Vietnam shrimp exports after signing EVFTA: Advantages and challenges

In October 2018, the European Council (EC) officially approved EVFTA. The agreement was signed in Hanoi on 30 June 2019.

After being effective, EVFTA will be considered as an opportunity for Vietnamese seafood enterprises to increase export value to this market. According to commitments in EVFTA, Vietnamese seafood exported to the EU will be completely eliminated tariff (except canned tuna and fish balls applying tariff quota of 11,500 tons) with the longest schedule of 7 years. Particularly, shrimp products will be more optimistic as import tax on this market will drop sharply from the first year, then gradually decrease to 0% in the following years.

The EU mainly imports frozen raw shrimp and processed shrimp from Vietnam. For frozen shrimp and prawn products, tax is reduced from the base rate of 20% to 0% as soon as the agreement comes into effect. Other shrimp products will reduce following a 3-5 year schedule, particularly processed shrimp will follow a 7-year tax reduction schedule.

Currently, the GSP tax rate that EU sets to Vietnam for frozen raw shrimp (HS 030617) of 4.2%; Frozen processed shrimp (HS 160521) enjoyed 7%. Vietnam has an advantage over the two rival countries, Thailand and China as these two countries do not enjoy GSP from the EU.

In addition to tax incentives, EVFTA also gives Vietnamese enterprises an opportunity to increase their competitiveness compared to competitors without FTA with the EU (such as India and Thailand). Enterprises can save production costs to increase competition as it is easier to access production services when Vietnam is committed to opening logistics, insurance, finance services ...

Enterprises also have conditions to participate in regional supply chains thanks to the investment movement of multinational corporations, ensuring a stable and transparent institutional and business environment (thanks to improving regulations and policies according to FTA terms).

However, there will be new challenges for Vietnam's fisheries sector when participating in EVFTA such as: conditions on technical barriers, quality standards, rules of origin, and more new and complex regulations, while Vietnam's products are less competitive in price compared to FTA partner countries...

Enterprises need to strengthen cooperation, focus on linkage chain to improve productivity, technological innovation, participate in global supply chains.

In the first 5 months of 2019, Vietnam shrimp exports to the EU reached 243.4 million, down 26.3% compared to the same period of 2018. The UK, Germany and the Netherlands are the 3 main importors for Vietnamese shrimp in the EU market. Shrimp exports to the UK in May have shown positive signs: an increase of 11.6% to over US$18 million.

With preferential tariffs and a favourable business environment, Vietnamese exporters will have an advantage over many other shrimp exporter such as India and Thailand. It is forecasted that EVFTA will contribute to increase the export of Vietnamese shrimp to the EU in 2019.