agri-products

9:07:51 AM | 7/26/2022

To boost agricultural exports to the EU market, Vietnamese businesses need to utilize more advantages of tropical agricultural products and the EU-Vietnam Free Trade Agreement (EVFTA).

More room for agricultural products exported to Europe

Mr. Phung Duc Tien, Deputy Minister of Agriculture and Rural Development, said, after more than 30 years of diplomatic relations and the Vietnam - EU Comprehensive Partnership and Cooperation Framework Agreement (PCA), the two-way relationship has been developing finely, intensively and produced many positive achievements.

The Vietnam-EU Free Trade Agreement (EVFTA) has opened up many opportunities for bilateral trade cooperation and development. The two-way trade revenue of agricultural, forest and aquatic products rose from US$4.3 billion in 2015 to US$5.2 billion in 2021. In the first five months of 2022, this figure reached US$2.26 billion, up 26% year on year.

According to Mr. Pham Tan Cong, President of the Vietnam Chamber of Commerce and Industry (VCCI), the EU is currently Vietnam’s third largest consumer market making US$5.5 billion a year, accounting for 15% of Vietnam’s total agricultural export value, but only 4% of the EU's total agricultural imports, in 2021.

Such shares show that the value of Vietnam's agricultural exports to the EU is still low relative to its potential as well as the EU's import demand, he said.

Vietnam still has plenty of room to foster agricultural trade such as rice, coffee and processed products with geographical indications into the EU market. In addition, Vietnam is currently attracting great attention from foreign companies and investors thanks to its comparative advantages in agricultural exports, a stable and safe macro environment, a large-scale market of 100 million people and its accessibility to Southeast Asia.

Deputy Minister Phung Duc Tien affirmed that Vietnam has been, and will be, actively joining global food chains in the context of supply chain disruptions. In 2021, the country produced 43.86 million tons of rice and exported 6.7 million tons.

Vietnam also wants to attract FDI projects to develop knowledge-based agriculture, ecological agriculture, organic agriculture, especially core technology, train high-quality human resources, enhance agricultural value and develop infrastructure, trading and logistics, he added.

Embracing EVFTA advantages

Mr. Ngo Chung Khanh, Deputy Director of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, said that the EVFTA, effective from August 1, 2020, has brought many benefits to Vietnamese and EU businesses in many fields, especially food trade. Currently, this trade pact has promoted bilateral trade in agriculture.

According to data from the Ministry of Industry and Trade, given the global pandemic, Vietnam's exports to the EU since the EVFTA took effect have grown by up to 40%, especially for key commodities such as seafood, rice, fresh vegetables and coffee. There is more room for export shipments to the EU when tariffs are eliminated.

Besides, EVFTA is also the first and only agreement with geographical indication protection. Within the framework of this free trade agreement, 39 geographical indications (GIs) are protected, better benefiting farmers and traders. Among famous products of Vietnam protected for geographical indications such as Phu Quoc fish sauce, Moc Chau tea and Doan Hung pomelo, the extension of GI protection can be negotiated in the coming months.

Although the EVFTA plays a major role in trade of goods between the EU and Vietnam, if Vietnam does not capitalize on EVFTA advantages, it may regret that, because it may face more competition from its peers in the region in the future, he added.

According to a survey by VCCI, only 10% of Vietnamese companies clearly understand EVFTA. Thus, up to 90% do not understand at all nor fully understand this bilateral trade agreement. This may be preventing Vietnamese companies from taking full advantage of opportunities from the EU market.

The EU is a potential market for Vietnam's agricultural, forest and aquatic exports, but it imposes high and strict requirements on animal and plant quarantine. In addition, potential product categories such as vegetables, rice and ready-to-eat foods have not yet reached the output levels required by large supermarket chains in the EU. 

According to experts, solutions to strengthen the position and reputation of Vietnamese agricultural products in the EU market are necessarily aimed to improve quality and achieve full compliance with EU standards and regulations. Last but not least, businesses need to pay attention to product quality, prices and sustainable development factors. 

Vietnam - EU relationship will grow even stronger 

Mr. Janusz Wojciechowski - European Commissioner for Agriculture 

Boosted by the EVFTA, Vietnam - EU agricultural trade is estimated to grow further in 2022. To ensure this strong and sustainable growth, I believe that we can take some important steps. 

Firstly, the balance of trade in agricultural products is tilted significantly toward Vietnam's side, with a difference of €1 billion. I see strong potential to increase the share of EU exports in this balance as a factor to bolster bilateral trade. Reaching such a balance is essential to ensure that our trading relationship can work in the future, possibly adding new products - from both Vietnam and the EU - to the list of products with geographical indications protected in the EVFTA. 

As part of shared priorities, Vietnamese research institutions benefit from the Horizon Europe Program for research and innovation. EU-supported agricultural projects range from the integration of coffee crops into agroforestry systems to the strengthening of food value chains and network interactions. The EU will also support the sustainable development of the cocoa industry in Vietnam through a new €1.55 million project called "Cocoa produced through the circular economy". This project becomes part of an important list of EU-supported projects designed to help address climate and environmental challenges facing Vietnam and develop sustainable agriculture, especially for smallholder farmers. 

Safe production is a mandatory requirement for exporters to the EU 

Mr. Vu Ba Phu - Director of the Vietnam Trade Promotion Agency (Ministry of Industry and Trade) 

Despite being a potential fruit and vegetable importer, the EU's fruit and vegetable imports from Vietnam account for a very small share, only about 0.08% of the EU's imports. Among fresh vegetables, tubers and fruits exported to the EU, fruits always generate the highest export turnover. 

In recent years, through trade promotion and technical support, importers, wholesalers, retailers and consumers in many European regions have had a new viewpoint on Vietnam's modernization and renovation of Vietnam's vegetable and fruit sector. Besides, Vietnamese fruit and vegetable companies are increasingly meeting strict requirements from EU partners, ably providing high-quality, value-added and safe products for many leading importers and premium distribution channels in many EU countries. 

However, the EU is a demanding market with very strict requirements and regulations on technical barriers, pesticide residues and banned substances. In exporting vegetables and fruits to the EU, with any infringement of food hygiene and safety, exporters will have their products returned, causing damage not only to them but also to the Vietnamese fruit and vegetable sector. Therefore, safe production is a mandatory requirement for them. 

The deep processing will help make full use of vegetables, tubers and fruits as raw materials for processing, thus tapping the maximum value of harvested products, helping farmers increase their income from products sold. 

Seeking a solution to meet EU criteria 

Mr. Jean Jacques Bouflet - Vice President of the European Chamber of Commerce (EuroCham) 

EU investors are optimistic about EVFTA. According to a business survey conducted by EuroCham and VCCI in the second quarter of 2022, the number of EU businesses gaining benefits from doing business in Vietnam increased from 5% in the fourth quarter of 2021 to 8% in the second quarter of 2022. 

The EVFTA has opened a new era for Vietnam - EU trade. In the past decade, there were many tariff policies in use but, with the EVFTA, we can see tariffs reduced substantially, even to 0% in the coming years. 

Given increasing requirements from the EU, just a limited share of raw vegetables and fruits are eligible for export to this market. The EU continuously updates and informs about SPS indices for imported agricultural products, and at the same time strengthens certification criteria related to environmental protection and sustainable social development. EU provisions are not intended to restrict exports but to ensure health and quality standards of agricultural products all over the EU market. Failing to meet these standards, the position and reputation of Vietnamese agricultural and aquatic products may be undermined. Therefore, Vietnam needs to find a solution to meet EU and international criteria to make inroads into markets more effectively. 

By Huong Ly, Vietnam Business Forum