EU–a potential market for Vietnamese businesses

If the negotiation for the Vietnam-EU Free Trade Agreement is successful, it will open up opportunities for Vietnamese exporters to do business in the region.

With a population of 500 million living in 27 member countries, its GDP accounting for 30 percent of the world’s, and its per capita purchasing power of US$32,700 per year, the EU market is always considered a potential one for businesses in many countries all over the world.

Vietnam’s export earnings from the EU increased sharply, from US$5.621 billion in 2005, to US$15.446 billion (18 percent of the country’s total export revenue) in 2010.

If the Vietnam-EU Free Trade Agreement is signed, both Vietnamese and EU exporters and importers will benefit from the removal of import tariffs on many of their products and as a result Vietnam’s status will improve considerably, says the European Chamber of Commerce.

Truong Dinh Tuyen, former Minister of Trade, says the agreement will create the best chance for Vietnamese products to penetrate the EU market, especially those which have to compete with made-in-China products.

In the long-term, both Vietnamese and EU businesses will benefit from the agreement, Tuyen says.

However, the former minister emphasizes, Vietnam will find itself in a difficult position as it also has to reduce tariffs for EU products coming to the country under the agreement.

Prof. Cladio Dordi, an expert of the Vietnam-EU Multilateral Trade Assistance Project (MUTRAP III), says that Vietnam should make certain concessions in return for EU commitments to reducing taxes in key fields.

The EU expects that the FTA will help the region promote exports and investments in Vietnam, offer more opportunities for EU investors and service suppliers, and ensure the respect for the intellectual property, he says.

Tariffs reduction will not have any negative impact on Vietnam as Vietnam and the EU are the two economic entities that supplement each other, says Tuyen, adding that Vietnam is to reduce the level of tariffs to zero percent by 2015 under the ASEAN and ASEAN plus FTAs.

Vietnamese products will have to compete fiercely with products coming from the EU, especially services which are its strengths.

At the same time, Vietnamese businesses will have to deal with hygienic and environmental problems when exporting goods to the EU, he says.

Tuyen describes these as positive challenges that will boost Vietnam’s economic restructuring and make businesses change their way of thinking and operation in a positive manner.

Jean-Jacques Bouflet from the European Commission delegation in Vietnam says meeting the EU’s technical requirements means that Vietnamese products are highly qualified to be exported to any countries. It will not only benefit consumers but also exporters.

Although the FTA is expected to put Vietnamese businesses at an advantage, they have to learn more about EU technical barriers, says Deputy Minister of Industry and Trade Nguyen Thanh Bien.

Leather and footwear, coffee, textile and garment, aquatic products and furniture now make up 68-70 percent of Vietnam’s export earnings from the EU. However, these products tend to be decline in volume as many Vietnamese exporters are unable to comply with EU import regulations.

Tran Ngoc Quan, Deputy Director General of the Europe Market Department of the Ministry of Industry and Trade, says Vietnam’s exports of handicraft products to the EU have dropped in recent times mainly due to their low quality.

Tran Trung Thuc, Minister Counsellor in charge of the Vietnamese Trade Office in the EU, says that there are many opportunities for Vietnamese businesses but they should know how to sharpen their competitive edge.

He suggests they should participate in trade fairs in the EU to learn more about the consumer taste and business climate there as there are many differences existing between its 27 member countries in terms of their cultures and interests. – VOV

Tags: Vietnam EU trade