Vietnamese businesses do not know how to safeguard

Nearly five years after joining the World Trade Organisation (WTO), Vietnam’s market has had enough time to test trade liberalisation impacts.

While its goods are given commercial preferences in importing markets, competing products and services imported from other WTO members are placing pressure on domestic production and service sectors.

Unfamiliar with filing lawsuits

Most countries are taking full advantage of trade barriers to protect domestic production. Therefore, within a short time, a number of Vietnamese goods have been sued on the world markets. Although they are more careful in doing business with foreign customers, they are still at a still disadvantage in case of being sued. Responding to a court case and knowing to file a lawsuit in right time and right place are becoming an urgent need and a vital skill for importers and exporters. One of the most effective tools at this time is to apply safeguard measures before fierce competing pressures of imported goods.

Vietnam used to face numerous difficulties in exporting leather-capped shoes to the EU and black tiger shrimp to Japan. The Vietnam Competition Authority said both big exports (shrimp, seafood and footwear) and small items are being sued. Bed springs exported to the United States with an annual turnover of much less than US$100,000 a year were brought to court. Vietnamese salad was litigated in India. This worrying activity is forecast to happen more often when trade competition is intensifying.

While a lot of Vietnamese goods are being taken to court, none of imports have faced a similar action in Vietnam for an unhealthy competition reason. According to some experts, Vietnam enterprises do not want to take legal action because this complicated procedure is costly, time-consuming and effort-taking. They prefer asking protections from State policies.

Safeguard mechanism is available

Dr Hoang Thi Thanh Thuy, a lecturer at Law Faculty, Hanoi National Economics University, said: Trade safeguard mechanisms are provided in the WTO Agreement on Safeguards which materialises and supplement Article XIX, the General Agreement on Tariffs and Trade (GATT) or the Ordinance No. 42/2002/PL-UBTVQH on safeguards to importation.

On May 8, 2003, the Prime Minister issued Decree No. 150/2003/ND-CP detailing the implementation of the Ordinance on Safeguards against importing foreign goods into Vietnam. The decree, which consists of four chapters and 17 articles, specifies safeguard measures, investigation procedures and measure application in case goods imported from foreign countries into Vietnam cause serious damage to domestic production. Accordingly, Vietnam reserves the rights to apply seven safeguard measures, including import tariff hike, import quota, tariff quota, absolute tax, import licensing control, surcharge on imported goods, etc.

Basically, the Ordinance 42 and the Decree 150 stipulate specific procedures for investigation and power of State agencies in trade remedy cases and regulations on procedures and conditions for applying trade safeguard measures.

But none is successful

While the Vietnamese steel industry is being sued in foreign countries, imported steel is pushing back domestic products but no legal action is taken against them. Even, the Vietnam Steel Association (VSA) pointed out that foreign manufacturers are dumping steel ingot and steel products in the Vietnamese market in a growing volume, especially Russia, Ukraine, Taiwan and Turkey. To compete with this invasion, steelmakers only know to ask the Government to ‘rescue’ by administrative measures, primarily tax instruments, rather than trade safeguard measures.

According to the Vietnam Competition Authority under the Ministry of Industry and Trade, no filings against unfair competition of foreign goods are recorded although unfair competition obviously exists. Vietnamese companies and many State agencies do not understand and consider lawsuits against dumping and subsidy are safeguard measures. Domestic companies only care about competing with each other rather than cooperate with each other to thwart dangers caused by foreign competitors. Moreover, apart from complex structure of imports and exports and complicated business nature and type of each enterprise, proofs are not always complete for taking a legal action.

In mid-2009, the Viglacera Float Glass Company (VIFG) and the Vietnam Float Glass Company (VFG) officially asked the Ministry of Industry and Trade to probe and apply safeguard measures against imported float glass. However, their request was rejected because of insufficient evidences.

Although safeguard lawsuit is successful to date, the float glass case is a typical example for the autonomy and activeness of domestic companies in protecting their rights and interest in international trade environment, according to Dr Nguyen Thi Thanh Thuy. This needs to be promoted in the coming time when Vietnam integrates deeper into the world market.

Source VCCI News

Tags: Vietnam business