Impact of EVFTA on rice exports

In order for Vietnam to enhance welfare gains from the integration, there has been analysis on impacts for Vietnam. Vietnamese government is expected to support firms with understanding about the EVFTA, market information on quality standards, labour and environmental requirements, building capacity to improve quality and value of exporting products including rice exports. Furthermore, revision of domestic policies is also recommended for Vietnam to further support domestic enterprises not only to promote exports to the EU, but also to enhance competitiveness of enterprises in the domestic market as the future entrance of EU enterprises to Vietnam. In term of enterprises, Vietnamese companies are recommended to improve the quality of products so as to align with higher standards of the EU market to increase exports of higher valueadded products.
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Impact of EVFTA on rice exportsTAØI CHÍNH QUOÁC TEÁ Taäp 05/2021 Impact of EVFTA on rice exports Trần Ngọc Phương Thảo - CQ56/21.01CLC Bùi Thị Thu Uyên - CQ56/21.01CLCT he EU-Vietnam Free Trade Agreement (EVFTA) is a new generation FTA between Vietnam and 27 European Union member states. The EVFTA is a win- win trade deal with balanced benefits for both Vietnam and the EU whichcomplies with the provisions of the World Trade Organisation (WTO). The agreement includes 17 chapters, two protocols and several attachedmemorandums, with main contents covering the following aspects: Trade in goods;Services, investment liberalisation and e-commerce; Government procurement;Intellectual property rights. It also covers other aspects including rules of origin, customsand trade facilitation, sanitary and phytosanitary measures, technical barriers to trade,sustainable development, cooperation and capacity building, and legal-institutional issues. On 2nd December 2015, the EU and Vietnam announced the conclusion of thenegotiations for an EU-Vietnam Free Trade Agreement (EVFTA). The EVFTA isexpected to create a free trade area among member economies. The EVFTA is of interestfor several reasons. Firstly, the EVFTA is created in the era of “next generation” trade agreement.It, therefore, is expected to extend is scope well beyond the limits of trade and trade-related policies. Secondly, the EVFTA is another FTA between the EU and an ASEAN memberstate. It is therefore considered as stepping stone towards an ultimate objective of acomprehensive region-to-region EU-ASEAN FTA. Participating in such agreement will bring both opportunities and challenges forthe member economies and there have been different opinions on potential impacts ofthe EVFTA to the member economies. The current situation of rice exports to EU Up to now, Vietnams rice products have penetrated the entire EU market. Thelargest consumer markets are Belgium, France, Germany, Netherland and Lithuania.However, rice exports to the EU account for a very small proportion (0.7%) in the totalagricultural exports of Vietnam to the EU. At the same time, rice exports have been ona significant decline in recent years. Rice export growth has been continuously negativefor the period 2014 - 2016 (-41.2% in 2014, -20% in 2015 and -4,02% in 2016). As of 77 Sinh viªnTaäp 05/2021 TAØI CHÍNH QUOÁC TEÁ2016, rice exports to the EU only accounted for 1.7% of Vietnams rice export turnover,down to 25.6% compared to 2015. In addition, the amount of Vietnams rice exports tothe EU stayed modest with only about 5.6 million USD in 2018 and 10.7 million USDin 2019. As a result, the decline in rice exports is “the general picture” of rice trade inthe world in recent years due to oversupply. However, in the first 8 months of 2020, rice exports from Vietnam to EU hadrisen rapidly, reaching over 15.800 tons rice, with approximately 8.5 million USD.Rice exporting to EU is expected to increase until the end of 2020 despite of theCOVID-19 effect. In the list of major rice importing markets of Vietnam, EU countries are not in thelist. The rankings of EU countries which import Vietnam rice are not as high as otherAsian countries with only some countries were in top 30. For example, in the first 4months of 2020, Poland ranked 20, the Netherland ranked 21, France was at 23, Spainranked 27 and Belgium was at 30. Consequently, although being the third rice exporterin the world, but Vietnamese rice grain is still absent in the EU The EU demand for rice is increasing significantly due to the growing popularity ofAsian food. However, in order to export to EU countries, it is a must to reach EU strictquality and standards. In 2019, the number of Vietnam rice consumption is in a low level,approximately 20.000 tons compared with the average rice consumption in EU is 2.5million tons. As a result, with strict rules, EU rice consumption is not as expected. Commitment of EVFTA According to EVFTA commitments, the EU gives Vietnam a quota of 80,000 tonsof rice / year, including: 30,000 tons of milled rice, 20,000 tons of unmilled rice and30,000 tons of fragrant rice. The EU will fully liberalize broken rice, this commitmentwill help Vietnam export about 100,000 tons to the EU annually. For products from rice,the EU will bring the tax rate to 0% after 3-5 years. The list of enterprises meeting the requirements: each party makes a list ofexporters of agricultural products and foodstuffs that meet the requirements of foodhygiene and safety with the export commodity codes to send to the other party. Predict the impact of EVFTA Positive impacts According to the Vietnam Food Association, despite the rice export quota to theEU standing at only 80,000 tons, Vietnamese rice exported to this market is generally ofhigh quality. Therefore, the status of local rice will be elevated within the internationalmarket upon gaining entry into the EU. Part of the quota for Vietnamese rice is licensedfor special rice varieties whose production output and cultivation areas are modest. 78 Sinh viªnTAØI CHÍNH QUOÁC TEÁ Taäp 05/2021 If the EVFTA is subsequently ratified by the Vietnamese National Assembly asexpected, the trade deal is poised to come into effect in August, with the tax rate imposedon rice set to be immediately slashed to 0%. This dramatic tax cut ...