Mr. Tran Tuan Anh, Vietnamese Minister of Industry and Trade, and Ms. Elizabeth Truss, Secretary of State for International Trade of the UK signed an agreement on concluding negotiations for the UK - Vietnam Free Trade Agreement (UKVFTA) on Friday, December 12th in Hanoi.
The UKVFTA will be signed in early 2021, offering great opportunities for investment and trade between the two countries. Specifically, with UKVFTA, Vietnam and the UK will continue to grant each other many tariff preferences and favorable market access conditions. These incentives are based on the EU - Vietnam Free Trade Agreement (EVFTA) with some adjustments to suit the current situation. Therefore, the trade relationship between Vietnam and the UK will not be interrupted because of Brexit.
According to Mr. Tuan Anh, the tariff reduction and preferential conditions in UKVFTA will help Vietnamese businesses save VND 3,500 billion when exporting goods to the UK. Also, high commitments and standards in UKVFTA will be a new driving force for Vietnam's reform activities and contribute to promoting our country's growth in this decade.
The seafood groups that have the earliest advantage are shrimp and some types of fish, for example, pangasius. Accordingly, the shrimp and pangasius processing sector will have the opportunity to boost export turnover and attract investment.
Regarding the textile and garment sector, the export turnover of this sector to the EU market is forecasted to increase rapidly at about 67% until 2025 compared to the scenario without an agreement, according to the Ministry of Planning and Investment.
When it comes to output, EVFTA, in general, has a positive impact on the output of the textile and garment sector with a growth rate of 6% and 14% by 2030, respectively. Currently, Vietnam's textile and garment exports to the UK account for only 2.77% of the total import turnover to the UK market. Therefore, with the new UKVFTA, this industry still has great potentials for development and an increase in turnover.
With rice, the UK is a very potential rice export market for Vietnam with commitments from UKVFTA. In 2019, Vietnam's rice export turnover to the UK had a considerable growth of 376% compared to 2018. With the opportunities from this agreement, Vietnam's rice will have a competitive advantage over ones from Thailand, China, and India. Also, the UK is committed to consider and increase the Tariff Rate Quotas (TRQ) for Vietnamese rice after three years from the effective date of UKVFTA. This will also be an opportunity to boost rice exports to this market.
Besides rice, the UK is also committed to increasing TRQ with more than 10 other commodities such as eggs, garlic, sweet corn, tapioca, surimi, etc. This benefit is especially meaningful when the UK is one of the potential import of these commodities.
Regarding fruit and vegetable products, when UKVFTA comes into effect, 94% of the total 547 tariff lines for vegetables and fruits will be eliminated immediately, including many strong products of Vietnam such as litchi, longan, rambutan, dragon fruit, pineapple, melon, etc.
With the UK's great demand for imported fruits and vegetables as well as the British consumer taste for tropical fruit products, Vietnam's fruit and vegetable export sector will have much opportunity to access the UK market more favorably and boost export turnover.
For the wood sector, Vietnam is one of the largest exporters of joinery and furniture to the UK. Specifically, Vietnam was the 6th largest wood exporter to the UK market in 2019 with an export value of USD 421.8 million accounting for 3.6% of the UK's wood products import market share.
Thanks to UKVFTA, many wood products have a tariff of 0% within five years (raw wood currently has a tariff rate of 2 - 10%). Therefore, Vietnam's wood sector will also benefit from this agreement.
Due to impacts of the COVID-19 pandemic, the UK's demands for agricultural products, food, electronic products (computers, internet equipment), toiletries, personal protective and medical equipment (ventilators, blood filtering system), testing equipment, hospital protective gear (nitrate gloves, masks, clothes for medical staff and patients) have tended to increase. Therefore, combined with market access opportunities from UKVFTA, exports to the UK market are expected to be strongly promoted.
Compiled by VietnamCredit
