Difficulties in implementing new generation FTAs

The effectiveness of utilizing FTAs is not high yet.

According to the assessment of the Ministry of Industry and Trade, exports to major FTA (Free Trade Agreement) markets such as the EU, CPTPP (Canada and Mexico), and the UK, although growing positively in recent times, the proportion of these markets is still relatively modest (in many provinces, this proportion is less than 10%).

The rate of preferential utilization has not yet reached expectations, such as the preferential utilization rate in CPTPP is about 5%, in EVFTA about 26% and in UKVFTA about 24%.

In addition, FDI enterprises still account for the majority of export turnover of large export items of Vietnam such as footwear, leather shoes, phones and components, machinery and equipment. Vietnamese enterprises mainly still perform processing or export raw materials and semi-finished products. The construction and positioning of brands for "Made in Vietnam" products in demanding markets such as FTA countries have not received due attention, etc.

Need to make better use of new generation FTAs. Photo: Hoang Giam

The Ministry of Industry and Trade believes that the number of enterprises exporting to FTA markets is still modest. The number of importing enterprises is generally lower than the number of exporting enterprises. Many enterprises only participate in some stages of the supply chain; the ability to meet and comply with requirements on quality, food hygiene and safety and technical requirements of Vietnamese export goods is still limited, especially in the context of many import markets increasingly raising technical standards and non-tariff barriers; enterprises are not proactive in meeting enough standards to enjoy incentives.

"Vietnam's export items are mainly in raw form or according to processing orders from foreign importers. The number of Vietnamese enterprises that have built export brands to FTA markets is still limited," the Ministry assessed.

To promote FTAs, a large number of conferences and seminars are organized, but sometimes the content is overlapping, leading to a waste of resources. According to preliminary statistics, in 2022 alone, the number of conferences, seminars or training courses on the CPTPP, EVFTA and UKVFTA is about 347 events, which means 1 event takes place every day. There are cases where 2-3 conferences and seminars with the same content are held in the same place, organized by different agencies.

Not to mention, a large number of businesses are still indifferent and not interested in participating in conferences and seminars on FTAs, especially in the situation where many events organized on FTAs have only 1/3-1/2 of the invited businesses attending.

What is the solution?

According to the Ministry of Industry and Trade, it is necessary to speed up the development and promulgation of documents implementing commitments in the FTA, especially documents related to import and export activities such as taxes, rules of origin, etc. In addition, it is necessary to periodically review the implementation and promptly handle difficulties and shortcomings in the implementation of these documents.

At the same time, continue to review legal documents to ensure compliance with commitments in effective FTAs; continue to research and propose ratification of international conventions and implementation of relevant international labor standards to ensure implementation of commitments in the CPTPP, EVFTA and UKVFTA agreements.

Regarding the group of solutions on measures to support businesses, the Ministry of Industry and Trade wishes to coordinate with ministries, branches and localities to build an ecosystem to take advantage of opportunities from FTAs. Due to limited resources, each province and city should initially focus on identifying 1-2 key sectors or industries to build an ecosystem. If successful, it will spread to other sectors.

To support this ecosystem, central and local management agencies need to connect closely with each other to develop policies and specific support measures suitable for the selected key sectors or industries.

According to this agency, it is also necessary to consider allocating separate capital to support businesses to take advantage of FTAs, including small and medium-sized enterprises (SMEs), especially SMEs in the fields of innovation, creative startups, SMEs practicing ESG standards, SMEs doing sustainable business, and green business.

The State Bank coordinates with the Ministry of Industry and Trade and relevant ministries and branches to work specifically with commercial banks to build appropriate credit sources to support businesses that want to improve production capacity to take advantage of opportunities from FTAs (possibly preferential interest rates in line with international commitments, more favorable credit access conditions, etc.).

In addition, it is necessary to proactively seek, connect and cooperate with international credit organizations such as IFC, WB, ADB or other legal financial sources to create capital to help Vietnamese enterprises carry out digital transformation and green transformation to promptly meet the increasingly high standards from export markets.

Luong Bang

Source