Producing rattan chairs for export to the EU in Da Nang
On May 1, 2004, the European Union (EU) admitted 10 new countries, bringing to 25 the total number of its members. With the enlargement, the EU now has 450 million people and its per capita income is among the highest in the world.
This is a good chance for Vietnam because its key exports to the EU will enjoy the Generalised System of Preferences from all 25 EU members, instead of the previously 15.
However, the enlargement also poses challenges to the expansion of economic, trade and investment relations between Vietnam and the EU. Trade liberalisation forced countries to slash tariffs and use more non-tariff tools for controlling imports such as technical barriers, hygienic conditions, environmental protection requirements, and equal competition regulations.
In addition, the abolition of garment quotas among WTO member countries as of January 1, 2005 is a great challenge for Vietnam’s exports to the EU because the country has not joined the organisation yet.
Last year, Vietnam’s garment exports to the EU increased significantly thanks to the enlargement of the group. Quota exports to this huge and lucrative market represented up to 10 percent of total exports. In general, quota markets such as EU, the US, Canada and Turkey made up 70 percent of the country’s total exports. Last year, exports to the EU grossed nearly US$800 million, accounting for 18.4 percent of the country’s total export value and representing a 40 percent increase against 2003.
On December 3, 2004, Vietnam and the EU initialled an agreement to abolish garment quotas for Vietnam as of January 1, 2005. The Ministry of Trade encouraged businesses to seek and sign contracts with EU partners and said they were allowed to export unlimited volumes of products to the EU. After holding discussions with the EU, the ministry said it would issue specific instructions on export procedures and the instructions will be also posted on its website at www.mot.gov.vn. Businesses are advised to give feedback to the ministry if they face any obstacles so that it can deal with the issues quickly.
According to the Vietnam-EU agreement, Vietnam will have three months (until March 31, 2005) to complete the transition from quota to quota free management mechanisms. During that time, importers will continue to maintain the import management mechanism from a third country.
While waiting for the initial agreement to be ratified by the two governments, the ministry said it still grants automatic export licenses to exporters, following requests from the EU. It will adjust licensing procedures as soon as the EU officially announces import procedures.
According to experts, Vietnam is confronted with unequal competition and a narrowing market share because its garment exports depend on quotas granted by WTO member countries. The abolition of the quota mechanism among WTO member countries as of January 1, 2005 means that importers will seek to import products from stable non-quota markets and Vietnam’s traditional markets will shrink, as will its market share. This also means that Vietnam will find it difficult to maintain growth rates of garment exports to traditional quota markets.
Recently, Vietnam abolished quota fees for garment products exported to the EU and Canada. The move helped businesses reduce fees associated with exports.
The ministry is finalising legal documents relating to the export of commodities to the EU. They include the trade law, regulations detailing the implementation of the anti-dumping ordinance, an e-commerce ordinance and a draft decree on inspections of multi-trade activities.
VOV - (25/01/2005)