Cinnamon industry seeks to take advantage of trade deal to expand exports to the UK

Cinnamon is processed at Sơn Hà Spice Company in Yên Bái Province. The cinnamon industry of Việt Nam has successfully taken advantage of the UKVFTA to increase export to the UK. — VNAVNS Photo Vũ Sinh

HÀ NỘI — The cinnamon industry of Việt Nam is seeking to develop an ecosystem to take advantages of free trade agreements (FTAs), including the trade deal between Việt Nam and the UK (UKVFTA) to expand exports sustainably.

With 16 FTAs that Việt Nam is participating in, including new-generation trade pacts such as the UKVFTA, EU – Việt Nam FTA (EVFTA), the Comprehensive and Progressive Agreement for Trans – Pacific Partnership (CPTPP), and the Regional Comprehensive Economic Partnership (RCEP), Việt Nam has gained considerable competitive advantages in term of tariffs, providing significant opportunities for cinnamon products to expand global reach.

According to the Việt Nam Pepper and Spice Association (VPSA), Việt Nam is the world’s largest cinnamon producer with a total plantation area of 180,000 ha and since 2021, has been the world’s largest exporter of cinnamon products. Statistics showed that Việt Nam exported nearly 90,000 tonnes of cinnamon worth US$260 million last year, accounting for 34.4 per cent of the global cinnamon market.

The global demand for cinnamon is increasing because it is used not only in the food but also in the pharmaceutical, cosmetics and health supplement industries.

Major export markets of Việt Nam’s cinnamon products were India, China, Bangladesh, the US and the EU.

Advantages of the UKVFTA

Notably, while cinnamon exports to major markets saw drops in the first months of this year, cinnamon exports to the EU and the UK witnessed impressive growth. Cinnamon exports to the EU rose by 12.7 per cent and to the UK by 94.4 per cent in the January – February this year, while exports to India fell by 30.3 per cent and the US by 0.8 per cent.

For the UK market, the strong tariff liberalisation under the UKVFTA has given an advantage in market access to a number of Vietnamese agricultural products in the UK, such as fisheries, fruits and vegetables, coffee, rice and cinnamon.

The trade deal immediately removed 85.6 per cent of tariff lines on Vietnamese products when it came into force on January 1, 2021, and 99.2 per cent from January 1, 2027. The remaining 0.8 per cent will enjoy zero tariffs within quotas.

The cinnamon industry of Việt Nam has successfully taken advantage of the UKVFTA to increase export to the UK. According to the United Nations COMPTRADE database on international trade, the UK’s imports of cinnamon and cinnamon-tree flowers from Việt Nam increased from $1.65 million in 2020 – before the trade deal came into force – to $2.97 million in 2021, $3.36 million in 2022 and $2.38 million in 2023.

Establish value chain

A cinnamon seedling garden in Yên Bái Province. — VNA/VNS Photo Tiến Khánh

Vietnamese cinnamon has been exported to nearly a hundred markets so far, accounting for a share of 95 per cent in India, 36.5 per cent in the US and 35 per cent in the EU.

However, processed products make up for just around 18.6 per cent, or more than 18,650 tonnes, which were mainly exported to the US (70 per cent) and the EU (12 per cent).

Meanwhile, import markets, especially the EU and the UK, have stringent standards for cinnamon products, including requirements for green consumption, carbon emission, origin traceability, sustainable production, product quality, and maximum residue level (MLR). These markets also have increasing demands for organic products or products with high added value.

According to VPSA’s President, Hoàng Thị Liên, it is necessary for Việt Nam’s cinnamon industry to make drastic changes to meet the export market requirements.

Scientific research is needed to respond promptly to the market’s requirements, especially issues related to MLRs, she said.

Farmers also need to change their cultivation towards sustainability and environmental friendliness, as well as follow the cultivation process by using fertilisers and pesticides.

The links between farmers, cooperatives, processors, and exporters are critical to meeting the market requirements and ensuring the sustainable export of cinnamon products, she stressed.

Liên also said that it is necessary to increase trade promotions and build a brand for Vietnamese cinnamon and Vietnamese spices in general to expand global reach.

The Government should raise support in terms of finance and credits to farmers and enterprises, together with policies to encourage the application of science and technology to increase added value. Plans must be made for growing areas to attract long-term investments in establishing cinnamon value chain and encourage the application of digital technologies in production management, origin traceability and sustainable programmes.

According to the Multilateral Trade Policy Department under the Ministry of Industry and Trade, links between management agencies, localities, enterprises, exporters, associations, cooperatives and farmers is critical to promote the development of cinnamon value chain, from which a cinnamon ecosystem will be built to better exploit FTAs for export expansion.

With the ecosystem, farmers can be provided with preferential loans and training in farming techniques to meet the export requirements while producers, processors and exporters can easily access to credit and market information.

Deputy Director of the Department of Industry and Trade of Yên Bái Province, Nguyễn Đình Chiến, which has the largest cinnamon growing area in the north, said that it is necessary to build a cinnamon ecosystem so that the industry can further take advantage from FTAs, including UKVFTA, to expand export sustainably.