Tóm tắt Hiệp định Thương mại Tự do Việt Nam EU (EVFTA) là một FTA thế hệ mới được đàm phán giữa Việt Nam và 27 quốc gia thành viên Liên minh Châu Âu. EVFTA dự báo sẽ có tác động đáng kể đến toàn bộ hệ thống kinh tế Việt Nam và hoạt động thương mại của các doanh nghiệp Việt Nam. Trong đó, sản xuất, gia công nhựa là một trong những ngành kinh tế được dự báo sẽ hưởng lợi lớn từ EVFTA với những cơ hội, đột phá mới cho cả xuất nhập khẩu và thu hút đầu tư. Trong bài nghiên cứu này, nhóm tác giả đã sử dụng thiết kế nghiên cứu định tính để thu thập, tổng hợp và phân tích dữ liệu thứ cấp từ các nguồn đáng tin cậy (Trademap, VCCI, MoIT, VPA). Bài viết này được thực hiện nhằm (i) đánh giá tác động của EVFTA đối với tăng trưởng xuất khẩu sản phẩm nhựa của Việt Nam sang thị trường EU, (ii) chỉ ra cơ hội cũng như thách thức mà EVFTA mang lại cho thị trường xuất khẩu nhựa Việt Nam, và (iii) đề xuất một số kiến nghị sẽ được đưa ra nhằm nâng cao hiệu quả kinh tế của ngành nhựa và thúc đẩy xuất khẩu nhựa của Việt Nam sang EU trong thời gian tới. Từ khóa: EVFTA, ngành nhựa Việt Nam, xuất khẩu
OPPORTUNITIES AND CHALLENGES FOR VIETNAMESE PLASTIC EXPORTERS WITH THE AGREEMENT OF EVFTA Vũ Huyền Phương Giảng viên Viện Kinh tế Kinh doanh quốc tế Trường Đại học Ngoại thương, Hà Nội, Việt Nam Tóm tắt Hiệp định Thương mại Tự Việt Nam - EU (EVFTA) FTA hệ đàm phán Việt Nam 27 quốc gia thành viên Liên minh Châu Âu EVFTA dự báo có tác động đáng kể đến tồn hệ thống kinh tế Việt Nam hoạt động thương mại doanh nghiệp Việt Nam Trong đó, sản xuất, gia công nhựa ngành kinh tế dự báo hưởng lợi lớn từ EVFTA với hội, đột phá cho xuất nhập thu hút đầu tư Trong nghiên cứu này, nhóm tác giả sử dụng thiết kế nghiên cứu định tính để thu thập, tổng hợp phân tích liệu thứ cấp từ nguồn đáng tin cậy (Trademap, VCCI, MoIT, VPA) Bài viết thực nhằm (i) đánh giá tác động EVFTA tăng trưởng xuất sản phẩm nhựa Việt Nam sang thị trường EU, (ii) hội thách thức mà EVFTA mang lại cho thị trường xuất nhựa Việt Nam, (iii) đề xuất số kiến nghị đưa nhằm nâng cao hiệu kinh tế ngành nhựa thúc đẩy xuất nhựa Việt Nam sang EU thời gian tới Từ khóa: EVFTA, ngành nhựa Việt Nam, xuất OPPORTUNITIES AND CHALLENGES FOR VIETNAMESE PLASTIC EXPORTERS WITH THE AGREEMENT OF EVFTA Abstract The EU-Vietnam Free Trade Agreement (EVFTA) is a new-generation FTA negotiated between Vietnam and the European Union's 27 member states EVFTA is expected to have a significant influence on both the Vietnamese economic system and the commercial operations of Vietnamese firms In which, production and processing of plastic are one of the economic sectors forecasted to benefit greatly from the EVFTA with new opportunities and breakthroughs for both export and import and investment attraction In the research, the authors have used a qualitative research design to collect, aggregate, and analyze secondary data from reliable sources (Trademap, VCCI, MoIT, VPA) This paper was conducted to (i) assess the impact of the EVFTA on the growth of Vietnam’s export of plastic products to the EU market, (ii) point out the opportunities and challenges that EVFTA brings to Vietnam’s plastic export market, (iii) propose recommendations to improve the economic efficiency of the plastic industry and promote Vietnam’s plastic exports to the EU in the near future Keywords: EVFTA, Vietnam’s plastic industry, export Introduction According to the World Bank, Vietnam is one of the fastest-growing economies in the region, supported mainly by strong domestic demand and export-oriented manufacturing Being involved in a large and unified market like the EU is an excellent opportunity for Vietnam The European Union-Vietnam Free Trade Agreement (EVFTA) was signed in the spirit of comprehensive cooperation and balanced interests of Vietnam and the European Union (EU) The new-generation FTA is assumed to provide strategic benefits to Vietnam by potentially expanding trade and investment with one of its largest and most significant partners With a wide range of commitments, a deep degree of liberalization, and high standard commitments, the EVFTA is forecasted to have a strong impact on the entire economic institutions as well as the business activities of Vietnamese enterprises In which, production and processing of plastic are one of the economic sectors forecasted to benefit greatly from the EVFTA with new opportunities and breakthroughs for both export and import and investment attraction In this paper, we used qualitative methods to analyze the topic “Opportunities and Challenges for Vietnamese Plastic Exporters with the Agreement of EVFTA” The paper is implemented mainly to achieve following objectives: (1) Identify a brief overview of EVFTA and its potential impacts on the Vietnamese development of the plastic industry (2) Commenting on the development of the plastic industry in Vietnam before and after the EVFTA officially came into effect (3) Indicating opportunities, challenges, and recommendations to optimally exploit the agreement and overcome limitations Therefore, the authors decided to conduct the paper with the aim to analyze and propose possible solutions and recommendations from three perspectives: policy makers’, businesses’, and government’s views By that way, we aim to increase the inclusivity of our research subject In the Harmonized System (HS) for commodity description and coding, plastic products (including plastic materials, semi-finished products, and finished plastic products) are classified under Chapter 39: Plastics and articles thereof Additionally, products containing plastic materials are classified under other chapters within the HS system However, for the purpose of this research, the data and analysis will be limited to plastic products under Chapter 39 Moreover, to ensure the highest level of credibility and validity of the study, the authors of this paper limited this research within the time period of years, from 2017 to 2021 Due to a shortage of time and limited knowledge, this research would face some challenges in terms of reliability and representativeness Apart from the introduction, this paper includes four main parts The first part is the literature review and research hypothesis After that, the overview of EVFTA's regulations related to plastic exporting; and the Vietnamese plastic industry in the context of implementing the EVFTA are systematically presented In the final two parts, the authors analyze the further opportunities and challenges; and draw a conclusion on the topic Literature review According to the Vietnam Chamber of Commerce and Industry (VCCI), The EU is the world's largest plastic import market, with a plastic import value of 207 billion US dollars in 2019, accounting for about one-third of the world's total plastic import value As such, researchers have conducted various studies among the FTAs and plastic industry from both theoretical and empirical perspectives Prior to this paper, several studies have been conducted to analyse the impact of EVFTA on economic institutions Jan Grumiller et al (2018) assume that trade liberalization is expected to have a good economic impact on Vietnam and loss in public revenue will negatively affect Vietnam, but should not pose a particular policy challenge According to Tran and Do (2018), new-generation FTAs stimulate economic development and stabilize macroeconomics Maryla Maliszewska et al (2020) also conclude that The EVFTA can bring significant benefits to the Vietnamese economy, not only on a macroeconomic level with increasing GDP and trade flows but also in terms of poverty reduction Focusing more on the sector of the plastic export industry, as reported by the Vietnam Chamber of Commerce and Industry (2020), The EU is currently Vietnam's largest plastic export market, accounting for 15% of Vietnam's total plastic export turnover in 2019 They also pointed out that after the EVFTA came into effect in August 2020, plastic is one of Vietnam's product groups that will soon take advantage of opportunities from this agreement to increase exports to the EU Phung Xuan Hoi (2022) wrote that EVFTA and various advantageous tariffs are valuable for Vietnam's plastic industry General Department of Viet Nam Customs (2019) indicates that plastic export turnover has consistently recorded increases in recent years, with the average growth rate reaching between 14% and 15% annually Hanh Nguyen (2022) concluded that the EVFTA is also a prospect to attract EU investors in the construction of the plastic segment Many researchers have conducted papers on various themes related to the FTAs However, those studies are primarily concerned with determining the impact of the EVFTA on the overall macroeconomy, or else just mentioned the overall plastic industry but did not exploit it intensively There were limited papers that looked at the plastic industry and point out opportunities and challenges, particularly in the Vietnam market Therefore, our group decided to dig deeper into the plastic industry, to clarify the present situation and give necessary proposals and recommendations Furthermore, the Covid-19 pandemic is a crucial component that we investigate in order to deliver more informative and up-to-date research that sets itself differs from other publications Research methodology Part Literature Review Conclusion Previous Reseach Review Research Methodology Proposals Opportunities & Challenge Part Overview & Regulations EVFTA Agreement Before EVFTA After EVFTA Analysis Figure I: Research model illustration To achieve the model above, we used the qualitative research design This entails employing information and expertise from credible papers and journals Regarding the collection of data, our paper makes use of the data provided by Trade Map, Vietnam Chamber of Commerce and Industry (VCCI), Ministry of Industry and Trade (MoIT), General Department of Viet Nam Customs (GDVC), Vietnam Plastic Association (VPA), These serve as the foundation for our group to make some suggestions for improving the Agreement European Union–Vietnam free trade agreement 1.1 Overview 1.1.1 Introduction of the EVFTA Agreement The EU-Vietnam Free Trade Agreement (EVFTA) is a new-generation FTA that was negotiated between Vietnam and the 27 member states of the European Union EVFTA, along with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), are two FTAs with the widest scope of commitments and the highest level of commitment of Vietnam to date (Wtocenter.vn, 2016) EVFTA was signed on June 30th, 2019 and took effect from August 1st, 2020 The agreement consists of 17 chapters, declarations, and several memoranda of understanding with the main contents being: trade in goods (including general provisions and market opening commitments), rules of origin, customs and trade facilitation, sanitary and phytosanitary measures (SPS), technical barriers to trade (TBT), trade in services (including general provisions and market opening commitments), investment, trade defense, competition, state-owned enterprises, government procurement, intellectual property, trade and sustainable development, cooperation and capacity building, and legal and institutional issues (Wtocenter.vn, 2017) With a wide scope of commitments, deep liberalization and high standards, EVFTA is expected to make a substantial impact on both the Vietnamese economic system and the business activities of Vietnamese enterprises 1.1.2 Overview of the plastic industry in Vietnam Plastics are commonly used in a wide range of industries in Vietnam, including packaging, consumer goods, electronics, automotives, aviation, textiles, and agriculture Regarding the structure of plastic products, the Vietnam Plastics Association (VPA) categorizes plastic products produced in Vietnam into four main product groups: packaging plastic, household plastic, construction plastic and engineering plastic (Ministry of Industry and Trade, 2020) (Table I) In general, Vietnam has strengths in the production of packaging, consumer plastic products, construction plastic products, and some high-tech plastic products such as oil pipes, plastic components for automobiles, and computer equipment However, Vietnam's plastic products still lack diversity in terms of design and models 6 Table I: Main groups of plastic products produced by Vietnam Product Proportion (%) Product primarily Packaging plastic 39 Thin film packaging, plastic bags, PET bottles Household plastic 32 Household items Construction plastic 14 Construction plastic pipe, building material plastic Engineering plastic Types of accessories Source: ITC Trademap The EU is the largest market for plastic exports from Vietnam, accounting for 15% of Vietnam's total plastic export turnover in 2019 Vietnam primarily exports finished products and semi-finished products including articles for packaging, plastic tableware, construction pipes, and various other plastic articles to the EU In 2019, the highest proportion being articles for conveyance or packing of goods at 43.9% (Trungtamwto.vn, 2021) In early 2020, the COVID-19 pandemic had a significant impact on the global market, including Vietnam's export industry However, Vietnam's plastic industry experienced less impact from the pandemic Specifically, based on data from the General Department of Customs, the export revenue of plastic raw materials in the first 10 months of 2020 amounted to $1.09 billion, showing a 0.6% increase compared to the same period in 2019 Additionally, the export revenue of plastic finished products during the same period reached nearly $3 billion, reflecting a 3.7% growth compared to the previous year (Trungtamwto.vn, 2021) 1.1.3 EVFTA's Commitments Related to the Plastic The plastic production and processing industry is forecasted to benefit significantly from the EVFTA, with opportunities arising for both exports, imports, and investment attraction In the Harmonized System (HS) for commodity description and coding, plastic products (including plastic materials, semi-finished products, and finished plastic products) are classified under Chapter 39: Plastics and articles thereof Additionally, products containing plastic materials are classified under other chapters within the HS system However, for the purpose of this research, the data and analysis will be limited to plastic products under Chapter 39 1.1.3.1 Commitments on tariffs measures Currently, the Most Favoured Nation (MFN) tariff rate applied by the EU for plastic products is commonly 6.5%, with an average MFN tariff rate for all Chapter 39 plastic products at 5.47% Plastic is one of the few products for which the EU maintains relatively high MFN tariff rates, as the EU primarily imposes high MFN tariffs on agricultural products and very low (or zero) tariffs on industrial products However, regarding the EU's import duties on Vietnam's plastic products, the EVFTA has committed to eliminating tariffs immediately upon the agreement's implementation, starting from August 1st, 2020 1.1.3.2 Commitments on non-tariffs measure As a new-generation FTA, the EVFTA encompasses a range of commitments concerning non-tariff measures Most of these commitments are applicable across various merchandise categories, including plastic products The commitments related to plastic products are primarily focused on import-export restrictions and Technical Barriers to Trade (TBT) Restrictions on Import and Export Measures The EVFTA reiterates the obligations set forth in the World Trade Organization (WTO), stipulating that Vietnam and the EU shall not impose or maintain any prohibitions or restrictions on imports or exports, except as committed or permitted under the WTO's existing provisions and exceptions Therefore, apart from the cases specified in the commitments, Vietnam or the EU cannot prohibit or restrict the import or export of plastic products The EU does not have any reservations regarding this obligation Vietnam reserves a list of products that are still subject to import and export restrictions, as stated in Annex 2-A4 of the EVFTA, which includes used household plastic products Thus, Vietnam will continue to prohibit or restrict the quantity of import and export of used household plastic products Technical Barriers to Trade (TBT) Regarding technical standards, the EVFTA introduces specific requirements that differ from those of the WTO These requirements include: Before issuing technical regulations, the EU/Vietnam must consider different methods of governance, beyond relying solely on legal regulations They are encouraged to assess the impact of these regulations When appropriate, the EU/Vietnam should refer to and use international standards such as ISO, IEC, ITU, Codex If different standards are applied instead of international ones, the differences must be clarified, and the reasons for not using international standards should be explained The proposed regulations must be notified to the other party's government at least 60 days in advance to allow for comments All relevant parties should be involved in the consultation process for the draft, and comments on the draft should be considered 8 During the implementation of technical standards, the EU/Vietnam must ensure that the standards are reviewed when necessary to align with corresponding international standards Regular reviews should be conducted to enhance the compatibility of noninternational standards with international standards When requested, the EU/Vietnam should consider recognizing equivalent technical regulations of the other party Regarding labeling and markings on goods under the EVFTA, specific commitments include: The mandatory information on labels should be relevant to consumers/users or indicate the product's compliance with mandatory technical standards If goods have already met the relevant mandatory technical standards, there is no obligation to register or seek approval for their labels before they are circulated in the market, except for public interest reasons Labels can be attached or supplemented at approved locations within the importing country's territory However, the old label may need to be retained on the product without removal Additional languages, internationally approved terms, figurative marks, symbols, images, and other information beyond the importing country's requirements can be included on labels Non-permanent labels that can be separated or removed from goods or label formats accompanied by other relevant documents are encouraged For EU goods exported to Vietnam, a special commitment states that if Vietnamese law requires information on the country of origin, labeling the product as "Made in EU" or "Produced in the EU" satisfies this requirement for non-agricultural goods (excluding pharmaceuticals) Overall, it can be seen that the TBT provisions in the EVFTA not bring significant changes to the existing mechanisms for issuing and implementing TBT measures of each Agreement party (EU/Vietnam), except for some new provisions related to labeling requirements (Wtocenter.vn, 2021) 1.2 The Situation of Vietnam’s Plastic Industry in the context of Implementing EVFTA 1.2.1 Plastic Export Situation of Vietnam before EVFTA came into effect From 2017 to 2019, the export situation of Vietnam's plastic industry to the EU showed some signs of growth With an average growth percentage of 6.5% per year, Vietnam's plastic export turnover to this region increased from 561.2 million dollars in 2017 to 636.3 million dollars in 2019 By the end of 2019, the EU market ranked third in the list of “Importing markets for plastic products exported by Vietnam”, with 13.1% of the total share value, just behind the US and Japan 9 660.000 636.321 640.000 620.000 612.092 600.000 580.000 561.240 560.000 540.000 520.000 Year 2017 Year 2018 Year 2019 Figure II: Exported value of Vietnam's plastic industry to the EU (2017-2019) (thousand dollar) Source: ITC Trademap This period of growth shows that before the EVFTA, the EU was considered as a potential and growing market for Vietnam's export plastic enterprises The reason is the EU market's characteristics always have two opposing trends: on the one hand, the demand for finished and semi-finished products such as plastic bags or plastic packaging is increasing with economic development and income levels; on the other hand, the concern of environmental problems increases the demand for high quality products In addition, even before the EVFTA, the EU tax applied to Vietnamese plastic products was low with a GSP rate of 3% (compared to MFN tax of 6.5%) At the same time, unlike other big competitors such as China and Thailand, Vietnam has not been subject to anti-dumping duties by the EU since 2006 In the EU (27) market, the countries in which Vietnam has the largest export value include: Germany, the Netherlands, France, Belgium and Poland In particular, the value of plastic exports to Germany and the Netherlands has always reached more than 100 million USD for consecutive years from 2017 to 2019 Moreover, in 2019, Vietnam's plastic export market in the EU was expanded thanks to the appearance of Luxembourg, with an export value of 17 million USD in 2019 (ITC Trademap, 2019) Similar to Vietnam's plastic export situation to the world, in comparison to plastic finished goods, Vietnam’s plastic materials exported to the EU only accounted for a small part of Vietnam's total plastic exports in 2019 with 13% 10 Table II: The structure of Vietnam’s plastic products exported to the EU in 2020 HS code Vietnam’s export to EU (27) share value in 2020 (%) Product label Plastic materials Polyacetals, other polyethers and epoxide resins, in 3907 primary forms; polycarbonates, alkyd resins, Polymers of propylene or of other olefins, in primary 3902 forms 12.6 0.4 Plastic product and Semi-product 3923 3926 3924 3920 3921 3917 3918 3919 Articles for the conveyance or packaging of goods, of plastics; stoppers, lids, caps and other Articles of plastics and articles of other materials of heading 3901 to 3914, n.e.s Tableware, kitchenware, other household articles and toilet articles, of plastics (excluding Plates, sheets, film, foil and strip, of non-cellular plastics, not reinforced, laminated, Plates, sheets, film, foil and strip, of plastics, reinforced, laminated, supported or similarly Tubes, pipes and hoses, and fittings therefor, e.g joints, elbows, flanges, of plastics Floor coverings of plastics, whether or not selfadhesive, in rolls or in the form of tiles; Self-adhesive plates, sheets, film, foil, tape, strip and other flat shapes, of plastics, whether 44.5 30.1 3.9 1.8 1.5 1.5 0.8 0.7 Source: ITC Trademap statistics From the above table we can conclude that until 2020, the groups of plastic materials and products (HS3907, HS3923) accounted for a large proportion of 57.1% export turnover Plastic products for industrial manufacture (HS3917) increased, from 9,260 thousand USD in 2019 to 14,072 thousand USD in 2020, to reach 1.5% share in exported value In contrast to the growth period of 2017-2019, Vietnam's plastic export situation to the EU market in the first half of 2020 showed signs of decline: 11 Export turnover 50 45 40 35 30 Year 2019 25 Year 2020 20 15 10 Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Figure III: Export turnover of Vietnam's plastic products to the EU market in 2019-2020 (thousand USD) Source: General Department of Vietnam Customs This cooling down situation was caused by the Covid-19 pandemic which broke out in China and spread around the world including the EU countries This epidemic has hindered international trade, goods exchange and supply chain bottlenecks As a result, the turnover of Vietnam’s export plastic to the EU market, by the first half of 2020, reached 227.8 million USD, down 9.9% compared to the same period in 2019 However, from April 2020, the situation has changed with some signs of growth due to the reopening of many European countries In addition, many countries have launched large-scale stimulus packages, increased fiscal spending, maintained essential economic activities, and increased import demand for goods In general, Vietnam's export plastic industry to EU before EVFTA has grown and developed, but still has not taken full benefits of competitive price and preferential tax rates 1.2.2 Plastic Export Situation of Vietnam after EVFTA came into effect After the EVFTA came into effect in August 2020, it has brought many growth and development opportunities for Vietnam in the EU market If in the past, the EU imposed a GSP tax of 3% for Vietnam's export plastic industry, now with the EVFTA, it was reduced to 0% This is a favorable condition that helps Vietnam have more advantages to compete with other big exporters to the EU market such as China 12 80 70 60 50 40 30 20 10 Jan Feb Mar Apr May Jun 2020 Jul Aug Sep Oct Nov Dec 2021 Figure IV: Export turnover of Vietnam's plastic products to the EU market in 2020-2021 (million USD) Source: General Department of Vietnam Customs As shown in the above chart, in 2021, the export of plastic products to EU markets slightly decreased due to the impact of Covid-19 pandemic However, in September 2021, the export of plastic products to this market increased sharply again then peaked at 439.5 million dollars, accounting for 11.3% of the total export turnover of plastic products in Vietnam, up 33.6% over the same period in 2020 (Vietnam Plastic Association, 2021) This impressive result is considered to have significant support from the implementation of the EVFTA Agreement and is especially remarkable in the context of international trade still facing many difficulties and challenges due to the Covid-19 pandemic Table III: Vietnam’s plastic exported value to EU member markets Market Total Netherland Germany France Poland Belgium Spain Denmark Sweden Finland 8/2020 - 7/2021 (thousand USD) 519,329 154,368 145,728 55,857 33,714 33,283 26,369 19,354 16,604 7,380 Compared to period of 8/2019 - 7/2020 (%) 17.4 17.9 8.7 33.3 13.4 29 34.1 34.5 -2.3 34.1 13 8/2020 - 7/2021 (thousand USD) Market Greek Slovenia Estonia Austria Portugal Latvia Litva Croatia Slovakia Compared to period of 8/2019 - 7/2020 (%) 5,554 5,418 5,119 3,600 3,406 2,145 794 365 272 9.4 11.8 1.7 73.2 29.5 -6.1 19.6 -4.8 -21.1 Source: General Department of Vietnam Customs Export turnover to most EU member markets achieved high growth in year after EVFTA came into effect The Netherlands, Germany, France, Poland and Belgium are still the main export markets for Vietnam's plastic products Leading the market is the Netherlands, with a turnover of 154.3 million USD, accounting for 29.7% of the total export value of plastic products to the EU, an increase of 17.9% compared to time before EVFTA Followed by the German market with export value accounting for 28.05% of Vietnam's total plastic products exported to the EU, up 8.7% share in value over the same period last year Vietnam’s plastic exported value to the EU continued increasing from 883.8 thousand dollars in 2021 to more than 1.3 billion dollars in 2022 This growth helped the plastic industry become one of the billion dollar industries in Vietnam 1.331.162 1.400.000 1.200.000 883.853 1.000.000 800.000 European Union (EU 27) Aggregation (thousand dollars) 625.670 600.000 400.000 Linear (European Union (EU 27) Aggregation (thousand dollars)) 200.000 Exported value in Exported value in Exported value in 2020 2021 2022 Year Figure V: Vietnam's plastic export value to the EU market from 2020 to 2022 (thousand USD) Source: ITC Trademap 14 In the first seven months of 2021, which is also the first year of the EVFTA coming into effect, the EU's import turnover of plastic products from Vietnam reached 532.1 million EUR, up 48.97% over the same period in 2020 (Eurostat data, 2021); Vietnam's market share in European countries within EVFTA also increased from 1.32% to 1.66% (Thong tin xuat khau vao thi truong EU: Nhua va san pham nhua, 2021) In conclusion, the EVFTA has had very positive effects on Vietnam's exports of plastic materials and plastic products After years of implementing the Agreement, Vietnam's export of this industry to the EU has witnessed a high growth despite difficulties and complications caused by the Covid-19 pandemic, thanks to great incentives on tariff reduction 1.3 Assessing the impact on Vietnam's plastic export industry after implementing EVFTA Vietnam's plastic export business was quite pessimistic in 2020 because the volume of plastic exports had been in steady decline The adoption of the EVFTA Agreement from August 2020 was anticipated to be crucial in the context of the COVID-19 pandemic having negative impacts on plastic production, export and helping to offset the fall of our nation's economy From a commercial perspective, the EVFTA Agreement was also supported as a means to give businesses access to a wider range of markets and give them a boost during this challenging time In 2021, exports of plastic to the EU amounted to 557.68 million USD, a 21.73% increase, according to the Ministry of Industry and Trade In terms of export markets and bringing in investment, the EU-Vietnam Free Trade Agreement (EVFTA) has paved the way for the plastics sector According to VPA, Vietnam Plastic Association, the plastics sector generated 9.54 million tons in 2022, an increase of 1.9%, marking the lowest year after more than a decade of consistent growth of over 15%, with over 30% in certain years Although it increased, which is regarded as valuable, Vietnam's exports of plastic goods were up less than half (10.5%) from 2021 to $5.447 billion The total revenue was roughly $25.18 billion, an increase of 5.68% from the prior year The cause is a combination of the COVID-19 pandemic's continued impacts and the current economic downturn The benefits of the EVFTA are significant given the challenges coming from all directions Although the International Trade Center claims that domestic EU plastic products currently outperform imports, Vietnam's plastic packaging products have a competitive advantage over plastic packaging products from other nations in the area like Thailand and China as we are not subject to 4–30% of anti-dumping taxation on the EU market Due to the fact that production materials are heavily dependent on imports, flexible rules of origin for plastic products supplied to the EU give Vietnamese businesses a significant competitive advantage Opportunities, challenges and recommendation for Vietnamese plastic industry after EVFTA 15 2.1 Opportunities The Europe Union (EU) is the world's largest plastic importer, its plastic importing value in 2019 was 207 billion USD, accounting for a third of world’s total plastic importing value The EU is an extreme potential market for any plastic industry, so after the EVFTA, Vietnam’s plastic industry can better take advantage of this market Before EVFTA went into effect, plastic exported from Vietnam to the EU benefited from the General System of Preferences (GSP), and was generally taxed at 3% However, the preferential tariff from GPS is considered unstable Since GSP is a facility granted unilaterally to developing countries, the EU has the right to suspend or modify the preferential tariff anytime Moreover, not only Vietnam but Cambodia, Indonesia, Laos, Myanmar, and Philippines also benefited from GSP; so Vietnam’s plastic product was not competitive enough After EVFTA went into effect (from August 1, 2020), all of Vietnam’s plastic products exported to the EU experienced a 0% tariff The preferential tariff from EVFTA is stable as EVFTA is a bilateral agreement between Vietnam and the EU Unlike GPS’s preferential tariff, EVFTA’s tariff will only change if both Vietnam and the EU decide to end the agreement Only a few plastic exporters to the EU can experience the 0% tariff like Vietnam, so it can be said that the EVFTA has created a considerable competitive advantage for the Vietnam plastic industry 2.2 Challenges The EVFTA creates great opportunities, but it also brings some threats for Vietnam’s plastic industry 2.2.1 Rule of origin In order to enjoy EVFTA’s preferential tariff, Vietnam’s plastic products must meet the Agreement’s rules of origin This rule requires that plastic products under EVFTA must be made of raw material mostly inside the EU/Vietnam However, currently, Vietnamese plastic enterprises mainly take advantage of cheap raw materials from China and some other Asian countries in the production process, so this rule of origin is a challenging problem for Vietnamese companies 2.2.2 EU import regulations and consumer taste The EVFTA only helps Vietnam’s plastic products break tariff barriers, not the EU import regulations It is well-known that EU import regulations about technical standards, environment, consumer’s health protection, are really strict In addition, to gain profit, Vietnamese plastic enterprises must design specific products that meet the taste of European consumers 2.2.3 Increasing risk of trade remedies, competition, and cost 16 There is a fact in international trade that tax reduction when a free trade agreement is signed will lead to the rise of non-tariff barriers Unfortunately, the EU is said to be one of the partners that usually apply non-tariff methods So that Vietnamese companies should have plans to face these trade remedies The EVFTA at the same time scratches out tax imposed on imported plastic products from the EU from Vietnam This will help reduce a great amount of price of EU’s plastic products It means that Vietnamese consumers may consider replacing Vietnamese plastic products with European ones So, Vietnamese plastic companies whose main target is the domestic market will have to compete hardly with high quality products of European plastic exporters Due to rule of origin, Vietnamese plastic companies will have to find different sources of raw materials, which is probably more expensive than Chinese materials Moreover, to follow EU strict import regulations, enterprises will have to pay more to protect the environment, and also to improve the technology Plastic enterprises should consider carefully to meet the needs of the EU market together with making profit 2.3 Recommendation for Vietnam’s plastic industry in the context of EVFTA In the context of EVFTA, the development of the plastic industry in Vietnam encounters notable opportunities and challenges Therefore, to fully optimise the advantages and mitigate the drawbacks, promoting development of technology, becoming responsive to the demands of the EU market and raising the industry’s competitiveness are recommendations for enterprises and the government in Vietnam Improving the effectiveness in implementing the EVFTA As the EVFTA provides Vietnam with numerous opportunities in increasing their export activities for plastic products, the government is recommended to supply enterprises with relevant information regarding the EVFTA and exporting plastic products (tariff schedule, preferential tariff between GSP and EVFTA, regulations and procedures for certification of origin) Promoting the development of technology In order to take advantage of the beneficial commitments EVFTA offers, it is crucial that enterprises are more proactive in updating technology, adapting new trends and improving their competitiveness Investment in new machinery, especially energy-saving and environmentally-conscious technologies, is vital for export production and domestic consumption In the expansion of raw materials production, enterprises and the government need to promote investment in research and development to fulfil the increasing standards of Industry 4.0 Businesses, therefore, should be responsive to new trends and innovation to further integrate new technology in production and infrastructure Managing the EU market 17 Because of the difficult, fastidious nature of the EU market as well as its potential for all exporting countries, competition in this area is fierce and requires high competitiveness from Vietnam’s plastic industry To penetrate and gain market share, plastic enterprises are recommended to further invest in brand building and product advertising Furthermore, plastic enterprises should pay attention to the strict regulations and requirements of the EU importers The China-US Trade War in 2018 - 2019 has led to a change in plastic product consumptions Consumers, after the Trade War, have shifted from purchasing produced-inChina products to choosing products from other countries including Vietnam This development will require Vietnam to push their production to meet the new standards of the buyers After the COVID-19 pandemic, final consumption plastic products are expected to have an increase in demand in the short term In the long run, however, the demand for highquality products will see a rise in the domestic and EU market Therefore, improving technical measures to ensure the EU requirements of manufacturing process and specifications is important to Vietnam’s exporting activities Moreover, the EU market also promotes products that are environmentally-friendly and recyclable Plastic products that are friendly to the environment, comply with the 3Rs and easy to decompose are being opted for by Europeans consumers For Vietnam's exporting products to continue to prosper, it is important to pay attention and adapt to this new trend Raising the competitiveness of Vietnam’s plastic industry The quality of Vietnamese products are at the moment still incomplete Therefore, improving to gain a competitive advantage is significant in the development stage First, enterprises and the government should focus on enhancing the labour force, especially in training progress, technology engineering and market research development Second, establishing brands and promotion campaigns should also be invested in to set up relationships with importers and EU consumers throughout various measures Finally, it is recommended that enterprises consider establishing ventures with foreign businesses to raise their competitiveness and the chances of penetrating new markets Comparison with Vietnam’s Competitors Table IV: Import Value to the EU/MS (EURO) for the period 2019-2022 Ranking Country Import value 2019 Import value 2020 Import value 2021 Import value 2022 China 363,467,354,481 € 385,132,193,939 € 473,811,430,784 € 626,432,887,933 € United States 235,186,317,601 € 203,034,207,474 € 233,526,552,440 € 358,660,830,164 € Russia 144,942,070,169 € 94,771,966,204 € 163,646,604,391 € 203,408,502,832 € United Kingdom 194,283,629,085 € 169,060,938,576 € 147,546,912,404 € 216,154,910,369 € 18 Ranking Country Import value 2019 Import value 2020 Import value 2021 Import value 2022 109,885,446,292 € 108,910,895,455 € 124,189,592,186 € 145,395,124,655 € Switzerland Turkey 69,811,911,866 € 62,465,072,639 € 78,001,927,985 € 98,678,109,808 € Norway 54,146,113,825 € 42,481,510,083 € 74,547,288,897 € 159,978,791,599 € Japan 63,031,220,520 € 54,955,281,649 € 62,285,410,543 € 69,894,512,278 € South Korea 47,448,005,170 € 44,218,275,151 € 55,498,560,242 € 71,883,717,042 € 10 India 39,585,759,955 € 32,988,192,218 € 46,189,678,960 € 67,635,033,259 € 11 Vietnam 34,507,265,373 € 34,541,747,298 € 38,546,690,708 € 51,633,356,464 € Source: Access2Markets In the year 2022, Vietnam is the 11th biggest exporter into the EU market for plastic products However, in comparison with India, Vietnam did not see as significant a growth in the export value to the EU market despite surpassing India in 2020 Noticeably in 2021 and 2022, India had further widened the gap between the Import Value for plastic products in the two countries from approximately 7.6 billion € to 16 billion € The factors leading to this rapid growth in Vietnam’s nearest competitors can be attributed mainly to Production Linked Incentive Scheme (PLI Scheme), Foreign Direct Investment (FDI), Sourcing diversification away from China and MAKE IN INDIA’s launch: PLI Scheme: An initiative by the Government of India introduced to provide an incentive for foreign companies to use domestic workforce and encourage domestic and local production to generate micro jobs FDI: The government has taken various steps to boost domestic and foreign investments in India Various measures have been put in place by The government of India to increase domestic and foreign investment in the country These measures include FDI Policy reforms, Reduction in Compliance Burden and Corporate Tax Rates, PLI of various industries, improving liquidity of NBFCs and Banks, Phased Manufacturing Programme (PMP) Sourcing diversification from China: During the COVID-19 pandemic, the considerable rise in consumption demand of goods and a trend in shifting sourcing away from China had led to a significant boost in trade for India and other countries, making India one of the top four destinations for relocations of American companies Launch of MADE IN INDIA: Launched on September 25th, 2014, MADE IN INDIA has created a vocal development that encourages domestic manufacturing and consumption Additionally, it is also one of the first initiatives that introduce India’s manufacturing domain to the world 19 Considering these measures in the context of Vietnam’s plastic industry, it can be noted that there are initiatives that Vietnam can take into consideration First, Vietnam has the advantage of a large labour work force, increasing development in technology and growing entrepreneurship as well as being rather attractive to foreign investment Therefore, the government can take into account policies that help improve capital inflow and ease of doing business Second, the COVID-19 pandemic has led to an accelerating migration of factories from China to Vietnam In order to optimise this opportunity, it is recommended that firms and the government further improve automation, research and development as well as worker training Finally, to assist in developing MADE IN VIETNAM brand, the Government of Vietnam should consider the following policies: Acknowledge the term “brand” to reduce loose use of the term and provide legal clarification Strengthen the protection of Industrial Property Rights and Trademarks Create opportunities for enterprises to build and protect brands through introducing advisory centres under the Ministry of Trade or the Vietnam Young Business Association Develop a national system of brand training, especially in training art designers and directors as there is currently a shortage of capable workforce efficient in both artistic and business capability Conclusion In general, we can conclude that the EU is a market with a lot of potential for the plastic industry of Vietnam Benefits granted by the commitments as well as challenges are worth noting in the context of the EVFTA After the implementation of the EVFTA, Vietnam’s plastic industry can shift from the preferential tariff from the GSP to experience a 0% tariff from EVFTA for plastic products This resulted in an increase in export turnover of plastic products and expanded the export market in countries such as Czech Republic, Greece and Saudi Arabia Notably, the considerable increase in export volume into Germany has led to Germany becoming one of the five largest export partners of Vietnam With the advent of the EVFTA, Vietnam’s plastic industry enjoyed a decreased tariff for plastic products However, the industry also encounters challenges such as the requirement to meet the Rule of origin, the need to adapt to the EU market taste and import regulations as well as increasing risk of trade remedies, competition, and cost Therefore, the authors give recommendations such as investing in technology, raising standards and quality to meet EU market regulations and taste as well as improve plastic products’ competitiveness References Thanh N D., Long V P., Quang P N., Le D T (2021) One-year implemention of European Union-Vietnam Free Trade Agreement (EVFTA), Impacts on the Vietnamese economy and policy formation 20 Hadjinikolov, D., & Zhelev, P (2018) Expected impact of EU-Vietnam free trade agreement on Bulgaria’s exports Alisa Eduardovna Uryupina (2022) Problems of Implementing the EU's Inter-regional Policy in the Asian Direction Grumiller, J., Raza, W G., Staritz, C., Tröster, B., Von Arnim, R., & Grohs, H (2018) The economic and social effects of the EU Free Trade Agreement with Vietnam (No 8/2018) Research Report Dinh Manh Tuan & Vu Thuy Trang (2020) Development characteristics of Vietnam industrial real estate in the context of European Union–Vietnam FTA Vietnam Studies, (3), 25-35 doi: 10.24411/2618-9453-2020-10022 Nguyen, T B N., & Nguyen, P Q (2020) The impact of new generation FTAs on the sustainable agriculture businesses in Vietnam: case of EVFTA International Journal of Conservation Science, 11(3), 819-828 Vu, K V., & Tri, N M (2021) Science and Technology Development in Vietnam: Current Situation and Solutions Studies in Social Science Research Bien, B X., & Tien, N V (2019) Solutions enhancing competitiveness of made-in Vietnam brands in Vietnamese market International Journal of Research in Marketing Management and Sales, 1(2), 93-99 Xuất sản phẩm nhựa tăng mạnh năm gần - Hiệp hội nhựa Việt Nam (n.d.) https://vpas.vn/thong-tin/thong-tin-xuat-nhap-khau/xuat-khau-san-pham-nhua-tangmanh-trong-nhung-nam-gan-day.html Hạnh T N (2021, March 3) Ngành nhựa hội từ EVFTA Copyright (C) by Công Ty Cổ Phần Vccorp https://cafef.vn/nganh-nhua-va-co-hoi-tu-evfta-20210303103811277.chn TTWTO VCCI - (FTA) EVFTA Ngành Nhựa Việt Nam: Cơ hội xuất, nhập cho doanh nghiệp Việt Nam (n.d.) https://trungtamwto.vn/chuyen-de/19045-evfta-va-nganhnhua-viet-nam-co-hoi-xuat-nhap-khau-cho-doanh-nghiep-viet-nam Xuất sân phẩm nhựa tới thị trường EU tăng mạnh tháng đầu năm 2021 - Hiệp hội nhựa Việt Nam (n.d.) https://vpas.vn/thong-tin/thong-tin-xuat-nhap-khau/xuat-khau-sanpham-nhua-toi-thitruong-eu-tang-manh-trong-9-thang-dau-nam-2021.html TTWTO VCCI - Cẩm nang doanh nghiệp EVFTA ngành nhựa Việt Nam https://trungtamwto.vn/file/20559/cam-nang-dn-evfta-va-nganh-nhua.pdf B (n.d.) Tổng quan ngành nhựa Việt Nam: Tiềm phát triển hội nhập (Phần 3) https://vioit.org.vn/tong-quan-nganh-nhua-viet-nam tiem-nang-phat-trien-trong-hoi-nhap-phan-3 4688.4050.html