Vietnam to Be Bright Star in US Market

For major markets like the United States and selective markets like Japan, companies need to follow some guidelines for long-term business.

 

In 2015, Vietnam completed and signed four important free trade agreements (FTAs) with big market areas like Trans-Pacific Partnership (TPP), Vietnam - EU FTA, Vietnam - Eurasian Economic Union (EEU) FTA, and Vietnam - South Korea FTA, thus opening up huge export opportunities for the business community.

 

Remarking on TPP Agreement, Mr Dao Tran Nhan, Trade Envoy in the US, said Vietnam is a leading exporter of garments - textiles and footwear in the US (one of 11 TPP partners of the US). In 2014, Vietnam paid nearly US$1.68 billion of taxes for garments and textiles exported to this market, accounting for three-quarters of duties paid by companies in Vietnam when they export to this market. Every year, Americans consume 2.5 billion pairs of shoes or eight pairs per person a year. Also during this year, 11 TPP signatories paid US$450 million of import duties on footwear in the US, of which Vietnam contributed close to US$445 million.

 

When TPP takes effect, almost all tariffs on Vietnamese garments, textiles and footwear imported into the US will be brought to 0 per cent right in the first year of implementation. At that time, Vietnam will be a rising star in the US market and gradually share the top spot with China. Vietnam’s exported footwear market share in the US is projected to climb from current 12 per cent to 22 per cent in 2019. Right in the first year, taxes on footwear Vietnam incurs will drop US$450 million in the first year and more than US$6 billion in 10 years.

 

With TPP, Vietnam’s exports will increase by 32 per cent and GDP will be expanded by 25 per cent. Therefore, Vietnam should study and take advantage of TPP opportunities to boost its exports and revenue and stand ready to confront rising domestic competitive pressures against foreign rivals when it has to open up its market as well.

 

Mr Nhan added that companies need to focus on modernisation, food safety and hygiene when it exports drinks and foods to the US. “Many companies contact us to learn about fresh fruit and flower conditions for import into the US. However, for the time being, only four fruits, namely dragon fruit, rambutan, lychee and longan, are allowed to be imported into the US. The Ministry of Agriculture and Rural Development is working with the US to add mango and star apple to the list of qualified fruits. It usually takes 5-7 years obtain a licence to export a fruit to the US,” he added.

 

For a fastidious market like Japan, it also requires a similar duration to gain permission for fruit export. Mr Nguyen Trung Dung, Trade Counsellor in Japan, said it took 5-7 years for dragon fruit and 4 years for mango to be exported to the Japanese market.

 

“The Ministry of Agriculture, Forestry and Fisheries of Japan recently asked Vietnam to supply the order of prioritised fruits exported to Japan. As such, it has given the green light for more fruits of Vietnam to be exported to Japan. It is important for Vietnam to decide on chosen fruits,” he said.

 

He added that exporting a commodity to Japan does not mean that we add an item but it has a great significance: A stepping stone for Vietnam to bring it to other markets.

As Japan is a demanding market, if it accepts Vietnamese goods, other countries will also allow. In 2009, dragon fruit was permitted for export to Japan although the volume was not big but the US immediately agreed to buy it from Vietnam. When TPP is effective, Vietnamese foods and agricultural products will gain more tax incentives when being exported. But, exports must meet food safety and hygiene requirements.

 

In 2015, Vietnam rectified food safety and hygiene of exports to Japan but stronger control was required to avoid infringing safety, antibiotic and pesticide regulations.