Advantages and Difficulties in Expanding the Market for Vietnamese Goods in the United Kingdom
- 186
- Business
- 23:42 01/02/2024
DNHN - As a relatively populous market with diverse demands and numerous tariff preferences for Vietnam through the UKVFTA and the upcoming CPTPP, the opportunity for Vietnamese goods to expand their market share in the United Kingdom is substantial.
Trade between Vietnam and the United Kingdom continues to develop positively
According to statistics from Vietnam Customs, in the first 6 months of 2023, the total two-way trade turnover between Vietnam and the United Kingdom reached over USD 3.23 billion, a decrease of 1.5% compared to the same period last year. Of which, Vietnam had a trade surplus of over USD 2.49 billion. Also during the above period, the export value of Vietnamese goods to the UK reached over USD 2.86 billion, a slight decrease of 2.2% compared to the same period in 2022. This decline was lower than the average export turnover decrease (-8.1%) of Vietnam to European countries in the first 6 months of 2023 and -11.5% to the whole world. The growth sectors include: Paper and paper products increased by 104.9%; Rubber products by 60.2%; Telephones and components of all kinds increased by 29.6%; Vegetables and fruits increased by 28.3%; Machinery, equipment, spare parts and other tools by 24.4%; Footwear of all kinds increased by 5.1%, Cashews increased by 2.7%; Plastic products increased by 1.4%. The items accounting for a large proportion of export turnover include: Telephones of all kinds and components (22.3%); Machinery, equipment, spare parts and tools (14.6%); Footwear of all kinds (13.1%); Textile and garment products (11.1%); Computers, electronic products and components (4.9%); Aquatic products (4.9%); Wood and wood products (3.2%);
Conversely, in the first 6 months of 2023, the import value of goods from the UK to Vietnam reached USD 372.5 million, equivalent to the same period in 2022. The import items that increased sharply include Aquatic products increased by 233.3%; Iron and steel products by 94.6%; Fabrics of all kinds by 71.9%; Base metals by 51.3%; Inputs for garment and textiles by 15.5%; Plastic products by 15.4%; Machinery, equipment, tools, spare parts and other 6.4%. The import items that decreased sharply include Rubber (-82.8%); Iron and steel scrap (-58.5%); Telephones and components (-56.8%); Cameras, camcorders and components (-31.2%), Fabrics of all kinds (-32.1%); Raw plastic materials (-29.9%), Completely built-up automobiles of all kinds (-17.7%)… The items accounting for a large proportion of import turnover include Machinery, equipment, tools, and spare parts (24%); Pharmaceuticals (11.8%); Chemical products (6.4%); Inputs for textiles, garments, leather, and footwear (5.2%); Aquatic products (4.6%).
Favourable conditions for Vietnamese goods to expand market share in the United Kingdom
Tariff preferences from free trade agreements (FTAs) that Vietnam and the United Kingdom are both members of:
According to Mr Nguyen Canh Cuong - Counsellor, Commercial Affairs of Vietnam in the United Kingdom, Vietnamese goods are benefiting from tariff preferences under the UKVFTA. In particular, Vietnamese enterprises have the opportunity to increase exports of paper and paper products, rubber, food and vegetables, leather shoes, etc. to the UK. The UK has a huge demand for these items, while the supply system has some gaps due to the impact of Brexit and the military conflict in Ukraine. The UK’s official signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in July also opens up many future options for Vietnamese enterprises in applying appropriate tariff preferences and regulations to protect their legitimate rights.
In addition, the UK market is quite large (about 68 million people) with diverse demands (the Asian community of over 5.5 million people); the diplomatic relations between Vietnam and the UK continue to develop well… are all opportunities for Vietnamese goods to continue to expand the market here.
The United Kingdom will recognise Vietnam as a market economy in trade defence investigations:
A market economy is a concept used by some countries when conducting trade defence investigations on imported goods from other countries. The determination of whether a country has a market economy is often based on an assessment of the level of government intervention in business decisions of enterprises as well as the level of government control and intervention in factors of production such as capital and labour. A country with excessive government intervention may not be considered a market economy.
If the country exporting goods is not considered a market economy, instead of using the information on costs and prices of the exporting enterprise itself to calculate the dumping margin, the importing country will use representative information of an alternative third-country enterprise that is considered to have a market economy. As a result, the dumping margin is often determined to be higher, leading to a much higher level of trade defence tax than countries considered to be market economies. In some cases, the trade defence tax on enterprises from countries not considered to be market economies can be up to over 100%. Within the framework of the United Kingdom’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the United Kingdom will recognise that Vietnam’s manufacturing sectors operate under market economy conditions. On that basis, the United Kingdom will not apply unfavourable regulations to goods imported from Vietnam in the event of investigations into trade defence cases.
Difficulties that businesses need to be aware of when accessing the UK market
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The general negative impact of the global economy and escalating geopolitical conflicts: The slowdown in global economic growth in the face of the complex developments of the geopolitical conflicts between Russia and Ukraine, China and the US, and the aftermath of the COVID-19 pandemic, Brexit, etc. directly affect international trade, causing trade in general to decline. Market demand also simultaneously decreases due to high inflation and people tightening their spending. The exchange rate fluctuations between the US Dollar and the British Pound increase financial risks for Vietnamese exporting enterprises.
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Specific standard requirements: Previously, in June 2022, the UK notified WTO member countries that it would amend the regulations on product safety, safety products, including requiring some products such as machinery and electronic equipment to bear a mark called the UKCA mark instead of the EU’s CE mark from 31 December 2024. The UKCA mark (UK Conformity Assessed - UK Conformity Assessment) is the UK’s new product certification mark, required for certain products placed on the market in the UK (England, Wales and Scotland) and covers most products that previously required the CE mark. This standard is not recognised in the European market, so if Vietnamese enterprises want to sell products in both the UK and European markets, they will need both the UKCA mark and the CE mark on their products.
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The UK’s anti-deforestation and forest degradation bill will affect exports of wood, coffee, rubber, vegetable oils, and soybeans.
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The trend of products for dieters is becoming more popular such as pure vegan, gluten-free (people with gluten allergy), and sugar-free (people with diabetes), making the production and supply of agricultural food products more specialised and complex.
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Vietnamese enterprises need to pay attention to the issue of traceability as well as build an effective system for managing the origin of goods. All incentives from the UKVFTA or CPTPP will only be valuable when the enterprise’s goods prove their origin from Vietnam clearly, with full documentation.
Phong Linh
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