“Adapting to High Standards: The Key to Successful EU Exports”

14 August, 2024

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Green production offers businesses the opportunity to deeply engage in the supply chain. (Photo: Duc Duy/Vietnam+)

Vietnam’s exports to the European Union (EU) have reached approximately 200 billion USD since the EU-Vietnam Free Trade Agreement (EVFTA) took effect in August 2020. This significant achievement underscores the agreement’s positive impact on bilateral trade relations.

As a new-generation free trade agreement with high standards, the EVFTA is the second of its kind signed by Vietnam, following the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, it is the first and most comprehensive agreement between the EU, comprising 27 developed economies, and a developing country like Vietnam.

Over the past four years, Vietnam has diligently improved its institutions and policies to meet the stringent requirements of the EVFTA. Nevertheless, Vietnamese businesses and industries continue to face considerable challenges as they enter the fifth year of the agreement’s implementation.

Significant growth in export volume

Despite the impacts of the COVID-19 pandemic, the Russia-Ukraine conflict, and global and regional challenges, both Vietnam and the EU have achieved positive results from the EVFTA’s implementation. The EU is now Vietnam’s fourth-largest trading partner, and the country has become the largest market share holder among ASEAN countries exporting to the EU. Vietnam enjoys a trade surplus with the EU, and its primary export markets within the bloc include the Netherlands, Germany, Italy, Belgium, and France. Key Vietnamese exports to the EU, such as seafood, fruits and vegetables, textiles and garments, footwear, wood and wooden products, have also witnessed robust growth.

Specifically, from 2020 to the present, Vietnam’s export growth has consistently been in the double digits, ranging from 12% to 15% annually. The total export turnover from 2020 to June 2024 reached approximately 200 billion USD, with export turnover in the first half of this year nearing 24.7 billion USD, a 15.37% increase compared to the same period in 2023. The EU remains Vietnam’s third-largest export market and fifth-largest import market.

According to experts and industry associations, the EU has long been a traditional export market for Vietnam, and the EVFTA has helped introduce Vietnamese suppliers to more EU importers.

Ms. Phan Thi Thanh Xuan, Vice President and General Secretary of the Vietnam Leather, Footwear and Handbag Association (LEFASO), shared that the EVFTA market has always been a primary market for the leather and footwear industry. Therefore, maintaining and promoting development in this market is a key focus for the industry, as the EU is the second-largest market after the US, with a growth rate of about 10%.

Ms. Xuan added that while the COVID-19 pandemic caused a decline in all markets, the EVFTA helped the leather and footwear industry maintain its presence in the EU and rebound after the pandemic.

However, she also acknowledged that upcoming challenges are significant, particularly regarding the EU’s Green Deal policies, which will compel businesses to adapt and restructure the global supply chain.

Leather and footwear businesses adapt to high standards to boost exports. (Photo: Duc Duy/Vietnam+)

Mr. Truong Van Cam, Vice President and General Secretary of the Vietnam Textile and Apparel Association (VITAS), pointed out that while the EU’s regulations are an inevitable trend, they also pose challenges for the textile and garment industry due to their focus on sustainability.

“The previous trend of fast fashion, with its rapid production, consumption, and disposal, generated vast amounts of waste. Hence, the EU introduced the strategy of sustainable textiles and garments, encompassing eco-design, production, and consumption. The EU now requires that products be designed with their end-of-life in mind, considering recyclability, and holds importers accountable for unsold or leftover stock,” Mr. Truong Van Cam explained.

Seizing opportunities through proactive measures

Despite the challenges, experts believe that successfully harnessing the opportunity to export green products to the EU can bring substantial benefits to Vietnam, as trade in green technology and sustainable products is becoming a global trend.

Ms. Nguyen Hong Hanh, First Secretary of the Vietnam Trade Office in Belgium and the EU (Ministry of Industry and Trade), noted that the EU will soon introduce laws for various imported goods, with effects starting from the end of this year and the beginning of next.

Notable upcoming regulations include those on waste collection, taking effect from early 2025; the “product passport” for traceability throughout a product’s life cycle, expected to take effect from early 2026; and regulations on deforestation-free products, which took effect in 2023, but for which importers must conduct a “due diligence report” from December 30, 2024.

Ms. Nguyen Hong Hanh elaborated that the “due diligence report” requires operators to collect information, documents, and data proving that their products are deforestation-free, including geographic coordinates, quantities, and country of production. The reporting is done through an online tool created by the EU.

“This August, the EU will provide guidance through videos, followed by written instructions in September and October 2024. In November, they will open the IF (information) system for companies to register from December onwards. As these are new EU regulations, businesses, especially those in the textile, garment, and leather and footwear industries, related to the production of Viscose and liosen fibers, need to pay attention,” the Trade Office representative advised.

While Vietnam has achieved positive results from the EVFTA, it also faces challenges in exporting goods to the EU. Despite being the top exporter to the EU among ASEAN countries, Vietnam’s exports account for just over 2% of the EU market’s capacity. Currently, most of the benefits from the EVFTA are enjoyed by foreign-invested enterprises (FIEs).

Minister Nguyen Hong Dien visits and works at a leather and footwear company in the South. (Photo: PV/Vietnam+)

Mr. Luong Hoang Thai, Director of the Department of Multilateral Trade Policy (Ministry of Industry and Trade), attributed this to FIEs’ experience in the EU market, their ability to meet rules of origin, and their control over raw material sources, among other factors. He emphasized the need for stronger support to help Vietnamese enterprises better utilize the agreement’s preferences.

Duc Duy