English ver Chính sách trợ cấp của Châu Âu đối với hàng nông sản và bài học dành cho Việt Nam

EU Governments subsidy polices towards their agricultural products and the application to Vietnam CONTENTS WTO EU GSP MFN CAP AEC World Trade Organization European Union Generalized System of Preferences Most Favored Nation Common Agricultural Policy ASEAN Economic Community INTRODUCTION Today, thanks to the global integration, the world is becoming smaller and smaller with many FTAs connecting countries together An international market will bring about opportunities of changes and sustainable development to Vietnam However, along with the bright side, we should be aware of upcoming challenges confronting us, especially in the battle of exporting Thus, with the comparative advantages in agriculture products, it is urgent tasks that Vietnamese government should enforce subsidy policies to boost its exporting activities so that we can keep pace with our partners all over the world On the other hand, Vietnam and EU have built up a long-last relationship for years, cooperating in many aspects including economics, politics, culture and societies Therefore, in the current circumstances, we have more golden chances to learn from their experiences, especially from their exporting subsidy policies Besides, it is obvious that the EU government has always been clever and determined at passing polices that can support their agricultural export The effectiveness of their policies has been proved by the stable growth of EU’s economies Thus, seeing what EU have accomplished and applying to Vietnam is of great importance if we want to raise the trade surplus and enrich our country All things considered, we decide to choose the topic “EU Governments subsidy polices towards their agricultural products and the application to Vietnam” to analyze in our thesis under the construction of PhD Vu Huyen Phuong – Lecturer of International Trade Policy We hope thanks to this thesis; we can have the general outlook about the trade policies of both EU and Vietnam In addition, we can see how EU countries motivate its free trade activities through appropriate subsidy policies and how we can apply to better the situation of free trade in Vietnam This thesis comprises four main parts: I Overview of EU market II Overview of agricultural subsidy policies in EU III Current situation about EU’s subsidy policies and their impact on Vietnamese market IV The application to Vietnam I OVERVIEW OF EU MARKET The foundation and development EU The EU (European Union), is a politico-economic union of 28 member states that are located primarily in Europe It covers an area of 4,324,782 km 2, with an estimated population of over 508 million The foundation of EU is illustrated by the graph below: European Coal and Steel Community (ECSC) European Economic Community in 1957 in 1951 European Atomic Energy Community (Euratom) in 1958 European Community (EC) in 1967 European Union in 1993 In addition, EU is the leading economic center of the world The position of EU is expressed by the table below Index EU US Japan Population (million - in 2005) GPD (billion USD - năm 2004) The proportion of export in GDP (% - in2004) The proportion of EU exports in world exports (% - in 2004) 464.1 12690.5 26.5 296.5 11667.5 7.0 127.7 4623.4 12.2 37.7 9.0 6.25 (Source: Statistics in 2004)  EU is one of the three largest economic centers in the world (the US, Japan and EU) with GDP of about 12690.5 billion in 2004  Its covers 7,3% of world population, 2.2% area of the world but the economic value accounting for 31% of world economic values EU is not only the leading economic center of the world but also the leading internatonal organisation The EU export makes up 37.7% the share of world exports, while that of the US is only 6.0% and Japan is 6.25%  Through the characteristics of the foundation and the development of the EU, it can be considered as the most successful model of regional integration today Some characteristisc of the EU’s market Firstly, each country always has its own consuming customs because the need of all members in the EU is abundant and diversified EU consumers want to choose the products with well-known brands in the world They speculated these products will adapt to customers’s requirement and make them feel secure EU market show that very few people choose the products from less prestigous brand or less well-known brand Thus, price’s negotiation seems not an optimal solution to approach this hot market EU Market is a difficult and highly selective market Importers from EU tend to have high expectation for products imported from other countries Secondly, to EU, the distribution network is an important element when importing and exporting products Corporational distribution channel is that manufacturers and importers of a corporation provided goods for only its system stores and its supermarkets That is main consuming trend The second distribution is noncorporational distribution channel Manufacturers, importers of a corporation provided goods not only for retail systems of its coporation but also provided goods of other independent retail stores Finally, as EU is the most developed market in the world, everything about consumers' health and safety always comes first To keep the consumers safe, they examine the products right at the producting places EU has made national or european-standard regulations to prohibit selling products from nations that have producting conditions that not meet EU standards II OVERVIEW OF AGRICULTURAL EXPORT SUBSIDY POLICIES IN EU Agricultural products EU market divided agricultural products into four main groups: Group - Very sensitive product: consists mostly of agricultural products and a few industrial consumer products such as fresh bananas, dried banana chips , pineapple, pineapple box, readygarments, raw tobacco pipe, silk, This group of products is taxed in GSP, equaling 85% of MFN export tax This is a group of products which EU limit to export Group - Sensitive products: mainly food, beverages, chemicals, materials, crafts (tiles and porcelain), footwear, consumer electronics, bicycles, cars, toys are taxed in GSP, equaling 70% of MFN export tax This is a group of items that the EU does not encourage to import Group - Less sensitive products: including frozen seafood (shrimp, crab, squid frozen, fresh chilled fish) some ingredients and chemicals (Air conditioners, washing machines, refrigerators) enjoy GSP tariff rates by 35% tax rate MFN EU encourages to import these products Group - Insensitive products: mainly some foods, drinks, (water minerals, beer, wine), raw materials (coal, crude oil, rubber), agricultural products (coconut shell, cashew nut), are taxed in GSP tariffs equaling from 0% to 10% of MFN rates This is the group which EU totally encourage to import Agricultural subsidies in EU The Agreement on Agriculture has three pillars—domestic support, market access, and export subsidies Agricultural subsidies are divided into groups: domestic supports and export subsidies Reason for the division into groups is of purpose of usage of such support If the support aims to stimulate exports, it is called export subsidies But the general support for agriculture, for specific products or a certain number of agricultural areas known as domestic support The mechanism applied to each group is different, so determining a form of subsidy is crucial a Domestic support The first pillar of the Agreement on Agriculture is "domestic support" The WTO Agreement on Agriculture negotiated in the Uruguay Round (1986–1994) includes the classification of subsidies into "boxes" depending on their effects on production and trade: amber (most directly linked to production levels), blue (production-limiting programmes that still distort trade), and green (minimal distortion) Domestic support includes the measures and the policies which government uses to maintain the price of the agricultural products So, the domestic producers receive the price at the level higher than the market price In WTO terminology, subsidies in general are identified by “Boxes” which are given the colours of traffic lights: green (permitted), blue (reduced), amber (forbidden) • The green box The green box includes subsidy measures in one of 05 groups identified and must fully satisfy the specific conditions Group - Subsidies for General Services Group - Subsidies aimed at food security reserves Group - Subsidies domestic food Group - Support for Disaster Reduction Group - Direct support to producers: Income support, Financial support to the program of the State Security, income insurance for farmers, support to offset the damage caused by natural disasters; support pension for agricultural producers To be considered as "green box subsidies," subsidy measures must fall into one of five groups mentioned and must meet the following conditions: As measures with little or no impact squeeze trade distortion; through programs sponsored by the government; no effect of subsidies for producers • The blue box The blue box includes direct payments from the state budget that are associated with the production The countries are not committed to cut down these measures, which means that the domestic support of this group does not need to be cut off or terminate Although these measures are put in the blue box which can distort trade, it is still allowed to be maintained (still green) because of belong in the narrow framework of agricultural production However, it will have to sustain the adjustment (should be blue) These subsidies based on fixed surface or yield The maximum subsidy equal to 85% or less than the level of production basis Livestock subsidies based on a fixed number of head This is the form of subsidies that many developed countries applied in production limitation programmes • The amber box Subsidies of the amber box are all the subsidies in a country that's not belong the green box and the blue box b Export subsidy Export subsidies are the third pilla For developing countries, the required cuts were 14% (by volume) and 24% (by value) over ten years.The government expenditure for the producer or exporter in the country to export their goods or services is called export subsidies According to the 1995 agreement on agriculture, developing countries must reduce 21% subsidies (in the amount of subsidies) and 36% (in cash) within years, developing countres is 14% (by volume) and 24% (in cash) within years The process of cutting, the countries can be flexible depending on the volatility of the market from to years, allowing the country can continue to export subsidies However, if this happens, the amount of subsidy in subsequent years must be cut further to ensure that the total reduction in the whole process is not affected III CURRENT STUATION ABOUT EU’S SUBSIDY POLICIES AND THEIR IMPACT ON VIETNAMESE MARKET The implementation of agricultural subsidies policy of the EU In 2009, subsidy to agriculture in EU increased to approximately 10000 EUR and it decreased about 7% and 16% for the industry which received subsidies of 300000 euro In trade policy, EU enhanced the protection of agriculture, environmental protection and protection of consumer health Beside subsidy policy for agricultural production, EU applied high taxes and impose quotas on some agricultural imports such as rice, sugar, bananas, cassava The requirement standards safety of food was strict implementation The market-opening commitments of agriculture in the WTO, EU countries maintain using tariff quotas for some products, descending the value and quantity of the products which are subsidized to export EU Union had set the Common Agricultural Policy - CAP, from the early 1960s to protect the border and created the mechanism subsidy for the agricultural sector It was introduced in 1962 and has undergone several changes since then to reduce the cost (from 71% of the EU budget in 1984 to 39% in 2013) (Source: https://en.wikipedia.org/wiki/Common_Agricultural_Policy) and to also consider rural development in its aims This policy split most domestic subsidy from production in EU, which means subsidy paid to farmers not for producing or farming and prices for the products that farmers produce With this reform, 90% of EU agricultural support have been transferred to Green Box On export subsidies, the EU proved to reduce the support in recent years (although that value is still quite large in some sectors, such as dairy products, sugar and beef) To beat against the strengthening narrow agricultural export subsidies, the EU offer to negotiate conditions tightened regulations on food aid and on the promotion of US exports CAP support for agriculture through three forms: support domestic prices, export subsidies and direct assistance (supply money) to compensate the lost income The aim is to make more money available for environmental quality or animal welfare programmes “For more detail, each cows receive $ 2.70 subsidies per day, which is more than double the salary of a poor farmer Thus, milk production in EU become surplus lead to the cheap export price, which affect milk production sector in a number of developing countries such as India, Jamaica (2003) In the autumn of 2007 the European Commission was reported to be considering a proposal to limit subsidies to individual landowners and factory farms to around £300,000 Some factory farms and large estates would be affected in the UK, as there are over 20 farms receiving £500,000 or more from the EU In 2012, the budget for the CAP is also about 50 billion euro The tools of the CAP application include export subsidies, direct payments and high import duties 50 billion euro budget of the CAP is used to support the domestic industry unconditionally For some European farmers, even 50% of their income comes from the CAP subsidies.” (Source: http://www.trungtamwto.vn/wto/cam-ket-ve-tro-capnong-nghiep ) EU claims to have an open export markets for agricultural products with developing countries, allow 50 developing countries free to access the markets and import agricultural product of developing countries The European Commission is now discussing the next reform of the CAP, which will coincide with the next financial perspectives package, as from 2014 The Commissioner responsible for Agriculture and Rural Development Dacian Cioloş, has outlined seven major challenges that the future CAP needs to address: food production, globalization, the environment, economic issues, a territorial approach, diversity and simplification This agreement will have a strong impact on overall global trade, including Vietnam It is probably regarded as a great benefit for developing countries Besides, EU promised to end the whole agricultural subsidies, had market opening to the developing countries The impact on agricultural subsidy policies of EU to Vietnam: Generally, the Vietnam - EU relationship is developing in a positive direction especially on commercial economic which is in line with Vietnam strategic interests In the framework Vietnam is a member of ASEAN and WTO, EU policy to Vietnam is clearly established and completed step by step in recent years EU support Vietnam in many aspects, especially development assistance, the majority of Vietnam's export products receive GSP preferences but actually, EU not admit Vietnam as a country has market economy To assess the impact of EU agricultural subsidy policy affecting to Vietnam, first, we need to see the dependence of agricultural products in Vietnam on EU market We have a table: 10 Vietnam’s agricultural products export turnover to EU Unit: Million USD Year Agricultural products export 2000 2001 2002 2003 2004 379.7 319.5 162 577 2005 649.5 795.2 200 968 2008 1271 (Source: http://www.tintucnongnghiep.com/2015/01/nam-2015-xuat-khau-nongnghiep-sang-eu-se.html ) Vietnam mainly export agricultural products such as coffee, rubber, rice, tea, fruits and vegetables to the EU market The production value of agricultural, forestry and aquatic products reached 219.887 billion, increase 3% from 2008 Recently, Vietnam exported agricultural products to the EU accounted for 18-19% of our export agriculture sector That indicates the important role of EU market in export activities of Vietnam Since 1997, according to trade relations between EU and Vietnam, Vietnam gain export benefit from EU market With coffee export, EU is the largest market for Vietnam's coffee, in 2008, coffee export to the EU reached 820 million USD In 2011, the volume of exported coffee to EU was 490 thousand tons accounting for 39% total Vietnam's exported coffee And tea, EU is a potential market for Vietnam's tea industry, the highest year exported 74,800 tons (2002) Export into the Polish market increased by times, bringing the proportion of exports to the market tea of Poland from 1.92% in 2008 to 2.6% in 2011 Wood products are identified as potential products developed because the EU market is the largest furniture The export of Vietnam's wood products to the EU market in 01/2008 reached 112 million Moreover, EU is the biggest aquatic consumption in the world, with annual turnover export increase to 34 billion dollars In 2008, exports Vietnam's seafood to the EU reached 275 thousand tons with a turnover of 910 million USD and the figure increase to 846 million USD in 2012 11 All trade details above indicate the strong influence of EU market to Vietnam's export, thus, each subsidy policy in EU also has an appreciate effect on the economy of Vietnam 2.1 Effect of subsidy policy for agricultural products of EU: Although the policy is applied to support the producer in EU, it also creates the barriers for products from export countries Export subsidies of the developed countries is one of the main reasons causing the dumping on the world market in 1980 Agricultural policy keep EU agricultural goods prices low, so it is hard for Vietnamese farmer to compete This direct influence on the growth and distribution of income between developing countries In addition, in the context of world food price volatility, the CAP instruments can exacerbate the negative effects on developing countries If CAP succeeded in stabilizing the European market, this means that the risk of price fluctuations will turn to the world market In contrast, expert Gail Soutar in Farmers Association UK and Wales argues that CAP actually bring many benefits to the developing countries “Each year nearly 60 billion euro EU import agricultural products from the developing countries, accounting for about 70% of the total value of EU agricultural imports The EU is also the largest importer of agricultural products from the developing countries, more than the US, Japan, Canada, Australia and New Zealand combined” (Source: http://finance.tvsi.com.vn/News/2012826/216283/chinh-sach-nong-nghiep-eu-lamkho-cac-nuoc-dang-phat-trien.aspx ) In particular, agricultural products imported from 49 countries are exempted from tariffs and quotas, the remaining developing countries enjoy preferential access to EU markets In addition, the importer to benefit from trade policy transparency and stability of the EU Argues that "over 90% of domestic subsidies separated from production and therefore are not considered trade distorting" more research was rejected, said separate payments for farmers has led to excess liquidity in the credit markets and this is a proof of the phenomenon of "trade-distorting" 2.2 Agreement with WTO to decrease export tax and subsidy and effect of Doha Development Agenda to Vietnam EU agree to WTO that EU will have open market for 50 developing countries to free access EU market This agreement has a strong influence to global commercial 12 economic and directly affect Vietnam In general, the elimination of export subsidies and domestic support on export markets would help developing country like Vietnam significantly increased competitive advantage compared, contributing to boost exports, particularly if export subsidies in the agricultural focus that Vietnam currently has the strength or potential exporters such as rice, coffee, cashew, pepper, vegetables, etc However, the elimination export subsidies and domestic support in major exporting countries like Vietnam can also adversely impact exports The table below summarizes some forecast John S Wilson (2002) related to the main theme of world agricultural trade • Effect on export: Certainly agricultural products in Vietnam will increase volume and expand the market to foreign markets The competitiveness of Vietnam's agricultural products in the world market also improved significantly when the countries commitment to eliminate export subsidies, returned to the world agricultural trade fair competitive ground based primarily on comparative advantage Moreover, once the domestic support and export subsidies are decreased, the world prices for agricultural products will reflect the actual cost of production and will be higher than before Thus, the value of agricultural exports of Vietnam will also increase respectively “According to this document of UNCTAD, a study by the World Bank shows that if all WTO member countries lifted import tariffs and subsidies, the agricultural exports of developing countries could increase 15% while imports increased by 12% World rice prices from this study is expected to increase to 16%” (Source: EUMUTRAP III) Thus, the annual revenue from Vietnam's rice exports will be further improved thanks to the beneficial changes of the terms of trade In the long term, the reduction of support distort production and trade will contribute to a global agricultural markets more stable, less volatile and less distorted than • Effect on import: The limit of domestic support under the Amber Box is still quite widely so that we can continue to maintain subsidies, although it cannot easily convert values from product support to other products Imports of agricultural products in Vietnam could be affected by the price increase (when exporting countries decrease support and subsidies) led to imports into the country may decline 13 IV THE APPLICATION TO VIETNAM Overview of agricultural subsidy policy in Vietnam Vietnam is an agricultural economy with rural residents accounting for 70 percent of population Agriculture’s share in GDP is about 24% As a key economic sector, agriculture plays an important role in development and economic stability of the whole economy; it is also simultaneously a sector that Government has supported much for many years In any country, support in agriculture tends to increase in accordance with the level of industrialization and modernization Vietnam is not exempted The main agricultural products include rice, coffee, tea, cotton and vegetable a Domestic support – Production subsidy Domestic support policy in Vietnam focuses mainly on “Green Box" and “Blue Box” which WTO member countries freely apply • Green box For many years, Government has mainly invested in agriculture through these measures From 1996, 6,850 billion VND was annually invested into through this box agriculture (84.5% of total domestic support), focusing on: Science research; Agriculture training; Production scale extension (staffs, training courses and administration cost); Agricultural infrastructure; Public Stockholding for food security purposes: National stockholding activities for food securities include: rice, reservation of some varieties of maize, vegetables, veterinary drugs, pesticides, etc ; Environmental programs; Payments under regional assistance programmes; Food aid; Payment for relief from natural disasters; Plant protection and veterinary; Job creating program • Blue box Subsidy policy in this box represents 10.7% of total domestic support, classified into: Investment support; Input subsidies generally available to low-income or resource-poor producers and those who live in difficult areas; Support to encourage diversification from growing illicit nacrotic crops During the period 1996 - 1998, annually, Government has granted VND 532 billion in agriculture through these support measures b Export Subsidy 14 In 1998, export subsidy was given to canned pineapple exported to US (assistance for importation of pineapple bud was put in domestic support measures) Under the Decision No178 of Prime Minister, the Government provides interest rate support to enterprises which export some farm products (meat, vegetables) in the form of granting loans at preferential lending interest rate of 0.2 percent per month lower than the normal interest rate applicable for export credit loans that commercial banks are generally imposing Since 1999 onwards: Export Supporting Fund was established Some kinds of subsidy from this Fund are as followed: Rice: Interest rate support for purchasing rice for temporary reserve and compensate lost on rice export; Vegetables and fruits: Support to import pineapple bud and export canned cucumber, pineapple and plum; Coffee: Compensate lost on coffee export in 1999-2000 and Interest rate support for purchasing coffee for temporary reserve; Pork: Support to export pork meat; Sugarcane and tea: Support to import varieties Between 1999 and 2001, Vietnamese Government used rewards export policy on seven agricultural products: rice, coffee, tea, vegetable, etc…, however, Vietnam rejected this direct export subsidy under the context of WTO Achievements and Limits of subsidy policy in Vietnam 2.1 Achievements of subsidy application “Vietnam ranks 26th in world exports, represents 1.1% of world exports for all products To be more specific, some leading agricultural products stand a high ranking such as coffee (7.9% of world export), rice (only behind China, Philippines, Malaysia, Hong Kong and accounting for 6.95%).” (Source: http://www.trademap.org) Vietnam has been focusing mainly on tropical products, fisheries and gradually improving the quality of products, especially meeting import developed countries’ requirements about food safety like EU, United State, Japan In recent years, a large proportion of our agricultural products has been accepted by EU – a market with high demands for food safety and sanitation The development of export markets represented a significant achievement in opening to a new market and exploiting an existing market as well Overall, the structure of the export market has shifted positively Agricultural subsidies match with the rule of WTO: Apply “Green Box” with a view to supporting for special training field, scientific research, expansive program, 15 protection and quarantine of animal and plant, infrastructure Moreover, the trade barriers for agricultural products has been gradually removed, becoming more suitable with international standards: Agreement on Agriculture and Bilateral agreement between countries; development of policies related to production, processing, export; innovation of management measures of agricultural lands; increase in capital of state investment for agriculture These subsidy measures are consistent with the term of WTO about assisting farmers and producers 2.2 Limits of subsidy application Supporting the number of agricultural products depends mainly on the situations arises simultaneously without any specific criteria for policies For instance, import restriction: Vietnam always applied prohibitive measures or restricted import licenses to protect domestic production Obviously, Vietnam export subsidy and domestic support are only on short term basis, so it is difficult for policy makers to work out long term plans Controlling measure on commodities is believed to protect people health and environment However, this measure lacks of specification and the commodities’ management of hazardous chemicals, fertilizer, pesticides is inappropriate Target group entitled to support are enterprises, mainly State owned enterprises (SOEs) The discrimination between SOEs and other economic sectors still remains due to lack of criteria to create equality between them Direct support to producers (farmers) is very limited, especially for poor people, and those in difficult areas (while other countries such as Malaysia, Thailand ) apply this kind of support on a large scale Some support policies WTO allows to use as a way of helping producers in retirement age and supporting income as the price of goods becomes low are unused by Vietnamese government The margin of subsidy is large, therefore, to increase opportunities and reduce challenges, government should promote other subsidy policies that WTO allows to enhance agricultural competitiveness in the international market Whereas some policies which are not permitted by WTO were applied like reward export based on export turnover and export performance for commodities: rice, coffee, pork, and canned vegetable This subsidy is a kind of direct subsidy that 16 government give a sum of money for producers when exporting Export subsidy measures are committed to reduce under the rule of Agreement on Agriculture Vietnam standard system has yet to meet the management requirement of export & import and circulation of commodities Agriculture has 768 standards, but many documents are out of date and incompatible with the demands of the Agreement on Technical Barriers to Trade and the WTO Quarantine The level of export subsidy for agricultural products is low because Vietnam is still poor compared to other countries in Asia and the ability of government subsidy is limited Even direct investment for agriculture production is far lower than the level WTO allows However, the trend to rise export subsidy in terms of both commodities and volume subsidized is existing For example with rice: the quantity subsidized has increased from million tons to million tons Similarly, coffee has been added to the list of commodities subsidized with a large volume, compensation of loss in coffee trading Moreover, Vietnam will not have access to the special safeguard mechanism (minimizing the impact of the mutation of import price) for breeding commodities such as pork, beef, etc… Causes of these drawbacks 3.1 Downside in the “Export Credit Regulations” a Definition of “Export Credit Regulations” Decree 75/2013/ NĐ- CP by Vietnamese Government  Term 1: Export Credit Regulations are favor by the State to help individuals, associations and enterprises to develop production and commercial activities of exporting products according to Exporting policies of Vietnam  Term 2: Forms of Export Credit Regulations − In medium and long term (> year):  Allow investment loans  Assist in interest rate after investment  Act as a guarantee for investment − In short-term (< year):  Allow short-term loans  Act as a guarantee for the performance of the exporting contracts b Downside 17 Since the demand for money loaned always exceed the supply, a limited number of enterprises and industries can approach to these government’s loans In addition, industries that need more support in order to enhance their competitive capacities (for example: agricultural processing) usually cannot meet the requirements of being loaned due to the drawbacks of small scale Besides, SME also find it difficult to converge on these loans, for they not have the ability of mortgaging their assets Therefore, this phenomenon lead to the issue of irrationality: Who need money most not have it while those who have great financial ability 3.2 Unnecessary administrative procedures Today, administrative procedure is still a controversial problem in our society, especially the Export licensing Procedures The law and order system of Vietnam still have some holes putting the red-tape on the way of exporting To specify, the procedures have to go through the party local hierarchy from district to province and nation levels Moreover, the local authority usually makes difficulties for local citizens, enterprises, or deal with it with irresponsibility when they ask for license As a result, this gives rise to the matter of bribery and embezzlement, which puts hinders on the development of export in general despite the subsidy policies of the government 3.3 Vietnamese Enterprises’ indifferences towards global integration In 2015, 20 FTAs were successfully signed, including FTA with EUEA, TPP, ACE Among these important ones, ACE is supposed to be the one with great, direct influence on Vietnamese enterprises However, according to the survey by the Ministry of Industry and Commerce: • 76% Vietnamese enterprises not know about AEC • 94% not know about the terms signed in AEC • 62% are not aware of challenging and opportunities when joining AEC While the leaders of Vietnam are eager on the negations, enterprises show no interest in the FTAs that will significantly affect on them Consequently, the subsidy 18 policies of the government make no means Should action not be done, sooner or later, Vietnamese enterprises will lose the battle right in our battlefield 19 The applications of EU’s subsidy paving the way for Vietnamese agriculture export to EU 4.1 Enhance the competitive capacities of Vietnamese agriculture product Improve the quality of our product by learning the advance in technology from developed countries Promote commercial activities by holding more trade fairs to display Vietnamese goods and introduce our products to EU Moreover, thanks to practical activities like this, our enterprises can access to valuable information about our competitors’ products like prices, designs, quality or their marketing strategy Vietnamese Representative offices in EU need to keep pace with changes in EU market and make forecasts about the consumption trends so that Vietnamese enterprises can adopt to these changes on time as well as being flexible on the exporting strategy About the trade name: The majority of our exporting products are in forms of process and FOB, so we not have famous trade name Therefore, if we form a jointventure or cooperate with prestigious ones, we can create our name gradually 4.2 Improve the non-tariff protective system towards leading agricultural products We can learn for EU’s subsidy policies by using different boxes suitable for the current conditions of Vietnam • Blue box: Vietnam should extend the scale of investment and raise the preferential investment rate, especially investment in modernizing equipments in processing and preserving agricultural products This is a essential stage in enhancing the value of our exported products Support the low-living condition areas by supplying them seeds, materials needed freely Simultaneously, we need to provide them with short-term training courses about modern agriculture techniques as well as how to use their resources effectively • Green box: 20 Government should invest in agriculture through constructing infrastructure For example, the “Nong thon moi” program 2011-2015 have concreted millions of kilometer road all over country, making the transportation system in agriculture regions become convenient Government should lunch “Innovating programs” in breeders, supporting scientific activities and motivate individuals and enterprises to be more creative, adapt to continuous changes 4.3 Improve and environmental standard system EU has environmental standards: ISO 14001 and EMAS ISO 14001pased in 1993 ISO 14001 is applied in common both inside and outside EU while EMAS ISO 14001 is only for inside EU These strict standards are good at improving the quality of the product and also restrict the commodity imported- motivating commodity exported For Vietnam, to raise our capacity and boost exporting activities, Government should impose and improve environmental standard systems like EU governments did For example, due to the downside in our environmental standard system, many foreign enterprises severe harm to the environment with just very light punishment or event without This will affect directly our production in general Therefore, more or less, the exporting quality will also be negatively affected as an inevitable result Besides, if we want to raise the export output in EU market, we need to be aware of the regulations of EU so that suitable methods can be taken from the beginning stage to the finishing ones 4.4 Improve the competitive capacity to Vietnamese enterprises From the data survey, we can see that many enterprises are not ready to the wave of global integration The incompetence and indifferent attitudes will be the hinder to the development, which makes all the effort of the Government through export subsidy be meaningless To make our export be fruitful, we have to raise the awareness of enterprises about upcoming integration by holding summits about the FTA that have been signed recently so that they can fully understand what are confronting them in the future 21 Government should also take advantage of the media to spread the latest information about our current economic conditions, about new-signed FTA to the country so that every citizen can feel that they are a part of this integration If the competitive capacities are enhanced, along with the subsidy policies from the Government, in near future, Vietnamese agriculture product can travel around the world, not only around EU 22 CONCLUSION Vietnam – EU relation has been transformed from political and diplomatic status to a both bilateral and multilateral form of cooperation about economy, trade, investment, science & technology on the basis of mutual benefit Obviously, EU is a difficult but promising market of importing agricultural products from Vietnam EU subsidy policies has a considerable impact on Vietnam trade situation Especially when Vietnam joins WTO, the domestic market will face many competitors Therefore, Vietnam has to implement the suitable commitments to dismantle tariff and non-tariff barriers followed a beforehand schedule To be consistent with international practices, Vietnam should increase the number of export products in EU market, provided that Vietnam confirm sustainable agricultural development, rural development and poverty reduction Moreover, agricultural subsidy policies should be adjusted completely, taking into account liberalization commitments such as ASEANIndia, ASEAN-Japan, ASEAN-Korea, ASEAN-Australia, ASEAN-New Zealand In a nutshell, our assignment partially helps us have an overall knowledge about EU agricultural subsidy policies and more understanding about Vietnam market, as well as shows possible measures to solve controversial issues of agricultural products in the economic integration period 23 REFERENCE Europa (web portal) (20 July 2010) The CAP after 2013' Brussels Farmers Guardian (1 September 2006) Top 20 cap payments Human Resource Club - Foreign Trade University (2015) Promotion clip “AEC, WE ARE READY” PhD Nguyen Thuong Lang (October 2010) Assignment “Agricultural subsidy policies in EU” Rpa.gov.uk (17 August 2006) Rural Payment Agency "Farm Payments by value 2003– 2004" VTV3 (December 2015) Report “Tap chi kinh te cuoi nam 2015” http://chongbanphagia.vn/tro-cap-nong-nghiep-n1254.html http://ec.europa.eu/justice/citizen/ https://en.wikipedia.org/wiki/Agriculture http://www.fao.org/docrep/005/y4252e/y4252e11.htm http://www.isgmard.org.vn/…/Agri…/General%20report-WTO-e.pdf http://thuvienphapluat.vn/van-ban/Xuat-nhap-khau/Quyet-dinh-133-2001-QD-TTgquy-che-tin-dung-ho-tro-xuat-khau-48183.aspx http://www.trungtamwto.vn/sites/default/files/publications/19%20nong%20nghiep.pdf 24 [...]... subsidies, although it cannot easily convert values from product support to other products Imports of agricultural products in Vietnam could be affected by the price increase (when exporting countries decrease support and subsidies) led to imports into the country may decline 13 IV THE APPLICATION TO VIETNAM 1 Overview of agricultural subsidy policy in Vietnam Vietnam is an agricultural economy with rural... Support to import varieties Between 1999 and 2001, Vietnamese Government used rewards export policy on seven agricultural products: rice, coffee, tea, vegetable, etc…, however, Vietnam rejected this direct export subsidy under the context of WTO 2 Achievements and Limits of subsidy policy in Vietnam 2.1 Achievements of subsidy application “Vietnam ranks 26th in world exports, represents 1.1% of world... increase 3% from 2008 Recently, Vietnam exported agricultural products to the EU accounted for 18-19% of our export agriculture sector That indicates the important role of EU market in export activities of Vietnam Since 1997, according to trade relations between EU and Vietnam, Vietnam gain export benefit from EU market With coffee export, EU is the largest market for Vietnam's coffee, in 2008, coffee export... because the EU market is the largest furniture The export of Vietnam's wood products to the EU market in 01/2008 reached 112 million Moreover, EU is the biggest aquatic consumption in the world, with annual turnover export increase to 34 billion dollars In 2008, exports Vietnam's seafood to the EU reached 275 thousand tons with a turnover of 910 million USD and the figure increase to 846 million USD... subsidy policies of the government 3.3 Vietnamese Enterprises’ indifferences towards global integration In 2015, 20 FTAs were successfully signed, including FTA with EUEA, TPP, ACE Among these important ones, ACE is supposed to be the one with great, direct influence on Vietnamese enterprises However, according to the survey by the Ministry of Industry and Commerce: • 76% Vietnamese enterprises do not... commodity imported- motivating commodity exported For Vietnam, to raise our capacity and boost exporting activities, Government should impose and improve environmental standard systems like EU governments did For example, due to the downside in our environmental standard system, many foreign enterprises do severe harm to the environment with just very light punishment or event without This will affect... compensation of loss in coffee trading Moreover, Vietnam will not have access to the special safeguard mechanism (minimizing the impact of the mutation of import price) for breeding commodities such as pork, beef, etc… 3 Causes of these drawbacks 3.1 Downside in the “Export Credit Regulations” a Definition of “Export Credit Regulations” Decree 75/2013/ NĐ- CP by Vietnamese Government  Term 1: Export Credit Regulations...Vietnam’s agricultural products export turnover to EU Unit: Million USD Year Agricultural products export 2000 2001 2002 2003 2004 379.7 319.5 162 577 2005 649.5 795.2 200 6 968 2008 1271 (Source: http://www.tintucnongnghiep.com/2015/01 /nam- 2015-xuat-khau-nongnghiep-sang-eu-se.html ) Vietnam mainly export agricultural products such as coffee, rubber,... While the leaders of Vietnam are eager on the negations, enterprises show no interest in the FTAs that will significantly affect on them Consequently, the subsidy 18 policies of the government make no means Should action not be done, sooner or later, Vietnamese enterprises will lose the battle right in our battlefield 19 4 The applications of EU’s subsidy paving the way for Vietnamese agriculture export... marketing strategy Vietnamese Representative offices in EU need to keep pace with changes in EU market and make forecasts about the consumption trends so that Vietnamese enterprises can adopt to these changes on time as well as being flexible on the exporting strategy About the trade name: The majority of our exporting products are in forms of process and FOB, so we do not have famous trade name Therefore,