Free trade deal cuts tariffs and enables Vietnam to start exporting to the EU

09 November 2020 Peak Recruitment

Vietnam Eu Export Deal

​Thanks to the EU-Vietnam free trade agreement (EVFTA) which came into force on 1st August this year, Vietnam’s agricultural export revenues have grown by an impressive 1.6% to US$30.05 billion over the first nine months of 2020.

Vietnam takes advantage of preferential trade tariffs

Vietnamese food exporters are taking full advantage of the preferential tariffs offered by the EU-Vietnam free trade agreement by exporting produce including coffee, coconut, dragon fruit, passion fruit and timber. In addition, seafood exporters are also making the most of EVFTA by increasing shipments by 10% since August.

The EU market is likely to prove valuable for Vietnamese food producers. For example, the EU is currently the biggest market for Vietnamese coffee and accounts for almost 40% of the country’s total exports. However, if full advantage of the trade deal is to be taken, farmers are being encouraged to make the move from traditional cultivation methods to a more sustainable approach.

The importance of standardisation to Vietnam’s food and seafood producers

According to Deputy Minister Phung Duc Tien, Vietnam’s agricultural sector must standardise many of its production processes; covering everything from the preparation of seeds and the propagation of plants, through to final processing. The importance of standardisation to the country’s agricultural sector is highlighted by Vietnam’s rice output: in 2020 the output is project to exceed 43 million tonnes, although there has been a slight fall in the total cultivation area to 7.2 million hectares as a result of crop switching triggered by the intrusion of salt water.

In addition the EU has also recommended the implementation of a range of measures for Vietnam’s fishing industry. These measures have been recommended with the aim of removing Vietnam’s current ‘yellow card’ warning and to reach the goal of sustainable development.

Agriculture in Vietnam today

Although agriculture in Vietnam is flourishing, with the country producing a diverse range and large quantity of crops, the sector is hampered by low quality and under-competitiveness. In fact, it seems as though the more agricultural products Vietnam produces the lower the cost: a vicious cycle which the country appears to be finding hard to break.

Approximately 30% of Vietnam's agricultural are grown throughout the year, whilst other seasonal crops such as bananas, jackfruit, mangoes and oranges are only produced seasonally. As a result, for a country which has an economy based upon agriculture and is otherwise poor, food is always plentiful.

So, what are the challenges facing Vietnam's agricultural sector?

Despite the fact that there is plenty of room in the markets to accommodate excess products, farmers aren’t growing crops to meet the new demands required by the markets. Furthermore, Vietnam is accustomed to a traditional market; making it harder for the country to compete with other countries such as Myanmar and Cambodia, for example. Farmers are facing financial hardship because of this situation and many do not have transferable skills which could benefit them if their career in farming ends. ‘Motivation’ is a new policy which has been put in place with the goal of encouraging farmers and policy officials to make the most of worldwide integration and to exploit the demands of the market. It is hoped that ‘Motivation’ will help break the current vicious cycle and advance current agricultural practices.

What is being done to improve agricultural practice in Vietnam?

In primary agricultural areas such as the Mekong River Delta and the Red River Delta, the agricultural industry depends upon intensive physical labour, with water buffalo still being used on many farms. Dikes are used by farmers in a similar way to dams to control the flow of rivers; enabling farmers to control the amount of water in particular areas to enable them to grow the correct amount of healthy crops.

Other steps being taken include the collection of seeds from rare wild plants which grow alongside rivers and in forests, with the aim of cultivating seed to increase crop revenue and encourage diversity. In addition, farmers have developed a new method of preventing pest infestation in rice plants by utilising an electronic device to eradicate them, rather than harmful pesticides. Furthermore, it has been discovered that when farmers plant rice as soon as an infestation has been cleared, the plants have an in-built resistance to pests and also grow stronger.

Last and by no means least, plans have been proposed for an impressive brand-new irrigation system for the Vietnamese agricultural sector. It is hoped that the system will help the country tap into new and lucrative markets and the Asian Development Bank has approved a $100 million contribution to help finance this exciting new scheme. The aim of the innovative irrigation system is to provide water on demand to five drought-affected areas, helping to increase productivity and enable the growth of high-value crops such as mango and dragon fruit. In addition, it is also hoped that the scheme will improve the quality of Vietnam's coffee bean crop whilst encourage diversity in the crops grown and helping to fight rural poverty.

Vietnamese wood producers overcome the challenges of coronavirus

Although the coronavirus pandemic has meant that Vietnamese wood producers have been struggling to cope with the many challenges presented by late payments and numerous cancelled orders, forestry export revenues are still set to meet the target of US$12 billion.

The future looks positive for Vietnam’s food, seafood and timber markets

Despite the extremely challenging markets which have resulted from the coronavirus pandemic, Vietnam’s food, seafood and timber producers are continuing to meet, and in some cases exceed, their targets for 2020.

In order for these markets to continue to grow, however, finding routes to more sustainable and efficient production methods is essential. To make this happen, the skills of talented and enterprising individuals will play an important part in Vietnam’s continuing growth.

Moving forward, Vietnam’s trade agreement is likely to prove extremely beneficial for the country, offering access to highly lucrative markets. As a result, Vietnam will continue to thrive with the food, seafood and timber industries earning their places as valuable assets to the country.

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