CHAPTER 2: SITUATION ANALYSIS OF VIETNAMESE AGRICULTURAL PRODUCTS’
2.2. Vietnamese agricultural products’ penetration into EU market
2.2.1. Overview on the exportation of Vietnamese agricultural products to the EU
It is also reported that there has been an increasing number of European companies are establishing in Vietnam, setting up a hub to serve the Mekong region (European Commission, 2020).
According to Vietnam’s Ministry of Industry and Trade (2022), the year 2021 is considered an important milestone for Vietnam as the export turnover of agricultural products to the key markets in the EU has either grown positively or only decreased slightly, despite the impacts of the COVID-19.
Graph 2.3: Total Vietnamese agricultural export turnover in EU member states (million USD)
Source: Author’s comprisal from the Vietnam’s Ministry of Industry and Trade It is evident that Germany accounted for the largest percentage with 28.8% of the total export turnover of Vietnam's main agricultural products to the EU, reaching USD 641 million, increasing 24.4% in comparison to the same period in 2020. Coming in second is the Netherlands with 22.5%, equivalent to USD 500 million which is 1.9%
higher than last year. Followed by Italy with the export turnover of 12.8%, reaching 285 million USD, Spain accounting for 9%, achieving the number of 202 million USD and France accounting for 6.4% with 142 million USD in export value. In addition, there are also markets with small export turnover but evaluated to have strong growth, showing imminent export potential such as Finland (up 198%), Hungary (up 86.9%), Czech Republic (up 49.2%) etc.
As of 2020, tea and coffee are the leading agricultural products when it comes to agri-food imports from Vietnam into the EU market with a total of 43%. Following up, fruits made up for 37%. The period of 2020-2021 is also the timeframe that Vietnam’s signature fruits such as lychee, fresh longan were exported directly to Western European
countries such as the Netherlands, Belgium, France, Germany, and the UK. It is even more impressive that the distribution of the fruits did not only stop in the Asian retail system, but has officially penetrated into the food supermarket chains in Europe.
Graph 2.4: Top EU Agri-Food imports from Vietnam in 2020
Source: Author’s comprisal from the European Commission Vietnam’s quality agricultural products are proving to be open for much potential.
According to Mr. Bui Vuong Anh, Commercial Counselor of the Vietnamese Embassy in Germany market, even though so far Vietnam’s agricultural products account for a relatively small proportion in Vietnam’s export products to Germany, the ability to further develop the product in the market is promising. It is also assessed by the Vietnam Trade Office stationed in Belgium and Luxembourg that the EU’s COVID-19 situation is now under control and that it’s the time for the EU to once again divert their attention back to the development of international trade. As the government bodies of EU member states are pushing back the pandemic by expanding the distribution of vaccinations, lifting the quarantine orders as well as the travel regulations, this is considered to be a favorable time to start promoting the export of Vietnam’s agricultural products in the EU market.
Alongside the finalization of the EVFTA and the agreement slowly coming into effect, many of Vietnam’s key agricultural products are being applied to a more favorable tax rate such as pepper, cashew nuts, coffee and vegetables etc. This will create a huge advantage for Vietnam’s agricultural products as Asia countries overall can have similar agricultural products based upon our similar climates and geography features, especially our big competitors within the area who have yet to establish FTAs with the EU, such as Thailand and China. In order to make use of this opportunity, Vietnamese agricultural productions need to invest their resources on promoting the act of trading and penetrating the products further into the EU’s market, quickly constituting and increasing the market share. This is a race against time and the politics movements as Vietnam needs to secure its market shares in the EU’s market before the union deploys other FTAs, granting the advantages to other countries. Gaining a clear gateway into the EU market will also help form and raise Vietnam’s credibility in the long term and even enter other difficult markets.
However, while there are many opportunities to further grow Vietnam’s exportation of agricultural products, it is not plausible to ignore the imminent problems which pose hindrances to the development process.
Firstly, the EU is a market with high requirements in terms of food quality, safety as well as hygiene and technical barriers. The EU has strict policies when it comes to the products that will directly affect the health and safety of its population and these measures are considered to be the most difficult barriers for Vietnamese agricultural products when exporting to the market. In fact, the EVFTA does not have many new commitments on non-tariff measures such as phytosanitary measures (SPS) or technical barriers to trade (TBT). According to Tuoi Tre News (2021), the European Union (EU) either recalled or issued a warning against five Vietnamese agricultural and fishery products in violation of food safety and hygiene regulations between October 6 and 12 just last year. It is of awareness that the EVFTA does not help to limit the EU's non-tariff barriers to Vietnamese agricultural exports. Hence, in order to conquer the EU market,
Vietnam's agricultural exports need to meet regulations on rules of origin. Compared with other FTAs that have been implemented in Vietnam, the regulations on rules of origin for agricultural products in the EVFTA are assessed to be stricter when the criteria of origin of goods applied are required to be wholly obtained.
Follow up, it is still quite difficult for Vietnamese agricultural firms to access the EU agricultural product market. The cause of this situation is due to the internal lackings in resources as well as knowledge of manufacturers and exporters. Beside the inadequacy of company capital, labor forces etc., manufacturers and exporters also often lack information and guidance on EU regulations while these regulations are frequently changed. As a result, the time it takes will lead to latency in the procedure to respond to sanitary and phytosanitary requirements, causing an increase in costs or possibly limiting the firms’ ability to export.
The issue of intellectual property is another important aspect that has not been paid enough attention by many businesses. While some enterprises only focus on export volume, they are missing out on building and developing the agricultural products as brands have been an urgent issue for the agricultural products of our country as well as one of the main aspects that the EU’s consumers value very much. In addition, Vietnam's agricultural exports are still facing difficulties due to the high cost of logistics in export in general and agricultural exports in particular after the impacts of COVID-19 to the overall supply chains. Most of these limitations come from within Vietnam's agricultural production industry. And it is of most importance that the appropriate assessment and solutions for these significant challenges be put into work, in order to achieve the goal of promoting Vietnam's agricultural exports to the EU and increasing the market share in the EU’s market in the coming time.