Vietnam and the European Union (EU) have signed the Vietnam-EU Free Trade Agreement (EVFTA), creating new opportunities for Vietnamese goods exports to the EU market, including many agro-forestry-fishery commodities.
This agreement is considered a great opportunity for Vietnam to promote its agricultural products in difficult markets. However, the agricultural sector will also face many new challenges that require strong efforts and must innovate on various aspects.
Thanks to the EVFTA, seafood is expected to create a breakthrough with new tariff preferences. According to the Vietnam Association of Seafood Exporters and Producers (VASEP), 50% of tax lines imposed on fishery products except for canned tuna and fish balls (equivalent to 840 tax lines with most of tax rates from 6 to 22%) immediately after the EVFTA takes effect. The remaining 50% of tax lines will be reduced to 0% in three to seven years after the effectiveness of the trade deal is implemented.
Vice Chairman of the Vietnam Fisheries Society and Chairman of the Vietnam Pangasius Association Duong Nghia Quoc, said that “the signing of the EVFTA has opened a great opportunity for the country's seafood sector, especially for main export products such as pangasius and shrimp. Particularly for shrimp, the import tax will dropped sharply when the first year of the agreement comes into effect and will return to 0% in the following years.
Specifically, tariffs on frozen prawn exported from Vietnam to the EU will fall from 20% at present to zero as soon as the agreement comes into effect. The tariffs for other shrimp products are reduced according to the 3-5 year roadmap, while processed shrimp products will have a seven-year tariff reduction schedule, excluding canned tuna and fish balls with a tariff quota of 11,500 tonnes each.
Now, the EU mainly imports frozen raw shrimp and processed shrimp from Vietnam with the Generalised System of Preferences (GSP) tariffs at 4.2% and 7%, respectively. With those tariffs, Vietnam has had an advantage over the two rival countries, Thailand and China, because these two countries are not entitled to the EU's GSP tariffs.
The EVFTA also helps Vietnamese seafood exporters have more opportunities to take services relating to production such as logistics, insurance and finance. Therefore, they could reduce production costs and increase the competitiveness compared to competitors who don’t have FTAs with the EU, such as India, Thailand and China. The local exports will also have the opportunity to participate in the European region's supply chain thanks to moving investment of multinational corporations to Vietnam.
In addition to fisheries, once the EVFTA takes effect, tax on rice will be cut to 0% after three to seven years; vegetables and fruits will enjoy 520 out of 556 tax lines to be reduced to 0%, whilst 85.6% and 93%of tax lines imposed on processed vegetables and fruits and pepper will also be reduced to 0%, respectively. In addition, Vietnam will grant registration and protection to over 160 EU Geographical Indications (GIs) while the EU will do the same with 39 Vietnamese GIs. All the geographical indications of Vietnam are related to food and farm produce. The process of GI protection for agricultural and handicraft products will have a positive impact on people’s awareness, attention and investment in local resources, reputation and value of protected products.
Vietnam has gained significant results in exporting agricultural product to the EU in recent times, but there are still several problems to overcome. Competitive barriers arising from the integration process and a lack of specialised processing and connections have hindered the potential of the country’s exports.
According to VASEP, there are still many challenges for Vietnam's fisheries sector when participating in the EVFTA, such as technical barriers, quality standards and strict rules of origin. In addition, labour rules under the agreement will be stricter, requiring local businesses to adapt to the agreement’s requirements.
Therefore, in order to take full advantage of the EVFTA, local enterprises must change production to meet the rules and standards of origin, quality, labour, environmental protection and other issues relating to sustainable development.
To successfully export agricultural products to the EU, experts say the Vietnamese Government should intensify food policy management and local initiatives while calling for more investors to invest in agriculture, especially after harvesting. Domestic enterprises should intensify deep processing, whist farmers should shift from traditional to sustainable cultivation. It is also necessary to strictly follow regulations on technical barriers and food safety and hygiene committed in the FTAs in general and the EVFTA in particular.