Businesses must work to fully benefit from the UKVFTA
VIETNAM, Aug 23 – HÀ NỘI — The UK-Vietnam Free Trade Agreement (UKFTA) has given Vietnamese exports a big boost, but insiders say businesses still have a long way to go. get the most out of the deal.
Nguyễn Thị Thu Trang, Director of the Center for WTO and International Trade (CWIT), Vietnam Chamber of Commerce and Industry, said News from Việt Nam that preferential tariffs under the UKVFTA require strict adherence to its rules of origin, which stipulate that the bulk of materials used in the manufacture of export products come from its members.
For companies heavily dependent on materials imported from non-members, it is not easy to qualify for the favorable tariffs unless they reconfigure their supply chains to adapt to the rules.
“Companies that do not comply do not lose their entry into the UK market, but they are not eligible for the preferential rate,” she said.
Trade data shows that in 2021, exports covered by certificates of origin issued under the UKVFTA accounted for around 17.2% of Vietnam’s total exports to the UK, well below the average figure in the UK. under other FTAs (around 32.7%).
The director also highlighted that the UKVFTA was a next-generation deal that raises the bar on intellectual property and demands new commitments on competition and labor standards.
Vietnamese companies therefore face higher compliance costs and follow more complicated procedures to expand their business presence in the UK.
It should also be noted that the UKVFTA gave Vietnamese products a tariff advantage over other products. Unfortunately, the benefit is not permanent and will change once the UK enters into FTAs with other countries.
Considering the risk of increased competition from new FTAs initiated by the United Kingdom, Vietnamese companies are advised to quickly seize the business opportunity to maintain a good position against future competitors.
“They shouldn’t take the UKVFTA for granted, but rather take full advantage of the deal to consolidate their position before new rivals quickly arrive,” she said.
The director urged companies to study the deal further to get a full picture of its impacts on their operations, thus being operationally ready for changing business models.
She also called for competitiveness enhancement strategies, which are not just for show but functional, to improve companies’ competitive positions in the short term to reap the full benefits of the deal.
Đặng Hoàng Giang, secretary general of the Vietnamese Cashew Association, said News from Việt Nam that tariffs on intensively processed cashew nuts have been reduced from around 5 and 7 percent to 0 percent based on the UKVFTA.
Notably, Việt Nam exported 18,000 tons of cashew nuts to the UK in 2021, equivalent to an export income of US$104 million.
As the UK was a member of the EU, its sanitary and phytosanitary measures and technical barriers to trade are, until now, not fundamentally different from other European countries.
UK importers prefer high quality organic products from internationally recognized manufacturers, including those certified BRC and SMETA.
They also demand fair trade, gender equality, a sense of community responsibility, and many other ethical frameworks.
“For British businesses, which are very disciplined and compliant with the rules, commercial fraud and breaches of contract are intolerable. Fraudsters and offenders are normally called defaulters,” he said.
The General Secretary fears that Việt Nam is lower than the Netherlands on the list of major exporters of intensively processed cashew nuts to the UK, even though the Netherlands is not a producer of cashew nuts. cashew.
“The Netherlands imports cashew nuts from Việt Nam, intensively processes the nuts and re-exports them to the UK. The country was the fourth largest importer of Vietnamese cashew nuts in 2021,” he said.
The Netherlands ranked first on the list and imported 11% of Việt Nam’s cashew production last year, indicating that Vietnamese companies have not taken full advantage of the agreement to unleash their potential. There is ample room for improvement.
The Secretary-General recommended that businesses keep themselves well informed of the UK’s Technical Barriers to Trade and other similar regulations to make it easier to enter the market.
Contacts with Vietnamese trade offices and the Vietnamese Embassy in the UK are also useful as they will help businesses with trade information.
Companies are also recommended to join forces commercially to become less dependent on foreign materials, thereby raising the domestic material content of their exports to levels specified by the rules of origin.
He also pointed out that strict adherence to contract terms and products that meet British standards were key for companies to gain traction in the market.
The UKVFTA was signed on December 29, 2020 and entered into force temporarily on December 31, 2020, before officially starting on May 1, 2022.
Negotiated on the basis of the principles of legacy of the commitments of the EU-Vietnam free trade agreement, the agreement facilitates trade flows between the two countries thanks to its almost generalized tariff reductions.
CWIT trade data shows annual two-way trade grew 17.2% just one year after the deal. Việt Nam’s exports to the UK reached $5.8 billion in 2021, up 16.4% year-on-year.
In the first six months of 2022, the figure reached $2.9 billion, up 1.1% from the same period last year. —VNS