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Things to know about goods circulation when Europe closes its border

Things to know about goods circulation when Europe closes its border

Friday 20, 03 2020
​Export growth in the second half of 2020 may be better if the epidemic is repelled and EVFTA comes into effect.

On March 17, the Leaders of all EU member states agreed for the first time with the European Commission's proposal to adopt a joint plan to close the border of EU territory. The closure of external borders is not a lockdown, the Ministry of Industry and Trade said.

The regulation

Facing an increasingly serious epidemics, with Europe becoming the center of it, EU countries have taken more drastic steps in applying strict measures to prevent the spread of the disease. On March 17, the Leaders of all EU member states agreed for the first time with the European Commission's proposal to adopt a joint plan to close the border of EU territory.

The closure of external borders is not a lockdown. Accordingly, non-EU citizens will not be allowed to enter the area for at least the next 30 days and this period can be extended if necessary. EU citizens, their relatives, diplomats, staff / medical professionals, and freight carriers are exempt from the above provision.

Internal movements are permitted but subject to certain restrictions. The purpose of this regulation is to protect the health of EU citizens, ensure the appropriate treatment of individuals wishing to move and ensure that basic goods and services are accessible. This EU disease control regulation may not affect the import and export of goods between Vietnam and the EU in the short term because it only applies to individual travel routes; basic cargo transportation and trading activities are not restricted.

EC President Ursula Von der Leyen emphasized: "Basic goods and services to the EU need to be continuously circulated to ensure the supply, especially essential goods such as food, food products, production components, medicine ... ". 

Its potential effects

However, in terms of some economic aspects, epidemic control measures will, in fact, affect the speed of goods movement from export, transportation, customs clearance, storage, loading, unloading, and consumption, causing disruption or delaying economic - trade - service flows.

In addition, the supply-demand of the market, the demand for goods exchange, and the trade activities between the EU and partners including Vietnam will also be somewhat limited. The demand for non-essential goods such as textiles, footwear, furniture, phones, etc. (which are Vietnam's key export products in the EU market) will likely decline. However, it is expected that the purchasing power for agricultural products and food can still be maintained.

According to the Ministry of Industry and Trade, in the context of the Covid-19 epidemic, goods imported into EU countries via aviation could be significantly affected by many flights being delayed, canceled or cut. In addition, intra-regional transportation is also more or less affected by a number of countries tightening border controls.

Things to know about goods circulation when Europe closes its border

Currently, the EU is an important trading partner and the second-largest export market of Vietnam. The volume of Vietnam's exports and imports to the EU is relatively large. In 2019, the volume of goods exported by sea reached 20.5 billion euros, by air reached 14.5 billion euros, and by railways reached 671 million euros; while imports by sea, air, and railways respectively reached 5,990 billion euros, 3.56 billion euros, and 9 million euros.

Regulations related to epidemic control may also delay the signing of export orders in the near future between Vietnam and its EU partners, obstruct the trade-investment promotion activities of the two parties, prevent the movement of experts and workers in restricted areas in the context of tightening isolation to combat epidemics.

The first three months of the year was a period of import-export reduction between Vietnam and the EU due to many holidays of both Parties, combined with the business in a number of areas waiting for EVFTA to take effect to export goods to enjoy tariff incentives. Combining all those factors with the current forecast of the economic growth in the EU, the prospect of import and export growth between Vietnam and the EU is forecasted to be relatively low.

Vietnam's first and second quarter’s exports to the EU are forecast to decrease by 6% to 8% if the epidemic continues until June. Some key commodities such as computers, phones, and components are expected to continue to decline sharply due to difficulties in supply and the reduced market demand.

Export growth in the second half of 2020 may be better if the epidemic is repelled and EVFTA comes into effect. Therefore, businesses need to closely monitor the disease situation to have an appropriate production and business plan, as well as to have a plan to transform the form of trade promotion in the direction of taking advantage of online advertising, connecting online businesses to maintain and develop markets even when the disease is happening, making sure that any activity can be restored quickly after the epidemic declines and ends.

>> What do European authorities do to save the economy? 

Source: https://cafef.vn/

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Economy News

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