Enterprises benefit from Free Trade Agreement

(SGI) - The EU-Vietnam Free Trade Agreement (EVFTA) has had a positive impact on Vietnamese enterprises and exports in the last two years since it came into force. However, the market share of Vietnamese products in Europe is still rather modest.
Illustrative photo.
Illustrative photo.

Fastidious market

In narrating his story of success in selling rice in the European market, Mr. Phạm Thái Bình, General Director of the Trung An High-tech Agriculture Joint Stock Company, is proud to say that he has now established the Trung An rice brand in Europe since 2020.

At first, the company management was worried that this might cause the export turnover to decrease, because before exporting, the packaging did not have the Trung An brand name. So far, customers in many countries have been very supportive. Even in the fastidious German market, Trung An rice has affirmed its position and is competing well in terms of quality and price with Thai rice, which already has a strong and well-established brand name in Europe.

Mr. Bình said that many people believe that when the rice import tax is exempted, Europe will increase technical barriers to protect domestic enterprises. In fact, protection of domestic enterprises already exists and in Europe, with or without the EVFTA, the quality standards for agricultural products to enter the market will never change. Moreover, each year Europe imports about two million tons of rice, so 80,000 tons of rice imported from Vietnam is only a small amount. This will not be affected by any technical barriers.

Mr. Bình confided that in order to meet the needs of the European market we must implement the Global GAP process well. He feels that it is important we do the right thing, and do not import fragrant rice from Cambodia or Thailand and then label it as Vietnamese rice for export, or export rice with residues of pesticides in it. Mr. Bình is clear that we need to do a good job to look forward to a lucrative future where the European people will have faith in our product and want to eat Vietnamese rice by choice.

According to Mr. Ngô Chung Khanh, Deputy Director of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, one of the barriers that prevent Vietnamese enterprises from promoting exports to the EU market is because many businesses are still afraid of the high technical standards set forth by EU officials, hence they continue to only export to traditional markets.

Mr. Khanh said that it is the fear that makes businesses feel that the EU market is out of reach, therefore it is important that we realize and understand that this is an area where people have a higher standard of living, so they have the right to demand higher standards for products they use. If businesses do not learn this, they will miss good opportunities. Till now, vegetables and fruits only account for 2.7% of the market share in the EU market, the same as rice, although seafood is slightly more.

Enterprises that have not exported to the EU market before are afraid of maintaining the high standards required. Export enterprises mostly do low-value processing and therefore building a brand of any Vietnamese goods in the European market is a difficult prospect. But the harder it is, the more we have to prepare. The Ministry of Industry and Trade says that in coming time, it will work with many provinces and cities, select one or more strategic products in each province and city, and organize training to develop long-term plans for businesses to take advantage of the best opportunity.

The success of a few strategic products will become the driving force that will spread to other category of products. Management agencies have already entered the game, so there is no reason to believe that businesses also cannot do the same.

Standing together

In the effort to win in the EU market and make the best use of the advantages offered by EVFTA, it is very important for businesses to stand together, especially those in the same industry. In the case of Trung An rice, Mr. Bình said that although EVFTA brings great benefits to his business, it is not what he really wants. Currently, Trung An export at FOB USD 1,008 per ton, excluding packaging and shipping, but that price is not high. Trung An clean rice sold to Vietnamese consumers is currently at USD 1,000 per ton, which means that selling to Europe must be USD 1,500 to USD 2,000 per ton to be at its true value.

Mr. Bình says that because of the competitive buying and selling habits of many Vietnamese enterprises, they always lower their selling prices to win customers, so the price of Vietnamese rice is always lower than the actual value. He says that Vietnamese rice is delicious, and its value is much more than USD 1,000, and Europeans are also willing to pay high prices if we can supply GAP or organic rice.

Vietnamese enterprises compete with each other by lowering the selling price of their products, not only in the rice industry, but also in a number of other industries. This brings many consequences that not only affect other businesses in the industry but even businesses that lower prices to win customers.

This method is not necessarily sustainable because when the price is low, it is not easy to ensure the best quality in the long term. Customers in difficult markets like the European Union attach great importance to product quality. If the quality of the second batch is not the same as the first batch, businesses will face the risk of losing customers. But more importantly, unfair competition will worsen the general image of an industry while losing the advantage that should rightly belong to this industry.

In order to enter market areas such as the European Union, in addition to meeting commodity standards, businesses need a professional team to fulfill many other requirements of import partners. However, now small, and micro enterprises are still very weak and lack in many facilities. In particular, at this time, the role of associations is more important than ever. It is time for export industries to have a common voice to create a united body and strengthen the demand for Vietnamese goods in important export markets, especially markets with new generation FTAs.

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