"The European Union (EU) is one of the major markets for Vietnam’s woodworks and handicrafts with an export turnover of US$741.8 million in 2016. In particular, export growth prospects of furniture and handicrafts in the EU market are forecast to be more positive for 2017." This is information presented by Ms Bui Thi Thanh An, Deputy Director of the Trade Promotion Agency (Viettrade),Ministry of Industry and Trade at the conference "Promoting furniture & handicraft exports to the European market" recently held in Ho Chi Minh city.
The conference was organised by Trade Promotion Agency in collaboration with Ho Chi Minh City Handicraft and Wood Industry Association (HAWA) in Ho Chi Minh City, with the support of the European Trade Policy and Investment Support Project (EU-MUTRAP).
With regards to the positive forecast about handicrafts and woodwork in 2017, Ms An said that the Vietnam furniture branding and wood market building in the EU is being aggressively promoted. In addition, it should be mentioned the positive effects of the EU-Vietnam Free Trade Agreement (EVFTA) which is expected to come into effect in 2018; and the Voluntary Partnership Agreement on Forest Law Enforcement, Governance and Trade (VPA/FLEGT) in Timber and Wood Products which was signed by the EU and Vietnam in May 2017.
Ms Jana Herceg, First Counsellor/ Deputy Head of Economic & Trade Affairs of the EU Delegation to Vietnam stated that EVFTA and VPA/FLEGT will create favourable conditions for Vietnam furniture and handicrafts to penetrate deeper into EU market. According to Ms Miriam Garcia Ferrer, Head of Economics & Trade Section of the EU Delegation to Vietnam, of the 10 ASEAN member countries, only Vietnam and Singapore signed a free trade agreement with the EU and this will create a huge advantage for Vietnam. In addition, according to the tariff reduction schedule, when EVFTA officially comes into force, most handicrafts and furniture exported from Vietnam to the EU will enjoy a zero tax rate (tax rate before EVFTA is 3 percent for processed wood and wood products, 5.6 percent for bamboo or rattan furniture, 4 percent for wood plywood, 3 percent for wooden decorations). This is a significant advantage for Vietnam's wood industry.
Sharing the view of Ms Jana Herceg, Mr Gellert Horvath, Vice President of European Chamber of Commerce in Vietnam (EuroCham) said that with the EVFTA and VPA/FLEGT agreements, Vietnamese exporters can better access EU markets because they are more aware of the licensing and the origin, legality of wood products and interiors. The EU is one of the key sources of raw material wood for Vietnam; therefore, the EVFTA and VPA/FLEGT agreements will provide Vietnamese businesses with the opportunity to increase their timber purchases from the EU market to produce more quality wood products.
Difficulties not diminished
Although seen as a potential market for furniture and handicrafts Vietnam, according to experts present at the conference, the EU is also a "difficult piece of cake" due to strict standard quality. In addition, the event of Britain leaving the EU (Brexit) is expected to significantly reduce the purchasing power of this huge market.
One more difficulty from the EU market is shared by Ms Bui Thi Viet Anh from the Institute of Policy and Strategy for Agriculture and Rural Development that the EU will require exporters to meet the commodity code, prove origin; ensure the capacity to implement and monitor, ensure legal timber and origin (according to supply chain). To meet these requirements, Vietnamese enterprises have to import inputs and raw materials from EU countries at higher cost instead of importing materials from outside markets such as Laos, Cambodia, China, etc, like nowadays. In addition, the requirements for technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures in the EU market will increase, which will make exporters face trade disputes when many new regulations are issued. "In order to meet these stringent requirements, Vietnamese timber exporters must pay attention to controlling the legal timber raw materials, increase investment in the application of new processing technologies, improve product quality and management. It is important them to be well prepared for dispute resolution in trade disputes," Ms Bui Thi Viet Anh recommended.
According to Nguyen Chanh Phuong - Secretary General of Hawa, besides the quality, Vietnamese businesses also need to pay more attention to the design and diversification of models to make wood products with high quality and unique identity. In addition, they must strictly adhere to the environmental, labour and legal standards of the source material production. "Once Vietnamese furniture and handicrafts meet the requirements of the EU, the door to this potential market will be more open than ever," Phuong stressed.