Increased trade

The Ministry of Industry and Trade has carried out measures to help businesses take advantage of opportunities provided by trade deals to promote exports to markets of FTA signatories. Nguyen Cam Trang, deputy director of the Agency of Foreign Trade under the Ministry of Industry and Trade, said the most recent new-generation FTAs, such as the EU-Vietnam Free Trade Agreement (EVFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the UK-Vietnam Free Trade Agreement (UKVFTA) have proven effective.

For example, thanks to the CPTPP, Vietnam’s exports to Canada and Mexico have maintained double-digit growth.

The EVFTA has made significant contributions to economic development of both sides. In 2021, bilateral trade turnover surged by 14.8 percent to US$63.6 billion. Of the total, Vietnam’s exports to the EU reached US$45.8 billion, a year-on-year increase of 14.2 percent, while imports reached US$17.9 billion, an increase of 16.5 percent compared to the previous year. The UKVFTA, which took effect on May 1, 2021, has also brightened Vietnam’s economic picture.

FTAs have contributed to the restructuring of Vietnam’s exports in a positive direction by increasing the proportion of processed goods and reducing the proportion of semi-processed products and raw exports.

Looming competition

The trade deals have created competitive advantages for the country’s exports and facilitated penetration of Vietnamese goods into export markets, but they have also thrown up challenges.

The Regional Comprehensive Economic Partnership (RCEP), which took effect on January 1, 2022, has contributed to promoting Vietnam’s trade and investment with ASEAN countries and five partners (Australia, New Zealand, Japan, China and the Republic of Korea). However, effective implementation of the trade deal will be more challenging as the economic structure of RCEP member countries is similar to Vietnam’s, said Luong Hoang Thai, director of the Multilateral Trade Policy Department under the Ministry of Industry and Trade. It will take years to see the benefits of the RCEP and it may not be as significant as the CPTPP and EVFTA, he added.

Due to easier movement of goods across RCEP members, Vietnamese firms may face more competition both domestically and in export markets. Failing to adapt to new competition will turn opportunities into challenges.

The EU applies strict quality standards, including food safety, traceability and product labeling regulations to imported goods. Currently, a default maximum residue limit (MRL) of 0.01 mg/kg is applicable to many pesticides, which is a very low threshold. In addition, the EVFTA was the EU’s first in the region but it is negotiating trade agreements with other countries in the region. Therefore, Vietnamese firms need to make the most of opportunities from the EVFTA to create a strong foothold, while strengthening investment attraction and promoting technology transfer to participate more deeply in the global supply chain.

Thu Phuong