Vietnamese workers process cashew nuts.(Photo vinacas.com.vn) Nguyen Thi Thu Trang, Director of the Centre for WTO andInternational Trade (CWIT) at the Vietnam Chamber of Commerce and Industry(VCCI), told Vietnam News thatthe preferential tariffs under the UKVFTA require strict compliance with its rulesof origin, which stipulate the chief part of the materials used in themanufacture of exports originate from its members.
For firms highly dependent on materials imported from non-members,it is not easy to be eligible for favourable tariffs unless they reconfiguretheir supply chains to adapt to the rules.
“Noncompliant firms do not forfeit their entrance to the UKmarket, but they are ineligible for preferential tariff,” she said.
Trade data shows that in 2021 exports covered by Certificates ofOrigin issued under the UKVFTA took up roughly 17.2% of the total Vietnameseexports to the UK, far lower than the average figure under other FTAs (about32.7%).
The director also underscored UKVFTA as a new-generation agreementthat sets the bar high for intellectual property and demands novel competitionand labour standards commitments.
Vietnamese firms, accordingly, must incur higher compliance costsand go through more complicated procedures to expand their commercial presencein the UK.
It is also worth noting that the UKVFTA has given Vietnameseproducts a tariff advantage over other products. Unfortunately, the advantageis not permanent and will change once the UK enters FTAs with other countries.
Given the risk of stiffer competition from new UK-initiated FTAs,it is advisable for Vietnamese firms to quickly seize the trade opportunity tokeep themselves well-positioned against future competitors.
“They should not take the UKVFTA for granted but rather take fulladvantage of the deal to consolidate their position before new rivals move inquickly,” she said.
The director urged firms to study the agreement in more depth togain a full insight into its impacts on their operation, thereby beingoperationally prepared for the changing trade patterns.
She also called for competitiveness enhancement strategies, whichare not just for show but functional, to improve firms’ competitive positionsin the short-term to make full use of the agreement.
Dang Hoàng Giang, General Secretary of the Vietnam Cashew Association,told Vietnam News that thetariffs on intensively-processed cashew were slashed from around 5 and 7% to 0%on the grounds of the UKVFTA.
Notably, Vietnam exported 18,000 tonnes of cashew to the UK in2021, equivalent to an export revenue of 104 million USD.
As the UK was an EU member, its Sanitary and Phytosanitary Measureand Technical Barriers to Trade are, so far, not fundamentally different fromother European countries.
UK importers prefer high-quality organic products from internationally-recognisedmanufacturers, including BRC-certified and SMETA-certified ones.
They also require fair trade, gender equality, a sense ofcommunity responsibility and many other ethical frameworks.
“For UK firms, which are highly disciplined and rule-compliant,trade fraud and contractual violations are intolerable. Fraudsters andviolators are normally called defaulters,”he said.
The general secretary is concerned that Vietnam comes lower thanthe Netherlands on the list of top intensively-processed cashew exporters tothe UK even though the Netherlands is not a cashew producer.
“The Netherlands imports cashew nuts from Vietnam, intensivelyprocess the nuts and re-exports them to the UK. The country was the fourthlargest importer of Vietnamese cashew in 2021,” he said.
The Netherlands ranked first on the list, and imported 11% of Vietnam’scashew output last year, indicating that Vietnamese firms have not fullyleveraged the deal to unlock their potential. There is ample room forimprovement.
The general secretary recommended firms keep well-informed aboutUK’s Technical Barriers to Trade and other similar regulations to penetrate themarket more easily.
Contact with Vietnamese trade offices and the Vietnamese Embassyin the UK are equally helpful since they will help firms with tradeinformation.
Firms are also recommended to commercially join forces to becomeless dependent on offshore materials, thereby elevating the content of domesticmaterials in their exports to rules-of-origin-specified levels.
He also underscored strict compliance to contractual terms andup-to-UK-standard products as the key to firms gaining ground in the market.
The UKVFTA was signed on December 29, 2020, and temporarily cameinto effect on December 31, 2020, before officially starting on May 1, 2022.
Negotiated based on the principles of inheriting commitments inthe EU-Vietnam Free Trade Agreement, the deal facilitates commercial flowsbetween the two countries through its almost across-the-board tariff cuts.
The trade data of the CWIT shows that annual bilateral trade grewby 17.2% just one year after the agreement. Vietnam’s exports to the UK hit 5.8billion USD in 2021, up 16.4% year-on-year.
In the first six months of 2022, the figure reached 2.9 billion USD,up 1.1% from the same period last year./.
VNA
