​EVFTA – Opportunities and challenges for development of Vietnam handicraft and furniture

HCMC, 14 June 2017 – EuroCham’s Vice-Chairman, Mr. Nicolas Audier attended the Workshop: “Promoting furniture and handicraft to the European Market” organised by VIETRADE (Ministry of Industry and Trade) in collaboration with EU-Vietnam MUTRAP project. Nicolas had a presentation on EU-Vietnam Free Trade Agreement – Opportunities and Challenges for development of Vietnam handicraft and furniture industry. 

As presented by Nicolas Audier, with the entry into force of EVFTA, most of the handicraft and furniture exported from Vietnam to the EU will be applied tax free, especially for processed wood. Therefore, EU – Vietnam trade would be significantly enhanced.

EU is an important Trade partner of Vietnam, not only as a large consuming market but also key supplier for furniture and raw wood. Wood imported from the EU to Vietnam which is mainly used for processing export and domestic market is Vietnam's main import. Vietnamese importers of furniture and handicraft products from the EU will be beneficial  from tariff reductions under EVFTA commitments. Price of wood processing machinery and equipment imported from EU will also be discounted, Vietnamese enterprises will have access to high quality equipment and machinery at lower prices. At the moment, wood processing equipment imported from the EU are very expensive due to tariffs rate ranging 20%-30%. . 

However, EVFTA is not only about tariffs and market access, it opens doors to non-tariff benefits.          
The EVFTA will bring the customs facilitation, exchanging information on custom requirements; investing in the modernisation and simplification of customs procedures and ensuring transparency of all custom requirements. A special committee on Customs will be established to solve relevant issues.
In term of Trade,  EuroCham sees many opportunities for both EU and Vietnamese companies. Imports of wood raw materials from the EU are expected to increase in the coming years in Vietnam. Vietnamese producers can import more wood from EU to produce better quality products with high technology. 

EU companies can enjoy protection of investments with trade facilitations and increase investments in the handcraft and furniture sector in Vietnam; therefore, local production would be improved with more variety of design and patterns as well as quality. EU investors would bring their well-known technology in management and training, allow more value added production, less waste of material and resources.  

With stronger awareness on license and origin, Vietnam’s wood and furniture products could have easier access to EU market. 

Challenges for Vietnamese products:
–    Lack of IPRs protection (patterns and designs), low labour efficiency, lack of resources management, etc. 
–    Global competitiveness: especially with the other countries in the SEA region, to overcome, Vietnamese producers need to develop product differentiation and diversification. 
–    Legal framework: Vietnam’s legal framework needs to be in line with the EU requirements with respects to the legality of products and the environment protection. 
–    Origins of the products’ materials: Vietnamese exporters have to provide information on the origins of the timber used for products, more particularly origin of wood and wood products according to EU timber regulation. 

EVFTA contains a comprehensive chapter on trade and sustainable development which gives a unique opportunity for Vietnam to improve some aspects of its economy. European customers do not only care about quality and safety, but also environment protection, Sustainable development and Corporate Social Responsibility. International practices, in regard to climate changes and commitment to preservation and sustainable management of biodiversity are important criteria of EU businesses. There are some other requirements such as fair labour and working conditions, health and safety; effects to community; protection of their trademarks, copyrights, inventions and patents, etc. 

The EVFTA  also provides for the FLEGT-VPA (Forest Law Enforcement, Governance and Trade – Voluntary partnership Agreements)  to apply between the EU and Vietnam in the coming years. Under these agreements, both the EU and Vietnam commits to fight against illegal timber trade, protect environmental protection and sustainable development. 

In conclusion, EuroCham Vice-Chairman emphasised EuroCham’s role in the entry enforcement of  EVFTA. EuroCham strongly believes that EVFTA would bring in a "new strong wave" of European investment into Vietnam, and where trade can increase by even 50% in the next coming years  and hopefully for the timber industry and far beyond.  

EuroCham, through its advocacy effort, aims to strengthen cooperation with Vietnam Government and EU Stakeholders on the trade/investment topics. EuoCham has been proactive in disseminating information of EVFTA, collecting recommendations and concerns from EU business community in Vietnam.