Businesses to save VND3,500 billion in taxes each year thanks to the UKVFTA

28/12/2020    42

Regarding the impact of the UK-Vietnam Free Trade Agreement (UKVFTA) on goods exports as well as production and business activities of enterprises, Minister of Industry and Trade Tran Tuan Anh said the agreement would bring businesses more opportunities to export to the UK. The value of import tax that Vietnam can save when exporting goods to the UK is estimated at VND3,500 billion each year.

What is your assessment about opportunities to promote exports of goods to the UK market thanks to the UKVFTA?

Over the years, the UK has become the second largest market in the EU (after Germany) for Vietnamese exports. The trade relations between Vietnam and the UK have developed in a favourable direction for many Vietnamese products, reflected in a trade surplus of nearly US$5 billion per year.

The structure of goods in Vietnam and the UK is largely complementary. Products that Vietnam has strengths in the UK include: tropical agricultural products, seafood, footwear, textiles, leather goods, furniture, ceramics, glass, plastics and rubber products, machinery, motorcycles, pharmaceuticals, wood and pulp products, iron and steel products, and chemicals. This shows the trade exchange between the two countries has a lot of opportunities for development in the future.

The UKVFTA is expected to continue the driving force of the two sides' trade and investment relations, especially to promote the export of Vietnam’s key products. After six years in effect, the UK will eliminate import taxes on 99.2% of tariff lines, equivalent to 99.7% of Vietnam's export turnover. The UK has also committed to giving Vietnam a tariff quota of 0% for 10 items such as poultry eggs, corn, rice, tapioca, tuna, sugar and mushrooms.

Could you please analyse the benefits in terms of quantitative tariffs into the numbers Vietnamese businesses and goods can benefit when the UKVFTA comes into effect?

- The UKVFTA has just been negotiated and signed with great significance to ensure the bilateral trade between Vietnam and the UK is not interrupted after the Brexit transition period ends.

With commitments to open markets and quotas for goods with competitive advantages, the agreement bring businesses more opportunities to export to the UK. Accordingly, the value of import tax that Vietnam can save when exporting goods to the UK is estimated at VND3,500 billion per year. This has very important implications during the Covid-19 pandemic.

Because of the pandemic, although overall exports to the UK have decreased, the demand for agricultural products, food, electronic products, personal protective equipment and medical equipment tends to increase. Therefore, combined with market access opportunities from the UKVFTA, export goods to this market will be promoted.

UK International Trade Minister Liz Truss: It is expected that the agreement will take effect in early 2021

The UK-Vietnam Free Trade Agreement is an important step forward in the context that the UK will officially apply to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2021.

Along with that, joining the CPTPP will increasingly tighten the relationship between the UK and Vietnam; and facilitate the two countries to strengthen relations with 11 dynamic economies in the Indo-Pacific region, bringing many opportunities for the UK, for the UK economy as well as the British people. The UK will work together with partners like Vietnam to realize economic issues through free trade, bringing great promise, especially in the recovery from the Covid-19 pandemic.

It is expected that the UKVFTA will take effect in early 2021. Enterprises, supply chains and consumers will benefit from the tax reduction policy for products imported into the UK such as clothing, fabrics and footwear. These are the strong export products of Vietnam.

Although the UKVFTA opens up many opportunities to promote exports of goods to Vietnam, especially agricultural and aquatic products, many people said non-tariff barriers, typically strict standards as well as high requirements for quality of goods, are not easy to overcome. This may hinder Vietnamese enterprises' opportunities. What is your opinion?

- In fact, technical standards and quality requirements for goods imported from the UK are very high. Typically for agricultural products, although the UKVFTA inherits incentives with flexible SPS (the agreement on the application of Food Hygiene and Safety and Phytosanitary Measures) provisions in the EVFTA, our country's agricultural products like tea and vegetables need to improve the uniformity of each batch, ensuring harvesting and preserving quality as well as product quality to conquer this "fastidious" market.

Although the agreement facilitates supply expansion in the rules of origin in the UKVFTA, the raw materials for Vietnam's export are mainly imported from China or ASEAN. Therefore, it is necessary to divert the imports of raw materials in this industry to take advantage of opportunities from the commitments of this agreement in the future.

Source: Customs News