IẠP CHÍ CÚNG TltfdHG SOME IMPACTS OF THE EU's TBT ON VIETNAM'S FOOTWEAR EXPORTING ENTERPRISES • NGUYEN auoc THAI - PHAM THI THUY TRANG ABSTRACT: Despite the on-going COVID-19 pandemic, Vietnam's footwear exports to the EU market in the first months of 2021 still grew partly thanks to the EU-Vietnam Free Trade Agreement However, the EU is a difficult market with complex technical barriers to trade (TBT) and many Vietnamese businesses have not fully understood these technical barriers This paper analyzes some impacts of the EU’s technical barriers to trade on Vietnamese footwear exporting enterprises Keywords: barrier, the EU, technical barriers to trade (TBT), footwear, impacts Introduction According to the World Trade Organization (WTO), technical barriers to trade are technical regulations and standards that a country applies to imported goods and/or the procedures for assessing whether an imported product conforms with the conformity of those standards and regulations Theoretically, technical barriers to trade are used to protect human health and safety, animals and plants, and ecological environment Due to the process of trade liberalization, tariff barriers are gradually removed, so countries seek to strengthen their barriers to create difficulties for imports, especially in developed countries including the EU market The EU and Vietnam officially signed the EU Vietnam Free Trade Agreement (EVFTA) on 30 June 2019 and it officially took effect from August 1, 2020 This is a comprehensive and new-generation free trade agreement with high quality commitments covering wide scopes in 78 SỐ 19-Tháng 8/2021 action The EVFTA’s commitments mainly cover trade in goods and services, investment, rules of origin, customs, trade facilitation, trade defense, state-owned enterprises, government procurement, intellectual property, sustainable development, sanitary and phytosanitary measures (SPS), and technical barriers to trade (TBT) The EU is a single market which has a huge demand for footwear and it is also one of Vietnam's largest ttading partners According to the International Trade Center (ITC), the import turnover of footwear (HS Code 64) in the year 2019 of 27 EU countries was US $58.53 billion In which, Vietnam was the second biggest footwear exporter to the EU, after China This article aims to summarize the exports of footwear to the EU, analyze the actual situation of the EU market's TBT for footwear, study some impacts of these barriers on Vietnam’s footwear exports, and thereby proposing some solutions to help Vietnamese businesses overcome these barriers and promote Vietnam’s i ? ô KINH Tẫ đ >3" ã footwear exports to the EU after the COVID-19 pandemic Vietnam's footwear exports to the EU market Currently, Vietnam is world’s second largest exporter of footwear According to the General Statistics Office’s data, the export turnover of footwear had grown continuously over the period from 2010 to 2019, from US $5.1 billion in 2010 to US $18.3 billion in 2019, representing an increase of more than 3.5 times However, in 2020 due to the COVID-19 pandemic, Vietnam's footwear exports only reached US $16.8 billion, decreased by 8.3% comparing to one year ago In the first five months of 2021, Vietnams footwear industry experienced a prosperous export growth with an increase of 25.5% over the same period of last year and reached a total value of US $8.4 billion This shows that Vietnam has effectively prevented and controlled the COVID-19 pandemic, many countries have increased their footwear imports after the COVID-19 pandemics blockades The major footwear export markets of Vietnam in 2020 was the USA with an export turnover of US $6.3 billion (accounting for 37.5%); the EU was the second largest footwear market of Vietnam with an export turnover of US $3.8 billion (accounting for 22.6%); the third biggest market was China (US $2.07 billion, 12.3%); the fourth biggest market was Japan (US $848 million, 5%); and the fifth biggest market was Korea (US $549 million, 3.3%) Footwear exports to the key markets in the EU (27 countries): Due to the impact of COVID-19 pandemic, footwear exports to the EU countries in 2020 decreased by 24.5% compared to 2019 However, the exports of footwear to this market increased again in the first five months of 2021 with a rise of 16.6% over the same period and reached US $1.96 billion According to the footwear export data in 2020 of the General Department of Customs, Belgium was the largest footwear export market of Vietnam and reached US $987 million, accounting for 26% of the total export turnover of Vietnamese footwear to the EU It was followed by the Germany with the export turnover of US $894 (accounting for 23.5%), the Netherlands ranked thfrd with a export turnover of US $683 million (accounting for 18%) Other markets such as France, Italy, and Spain respectively reached US $423 million (11.1%), $245 million (6.5%), and $176 million (4.6%) in 2020 Chart 2: Key footwear export markets of Chart Vietnam's footwear export market in 2020 (US $ million) 000 299 USA EU China Japan South Korea Source: Compiled from the General Statistics Offices data According to data from the General Department of Customs, Vietnam's key footwear products exported to the EU include HS Code 640411 (Sports footwear; tennis shoes, basketball shoes, gym shoes, framing shoes, and the like with outer soles of rubber or plastics), HS Code 640399 (Shoes with outer soles of rubber, plastics or composition leather and with uppers of leather (not including ankle, incorporating a protective metal toe-cap, sports footwear, orthopedic shoes, and toy shoes)) and other HS Code 640419, 640299, 640291,640319, etc Số 19-Tháng 8/2021 79 ■■■■ ị ■: :■■■■■■ ,íỉ fe ■■ xS A a s :s :ss fe » s * TẠP CHÍ CƠNG THIÍdNG Some of the EU’s TBT of footwear The EU currently has 27 member states (after the withdrawal of the UK on January 31, 2020) with a population of around 450 million people, 50% of the footwear here being imported mainly by orders This is a stringent import market with non-tariff barriers, including technical barriers to trade, which are considered the most complicated barriers, causing difficulties for footwear exporters • Product safety: All products, including leather shoes, to be consumed in Europe are required to comply with the regulations of the Directive No 2001/95/EC (The European Union General Product Safety Dừective) • Labeling Regulations: Footwear exported to the EU market must comply with the regulations on labeling the materials used in the main components (uppers, in-soles, outer soles) According to the EU Dừective No 94/11/EC on labeling footwear, the label must be legible, printed, stuck, embossed, or affixed to at least one of each pair of shoes • CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora): According to the Council Regulation No 338/97 on the protection of wildlife, businesses wishing to export footwear to the EU need to check the list of plants and animals restricted from use on the website of the EU Trade Helpdesk • REACH: This is a regulation related to the four processes of REACH, namely registration, evaluation, authorization, and restriction of chemicals for imported products into the EU market with methods of assessing the hazards of substances used in the product According to this regulation, the use of chemicals is restricted by quantity limits (mg or kg) or banned altogether REACH is considered the most stringent and complex chemical regulation in the world (details are available on: https://echa.europa.eu/ regulations/ reach/understanding-reach) • POPs (Persistent organic pollutants): The use of POPs is prohibited under the EU Regulation No 2019/1021 However, POPs are also sometimes used to produce fireproof, water-resistant fabrics, or at the end of the shoe making process 80 So 19 - Tháng 8/2021 • RSLs (Restricted Substances List): This is a requừement of many retailers and fashion brands, more stringent than the REACH regulation RSL is for leather footwear and textile buyers in the EU • Restriction on the use of certain chemical substances: The EU has Regulation No 1907/2006 on the list of some chemicals that are restricted or prohibited from being used in the production process In Regulation No 528/2012, the EU also provides a list of biocides that are allowed to use in production Recently, the EU has Regulation No 2019/1021 banning the use of serious envừonmental contaminants in products • Intellectual Property Rights: Leather shoe exporters wishing to sell their designs in the EU market need to ensure that they not infringe intellectual property rights If the EU importers provide designs, they will be responsible for products found by the EU to infringe intellectual property rights Businesses can access the website of EUIPO (European Union Intellectual Property Office) if the data on designs are protected by the EU intellectual property rights If the designs are protected outside the EU, they can check the website of WIPO (World Intellectual Property Organization) • CSR (Corporate Social Responsibility): Many importers in Europe require exporters to have a commitment to respect labor law, be responsible for employees, responsible for the living environment or how to treat waste, responsible for each product to the customer, provide the certificate of origin of the product, etc Some impacts of technical barriers to trade on footwear exports from Vietnam to the EU • Positive impacts: When implementing the commitments in the EVFTA, Vietnamese enterprises have the opportunities to exploit the sources of imported materials, machinery, and technology from the EU, especially from the countries with modern footwear production such as Germany and Italy so that the export products meet the technical KINH TÊ regulations and standards of this market Besides, Vietnamese businesses have to improve production activities, innovate technology, enhance product quality and labor skills, etc In particular, domestic small and medium-sized enterprises will also strive to overcome barriers, improve competitiveness, and become more mature In addition, Vietnam is forced to change, improve the business and institutional environment towards more transparency in line with international practices This enhances the reputation and the competitiveness of Vietnamese footwear products in the world market Vietnamese enterprises not only promote export to the EU but also to other high-quality markets • Negative impacts: I The EU countries are abusing technical barriers to trade at a more sophisticated level for imports in the name of protecting public health, protecting the environment, etc when tariff tends to gradually decrease to 0% under the integration process The domestic leather and footwear industry is facing major problems as 90% of Vietnam's leather and footwear products are processed for export Currently, the percentage of domestic raw material supply is low, only reaching 40-45% of the demand and the quality has not met most of the customers needs Compulsory requirements on products to be safe, labeled, socially responsible, environmentally friendly, met the rules of origin and intellectual property rights, etc will be big challenges for footwear exporters, increasing costs and reducing the competitiveness of enterprises Many domestic footwear enterprises have weak capital, production management, labor skills, technology In addition, they still have many limitations in terms of their ability to grasp TBT measures, update market information as well as diverse needs of the EU customers This also leads to many risks for Vietnam's footwear exports to this difficult market Some solutions and recommendations • Vietnamese footwear exporters need to carefully study the commitments in the EVFTA and the technical barriers of the EƯ to exploit the opportunities brought by the EVFTA • Enterprises should invest more in technological innovation; improve product quality; focus on product design, professional training, and market research; enhance internal capacity in management, finance, human resources, etc to meet the standards of the EU market and increase their competitiveness • It is necessary to promote the formation of linkage networks to provide products and services between enterprises Thereby, businesses will be more proactive in the source of raw materials for the production of footwear • Small businesses need to step up further in cooperation and information sharing to easily grasp the EU customers strict regulations • The government should promote a synchronous plan for the leather and footwear industry, especially developing high-quality supporting industries In addition, it is necessary to create a more favorable business environment and improve institutional capacity towards more transparency Currently, FDI enterprises are very strong in capital, production, technology, raw material supply and account for a very high proportion of footwear exports Accordingly, the state should strengthen support in line with WTO to help domestic, small businesses improve theữ production capacity and grasp non-tariff barriers of the market Conclusion As the COVID-19 pandemic is gradually being controlled with a growing supply of vaccines, the EU market is forecasted to fully reopen and recover quickly Thereby it is an opportunity for Vietnam's goods exports to the EU to develop strongly However, the EU’s TBT are considered the biggest obstacle for Vietnamese footwear exporters Businesses need to make great efforts toovercome barriers, to promote footwear exports to this difficult market ■ So 19 - Tháng 8/2021 81 TẠP CHÍ CŨNG THIÍdNG REFERENCES: Balaam and Dillman (2018) International Political Economy, 7th Edition UK: Routledge Cadot, o, Maliszewska, M and Saez, s (2011) Nontariff measures: impact, regulation, and ttade facilitation In Gerard McLinden, Enrique Fanta, David 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https://echa.europa.eu/ understanding-pops Received date: July 20,2021 Reviewed date: August 5,2021 Accepted date: August 19, 2021 Author information: NGUYEN QUOC THAI1 PHAM THI THUY TRANG1 Faculty of Business Administration, Nguyen Tat Thanh University MỘT SỐ TÁC ĐỘNG CỦA RÀO CẢN KỸ THUẬT TRONG THƯƠNG MẠI (TBT) Đối VỚI MẶT HÀNG GIÀY DÉP CỦA VỆT NAM XUẤT KHAU sang EU • ThS NGUYỀN QUỐC THÁI’ • ThS PHẠM THỊ THÙY TRANG' 'Khoa Quàn trị Kinh doanh, Đại học Nguyên Tất Thành TÓM TẮT: Trong bối cảnh đại dịch COVID-19 diễn phức tạp, hoạt động xuất mặt hàng giày Ịdép Việt Nam sang thị trường EU tháng đầu năm 2021 tăng trưởng Điều cho thấy có tín hiệu tích cực Hiệp định EVFTA mang lại Tuy nhiên, EU thị trường khó lính với rào cản kỹ thuật tíong thương mại (TBT) phức tạp mà nhiều doanh nghiệp Việt Nam chưa nắm rõ Bài viết phân tích số tác động rào cản TBT doanh nghiệp Việt Nam xuất giày dép sang thị trường Từ khóa: Rào cản, EU, rào cản kỹ thuật thương mại (TBT), giày dép, tác động SỐ 19-Tháng 8/2021 83 ... Business Administration, Nguyen Tat Thanh University MỘT SỐ TÁC ĐỘNG CỦA RÀO CẢN KỸ THUẬT TRONG THƯƠNG MẠI (TBT) Đối VỚI MẶT HÀNG GIÀY DÉP CỦA VỆT NAM XUẤT KHAU sang EU • ThS NGUYỀN QUỐC THÁI’ • ThS... trường khó lính với rào cản kỹ thuật tíong thương mại (TBT) phức tạp mà nhiều doanh nghiệp Việt Nam chưa nắm rõ Bài viết phân tích số tác động rào cản TBT doanh nghiệp Việt Nam xuất giày dép sang thị... TBT doanh nghiệp Việt Nam xuất giày dép sang thị trường Từ khóa: Rào cản, EU, rào cản kỹ thuật thương mại (TBT), giày dép, tác động SỐ 19-Tháng 8/2021 83