EVFTA will be an opportunity for Vietnam to expand its market, increase its market share in the European market and be a condition for Vietnam to improve its competitiveness. However, not all industries will benefit when this FTA comes into effect.
Immediately after the European Parliament ratified the ratification of the Vietnam-EU Free Trade Agreement (EVFTA), the Ministry of Industry and Trade said that, if all goes well, the National Assembly approved in May, the legal procedures. The two sides work very quickly and the EVFTA agreement can go into effect in July.
According to the Ministry of Industry and Trade, EVFTA will be an opportunity for Vietnam to expand the market to improve the quality of agricultural products, increase market share in the European market and be a condition for Vietnam to improve competitiveness. .
However, not all industries will benefit.
The report “EVFTA – New driving force for export growth of Vietnam” has just released on the afternoon of February 13, analysts from VNDirect Securities Joint Stock Company have pointed out the three most profitable business areas. of the three export items and the three most difficult sectors after EVFTA takes effect.
Source: VNDirect Securities Company
Fishery, textile and electronics will benefit the most
For fishery products, except for tuna products, after EVFTA takes effect, the EU will immediately remove about 50% of import tax lines for Vietnam's exports when the agreement comes into effect; The remaining 50% of tariff lines will be eliminated in 3-7 years.
According to VNDirect, the EU is Vietnam's second largest seafood export market with an export value of US $ 1.44 billion in 2018. About 90% of tariff lines for Vietnamese seafood products will be reduced to 0% in 3-4 years from the current average export tax rate of 14%.
For textiles and clothing, 42.5% of all import tariff lines on Vietnam's exported products will be removed (mainly tariffs on textile materials) as soon as the agreement comes into effect, the rest (mainly taxes on final textile products) will gradually decrease to 0% within 3-7 years from the starting level of 12%.
With the EU being the second largest export market of Vietnam's textile and garment industry, with export value in 2018 reaching US $ 4.1 billion (equivalent to 13.4% of total textile and garment export turnover), the reduction of From the current rate, Vietnam's textile and apparel products exported to the EU are subject to a tariff of 7-17% (average of 9.6%) under the GSP.
VNDirect believes that exporters of textile materials (fabrics, yarn, wool …) to the EU (currently accounting for a small proportion of Vietnam's textile and apparel export value to the EU) will benefit as soon as EVFTA takes effect.
For enterprises exporting finished textile products to the EU, this securities company believes that the benefits from EVFTA will increase sharply along with the decline of tariffs from the second year onwards.
Although it is forecasted to benefit from the EVFTA agreement, Vietnam's textile and garment industry is also recommended to make changes to be able to meet the conditions of origin, so that it can take advantage of tariff preferences provided by EVFTA.
At the same time, the textile and apparel industry is also facing quite painful issues that are increasing human resource competition. The wave of moving factories into Vietnam to avoid taxes is pushing labor costs more and more expensive, affecting profit margins of businesses.
In addition to textiles, phones, computers and electronic products will also benefit greatly, as 74% of import tariff lines will be removed as soon as the agreement comes into effect, the rest will be eliminated. within 3-5 years.
This is the largest group of Vietnam's exports to the EU, with a total value in 2018 of more than 18.1 billion USD, accounting for 43.3% of Vietnam's total export value to the EU.
“The tax reduction will create a competitive advantage for Vietnam's export electronics products, while promoting the trend of relocating manufacturing factories from elsewhere to Vietnam to take advantage of tariffs. under a number of FTA agreements, including EVFTA, ”VNDirect analysts forecast.
Pharmaceuticals, dairy and livestock will face growing competition pressure
According to VNDirect, about half of EU pharmaceutical exports will be immediately tax-free and the remainder after 7 years. Reducing import duties on pharmaceuticals from the EU will increase competitive pressure on domestic pharmaceutical manufacturers.
In addition, the dairy processing sector is also under competitive pressure because European countries are well known for their dairy products. Reducing import duties on dairy products imported from the EU will increase competitive pressure on domestic dairy producers.
However, analysts believe that EVFTA will also open up opportunities for Vietnamese dairy companies to have easier access to European production technologies and raw materials, which are highly appreciated for quality and food safety, thereby contributing to improving the quality of domestic dairy products.
In the livestock sector, the frozen pork product line will be exempt from tax after 7 years, daily products after 5 years, processed foods after 7 years and the tax rate for chicken will gradually decrease to 0%. for 10 years.
Currently, EU livestock products exported to Vietnam are subject to a tax rate of 10-40%. The reduction of import tax on livestock products from the EU will promote the penetration of these products into Vietnam and increase the competitive pressure on domestic livestock products.
