Identifying challenges and opportunities in the European market

Big opportunities

The meeting of Vietnamese trade counselors in the European region held in Italy on July 18, 2024 consisted of two main sessions: the working session between units of the Ministry of Industry and Trade and the Vietnamese trade offices in European countries; and the official working session.

The meeting of Vietnamese trade counselors in the European region held in Italy on July 18, 2024 consists of two sessions

Minister Nguyen Hong Dien chairs the meeting

At the official working session, delegates focused on discussing and identifying challenges and opportunities in the European market; market research, market information development as well as solutions for market diversification and trade promotion; building sustainable supply chains; exchanging solutions to strengthen cooperation in industry, energy and investment with European countries.

Discussing opportunities and challenges in exporting goods to European markets, representatives of Vietnam Trade Office in the EU, Russian Federation, Ukraine, Belarus and Switzerland have focused on assessing the current situation and trends of economic and trade policies in the European region - the impacts on Vietnam and the issues in the coming time; and proposing many solutions to solve them.

Europe is one of the largest and most potential export markets in the world with a population of more than 740 million people and a GDP of over US$18 trillion; and this is also Vietnam's third largest export market with many sectors that Vietnam has strengths in. Countries in the European region are increasingly in high demand for items such as household appliances, food, agricultural products, handicraft products…

In 2023, the total bilateral trade of Vietnam - Europe (including EU and non-EU) reached US$71.15 billion, down approximately 4.4% compared to 2022. In particular, Vietnam's export turnover to Europe reached US$52.22 billion, down 4.7%; Vietnam's import turnover from Europe reached US$18.93 billion, down 2.7%.

Total import and export turnover of goods in the first 6 months is estimated at US$370 billion, an increase of 16.03% compared to 2023. The trade balance of goods continues to be in surplus with an estimated trade surplus of US$8.4 billion. The basic export market has had a good recovery and high growth, notably the EU market. The export value to the EU market in five months of 2024 reached US$20.29 billion, up 14.1%, corresponding to an increase of US$2.52 billion over the same period last year.

Duong Hoang Minh, Vietnamese Trade Counselor in the Russian Federation, shares the opportunities and challenges when exporting Vietnamese goods to Russia in particular and European countries in general.

For the Russian Federation, Duong Hoang Minh - Commercial Counselor of the Vietnamese Trade Service in this market said that trade between Vietnam and the Russian Federation is having a positive recovery. In 2023, bilateral trade reached US$3.6 billion, up 2.3% compared to 2022. In the first 6 months of 2024, bilateral trade turnover reached US$2.34 billion, up 45.4% over the same period in 2023…

Not only that, Vietnam and Russia are two complementary economies. Vietnam needs to import Russian products for production and consumption (coal, metals, fertilizers, petroleum, liquefied petroleum gas, machinery, food, seafood, wood...). Meanwhile, the Russian Federation imports from Vietnam tropical agricultural products, seafood, food, beverages, textiles, shoes, electronic goods, machinery equipment, consumer goods…

“The two countries' economies are forecasted to grow quite well in the coming years. At present, the withdrawal of Western businesses from Russia has created a gap in the market. This is an opportunity for Vietnamese enterprises to promote exports and investments in Russia in the fields of processing agricultural products, food, beverages, aquatic products, garments, manufacturing furniture, household appliances…” – Trade Counselor Duong Hoang Minh commented and recommended domestic export enterprises.

Tran Ngoc Quan, Vietnamese Trade Counselor in Belgium and the EU, said that the EVFTA Agreement brings many opportunities for domestic export enterprises, but also poses many challenges

Analyzing the opportunity to promote Vietnamese exports to the European market in general and the EU in particular, Tran Ngoc Quan, Vietnamese Trade Counselor in Belgium and the EU, said that the EVFTA has now entered its fifth year of implementation with a B5 schedule of zero. According to EU information, 99% of tariff lines are liberalized. And the EVFTA Agreement is considered one of the good supports for Vietnam-EU trade. A lot of ASEAN countries are trying to get an agreement like Vietnam.

“Therefore, the protection of benefits from EVFTA is very necessary. This protection stems from ensuring that Vietnamese goods are methodically produced and exported, in good compliance with EU regulations, especially in terms of product quality and safety” - Tran Ngoc Quan informed and said that Vietnam is the 17th largest partner in goods trade and the largest partner in ASEAN. Vietnam exports mainly to the EU are footwear, textiles, agricultural products, consumer electronics and imports mainly cosmetics, pharmaceuticals, means of transport are high-tech goods.

Identifying challenges

At the trade counselors meeting, in addition to the advantages, representatives of many Agreements also frankly analyzed the challenges for domestic enterprises when promoting the export of goods to the markets of European countries.

Hoang Dinh Chai, in charge of Vietnam Trade Office in Ukraine, said that at present, the products of Vietnamese exporters and Ukrainian importers still do not trust each other, especially Vietnamese enterprises. This will be an obstacle and barrier to trade cooperation between the two countries. Currently, for the Ukrainian market, businesses and the state prioritize the import of essential goods for life and the military.

Regarding the Russian Federation market, Counselor Duong Hoang Minh said that economic and trade cooperation between the two countries is facing great challenges in the context of the world economy facing many difficulties. Although the authorities on both sides have made many efforts, the bilateral trade turnover has decreased deeply, recovered slowly, and many bilateral investment projects have encountered difficulties in implementation on both sides.

The biggest hurdle is a payment issue. In the context of the financial-banking system of the Russian Federation being sanctioned by the United States and Western countries, Vietnamese banks are very concerned when making payments for contracts with the Russian side in dollars or EUROS; while the Russian ruble and VND are not strong foreign currencies, the ruble exchange rate is often fluctuating, bilateral trade between the two countries is still low, making the two countries' efforts to use the local currency in payment difficult and high costs; Vietnamese enterprises have not used other strong foreign currencies in payment.

In order to remove difficulties, the Transaction encourages commercial banks to participate in payment channels in RUB and VND, including through allowing connection with the Russian Financial Communication System (SPFS) to replace the swift system; considering a specific mechanism to allow the establishment of specialized banks to conduct sensitive transactions with Russia to avoid the risk of secondary sanctions; and considering the use of the yuan in international trade with Russia and other countries such as Cuba, Iran…

Regarding obstacles in economic, trade and investment cooperation between the two countries, the Transaction Office proposed that the two sides soon amend the VN-EAEU FTA to create more favorable conditions for enterprises, including removing barriers on threshold protection for Vietnam's garment and footwear exports to EAEU.

On the other hand, encourage and create favorable conditions for Vietnamese enterprises to invest in Russia in areas that our enterprises have strengths in such as processing agricultural products, food, beverages, fisheries, apparel, manufacturing furniture, household appliances... Facilitate Russian businesses to invest in Vietnam.

Meanwhile, in the EU, Tran Ngoc Quan said that with the EVFTA, some Vietnamese industries have been expanded to investigate or impose taxes from EU taxes applied to China. This directly affects the benefits from EVFTA. Therefore, it is necessary to ensure that in two aspects, no goods from a third country in disguise enter Vietnam to benefit from the EVFTA or enter Vietnam to avoid self-defense tax, devaluation and export to the EU.

To do this, the Trade Office recommends, regularly inspecting the trade flow between Vietnam and the EU or a third country to see if there are any interconnected relationships to prevent violations.

The meeting of Vietnamese Trade Counselors in the European region was held to promote economic and trade activities, foreign market work and trade promotion, contributing to strengthening Vietnam's export of goods to countries in the region and the world; At the same time, towards the goal of strengthening connectivity, coordination and support for enterprises to promote export activities.