German Market

Advantages and disadvantages of Vietnamese exports in the German market?

Question: Advantages and disadvantages of Vietnamese exports in the German market?

Answer: 

Advantages

Germany is the main export market in Europe for many key export products of Vietnam such as footwear, clothing, vegetables and fruits, seafood, coffee, furniture, etc. Although most of Vietnam’s products are accounting for only a small share in Germany's total import turnover, their export growth rate to this market is increasing. Currently, many Vietnamese goods have acquired a certain position in the German market.

In the coming time, Vietnam's exports to Germany are forecasted to continue to grow thanks to favorable factors such as:

  • The number of Asians in general and Vietnamese in particular living, working and studying in Germany has been increasing in recent years. These consumers tend to use a lot of Asian products, including Vietnamese products;

  • German consumers are also more and more open to using Asian products in general and Vietnamese ones in particular. They are willing to use products imported from developing countries if the products have reliable origin, good quality and competitive price. Meanwhile, Vietnam has many strong products that German consumers have high demand or are increasing demand for, such as furniture, garments, shoes, coffee, tropical fruits and vegetables...;

  • Vietnamese products have increasingly high quality and are gradually conquering tough markets, including the EU market in general and Germany in particular... Many large Vietnamese enterprises have invested methodically and long-term for the production and export of high-standard goods for export to developed markets, with high requirements on product quality and design. Vietnam is also focusing on attracting high-tech investment in potential underdeveloped industries such as vegetables and fruits, seafood, etc. to improve the quality of export products;

  • Vietnam is one of the few countries in Asia (Japan, Korea, Singapore...) that has an FTA with the EU, so Vietnamese goods have an advantage over competitors from many countries in the region when enjoying preferential tariffs as well as other advantages from the EVFTA. Moreover, when Vietnam implements commitments on labor, environment and sustainable development in the EVFTA (which is designed according to EU standards), Vietnam's exports can partly meet requirements of German consumers who are increasingly interested in "sustainable" products - products that meet the standards of environmental and labor protection.

  • Under negative impacts of the COVID-19 pandemic, the German economy has been seriously affected, leading to a decrease in the income of a part of consumers. This leads to an increase in demand for more affordable products from developing countries like Vietnam, especially for essential goods such as food, clothing, shoes, etc. Meanwhile, Vietnam has the strength to produce these products and their prices are usually lower than that from developed countries. In addition, Vietnam’s products have the advantage of lower tariffs thanks to the EVFTA, thus, they will have many opportunities to increase market share in Germany in the coming time.

 Disadvantages

  • EU/Germany’s mandatory import requirements on food hygiene and safety, technical standards, labelling, packaging, etc. are very strict and more difficult to meet than other export markets of Vietnam. Sanctions for violations of import regulations are also very strict. Goods found to be in violation of mandatory German import requirements are at risk of being returned or destroyed. In some cases, if the frequency of violations is high (a number of times in a certain period of time), Germany can apply stricter control measures such as increasing the frequency of inspection, applying import ban for a period of time, etc.;

  • German consumers have very high requirements on the quality, design, brand, reputation... of imported products. These requirements are often much higher than that of consumers in many other exporting markets of Vietnam like China, ASEAN countries, and even in some other EU members. Meanwhile, some Vietnamese products still have limitations in quality, design and brand. In addition, the German consumers are increasingly interested in sustainable consumption, choosing products that are friendly to the environment and the society, etc. Therefore, German importers often require imported products to have additional certificates (which are not mandatory import regulations) such as certificates of food safety, social certificates, green labels, eco-labels, etc. These requirements take more time and cost for Vietnamese enterprises to meet, thereby als reducing their interest in the German market;

  • Germany has a long geographical distance from Vietnam, so the cost of transporting and preserving goods exported to this market is often high, leading to increased product prices and difficulty in competing with goods from countries near Germany. Especially during the COVID-19 period, the rising costs of transportation and logistics made Vietnam's exports to German market significantly affected;

  • The level of competition in the German market is relatively high. Up to now, the EU has had a total of 42 FTAs in force with 79 partners, and granted GSP preferential mechanism for 67 developing and least-developed countries. In addition, Vietnam's export goods also have to compete fiercely with Chinese goods - the country that exports the most to Germany. China and many countries enjoying preferential tariffs of the EU have similar export product structure to Vietnam, leading to a high level of competition.

Source: The Center for WTO and International Trade

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