Businesses need to discover full benefits of FTAs to spur exports

Lately, Vietnam has joined in negotiating and signing a number of FTAs. At present, the country has committed to 17 FTAs, of which, ten have so far been signed and come into effect. Some Vietnamese businesses say they have not seen the practical benefits from the FTAs between Vietnam and other countries.

Nguyen Hai Minh, director of Tan Phat Spare Parts Import-Export Joint Stock Company says his company has become involved in many import-export markets with several domestic and foreign partners. Although he has heard about FTAs, there is a lack of clarity surrounding the real impacts of these agreements upon businesses.

Ngo Chung Khanh, deputy head of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, explains that regarding trade ties, Vietnam has to cooperate 60-70% with partners in the East Asia region but suffers huge losses. For example, Vietnam’s trade deficit with the East Asian region was estimated at nearly US$70 billion last year, with the ASEAN region accounting for US$65 billion.

Participation in several FTAs and the establishment of fine relations with some partners in the region has helped the country to restore its trade balance.

Mr Khanh notes that involvement in FTAs is a major contributing factor to the sharp increase in exports of Vietnamese goods. Vietnam’s export turnover stood at around US$48 billion in 2007, growing exponentially to more than US$213 billion in 2017.

MrKhanh cited the garment and textile sector for an analysis of the practical benefits brought by FTAs, noting that as a member of the World Trade Organisation (WTO) Vietnam enjoys an average tariff of 25% instead of 150%. Furthermore, the tariff will be reduced to just 0-5% instead of 25% upon the signing of an FTA with the US.

Mr Khanh adds that FTAs, especially new-generation FTAs, will bring other benefits, such as providing equal access.

This has set the requirements for the State to create equality between state and private businesses, which will help private businesses in securing equal resources. FTAs have also helped Vietnam improve its infrastructure, attract investment, accelerate administrative reforms, and remove barriers for joining the market.

In 2018, Vietnam’s exports are forecast to be on the rebound, while the production capability of Vietnamese businesses has increased sharply in line with improved quality. However, there remain challenges of trade protectionism and emerging trade wars among major economies.

Analyzing the challenges from rising trade protectionism, Do Ha Nam, managing director of Intimex Group Joint Stock Company – one of the businesses making forays into coffee product exports– underlines the need to make accurate predictions of market developments.

Mr Nam says there remains a lot to be desired in market forecast work and the government needs to assign the Ministry of Agriculture and Rural Development or the Ministry of Industry and Trade to make astute projections about product volumes from nations, so that businesses can adjust their production activities.

To deal with trade protection measures, which are not in compliance with international commitments and cause difficulties for Vietnamese exports, Minister of Trade and Industry Tran Tuan Anh says the MoIT is to chair and co-ordinate with relevant agencies to deploy an improved early warning system for businesses to avoid trade defense lawsuits lodged by foreign businesses.

Mr Nam also emphasizes the importance of taking stronger measures against trade fraud, and the rule of origin to protect Vietnam’s export industries from any possible future lawsuits.

Moreover, the Ministry of Industry and Trade should disseminate information providing businesses with the necessary details to deal with lawsuits launched by foreign businesses to reduce the negative impacts of any such lawsuits, he notes.