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Time needed to adapt to tariff regime

Released at: 10:41, 20/08/2015

Time needed to adapt to tariff regime

EU Minister Counselor Jean Jacques Bouflet, Head of the Trade Section at the EU Delegation to Vietnam, shared his thoughts with VET about the elimination of tariffs after the EVFTA is signed.

by Quynh Nguyen - Huong Loan

■ After the EU - Vietnam Free Trade Agreement (EVFTA) is formally signed, 99 per cent of tariff lines will be eliminated. Why 99 per cent and not 100 per cent? What is happening with the remaining 1 per cent?

Ninety-nine per cent of tariff lines will be eliminated under a ten-year schedule for Vietnam and a seven-year schedule for the EU. After the agreement takes effect, however, 65 per cent of goods exported to the EU by Vietnam will benefit from 0 per cent tariffs, while EU will have 71 per cent enjoying zero tariffs. The remaining 1 per cent is mostly sensitive products in agriculture. But dairy products will be completely liberalized with tariffs of zero while pork, chicken and beef are subject to quotas.

■ Why do many exported items that are an advantage for Vietnam, such as textiles, footwear, seafood, and rice, have a longer tariff reduction schedule than EU goods being exported to Vietnam?

The reason for the difference is the level of development between the two sides also being different. Vietnam needs a longer time to adapt to the tax cuts.

Vietnam’s textiles are not subject to import quotas. The only problem with its garments is rules of origin. We must strictly impose these rules of origin because we signed the FTA with Vietnam, not with other countries near Vietnam. Garment products must therefore be from Vietnam when exported to the EU.

Other items will still be subject to a quota, such as rice, with 25,000 tons of milled rice per year and 30,000 tons of milk rice per year at a tax rate of zero. For processed coffee, I believe it will benefit from a zero tax rate after seven years. Similarly, tariffs on seafood will be gradually eliminated, with some subject to quotas, such as tuna.

But, overall, we have been very generous in priority sectors. In the following years Vietnam has enough time to maximize its advantages. The important thing now is that Vietnam must elevate its brands. This means it should produce goods of higher value to obtain higher profits.

■ So rules of origin are the most important issue for Vietnam to benefit from the FTA?

We attach great importance to rules of origin for Vietnam’s textiles. Textile products must ensure dual origin. In other words, at least fabric and garments must be produced in Vietnam, not imported fabric from other countries. However, if Vietnam imports fabric from countries that have signed an FTA with both Vietnam and the EU the fabric is considered to be of Vietnamese origin. For example, South Korea has an FTA with both Vietnam and EU, so material sources from South Korea are also considered to be from Vietnam.

■ The opportunities from the EVFTA to Vietnam are clear. It will not be easy, however, because the EU still applies non-tariff barriers on trade that Vietnam’s enterprises must overcome. What are your thoughts?

I disagree with them being described as non-tariff barriers. They are essentially international standards that Vietnam and EU enterprises must comply with. In other words, it is about equality. These provisions in the agreement have been adjusted to make them more suitable to Vietnam’s enterprises. You can see it is technically challenging but if overcome there are big rewards, such as average annual per capita income reaching at least $24,000 and Vietnamese enterprises accessing a market of 560 million consumers.

Technical barriers are essentially international standards. These standards are based on transparent criteria. Take the example of Vietnamese catfish. There have been many assessments made by non-government organizations over the quality of Vietnamese catfish. But these are not EU standards. Therefore, we must consider whether they meet EU standards or not. We will provide technical support to help improve the capacity of Vietnamese enterprises to meet these standards.

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