Exporting vietnamese agricultural products to australia and new zealand in the context of asean

In recent years, Vietnamese agricultural products have increasingly developed and affirmed their position in the world market. Since the ASEANAustraliaNew Zealand free trade agreement (AANZFTA) officially took effect in 2010, the amount of Vietnamese agricultural products exported has experienced significant change. Australia and New Zealand both have high requirements about the quality of imported products, therefore this agreement has opened up new opportunities for Vietnam to increase agricultural exports to these two countries. Based on an assessment of the current situation and challenges Vietnamese agricultural products cope with, the authors provide an overview of the AANZFTA agreement as well as its impact on the export of Vietnamese agricultural products to Australia and New Zealand. In addition, the paper also proposes a number of recommendations to exploit the agreement optimally, making it easier and more efficient to export Vietnamese agricultural products to Australia and New Zealand.

Exporting Vietnamese agricultural products to Australia

and New Zealand in the context of ASEAN - Australia/ New Zealand Free Trade Agreement

an overview of the AANZFTA agreement as well as its impact on the export ofVietnamese agricultural products to Australia and New Zealand In addition, the paperalso proposes a number of recommendations to exploit the agreement optimally, making

it easier and more efficient to export Vietnamese agricultural products to Australia andNew Zealand

Keywords: ASEAN-Australia-New Zealand free trade agreement, AANZFTA,

agricultural products, export

1 Contact via: k60.2112150054@ftu.edu.vn

1 Methodology

In order to illustrate the relationship between the AANZFTA and Vietnam’agricultural products export, a qualitative method is used in this research paper.Secondary data is collected and analyzed to demonstrate the growth in the exportation ofVietnamese agricultural products to Australia and New Zealand before and after theapplication of AANZFTA Through the process of analyzing data, our group can produceevidence and interpret the opportunities and challenges of the agreement, which lay thefoundation for some recommendations to enhance the ability of exporting agriculturalproducts in the context of AANZFTA

2 Literature review

During the period of implementing AANZFTA in the development of the nation,significant achievements in exporting Vietnamese products to Australia and New Zealandhave been recognized Several papers have been written to show the relationship betweenthis comprehensive foreign trade agreement and Vietnamese exports

Tue (2019) used descriptive statistics method and meta-analysis method todemonstrate the connection between AANZFTA and Vietnamese export Her papershows that although there is big improvement in the trade balance among countries,Vietnamese export value experienced many fluctuations, with unstable market value.This paper also pointed out the reasons behind this situation and recommended solutionsfor enhancing the ability of Vietnam exporting

Moreover, according to Phuong (2019), since AANZFTA went into effect in 2010,the structure in the goods exchange of Vietnam with these two countries has shifted in thedirection of specialization and exporting more advantageous commodities However, therate of taking advantage of AANZFTA is still low for Vietnamese enterprises, whichdecreases the efficiency of that free trade agreement

In 2015, the Ministry of Industry and Trade also published a book relating toexporting products to Australia and New Zealand with the advantages from AANZFTA.The book focuses on analyzing, evaluating the situation of Vietnam export to Australiaand New Zealand in the period 2005 - 2014 in order to give disadvantages, reasons aswell as achievements One unique point is that the book compares the level of takingadvantage of agreement compared to other countries in ASEAN so that a wider view can

be seen

Despite the number of studies researching Vietnam’s trade relationship withAustralia and New Zealand, those studies are mainly focused on analyzing the impact ofthe AANZFTA on the entire macroeconomy, which has not given a specific view aboutstructure of goods export Vietnamese agricultural products export is recognized to lack

data and information to result in a deeper sight for improvement Noticing this researchgap, this working paper will analyze the relationship between AANZFTA and Vietnam’sagriculture development, including the current situation, opportunities, and challenges inorder to put forward new recommendations about Vietnam’s growth in agriculture.

3 ASEAN - Australia/ New Zealand Free Trade Agreement (AANZFTA)

3.1 Overview of AANZFTA:

3.1.1 Overview

AANZFTA is a Free Trade Agreement (FTA) between Australia, New Zealandand the countries covered by ASEAN ASEAN includes Brunei, Cambodia, Indonesia,Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.AANZFTA was signed in February 2009, and came into effect on January 1st 2010 TheAANZFTA is a comprehensive and single-undertaking free trade agreement that opens

up and creates new opportunities for approximately 663 million peoples of ASEAN,Australia and New Zealand - a region with a combined Gross Domestic Product ofapproximately USD 4 trillion as of 2016 In line with the ASEAN Community Vision

2025 , the AANZFTA aims for sustainable economic growth in the region by providing amore liberal, facilitative and transparent market and investment regimes among thetwelve signatories to the Agreement (The ASEAN-Australia-New Zealand Free TradeArea – AANZFTA)

3.1.2 The main content of AANZFTA

Main content of AANZFTA includes 18 chapters and 4 annexes The main areas

of commitment in the AANZFTA consist of:

a Tariff measures

Trade of goods

The AANZFTA provides for special and differential treatment to ASEAN

in recognition of the different levels of development among the ASEAN MemberStates and between the ASEAN Member States and Australia and New Zealand

For trade in goods, the tariff reduction and elimination schedules aredifferentiated among 3 groups of countries, which are based on the levels ofdevelopment:

● Group 1: Australia, and New Zealand;

● Group 2: The ASEAN 6 consists of Brunei Darussalam, Indonesia,Malaysia, Philippines, Singapore, and Thailand);

● Group 3: Newer ASEAN Member States consists of Cambodia, Lao PDR,Myanmar, and Viet Nam

Cambodia, Lao PDR, Myanmar, and Viet Nam enjoy a more gradualphasing and longer gestation for the elimination of tariffs In the case of trade inservices, the Parties recognize the importance of according special and differentialtreatment to Cambodia, Lao PDR, Myanmar, and VietNam through negotiatedcommitments relating to strengthened domestic capacity; improved access todistribution channels and information networks; and commitment in sectors ofexport interest to the four countries

In recognition of the differences in capacity, the AANZFTA also provideseconomic cooperation between and among Parties The Governments of Australiaand New Zealand have provided funding support for implementing the EconomicCooperation Work Program under the AANZFTA Economic Cooperation SupportProgram (AECSP)

Commitment on tariffs

Australia and New Zealand's commitment on tariff for Vietnam:

● Since 2015, Australia has eliminated tariffs for about 97% of tariff lines(only maintaining a low tariff less than 10% for some products such asbamboo shoots, surgical threads, wood and wood products, iron and steelproducts, fabrics )

● Since 2015, New Zealand has eliminated tariffs for about 91% of tarifflines (only maintaining low tariff less than 10% for some products such ascakes, sweets, cereal products, wood and wood products, chemicals,components, auto parts, machinery, equipment, tools and spare parts,computers, electronic products and components,…)

● By 2022 (at the end of the schedule), both Australia and New Zealand willcompletely eliminate tariffs (all Tariffs) for goods from ASEAN countries

Vietnam's commitment:

● Since 2018, 86% of tax lines in the Tariff will be eliminated

● By 2022 (at the end of the schedule), 92% of tariff lines in the Tariff will beeliminated (including items such as livestock; pharmaceuticals; sugar; rice;wood; paper; chemicals; cosmetics; etc.)

● 8% of the remaining tax lines will be reduced according to a separateschedule or maintained at the same rate (for example, goods such as fruits(oranges, tangerines); alcohol, cigars, petroleum, tobacco leaves, steelproducts, etc.)

Goods meets the general criteria:

● Regional Value Content (RVC): 40% minimum, or

● Change Tariff classification at the 4-digit level (CTH – non-originatingmaterials must be in a different HS Group from the HS Group of thefinished product)

Goods with specific rules: some goods do not apply the general criteria, but theproduct specific rules applied to them are specified in the List of Product-SpecificRules

AANZFTA Certificate of Origin is the AANZ C/O form Vietnam andASEAN countries issue a paper C/O while Australia and New Zealand issue anelectronic C/O, so the electronic C/O AANZ issued by Australia/New Zealand will

be printed out and submitted to the customs offices of ASEAN importingcountries Error AANZ C/O can be corrected or renewed C/O AANZ can beissued before, during or after (no more than 1 year) the time of export AANZFTAdoes not have a provision for Self-Certification of Origin.

Commitment on Services and Investment

Vietnam's commitment on opening up the service market in AANZFTA isequivalent to that of Vietnam's WTO accession commitments, except thateducation services are broader than WTO commitments, mainly in terms of scope

The chapter on Investment in AANZFTA is the largest one of investmentcommitments that Vietnam has signed before, including both liberalization(opening to foreign investment) and principles of treatment and investmentprotection However, many contents in this Chapter have not taken effectimmediately but depend on further negotiations between the Parties Thecommitments that have not taken effect immediately mainly relate to the principle

of expropriation of investors, compensation in case of armed conflict, andsettlement of international investment disputes (ISDS)

Customs procedure

Customs procedure in AANZFTA refers to the rules and regulations thatapply to goods traded among the Parties of the ASEAN-Australia-New ZealandFree Trade Area (AANZFTA) (Customs Procedures and Trade Facilitation -ASEAN Main Portal) The objectives of this procedure are to ensurepredictability, consistency and transparency in the application of customs laws andregulations of the Parties, and to promote efficient, economical and expeditiousclearance of goods (Chapter 4 Customs Procedures - ASEAN Main Portal) One

of the features of this procedure is the advance ruling provision, which allowstraders to request a binding decision from the customs authority of a Party oncertain matters before the importation or exportation of goods This would helpreduce the time and cost of checking and assessing goods at the ports of entry

Sanitary and Phytosanitary Measures

Under Chapter 5 of AANZFTA, the Parties agree to provide greatertransparency in their SPS regulations and procedures, and to explore opportunitiesfor collaboration and information exchange on SPS matters, including technicalassistance The Parties also agree to establish an SPS Committee to oversee theimplementation of this Chapter and to address any issues that may arise (SanitaryAnd Phytosanitary (SPS) Measures - ASEAN Main Portal)

Safeguard Measures

The party entitled to participate shall apply safeguard measures when theimported goods increase suddenly due to the implementation of commitments inAANZFTA This sudden increase in goods has a serious impact on the domesticindustry that produces similar goods The condition for applying a safeguardmeasure is when imports from one Party exceed 3% of the total imports from the

other Party and when the total imports from the other Party exceed 9%.

3.2 Overview of Vietnamese agriculture in the context of AANZFTA:

According to the scientific conference "Promoting trade in agricultural productsbetween Vietnam and Australia in the context of the implementation of Free TradeAgreements (FTAs)" , the growth rate of two-way trade between Vietnam and Australia

in the period 2010-2022 reaches 14%/year After AANZFTA came in handy in 2010, theexport value of Vietnam’s agricultural products has increased significantly However,expanding market share for these products is not easy because Australia sets strictrequirements on labeling and food safety; some standards are even higher than those ofthe US and EU

Import and export turnover of Vietnam - Australia has just set a new record of15.7 billion USD in 2022, up 27% compared to 2021, of which exports reached 5.6billion USD, up 26% and imports reached 5.6 billion USD 10.1 billion USD, up 27%.Currently, Vietnam is Australia's 10th largest trading partner, while Australia isVietnam's 7th largest trading partner

Source: ITC TradeMap

In terms of agricultural products, the Australian market's demand is still low for Vietnamese agricultural products, possibly partly due to a matter of taste.

Moreover, the quality of Vietnamese agricultural products is not really high and has not met the requirements and import regulations of Australia, together with the fact that the brand value is not high.

In 2011, only after 1 year since AANZFTA was active, mangoes which were the first kind of fresh fruits from Vietnam were officially exported to New

Zealand Until now, Vietnam has received licenses to export fresh mango, dragon fruit, rambutan, lime and pomelos to New Zealand Statistics from the MARD show the trade turnover of agro-forestry-fishery exports between Vietnam and New Zealand in 2021 reached approximately US$550 million, accounting for 41%

of the total bilateral trade revenue Both sides also inked an agreement to facilitate customs clearance of agricultural, forestry, and fishery products through the use of electronic certificates in July 2020.

Source: ITC TradeMap

4 The situation of Vietnam's agricultural export industry to Australia and New Zealand in the context of AANZFTA

4.1 The situation of Vietnam's agricultural export industry to Australia and New Zealand before AANZFTA came into effect

4.1.1 Trade barriers between Australia and Vietnam, New Zealand and Vietnam before the AANZFTA

Prior to the implementation of the AANZFTA, trade between Vietnam and Australia was subject to import tariffs

According to the World Bank, In 2009, Australia’s average HS tariff rate across imports from Vietnam was 5,27%, while its average MFN tariff on imported products from Vietnam was 5,5%

(The average HS tariff refers to the average tariff rate applied to goods classified under the Harmonized System (HS) of product codes

The Most Favored Nation (MFN) represents the average rate of tariffs imposed on all goods imported into a country without preferential treatment)

NTB:

● Australia is one of the markets with the strictest regulations on inspection,hygiene, and product safety.

● Vietnam was among the top 10 countries with the highest number ofagricultural imports rejected by Australia or with the highest import valuerefusal during the period of 2003-2010

● Among these, the primary reasons for the rejection of Vietnameseagricultural exports to Australia were

○ labeling issues (265 times),

○ contamination (129 times),

○ residue of veterinary drugs (44 times),

○ food additives and ingredients (14 times)

● Additionally, there were also reasons such as excessive levels of other pesticide residues, falsification/missing documentation, and packaging

(According to VCCI)

4.1.2 Agricultural export values

The context of Vietnam's agriculture export industry to Australia before the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) is characterized

by a growing trade relationship and significant export opportunities

Source: ITC Trade Map

Before the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) came into effect, the agricultural export values from Vietnam to New Zealand were relatively low However, the figures saw an escalation since the implementation of AANZFTA.

Source: ITC Trade Map

4.2 The situation of Vietnam's agricultural export industry to Australia and New Zealand after AANZFTA came into effect

4.2.1 Trade barriers between Australia and Vietnam, New Zealand and Vietnam after AANZFTA came into effect

Under Vietnam’s PTA with Australia and New Zealand (AANZFTA) and with theexception of a few sectors (e.g., tobacco, alcohol, and some meat products), allVietnamese tariffs are set to be phased out by 2018 According to the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) roadmap, Australia cuts 90 percent of importtaxes in 2018 and 100 percent of tax lines will drop to zero as from 2020 Meanwhile, theComprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) willpromisingly facilitate trade ties between Vietnam and Australia According to statistics,Vietnam’s exports to Australia make up 1.7% of the

country’s total imports only, although Vietnam is its 15th biggest exporter and Australia

is considered a potential market for Vietnamese businesses

Likewise, as of 2020, AANZFTA has eliminated tariffs on 99 percent of NewZealand's exports to Vietnam

AANZFTA provides commitments to duty-free access to the majority of Vietnam’s export commodities

4.2.2 Exports value of agricultural products from Vietnam to Australia and New Zealand a) Exports value of agricultural products from Vietnam to Australia

● Export value of agricultural products from Vietnam to Australia in the period from 2010 to 2015

Source: ITC Trade map

● Export value of agricultural products from Vietnam to Australia in the period from 2016 to 2021

Source: ITC Trade map

Fruits is the group of goods with the largest import turnover, thetrend has almost no change in value during the period 2016 - 2021 In 2016,the value of Vietnam's fruit exports to Australia was 137,287 thousandUSD and increased to 9.9% in 2017 (150,943 thousand USD) From 2018

to 2020, the export value returned to a stable figure of about 135,000thousand USD, and even decreased slightly in 2021 Import value of coffeeand tea (the group with large turnover) second) as well However, thisgroup tends to decrease slightly from year to year In 2016, the export value

of coffee and tea from Vietnam to Australia was 52,082 thousand USD , by

2020 it will only be 37,017 thousand USD Thus, the two main groups ofagricultural export products of Vietnam tend to keep stable or graduallydecrease in value

Meanwhile, other commodity groups tend to increase Cerealsincreased 4 times Vegetables increase 2 times

b) Exports value of agricultural products from Vietnam to New Zealand