According to the Vietnam Chamber of Commerce and Industry, Vietnam has joined 15 free trade agreements (FTAs), including high-quality pacts such as the CPTPP and the EVFTA, covering many major economies in the world.
The benefits that these FTAs offer include lower tariffs, a competitive business environment, cheap and high-quality goods, thereby creating better opportunities for Vietnamese exports to enter the markets of partner countries.
The benefits are enormous, but the challenges are also considerable, requiring Vietnamese enterprises to be well-prepared to seize the opportunities from the most sweeping wave of integration ever.
In fact, the utilisation rate of the 15 FTAs by Vietnamese enterprises in 2021 was only 33%, with total exports utilising tariff cuts estimated at 69.8 billion USD.
The past two years have seen a slump in global trade on top of risks and uncertainties in the world economy, but Vietnam has still managed to record decent export growth.
Nevertheless, the weakest point in Vietnam’s export sector is its unsustainability as the majority of farming exports are raw or only saw preliminary processing. Manufacturing accounts for 86% of Vietnam’s total exports, but most is assembly, therefore Vietnam can only benefit from labour costs, land rent and tax.
Furthermore, Vietnam’s other established goods, such as rice, pepper, cashew and coffee, are given the opportunity for further processing under the FTAs but Vietnamese enterprises have failed to meet the requirements.
That is why Vietnam’s exports have only grown in quantity while not much change has been made to value and structure to allow Vietnam to be more deeply involved in the global value chain.
It should also be noted that Vietnam’s exports and trade surplus rely on foreign-invested firms while domestic enterprises are still importing a large share of goods.
Vietnamese enterprises should pay attention to the rule of origin issue to avoid being investigated and facing the trade defence measures imposed by importing countries.
They also need to work closely with functional agencies to have a concrete and practical plan of action to enhance the capacity to utilise tariff preferences and address policy obstacles related to the rule of origin, thus helping exports become more sustainable and effective.