EVFTA: Great opportunity for the seafood industry to break through (11-07-2019)

With the EU-Vietnam Free Trade Agreement (EVFTA), up to 90% of the tariff lines of seafood products will be committed to cut to 0% (except for canned tuna and fish balls) with the longest schedule of 7 years.
EVFTA: Great opportunity for the seafood industry to break through

Seafood is a key export product of Vietnam to European market. It is also the product that enjoys preferential advantages from the EVFTA. The EVFTA is signed with the commitment of cut off up to 90% of the tariff lines of seafood products (except for canned tuna and fish balls) with the longest schedule of 7 years. Many experts believe that this is a great opportunity for the seafood industry to break through. According to Truong Dinh Hoe, Secretary General of Vietnam Association of Seafood Exporters and Producers (VASEP), the import tariff on seafood into the EU is currently around 14% on average; in which, many items are taxed up to 26%. But when the EVFTA comes into effect, there are about 840 basic tariff lines, accounting for about 50% of the tariff lines for aquatic products will be reduced to 0%; the rest has a reduction schedule of 3-7 years. Some special items such as canned tuna and surimi, Vietnam will be benefited a tariff quota of 11,500 tons and 500 tons respectively. Thus, the EVFTA to be implemented is a great push for Vietnam's seafood export to the EU market.

According to Mr. Hoe, for the fisheries sector, the EU is an important market for 28 member countries. Particularly, shrimp products will be more optimistic because import tax on this market will drop sharply from the first year, then gradually decrease to 0% in the following years. Vietnam currently ranks second in the world of shrimp exports with 14% market share after India. When EVFTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) come into effect, tariffs on raw shrimp imports from Vietnam as well as export duties on processed shrimp into the EU and CPTPP members are all reduced. Meanwhile, India is not a member of CPTPP and the negotiation process of FTA between India and EU is also suspended. This is considered an opportunity for Vietnamese shrimp exports to compete with India.

According to VASEP, with the target of exporting shrimp setting for 2019 reaching US$ 4.2 billion, the US is determined to be the key growth market with a turnover expected to reach US$ 750 million, up 17.6% compared to 2018. At the same time, the demand of Vietnam's largest shrimp export market, the EU, is also forecast to continue to increase, especially in the UK and the Netherlands. That is the basis for the shrimp industry to strive to bring export turnover to the EU market at US$ 1.5 billion in 2019.

“For tra fish products, the EU market will be recovered, especially the Spanish-speaking countries, after the crisis of communication on this item. Vietnam has made great efforts to handle that crisis, hence, this market is showing signs of recovery. When EVFTA is signed, importers will be more assured of Vietnamese tra fish products” - Mr. Hoe emphasized. Chairman of VASEP's freshwater fish Committee said that the position of tra fish in the world seafood market is gradually being confirmed. The effectiveness of trade promotion in many years and the market demand for this item is on the rise. This helps Vietnamese tra fish products gain a certain market share and be received by the world consumers.

 For tuna products, Thailand and China are the two biggest rivals of Vietnam, holding a large export market share. However, both of two countries have not signed a FTA with the EU nor are members of CPTPP. This means that Vietnam's tuna has an absolute advantage in tax compared to the two rival countries in the EU and the member countries of CPTPP.

Many experts said that the signing of EVFTA is an opportunity for Vietnamese seafood enterprises to expand export markets, especially new markets. At the same time, it helps improve the competitiveness of Vietnamese seafood products compared to many countries that have not yet participated in FTAs. According to businesses, price competition in the fisheries sector is now very fierce. Meanwhile, the seafood export tax on some markets is very high. Specifically, Vietnam's shrimp exports to the EU have an average tax rate of 6-20%, tuna products also have a tax rate of 11-20%.

However, besides the advantages, the EVFTA also brings some challenges in terms of technical barriers that Vietnamese seafood exporters need to pay attention to. “In order to take advantage of incentives, exporters need to comply with EU standards of food safety and hygiene. Accompanying with the commitments of EVFTA on tax reduction, it sets also high quality requirements on food quality, safety and hygiene, antibiotic residue standards for export products that Vietnamese enterprises need to overcome to take their advantages, otherwise they will face difficulties”- Mr. Hoe stressed.

In fact, these requirements are not regulated by any market but have become a global trend, especially for Vietnamese seafood when 70% of input materials are from farming. Therefore, businesses need to prepare to provide data, records, traceability process in a methodical way to create trust for Vietnamese seafood importers.

Experts also recommend that enterprises need to be proactive in developing business plans in the medium and long term, adjusting the supply of materials in accordance with the origin requirements of each market. Moreover, in the context of global trade liberalization, the competitive advantage of tariffs only lasts for period, Vietnamese enterprises need to quickly innovate technology to be able to participate in global production networks and value chains in order to grow sustainably.

Cat Tuong

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