EUVietnam Free Trade Agreement: the impact on VN (with a special focus on SMEs)

• Recent FTA Commitments of EU and VN• Tariffs export to EU • Increased trade following the EVFTA – Support to SMEs • Perceived barriers to export to the EU • What kind of support SMEs m

EU-Vietnam Free Trade Agreement:

the impact on VN (with a special focus on SMEs)

Presenter: Claudio Dordi

Ha Noi, 12 November 2014

• Recent FTA Commitments of EU and VN

• Tariffs (export to EU)

• Increased trade following the EVFTA

– Support to SMEs

• Perceived barriers to export to the EU

• What kind of support SMEs might need?

• Some basic ideas for further support

2

EU-VN Trade: VN surplus

Blue: import into EU Red: export to VN EU Balance

EU trade with Vietnam (2003-2012)

Levels of Protection

• Vietnam’s exports to the EU face an average tariff of 4.6 per cent, but this hides a number of tariff peaks

• EU exporters to Vietnam also face significant barriers on

specific items, most notably on alcohol and tobacco

products, 100 per cent, and motor vehicles, especially

motorcycles

• Behind the border restrictions, which include non-tariff

measures are significant in both parties

• Restrictions on services are also extensive

4

Recent FTA Commitments of EU and VN

• EU has liberalised fully or over 99% of its trade over 0-7 years

in recent FTAs

• EU has gone beyond GATS in services, and added other

cooperation or commitments for government procurement,

competition policy, investment, TRIPS, trade facilitation and customs, mutual recognition agreements, dispute settlement, labour rights, capacity building and sustainable development

• Vietnam has similar trade in goods commitments across

agreements

• Vietnam has tended to stick to its WTO accession protocol for services and shied away from other trade related areas

Industrial tariffs

on Vietnam’s exports to EU

Source TASTE 2013 and simulations

Vietnam total exports

relative to base

8

Vietnam total imports

relative to base

Vietnam gains from services reform

relative to baseline in 2020

10

Improvements in bilateral access

Welfare gains =$321m.

Imports, agriculture

Change in 2020 relative to 2007

Imports, industrial

Change in 2020 relative to 2007

12

Exports, agriculture

Change in 2020 relative to 2007

Exports, industrial

Change in 2020 relative to 2007

14

Change in 2020 relative to base in 2007

Output in textiles sector

Change in 2020 relative to base in 2020

16

Agricultural Issues

• The agricultural and fisheries sectors are sensitive sectors for both parties of the negotiations (use of tariff peaks, subsidisation,

income support, etc.)

• Impact on employment, poverty alleviation and rural development

• Vietnam has significant input requirements across the entire supply chain of agro-processing sector with a high propensity to import

• Non-tariff measures are significant (SPS, HAACP, EuropGAP,

GAP etc.)

Industry Issues

• VN experienced high growth and competitive in all sectors

• Three sectors are particularly outward oriented: textiles and

clothing, footwear and handicrafts

• Investment is also drawn significantly to four of these sectors: textiles and clothing, footwear, high-technology and automotive

• Inputs often rely on imports

• Rules of origin concerns, standards and investment concerns, IPRs

18

Services Issues

• VN experienced high growth, major investment and restructuring in most sectors

• Commitments go quite far for VN

• EU highly competitive in most service sectors

• Problem in VN of implementation, regulations,

licensing and policy uncertainty

• Problem in EU for mode 3 and mode 4 => strong VN interests Currently VN exports mainly under mode 1.

• Professional services most complicated to liberalise

Perceived barriers to export to EU

• Bureaucratic legal and business environment (including tax)

• Poor access to sufficient HR

• Cultural differences, language

• Limited information to locate/analyze markets

• Poor access to information and difficulties in obtaining reliable information

What kind of support SMEs might need?

Coordination in the target country:

experiences of EU SMEs

• Situation

• Enterprises from some Member States are better provided than others

• Parallel services provided by different MS and agencies= often duplication or inefficiencies

• Competition among different agencies from MS=how to coordinate?

• Added value

• Make it possible that SMEs from MS not providing support services in VN can also get access to services provided by support service organizations from another MS (EU Business center: hub in the target country linking support service organizations)

• There are services where there is no competition among different service

providers’ organizations (e.g technical standard, IPRs, legal environment, basic market studies, trade information, etc.)

• Is there room for cooperating on trade missions?

• Liaison with Enterprise Europe Network

• Acting as counterpart of coordinating bodies at a NATIONAL level in the EU (e.g bringing together the existing agencies, establishing an effective division

of labor, identifying gaps and improving relations with the business support system “at home”

• Signposting: reference point for enterprises/support agencies in Europe

directing them to the most appropriate form of support

• Efficiency gains (division of labor…is it possible?)

Some basic ideas to further support

- First entry services information (how the country is, a few

brochures on how to recruit, how to deal with taxes, etc)

- Matchmaking, Trade promotion

- Organize activities, like VN pavilions in trade fairs

- Support to import is equally important to other support activities!

- Make baseline studies

THANK YOU!

26

Contact :

Trade Capacity Vietnam (TCV) Project Office:

Rm 603 – 604, 6 th floor, 65 Van Mieu, Dong Da , Hanoi , Vietnam Tel +84 (4) 62757026 ; Fax +84 (4) 38232786;

Website: www.mutrap.org.vn

(workshop documents are available on above websites)