Exporting Vietnams Agricultural and Fishery Products to European Union Market under Green Trade Barriers

Exporting Vietnams Agricultural and Fishery Products to European Union Market under Green Trade Barriers tài liệu, giáo...

Int J Diplomacy and Economy, Vol 1, Nos 3/4, 2013 309 Exporting Vietnam’s agricultural and fishery products to European Union market under green trade barriers Nguyen Viet Khoi* VNU University of Economics and Business, 144 Xuan Thuy, Cau Giay, Hanoi, Vietnam E-mail: khoivnu@gmail.com E-mail: vn2199@columbia.edu *Corresponding author Le Thi Thanh Thuy International Union for Conservation of Nature, 1st Floor, 2ABuilding, Van Phuc Diplomatic Compound, 298 Kim Ma, Ha Noi, Vietnam E-mail: thanhthuyle88@gmail.com Abstract: The number of environmental protection regulations, acting as green trade barriers is increasing despite the fact that there is no common policy framework or a powerful international organisation responsible for monitoring them The vague borderline between environment protection and trade protectionism has fuelled many trade disputes and concerns over its negative impacts on exporting countries This research is done with a view to providing a comprehensive theoretical framework on impacts of environmental trade barriers as well as exploring how they work in reality, especially in Vietnam and European Union trade relationship The study finds one important result: requirements to upgrade technology to meet the precise technical regulations and expenditure for conformity assessment actually increase production costs to small and medium companies in the short-term However, proper adjustments to these requirements will bring about long-term benefits Specifically, studying the case of applying good agricultural practices (GAP), one kind of voluntary environment regulations reveals that GAP helps to improve products’ quality and raise the productivity, which opens an access to developed markets to gain higher profits Keywords: green trade barrier; trade protectionism; environment protection; good agricultural practices; GAP; Vietnam export; EU market; value chain in Vietnam; Vietnam agriculture and fishery Reference to this paper should be made as follows: Khoi, N.V and Thuy, L.T.T (2013) ‘Exporting Vietnam’s agricultural and fishery products to European Union market under green trade barriers’, Int J Diplomacy and Economy, Vol 1, Nos 3/4, pp.309–328 Biographical notes: Nguyen Viet Khoi has been working for VNU University of Economics and Business at Hanoi, Vietnam since 2001 In the academic year 2012–2013, he works as Post-Doc Researcher under Fulbright Program Award at Columbia University, USA He also worked as Visiting Researcher and Professor at University of Wisconsin – Eau Claire, USA in 2006 and 2008 His main research areas are international economics, global value chain and e-commerce His latest researches have addressed some key issues in MNCs and trade, supply chains under globalisation Copyright © 2013 Inderscience Enterprises Ltd 310 N.V Khoi and L.T.T Thuy Le Thi Thanh Thuy graduated from VNU University of Economics and Business, Hanoi, Vietnam in 2010 with a major in international economics While at university, she paid interest on development issues such as environment, poverty and disadvantaged people Since 2011, she has been pursuing a joint Master programme in Development Economics between Vietnam National Economics University (NEU) and Institute of Social Studies (ISS), The Hague, The Netherlands At the moment, she is working for IUCN, International Union for Conservation of Nature – an international organisation working in environment field Green trade barriers Environmental protection regulations are aimed at raising the public and corporate’s awareness of reducing environmental pollution These regulations, however, have also been used by some developed countries and others to control importing from developing countries, where environmental standards are lower It bears the nature of a non-tariff barrier to trade Nevertheless, there is no international organisation or a common policy framework that is powerful enough to enforce green trade barriers Although the 1992 Earth Summit, the 1994 WTO Agreements, the 1996 World Food Summit and numerous multilateral environmental agreements have comprised the major international frameworks, they have not reach consistency or coherence in balancing the objectives – environmental, economic and social – of the world’s diverse nations Moreover, the difficulty in monitoring environmental problems also creates many challenges in applying green trade barriers Despite the growth in debates and controversies, the trend for imposing green regulations as a non-tariff barrier is upward Europe Union (EU), which is ranked the highest in terms of environmental protection consciousness, is noted for its strict green barriers This green rampart has exerted a tremendous impact upon imports from many countries all over the world including Vietnam For example, in 2002–2003 alone, EU rejected as many as 72 vessels of aquarium products from Vietnam on account of incompatibility with EU green regulations on imported fish products In spite of the public concern about these green barriers, very few researches, especially on the impact of green barriers on Vietnam agricultural and fishery trading with EU have been done This study is therefore an attempt to occupy this research space There is no clear-cut and widely accepted definition of what it means by green trade barrier In some contexts, the terms trade-related-environment measures (TREMs) or environment-related trade measures (ERTMs) are preferred For example, in one survey on the reality of TREMs and ERTMs in APEC, the Economic Committee of APEC defines these two measures as: “Trade-related environment measures have a relatively wide coverage They refer to environmental measures with significant trade effects, including laws, regulations, and administrative measures as well as regional and multilateral agreements that are formulated and implemented or signed by APEC member economies Environment-related trade measures refer to national trade laws, regulations as well as administrative measures enacted to achieve a specific environmental goal or for environmental purposes, including trade-related measures adopted by individual economies pursuant to the multilateral Exporting Vietnam’s agricultural and fishery products 311 environmental agreements Examples of ERTMs include bans, restrictions, or permit requirements in respect of imports or exports” Thus, while trade-related environment measures are multilateral and commonly agreed by parties concerned, environment-related trade measures are national Both types have been materialised in policies, which can be either internal or bilateral level, and those policies are enforced through multilateral free trade agreements (FTAs), and/or through multilateral environmental agreements (MEAs) and controlled by the WTO However, it is hard to distinguish between these two measures As explained in APEC study, ‘The impact of environmental regulation on trade’ (2009) is aimed to protect the environment, but the lack of recognised definitions makes it difficult to differentiate them since some countries may have different interpretations of these measures WTO and its precedence – GATT, though has no official definition of TREMs, has often used this term in its documents and agreements Because of this popularity and in order to stand at a neutral and objective point, in this study, green trade barriers are regarded as trade-related measures, which are all restrictions imposed by one country or a group of countries on imported goods from other countries based on environmental concern This concern involves the threat to the environment of both implementing country and the global as a whole For example, European Union (EU) requires exporters to minimise the amount of packaging waste and use recyclable materials in their products so that consuming these products not create more burden of solving trash and land degradation on them, which affects their own environment Besides, EU also issues the directives preventing illegal, unreported and unregulated (IUU) fishing to deal with its threat to the survival of coastal communities all over the world Environment protection or trade protectionism While consensus on the need of environmental protection through the enforcement of green barriers has been reached, protection and protectionism, in practice, are likely to be confused Green rules can be abused and environmental issues are used as an excuse for trade protectionism There have been many disputes around this issue in recent years In such cases, some countries wanted to ban the import on environmental grounds, while exporting countries invoked their rights of non-discrimination in trade granted under the General Agreement on Tariffs and Trade (GATT) and other agreements under the World Trade Organization (WTO) A central issue in this conflict is the legitimacy of unilateral action and national decision-making under WTO law, as opposed to multilateral decision-making A second line of conflict-often indistinguishable from the first-runs between the governments of the large developed markets in the North, with their strong environmentalist movements, and the smaller trading nations, in particular in the developing world (Biermann, 2001) Regarding the former, it should be remembered that WTO is not an environment agency and WTO jurisprudence has affirmed that WTO rules not take precedence over environmental concerns Its main objective is to foster international trade and open markets However, WTO rules permit members to take trade-restricting measures to protect their environment under specific conditions as mentioned in Article XX of GATT: 312 N.V Khoi and L.T.T Thuy “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (b) necessary to protect human, animal or plant life or health; … (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production of consumption;… ” This exception can be ambiguous in some cases According to Macmillan (2001), a measure will be ‘necessary’ to protect human, animal or plant life or health under the Article XX (b) if there are no alternative measures that are more consistent with GATT but WTO panel would be not suitably qualified to assess those alternative measures and how to evaluate which measure is the least trade restrictive? Additionally, it is very difficult to interpret the expressions ‘arbitrary discrimination’, ‘unjustifiable discrimination’ and ‘disguised restriction on international trade’ due to the absence of any chapeau criteria for assessing arbitrariness, unjustifiability and disguise Many people also have been confused by the phrase ‘relating to’ in the Article XX (g) ‘Relating to’ means ‘primarily aimed at’ but how about measures that have more than one significant, although one of which is conservation aim, if the non-conservation aim was regarded as being of more significance than the conservation aim? Besides WTO Agreement, there are also two non-binding instruments, Agenda 21 and the Rio Declaration adopted at the 1992 United Nations Conference on Environmental and Development (UNCED), which stand at the intersection of trade, developmental and environmental issues However, they face the same problems of ambiguous information as Article XX For example, Rio Principle 12, the heart of the Rio Declaration provides: “States should cooperate to promote a supportive and open international economic system that would lead to economic growth and sustainable development in all countries, to better address the problems of environmental degradation Trade policy measures for environmental purposes should not constitute a means of arbitrary or unjustifiable discrimination or disguised restriction on international trade Unilateral actions to deal with the environmental challenges outside the jurisdiction of the importing country should be avoided.” What amounts to arbitrary or unjustifiable discrimination, disguised restriction is still open to question Moreover, the language of Principle with the use of ‘should’, not ‘shall’ is quite discretionary Despite this ambiguity, these words in GATT Article XX preamble were still utilised by other agreements such as Article 36 of the Treaty Establishing the European Economic Community One conclusion may be drawn here is that the border line between protection and protectionism is quite vague, which leads to the difficulty in monitoring them as well as settling disputes As Clinton Administration’s environmental review of NAFTA correctly point out “the choice of the appropriate level of protection is a social value judgment There is no requirement for a scientific basis for the level of protection because it is not a scientific judgment” When there is no concrete scientific evidence on these problems, each people will have different points of view and these controversial issues may lead to disputes and even trade wars, which affect both sides’ interest dramatically Exporting Vietnam’s agricultural and fishery products 313 The second conflict between the governments of the large developed markets in the North and the smaller trading nations, in particular in the developing world in the South is even more complicated As stated by Macmillan (2001), all developing countries are either strictly opposed or at least most reluctant to accept MEAs due to costs they would face in complying with these obligations Their fear is that these will be used to restrict developing countries’ access to developed countries’ markets Qing (2007), a researcher from China, a developing country is even more frank in claiming that green barriers are a ‘disguised’ means of protectionism behind their morality facade He asserts “… the rapid expansion of manufacturing industries in these countries (developing countries) rouses worries from developed countries In this context, the developed nations put in place green and technological barriers one after the other in a bid to hold an advantageous position over the competition” He goes on to elaborate that green barriers weaken the competitive power of developing economies by adding additional costs to their export goods He concludes that the green barriers are “actually a new type of trade barrier” Meanwhile, the developed countries, as Biermann (2001) explained, reasoned that MEA has been widely applied by that the vast majority of WTO members CITES, for example, has been ratified by 90% of WTO members (152 members) and is thus almost universally recognised as the general standard of behaviour in this issue area Because of its wide application, one can safely assume that many WTO members that are parties to these multilateral environmental agreements not view them as violating the spirit of GATT and being applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade This disagreement in using green trade barriers may root from conflicts over standards People in high-income country may have better awareness of environment protection and require stricter compliance of products to environmental rules In addition, to non-transboundary environmental impacts, which not cross borders, each country has different optimal set of environmental standards from others An optimal set of standards in Europe, for example might be entirely different from the optimal set in North Africa or Central Asia due to budgets constraint and regulatory abilities However, as Neumayer (2001) said, the hostility towards practically any form of greening of multilateral investment and trade regimes is rooted in a much deeper frustration with the distribution of benefits in these multilateral regimes In the view of developing countries, the developed countries benefit much more from these than they themselves In particular, they believe that the developed countries have benefited quite substantially from the Uruguay Round of trade negotiations on topics that they favour: intellectual property rights, investment, services, telecommunications, restriction of production and export subsidies, strengthening of anti-dumping measures, increased access to developing countries’ market, to mention just a few The developing countries on the other hand, have hardly benefited Although WTO guaranteed them “special and differential” treatment, they rightly complain that the special provisions of safeguarding their interests have largely ineffectual in reality; the transitional periods were too short for them to adjust to the requirements of the WTO agreements and that the promised technical assistance was too little and too unsystematic to strengthen their capacity to comply with trade obligations Thus, it seems fair to say that developed countries have benefited much more relative to developing countries from Uruguay Round Given this imbalance, it is understandable why developing countries are desperate to seek access to developed countries’ markets and show their great suspicion and outright 314 N.V Khoi and L.T.T Thuy hostility to any restriction of this access – even if it comes in the name of saving ‘our common environment’ 3.1 EU green regulations on agricultural and fishery products Mandatory regulations Environmental regulations on agricultural and fishery products are mentioned in European Union Environment Product Legislation Their goal is to protect community health and environment They can be divided into two types: regulations affect environment directly such as packaging waste, organic food labelling and regulations have indirect impact on environment but relate to people’s health and food sanitary such as allowed maximum of pesticide, residue used in products The followings are some of popular regulations imposed on agricultural and fishery products They are arranged from the most influential regulation on environment to the least one • Packaging waste: A directive followed the packaging note in December 1994 (94/62/EC) require the exporters to minimise the amount of packaging waste (transport packaging, surrounding packaging and sales packaging) and give preference to materials that are re-useable or recyclable • IUU regulation: The European Community adopted a Regulation to prevent, deter and eliminate illegal, unreported and unregulated (IUU) fishing on January 2010 In order to ensure that no products derived from IUU fishing appear on the Community market or on markets supplied from the Community, the Regulation seeks to ensure full traceability of all marine fishery products traded with the Community, by means of a catch certification scheme The catch certification scheme covers both processed and unprocessed marine products and will improve cooperation between flag, market and processing states • Maximum pesticide residue levels: it is necessary to ensure that residues used in production should create no risk to humans Maximum residue levels (MRLs) are therefore set by the European Commission to protect consumers from exposure to unacceptable levels of pesticides residues in food and feed These regulations directly concern public health Yet, they also influence the environment because if pesticides are overused on food and plants, land cannot absorb these substances, leading to degradation or contaminating water source Hence, pesticide residues are always of environmentalists’ concern • Veterinary and zoo technical checks on live animals and products: Products from third countries are subject to checks to protect the health of citizens and animals inside the European Community Based on Council Directive 97/78/EC of 18 December 1997, a documentary check by the veterinary staff of the border inspection post or by the competent authorities must be carried out for each consignment of products coming from third countries The products then undergo a physical check at the border inspection post situated at or in the immediate vicinity of an entry point into the EU This scheme is to ensure the verification of compliance with feed and food law, animal health and animal welfare rules Exporting Vietnam’s agricultural and fishery products • 315 Authorised food additives: the Council Directive 89/107/EEC of 21 December 1988 draws up a list of substances the use of which is authorised to the exclusion of all others; a list of foodstuffs to which these substances may be added and the conditions under which they may be added, and restrictions which may be imposed in respect of technological purposes and rules concerning substances used as solvents including purity criteria where necessary Food additives, like pesticide residue and veterinary checks, though belongs to food hygiene regulations have indirect impact on environment Growing, producing and consuming products that are overused these substances can cause land erosion, water pollution, affect natural biodiversity and other serious environmental problems Thus, to some extent, they can be regarded as environmental regulations on products If products from third countries not meet these above requirements, EU imposes different sanction measures in the form of financial tools and administrative tools EU’s generalised system of preferences (GSP) is a good example of financial tool According to 1154/98/EC, GSP has tax incentives scheme to encourage trading environmental friendly products or the ones having good social performance (good working conditions, not abused young labour) If firms export such products to EU countries, they can get 10–35% tax off on agricultural products and 15–35% tax off on industrial products By contrast, to products violating EU environmental regulations, basing on the level of violation, they can be levied higher tax or even removed from the list of GSP’s goods In case of breaking the law of forest and sea protection, EU can even abolish all GSP priority Examples of administrative tools are quota cutting or ban on importing For instance, when the EU imported shipment inspection found violations that may result in severe consequences such as causing widespread disease, these animals will be destroyed immediately at the port of shipment To more serious violations, the EU will return to 100% inspection of import consignments from the breach 3.2 Standards In addition to compulsory requirements, EU also has many voluntary environment standards like ISO 14000, EMAS and non-legislation requirements like eco-labelling Though they are voluntary, without complying them, exporting firms will face many difficulties in entering exporting markets To agricultural and fishery products, organic food labelling, good agricultural practices (GAP) and EMAS, ISO 14000 seem to be the most popular ones • Organic food labelling: Organic farming is an agricultural system that seeks to provide the consumers with fresh, tasty and authentic food while respecting natural life-cycle systems To get organic products labels and logo, firms have to follow a strict certification process Conventional farmers must first undergo a conversion period of a minimum of two years before they can begin producing agricultural goods that can be marketed as organic Both farmers and processors must at all times respect the relevant rules contained in the EU regulation They are subject to inspections by EU inspection bodies or authorities to ensure their compliance with organic legislation After the two-year period successful operators are granted organic certification and their goods can be labelled as organic 316 N.V Khoi and L.T.T Thuy • GAPs: GAP is also one kind of organic farming but its benefits are more than that It is a means to concretely contribute to environmental, economic and social sustainability of on-farm production resulting in safe and healthy food and non-food agricultural products Each country has built its own GAP standards like USGAP of USA, EUREPGAP of EU, INDON GAP of Indonesia and VietGAP of Vietnam for example EUREPGAP is a global scheme and reference for good agricultural practice that bases on the following standards: a Food safety: The standard is based on food safety criteria, derived from the application of generic HACCP principles b Environment protection: The standard consists of environmental protection good agricultural practices, which are designed to minimise negative impacts of agricultural production on the environment c Occupational health, safety and welfare: The standard establishes a global level of occupational health and safety criteria on farms, as well as awareness and responsibility regarding socially related issues; however it is not a substitute for in-depth audits on corporate social responsibility d Animal welfare (where applicable): The standard establishes a global level of animal welfare criteria on farms • Eco-management and audit scheme (EMAS): The EU EMAS is a management tool for companies and other organisations to evaluate, report and improve their environmental performance The scheme has been available for participation by companies since 1995 (Council Regulation EEC No 1836/93 of 29 June 1993) To receive EMAS registration an organisation must comply with the following steps: a Conduct an environmental review considering all environmental aspects of the organisation’s activities, products and services, methods to assess these, its legal and regulatory framework and existing environmental management practices and procedures b In the light of the results of the review, establish an effective environmental management system aimed at achieving the organisation’s environmental policy defined by the top management The management system needs to set responsibilities, objectives, means, operational procedures, training needs, monitoring and communication systems c Carry out an environmental audit assessing in particular the management system in place and conformity with the organisation’s policy and programme as well as compliance with relevant environmental regulatory requirements d Provide a statement of its environmental performance, which lays down the results achieved against the environmental objectives and the future steps to be undertaken in order to continuously improve the organisation’s environmental performance • ISO 14000: The International Standards Organization, have developed a series of voluntary standards and guidelines in the field of environmental management Developed under ISO Technical Committee 207, the 14000 series of standards address the following aspects of environmental management: environmental management systems (EN ISO 14001), environmental auditing and related Exporting Vietnam’s agricultural and fishery products 317 investigations, environmental labels and declarations, environmental performance evaluation, life cycle assessment and terms and definitions Impacts of EU green trade barriers on Vietnam exporting 4.1 Negative impacts Environmental regulations have created many challenges for Vietnamese firms because many companies not have modern technologies that are friendly to environment to meet EU green requirements According to a report made by Tan Duc Thao Company in Vietnam Trade and Investment Forum (January, 2008), among all factories in Vietnam, there are only 10% having environmental friendly technology but 76% still utilising old technology of 1960s, 75% of this technology has run out of depreciation During the period 2003–2005, the Department of Science Technology and Environment inspected 2,893 factories but 1,129 of which violated Environmental Protection Law Agriculture products fail seriously to meet maximum pesticide level of EU The inspection of Plant Protection, Ministry of Agriculture and Rural Development in 2006 showed that among 4,600 inspected farms, 59.8% did not follow chemicals using process, 20.7% did not meet the required time isolating; 10.31% used substances not listed in permitted chemicals, 0.18% used restraint drugs; 0.73% used unknown origin drug Of 373 tested vegetable samples, there were 33 samples (13.46%) having amount of chemicals exceeding permitted level In 2008, 20% farms abused pesticide; nearly 60% did not follow prescribed technique To products relating live animals, according to the Department of Livestock Production (MARD), at present, there is only 45% of slaughter cattle and poultry houses that have permission but 65% have no sanitation facilities after slaughtering The number of houses that use tap water accounts for 25% Meanwhile, under the supervision of the National Assembly Standing Committee, up to 16,512 small slaughters not comply with the requirements of food hygiene The process of testing antibiotic residues in meat of Management Department of Agriculture, forestry and fishery (NAFIQAD) also revealed that during first six months of the year, there was still nearly 4.9% pork and 3.6% chicken, ducks having antibiotic residues exceeding permitted level In 2008, there were only 49 ISO 22000:2005 certificates on food safety management issued to Vietnamese firms Because of such poor technology and awareness, many of our export products have been inspected or even rejected by importing markets In July 2002, EU found imported fishery goods from Vietnam had the sign of violating veterinary checks requirement and having the amount of antibiotics over the permitted level Thus, EU inspected 100% of our exporting products since September 2001 From September 2001 to February 2003, EU destroyed and returned 76 fish vessels, which did not meet maximum antibiotics level They also warned that if this situation happened again, imported products from Vietnam would be put in the third group, which needs 100% inspection To face with this threat, Vietnamese authority temporarily banned six fishery suppliers who did not comply with EU rules and warned that any firm having one vessel violating EU rules will be removed from the list of permitted exporting fishery products companies to EU In 2008, Vietnam food was notified 51 times by Rapid Alert System for Food and Feed in the threat of violating food hygiene regulations In 2007, this number was 318 N.V Khoi and L.T.T Thuy only 42, including 31 cases of fishery products and 20 of agricultural products The RASFF does not always make the right decision based on scientific evidence In case of wrong conclusion, the cost will be great, especially for fishery products, which are easily to be destroyed and have high cost of preservation Moreover, if information about the name of company is revealed, it will have serious impact on firms’ profit In ‘Clean Production for Better Products’ (CP4BP, 2008) project report, presently seafood companies have to pay USD 1,000 to get each consignment examined before export, which is costly given the financial capacity of most seafood companies Moreover, seafood exporters have suffered big financial losses and have suffered reputation damage due to chemical and antibiotic residue that was found in Vietnamese seafood by foreign importers Many criteria tests are also very expensive and, therefore, make a significant increase in the product cost Take ISO 14001 for example It is very costly and time consuming to get this certificate It takes at least eight months to meet compulsory requirements And the cost to implement it can reach hundreds of millions dong, dependent on production scale, method and the number of labour Given that almost all Vietnamese firms are small and medium, the cost can create great burden for them Therefore, until now, there are just few corporations getting this certificate Till 2008, there were only 325 Vietnamese firms getting ISO 14001:2004 certificates Meanwhile, this number was 39,195 in China, 997 in Malaysia, 773 in Philippine and 934 in Thailand Likewise, it is very costly to get EUREP GAP or Global GAP, approximately 5,000–7,000 USD/per certificate With this cost, the price will rise notably, which makes export products unaffordable to domestic and ordinary importing markets Suppose that a farmer has a pond with its own water supply and drainage channel In order to meet the requirements of GAP, this farmer has to invest money to renovate the pond to kill germs, remove the transmission medium, such as crabs, water filtration and water treatment pond to ensure no pathogens At the same time, he also has to spend more money to buy certified clean shrimp Hence, there is a significant growth in his cost According to NAFFIQAVED in 2006, applying GAP increases the cost by 2.352 dong/kg in Ben Tre This cost is mainly for analysing chemicals residues and antibiotics level in and on shrimp products To farms having no separate water supply and drainage channels, the expense is even higher, about 13.700 dong/kg in Khanh Hoa, for example This rise in cost will simultaneously raise the price by 20% Many farmers, therefore, are afraid that the revenue may not cover the cost and they are under the threat of great lost It also explains why almost all 7,000 farmers registering to apply GAP are operating large business, the small and medium enterprises just account for very small rate Although there are 1,198 farms having certificates of ecological shrimp growing with the total area of 4,000 ha, this number just accounts for 1.1% of 369,094 shrimp growers in 2008 The same pattern happens to agricultural products In Binh Thuan, the first province applying EUREPGAP in growing dragon fruit, there is only 1.2% of land certified with EUREPGAP This number is too small to guarantee for high valued contracts In Vietnam, there are only 3,000 companies were issued international certificates like ISO, HACCP, SA 8000 They companies accounted for only 1.5% of all operating businesses Even in Ho Chi Minh City, the biggest city in Vietnam, this number was just 3% Although these certificates are not mandatory requirements to enter EU markets, without them, firms will face many difficulties, especially in verifying their products quality In this case, green barriers are really a burden for small and Exporting Vietnam’s agricultural and fishery products 319 medium enterprises, which have low technology, lack of capital to apply international qualified management system 4.2 Positive impacts High cost, however, does not always have negative impact on enterprises On the other hand, if high cost adds more value to products, the producers will have power to increase the price And in this case, their profit will rise dramatically 4.2.1 The case of GAP To enter EU markets, it is necessary to produce agricultural and fishery products following GAP This certificate is somehow a green ticket to enter to developed markets where there are strict requirements of products quality and its impact on environment Realising this trend, in December 2005, Vietnamese government, in an association with USAID and AUSAID signed a contract with Southern Fruits Research Institute (SOFRI) to implement a project, which helps to introduce Europe GAP (EUREPGAP) to dragon fruit growers in Binh Thuan and Tien Giang The aim of this project is to improve the quality of Vietnam dragon fruits complying with EUREPGAP so that our fruits are able to export to European and Southern American markets Since these markets have very strict requirements of environment protection, safe for producers as well as consumers Despite many challenges and difficulties, the initial results show potential success The price of dragon fruit exporting to EU and USA has increased to 4–5 $/kg, while the ordinary fruit is just sold at $/kg, less than two to three times As Mr Tran Ngoc Hiep, chairman of Binh Thuan Dragon Fruit Association as well as the Director of Hoang Hau Company – the biggest dragon fruit exporting company in Vietnam said, during seven months after receiving EUREP GAP, the number of his company’s consumers rocketed, especially in European market In the first six months of 2008, the volume of exporting to EU was 500 tons, equivalent to total export of 2007 The price is obviously higher than uncertified dragon fruit Table Cost, revenue and profit from growing organic tomatoes and cabbages Tomatoes Cabbages Type content Organic Ordinary Organic Ordinary Revenue 40 million dong/sao 20 million dong/sao 4.000.000 đ 3.500.000 đ Cost 922.000 đ/field 945.000 đ/field Profit 38.780.000 đ 19.055.000 đ 400 kg 1.4 tons Quantity Source: http://www.kinhtenongthon.com.vn/printContent.aspx?ID=17204 Another case of the benefit of organic farming is about vegetables growers in Soc Son They made a comparison between the cost and revenue of the normal farming and organic farming It is clearly that organic farming creates higher profit and quantity for farmers Because of terrible flood last November, the yield of organic vegetable was just 400 kg cabbage/field but the selling price was 10,000 dong/kg Meanwhile, farmers harvested 1.4 tons of inorganic cabbage but just sold at 2.500 dong/kg For tea and other 320 N.V Khoi and L.T.T Thuy agricultural products, we also see the same pattern As Ms Nguyen Thi Huong, director of Van Tai Co, Ltd, which produces ‘clean’ exporting tea following GAP said about her company products of O Long and Hong Tra Tea, although they are very expensive from 400,000 dong to million dong, there is still an excess in demand while the conventional tea is just sold at 80,000–200,000 dong Organic farming just utilises natural resources such as using remnants of plants, animal waste to make fertiliser, making pesticide from herbs (wood vinegar, crushed leaves of Melia azedarach) so it lowers the cost To some products, the input cost of organic farming is even 30% lower than normal method Ms Nguyen Thi Thinh, a farmer in Vinh Phuc calculated that the cost of organic fertiliser for her vegetable crop is 70,000 dong/sao1, equivalent to half of chemical fertilisers Organic farming also helps to improve the productivity According to Mr Nguyen Moi, a grape grower in Ninh Thuan who has used organic farming for three seasons, thanks to this new kind method, his crop productivity has gone up gradually from tons/ha, 9.5 tons/ha to 18 tons/ha and the quality of the fruit is also better In Binh Phuoc, it is also verified that the productivity of organic vegetables is two times higher than ordinary products In 2006, with the help of NORAD and Fishery Law Project, NAFIQAVED introduced GAP to aquaculture industry, starting with shrimp farmers in Tra Vinh and Binh Thuan The initial result showed that the yield of households using GAP is 20–30% higher than the conventional farming Nha Be agricultural extension station, belonging to Ho Chi Minh extension centre also applied GAP into shrimp farming semi-intensive model at four households during four months from February 2009 to June 2009 within the area of The density in pond was 15 units/m2, size 12 post, feeding with Tomboy industrial food And the result was that each household yields tons/ha/crop, the survival rate was 60–70% Fishes, whose weight is 70–60 kg, were sold at 60,000–80,000 dong/kg and the average profit was about 50–60 million dong/ha/crop In addition to increase in profit, good agriculture practice also helps enterprises expand their domestic as well as exporting markets The food scares in developed countries, combined with the increasing awareness of health, diet and nutrition, has increased interest in organic food products Sales of organic products are increasing in almost all countries of the EU Organic and other certified products, as well as high quality specialties, are an especially good opportunity because conventional products are mass commodities where traded quantities are large and it is more difficult to compete Take coffee for example Coffee is mainly consumed in the developed countries of the northern hemisphere and much less in the producing countries in the South It is estimated that consumers in 11 major EU member states together used approximately 27.4 million kilograms of certified organic coffees every year and this number has risen constantly All examples above are good illustrations for the profitability of GAP to farmers and exporting companies However, the benefit of GAP is more than that Organic farming not only helps to protect their industry from the unscrupulous but also helps to strengthen vital skills among producers for whom organics offer the chance to participate in competitive higher-value trade Traceability and production management are part of rigorous organic standards that can help smaller producers to compete in agricultural trade Moreover, if domestic companies are compelled to apply green regulations like GAP, it will be fair to make foreign producers follow these rules In Vietnam, there is still lack of environmental regulations imposed on import goods, leading to unsafe products for consumers and environment by many foreign companies Thus, it is Exporting Vietnam’s agricultural and fishery products 321 necessary to have green regulations, which play as technical barriers to protect our own benefit In addition, GAP and green regulations also help us reach goals of sustainable development According to agriculture specialists, organic farming will keep the soil fertile for crop rotation, make the water source less pollutant, protect wild animals and biodiversity, save energy and scarce natural resources Limited using chemicals also make the products safer for consumers In general, GAP helps to enhance the competitiveness of company’s products, make the products reliable, create good image of brand in customers’ mind, expand domestic and exporting markets, increase revenue, decrease cost to raise profit and meet the goal of sustainable development From the case of GAP, we may draw a conclusion that if complying environment regulations, our export products are not only eligible for entering developed markets like EU but also able to take the advantage of modern production methods to increase profit and develop sustainably Moreover, amid globalisation time, there is a tough competition between companies of different countries and the awareness of environment protection of people have improved significantly, enterprises should advance their technology to follow new rules of modern time instead of fighting against them If this situation happens, green regulation will be no more barriers but a tool for companies to increase their profit Suggested countermeasures to green trade barriers 5.1 To the government 5.1.1 Provide update information for firms It is very necessary for firms to be informed update information on regulations of their exporting markets Moreover, trainings also improve their awareness of environment protection and social responsibility, which leads to their voluntary compliance to goals of sustainable development According to UNCTAD, because of lack of information and not understanding EU’s regulations, developing nations just used up to 18% priorities of EU in generalised system of preferences (the system provides developing countries preferential access to the EU market through reduced tariffs) Therefore, the government should organise more and more training courses, be proactive in finding markets information and then disseminate to domestic corporations The social survey of Binh (2005) reveals that in Vietnam, firms get information from various sources such as Ministry of Trade (52%), newspaper and internet (52%), import partners (49%), VCCI (40%) And the quality of information also varies Ministry of Trade (now has changed to Ministry of Industry and Trade) is the most trustable and specific source of information Other parties like trade promotion agents, Vietnamese trade representatives in EU should play more important role in providing market information for corporations In addition to disseminate information, these organisations should also give clear explanation and instruction to facilitate companies’ applying new rules 322 N.V Khoi and L.T.T Thuy 5.1.2 Build and complete regulations and national standards in accordance with international standards It is necessary to have common criteria to assess the quality of products For instance, until now, although organic farming has been applied widely, there is no national standard for a good organic product Consequently, it is very difficult to assess whether products meet requirements of organic farming or not The consumers, as a result, feel very confused and not believe in the quality of Vietnamese organic products Therefore, the government should establish an assessing system with specific criteria and standards In fact, Vietnamese Government has issues numerous standards related to environment Until now, there are 502 TCVN (Vietnam standard), 412 of which were promulgated before 2002 This number in 2002 was 49 and in 2003 was 52 In 2000, Vietnam issued TCVN: ISO 14020 and STAMEQ is thinking of declare ISO certificate on eco-label as a basic for granting eco-label for Vietnamese firms in the future However, according to one statistics report, the accordant level of our standards with international ones is 20% (compared with Malaysia – 38%, Russia – 30%, China – 43%, Korea – 32.5%) Therefore, it is advisable to increase this rate to 30% In general, the STAMEQ should gradually raise the compatibility of national standards with international standards Another way to make our standards compatible with international standards and widely recognised is to create bilateral negotiations Once we can reach these bilateral agreements, they will establish a mutual recognition of two countries’ standards With mutual recognition, products lawfully manufactured and sold in one country may enter other countries-broadly implying the mutual acceptance of one another’s standards The advantage of mutual recognition is that it can remove trade impediments arising from less essential standards and thus allow harmonisation efforts to focus on narrower and better-defined set of standards It has been proved to save costs and have a positive and highly significant effect on trade volumes 5.1.3 Boost trade promotion at macro level Lack of information can be addressed by the help of trade representatives and trade promotion agents whose activities are to introduce, market domestic products to international markets as well as establish consultant services providing information to enterprises For many years, Vietnam has tried to establish many trade agencies in foreign countries but it seems that their activities are not as efficient as expected It has been proved that trade promoting at the macro level is more efficient than at micro level when enterprises have to promotion by themselves Vietnam exporting companies are small and medium enterprises so they not have much experience as well as financial capacity to implement big trade promotion events Hence, governmental trade promotion agents should give them a hand by organising trade fairs and expos or Vietnam’s day in foreign countries Through these activities, firms will have chance to introduce their products and gain knowledge from the experiences of exporting markets Vietnam has cooperated with EU’s Centre for the Promotion of Imports from developing countries (CBI), called BSOD ITPC Vietnam (Business Support Organization Development – Investment & Trade Promotion Center) The projects purpose is to strengthen the capacity of the Investment and Trade Promotion Centre of Vietnam in supporting the exporting community Exporting Vietnam’s agricultural and fishery products 323 Besides, European Chamber of Commerce (EuroCham) has participated in a number of projects with European and Vietnamese partners with the general aims and objectives of: assisting the internationalisation of Vietnamese small and medium-sized enterprises (SMEs) through capacity building; allowing for the transfer of know-how, networking and matchmaking between European and Vietnamese SMEs, business and sectoral associations; raising the profile of Vietnamese businesses and business associations amongst the European business community and vice versa However, these projects seem not to be utilised appropriately The number of Vietnamese firms joining these projects is still small Therefore, the authorities should make more effort in introducing and supporting firms participating these projects Furthermore, with the sponsorship of large companies and the permission of European countries’ government, Vietnam government should build commercial centres in foreign countries where our exporting firms can introduce and sell their products It is one way to marketing on sight very effectively Though the initial cost may be great, the benefit in the long term will be able to compensate these costs because companies can save market research and marketing cost and have better access to EU’s consumers Moreover, when trade exhibitions happen, it will be economical to deliver goods to these exhibitions on the ground that there is no clearance fee and domestic transportation is cheaper Currently, there is a Vietnamese commerce centre in Poland If in the future, there are two other centres in France and Germany, they will promote our trade activities with overall EU 5.1.4 Supporting mechanism for farmers and SMEs Given the poor technology and cash flow of farmers as well as SMEs, it will be very costly for them to meet EU’s requirements There are different ways to support firms such as financial aid through low interest rates or technology aid via agricultural extension centres Such centres should provide training courses to instruct farmers how to apply new technology, advise them as necessary and assess the quality of products before exporting However, forms of assistance should gradually shift from direct subsidies to support research and technological development because of the threat of violation of WTO spirits and regulations of market economy Furthermore, to encourage farmers and domestic enterprises innovate their production methods, the government should also make some incentives like presenting certificates of merit for good producers, accompanied by strict sanction mechanism for firms breaking rules like export suspension or fine Finally, the government should help SMEs in dispute settlement on the ground that green trade barrier is a controversial issue and some countries abuse it for protectionism The government can support businesses to negotiate and settle the case before judges make the decision, which may be adverse to the business as well as the prestige of Vietnam export products Thereby protecting the deserved interests for our exports 5.1.5 Long-term development plan It is pity that Vietnam’s current model for growing and producing agricultural products is quite fragmented and short-sighted For example, some people have advantage of large growing area but cannot use up all these land for organic farming because of poor technology Meanwhile, others, who are capable of adapting new technology, not have 324 N.V Khoi and L.T.T Thuy enough land for development This problem happens not only in organic farming but also in other fields of agriculture, which creates many challenges for the authorities It will take times to address it and hence, it is necessary to have a long-term development plan Again, take organic for example Although organic farming has been applied in Vietnam for several years, it is still a new method for many farmers and businesses Therefore, it will be very difficult to conduct organic farming massively Instead, we should first focus on some key products like basil, coffee, pepper, cashew, etc And production process just starts with simple methods of organic farming such as using green manure instead of chemical fertilisers; taking advantage of natural enemies, poloculture to prevent pests, protecting soil quality, not burning straw; nutrient recycling In addition to a long-term development plan, it is also imperative to have a good export strategy to avoid exceed growing when have favourable weather condition leading to low price 5.1.6 Improve people’s awareness of environment protection and gradually change their consuming habit Many sociology investigations show that Vietnamese consumers are not of high opinion of buying eco-friendly products despite great effort of environmentalists Although there are advertisements of several brands marked with eco-label such as detergents less harmful to environment, energy save cooks, recyclable papers, it has not made deep impression on consumers One survey revealed that there are 34% respondents having heard about environmental-friendly products but only 4% prefer them than the ordinary ones 72% said that they are aware of the environment protection aim of eco-labelling but 64% thought such kinds of product are more expensive This situation can be explained by the fact that the income of consumers is not high enough to be willing to purchase products that have good impact on environment but may be more expensive Moreover, their awareness of environment protection and social responsibility is still poor All these thoughts lead to low demand in environmental friendly products, which may not create incentives for producers to comply with green regulations Therefore, the government should invest more in communication and advocacy to go up the number of ‘responsible’ consumers It can be done through attractive advertisements on TV, newspaper, internet and other means of media or organising contests like designing eco-friendly products Students right from primary school should be taught about responsibility with society and environment 5.2 To farmers and businesses 5.2.1 Improve products’ quality To overcome green barriers, it is obviously to meet green requirements Farmers and producers should improve their awareness of responsibility to environment and society, which then leads to their voluntary compliment to green regulation In the future, when Vietnam is not in the list of GSP priority, there will be a fair but tough competition between these enterprises and foreign corporations Given that foreign products have advantage of price, quality, large quantity, constant supply, without meeting green regulations and getting certificates, it will be more difficult for us to compete with the others Moreover, quality control also creates favourable conditions for the procurement Exporting Vietnam’s agricultural and fishery products 325 process, processing, storage, preservation, thereby ensuring quality for the entire chain of production of agricultural goods This is how Thailand has adopted and thereby there are fewer cases of Thailand agricultural exports refused by EU than Vietnam The best way is to carry out actively the green management under the guidance of the green concept; apply actively for the ISO14000 environment management system authentication, ISO 9000 for products quality, or SA 8000, HACCP Cleaner production (CP) is also another effective measure It is defined as the “continuous application of an integrated, preventive environmental strategy towards processes, products and services in order to increase overall efficiency and reduce damage and risks for humans and the environment” In other words, CP is a method and tool to identify where and why a company are losing resources in the form of waste and pollution, and how these losses can be minimised By substituting inputs materials, changing technology, good operation practices, product modification, reusing and recycling, the end result of CP not only benefits the environment, but also the safety and health of staff, neighbours and customers To implement such modern production method, the companies need a highly qualified staff that have professional skills, experienced in using high technology and have knowledge of market requirements Another way is to hire professional consultant companies 5.2.2 Sign more technology purchasing and transfer from EU companies Another way to meet EU requirements is to use technology made in European countries For years, Vietnam has just imported machines from Asian countries, which may be cheaper but can use in long time This poor technology contributes partly to poor quality, harmful impact on environment and rejection from developed markets It is time to use modern technology made in developed countries to produce high quality products However, it can be very costly to invest in such kind of technology and for SMEs, it is even impossible to import expensive machines One solution is to take advantage of two sources: government investment and foreign direct investment Firms can attract investment from EU partners or join projects of developing EU export competence as mentioned above 5.2.3 Investing in designing, producing and using eco-friendly package Vietnam firms face so many difficulties in meeting package requirements of EU markets because they require not only materials made package but also using and recycling these package harmless to environment Thereby, we need to have good package research and development scheme, which meet following requirements: • Design in the most economical way but still ensure the safety, hygiene for consumers and suitability with the products it contains • Increase the rate of reusable, recyclable and easily decomposed materials making package such as glass, carton Such kinds of materials are easy to use and recycle with low initial costs and low recycling cost as well • Limit using package made from wood and avoid straw in package, which not satisfy sanitation and epidemic prevention requirements 326 N.V Khoi and L.T.T Thuy • Limit using chemicals mentioned in Directive 94/62/EC • Participate in EU package program to improve competitiveness of Vietnam products and impression in consumers’ mind 5.2.4 Continuously find, collect and analyse market information As mentioned before, information is of vital importance for business Apart from waiting for government’s help, each company should be proactive in finding market information in order to have suitable export strategies Market information includes demand, consumers’ preference, and the suitable level of products to consumers in each market segment For instance, European people like fishery products but these products must meet the requirements of sanitary and food safety and have chloramphenicol antibiotics residue of less than 0.003 × 10–9 Furthermore, producers should have hazard analysis and critical control point (HACCP) system certificate They are important market information that one fishery company should know and then have countermeasures to these rules To good market researches, enterprises should implement these steps: • Train workers responsible for market researching They should be qualified with theory and practical knowledge, have ability to collect and analyse information and then make correct forecast • Have a special department to market research This department will be responsible for finding information, write and implement strategies to have better access to the exporting markets • Enterprises should actively coordinate with trade promotion organisations to grasp information and ask for their help in introducing, marketing products as well as to have permission to join trade fairs, open show-rooms in foreign countries Currently, Vietnam has already trade representative offices in all courtiers of EU Since the middle of 2004, among 12 offices, there is only one in Brussels responsible for general trade policy in EU And the rest just does trade promotion activities Hence, domestic enterprises should be proactive in contacting with these offices and take advantage of all of their supporting services • If possible, producers should establish their own trade representative offices in overseas markets Such offices will regularly provide update information to the headquarters, control operating business oversea and be responsible for finding new business opportunities • In another case, when it is impossible to open a trade representative office, enterprises can sign contracts with professional consultant companies like law companies whose main task is to find market information and support legal procedure for firms It is somehow a kind of specialisation that is promised to bring about high efficiency 5.2.5 Enhance building and promoting images of environmental friendly products Product image is an important factor in making the sale To European consumers who have high preference to environmental friendly products, an eco-label or any sign on Exporting Vietnam’s agricultural and fishery products 327 products showing their harmless effect on environment will put a deep impression on them Therefore, when companies have complied with green regulations and gotten environment certificates, they should show off this preeminent feature of their products Traditional marketing methods like advertisements on TV, newspapers and other means of media are still very efficient Besides, e-marketing and social marketing are another useful tools 5.2.6 Strengthen horizontal and vertical linkage Horizontal linkage is the association of different companies selling the same products This linkage will increase the quantity produced, which helps firms be capable to sign big contracts with foreign partners Moreover, when small firms cooperate with each other to build an association, this organisation will be very useful in help firms find high value contracts as well as improve their power in dispute settlement Accompanied with horizontal linkage is vertical linkage, which creates the integration between different parts in production process from the inputs suppliers, processors to exporters This linkage helps firms to share cost burden with others and specialisation also increases the productivity If it happens, the supply chain will also help firms verify the origin of goods, increase the domestic level in the product, ensure operational efficiency, quality control as well as ensure to meet environmental requirements In export policy, increasing the domestic level is very useful in gaining GSP priority and verifying the origin of products is a determinant factor to increase the export volume, save time and money by facilitating quality inspection process, proving the safe and environmental-friendly origin of products Another advantage of vertical linkage is to control the quality of products and ensure that both inputs and production methods meet green regulations According to EU regulation, a product is certified as environmental-friendly only when all stages in production it is verified to be ‘green’ from raw materials, processing, storage and recycling after consuming Conclusions Green trade barriers can induce higher costs for enterprises, including the costs of complying the precise obligations and the conformity assessment However, if high cost adds more value to products, applying modern technology helps improve products’ quality, obtaining ISO 14000 and other green certificate can attract more consumers of high environment consciousness, the producers will have power to increase the price and get more benefits Thus, companies should be proactive in applying advanced technology so as to meet green regulations and improve their products competitiveness Strengthening vertical and horizontal integration is also another effective measure to share the cost burden and control products’ quality Government should also give enterprises a hand by informing them with update market information, increasing trade promotion, building a common standard system and have support mechanism By doing so, our agricultural products will be able to break through barriers, increase our export products’ competiveness in the world market, leading high profit in the future 328 N.V Khoi and L.T.T Thuy References APEC (2009) ‘The impact of environmental regulation on trade’, APEC Committee on Trade and Investment, Report on APEC Seminar on Facilitating Trade and Environmental Protection, APEC Publisher, December Biermann, F (2001) ‘The rising tide of green unilateralism in world trade law options for reconciling the emerging north–south conflict’, Journal of World Trade, Vol 35, No 3, pp.421–448 Binh, N.T (2005) Thị trường EU, quy định pháp lý liên quan đến sách sản phẩm marketing xuất khẩu, Labor and Society Publisher, Vietnam CP4BP (2008) Indication for the Selection of Relevant Industrial Sectors for the Application of Sustainable Product Design in Cambodia, Lao PDR and Vietnam, CP4BP Project Preparation Report Macmillan, F (2001) WTO and the Environment, Sweet & Maxwell, London Neumayer, E (2001) Greening Trade and Investment, Environment Protection Without Protectionism, Earthscan Publications Ltd, London and Sterling, VA Qing, H (2007) ‘Green barrier disguises face of protectionism’, China Daily Notes 1 = 360 m2  ... environment’ 3.1 EU green regulations on agricultural and fishery products Mandatory regulations Environmental regulations on agricultural and fishery products are mentioned in European Union Environment... necessary to produce agricultural and fishery products following GAP This certificate is somehow a green ticket to enter to developed markets where there are strict requirements of products quality and. .. Thus, it is Exporting Vietnam’s agricultural and fishery products 321 necessary to have green regulations, which play as technical barriers to protect our own benefit In addition, GAP and green regulations