The EU-Vietnam Free Trade Agreement (EVFTA) is expected to create solid opportunities for Vietnam to expand its export markets in the time ahead, especially in terms of the garment and footwear industries.
After the deal takes effect, taxes on many items will decrease to zero percent.
Experts have said that Vietnam still holds an advantageous position as its labour and production costs are lower than those in neighbouring countries. On the other hand, Vietnam’s garment and leather products have established their brands on the EU market.
The export turnover of Vietnamese textiles and footwear is expected to increase remarkably as the tariff barriers are gradually removed.
According to Chairman of the Vietnam Textile & Apparel Association (VITAS) Vu Duc Giang, the textile and garment export turnover target of US$35 billion in 2018 is quite feasible.
Free trade agreements that have played a big role in realising the target, especially those with EU as this is the second largest export market of Vietnam’s textile and garment industry after the US, Giang said, adding that the trade deal promises to help Vietnam’s textile and footwear sectors grow strongly in the coming years.
Giang, however, also mentioned some of the difficulties facing Vietnamese textile firms as they have to import a great volume of materials from many countries.
Each year, the textile and garment sector uses about 820,000 tonnes of materials, with about 70% imported from China.
In order to enjoy the preferential tariffs from the EVFTA, enterprises must comply with regulations related to origin of goods if they do not want to pay the normal tariff.
Giang added that regulations on origin are the most important factor in the EVFTA. Accordingly, Vietnamese textile and garment exporters must ensure that their products are produced from domestic materials or that those imported from the EU and other countries signed bilateral trade agreements with the EU. If Vietnam meets regulations on these issues, its textile and garment industry is likely to be stronger in the future.
Nguyen Duc Thuan, Chairman of the Vietnam Leather, Footwear, and Handbag Association (LEFASO), said that when the EVFTA comes into effect, the zero-percent tariff will be applied to about 50 types of footwear products of Vietnam exported to Europe.
In the sector, Vietnam’s biggest competitor is China. Vietnam's footwear products will enjoy a tax difference of between 3.5 to 4.2% when exported to the EU, creating a huge competitive advantage.
The EU also offers unilateral incentives for a large number of goods originating from Vietnam under the Generalised System of Preferences (GSP), which will help Vietnam's footwear become more competitive than its rival Chinese products in the EU market.
Many foreign footwear producers have shifted their businesses from China to Vietnam to benefit from the EVFTA, Thuan noted.
He added that Vietnam is the second largest exporter of footwear in the world, after China, and its footwear export turnover has increased continuously through years, hitting US$14.6 billion in 2017, from only US$8.4 billion in 2013.
This year’s export turnover for the sector is forecast to reach US$19.5 billion, up 10% against 2017.
However, Thuan also said that the sector is facing difficulties in terms of sources of raw materials for production, adding that attention should be paid to modernising production lines, thus helping the sector improve its competitiveness in the regional and international markets.