Challenges from the EVFTA for Vietnam's exports to the German market
Besides opportunities, the EVFTA also poses some challenges for Vietnam's exports, including:
Challenges in meeting rules of origin to enjoy preferential tariffs
In order to enjoy the EVFTA tariff preferences, Vietnam's export products must meet rules of origin of the Agreement. However, a lot of inputs for production of Vietnam’s enterprises are still dependent on imported sources, especially from China and some other Asian countries. Therefore, meeting the EVFTA rules of origin may be a big challenge for Vietnamese businesses to grasp the opportunities from tariff elimination under the EVFTA.
Risk of increasing trade remedy measures
The EU is a frequent user of trade remedies for imported goods from abroad and Vietnam. In the coming time, with the advantage of tariff reductions under the EVFTA, Vietnam's goods exports to the EU are expected to increase, leading to the increase in the risk of facing trade remedies cases initiated by the EU domestic manufacturing industries.
In addition, the EVFTA also allows EU’s domestic producers to use an additional trade remedy measure - the bilateral safeguard measure in the period of 2020-2030 if the EVFTA tariff incentives lead to the massive import of goods from Vietnam into the EU, threatening to cause serious damage to EU domestic industries. Therefore, with the EVFTA, besides the common risks of anti-dumping, anti-subsidy, and global safeguard measures, Vietnamese goods exported under the EVFTA preferential tariff mechanism also face an additional risk of being imposed a bilateral safeguard measure.
It should be noted that trade remedies in the EU are implemented uniformly throughout the territory of this tariff area. Therefore, trade remedy risks for Vietnamese goods exported to Germany may not arise from an initiation of German manufacturers but from any manufacturers in any EU member state if they feel threatened by competitive pressure from Vietnamese goods.
Challenges in increasing costs for businesses from commitments on intellectual property, labor, and sustainable development in the EVFTA
To implement commitments on labor, environment, and sustainable development in the EVFTA, Vietnam is likely to tighten legal regulations and law enforcement on protecting workers' rights and the environment for sustainable development… This may increase costs for Vietnamese enterprises in general, and especially for sectors where production and consumption may have negative impacts on workers and the surrounding environment...
Other challenges
Besides the challenges associated with the EVFTA, Vietnam’s exports to Germany may also face other challenges, especially non-tariff measures (NTMs).
NTMs is the term used to refer to all measures other than tariffs that countries apply to goods moving across borders. In principle, these measures are applied to realize the legitimate management objectives of each country (protecting human and animals’ health and life, protecting the environment, etc.) However, in many cases, NTM can be abused as a form of restricting imports.
The EU's NTMs are generally applied to all imported goods (not just goods from Vietnam) and are not related to the EVFTA. However, the EVFTA tariff reduction can be a catalyst to promote the increase of EU’s NTMs, causing Vietnamese exports to face additional or stricter requirements.
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EU non-tariff measures frequency ratio The EU is one of the most common users of NTMs in the world. According to the World Bank's 2018 survey data, the EU has the frequency ratio of using NTMs (the percentage of imported products that are subject to at least one NTM) of 93.88%, significantly higher than many other developed countries such as Australia (61.80%), USA (61.52%), Japan (61.20%), and much higher than the average ratio of 43.04% of the 75 countries surveyed. The NTMs that the EU has used the most are labeling requirements, product inspection requirements, product quality and performance requirements, product certification requirements, etc. The groups of items with the highest frequency ratio of NTM application when imported into the EU are textiles and clothing, animal, vegetables, hides and skins, chemicals, food products, footwear, plastic products, etc. These are also popular export products of Vietnam. |
Source: "Business Handbook: Exploiting the EVFTA to import and export goods between Vietnam and Germany" - Center for WTO and International Trade
