VJEPA paves the way for Vietnam’s products to penetrate Japan’s market

Published: 25/12/2008 05:00

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VietNamNet Bridge The Japanese market is now open wide to Vietnam-made products with the signing of VJEPA, under which many of Vietnam’s export items to Japan will enjoy the 0% tax rate.

Vietnamese Minister of Industry and Trade Vu Huy Hoang (left) and Japanese Foreign Minister Hirofumi Nakasone at teh VJEPA signing ceremony

Tran Quoc Khanh, Director of the Multilateral Trade Policy Department under the Ministry of Industry and Trade and Deputy Head of the Government Negotiation Team, talks about the opportunities for Vietnam’s products to penetrate Japan’s market in the VJEPA period.

Experts have said that VJEPA will bring big opportunities to Vietnam’s farm and seafood exports. Could you please give us more details about these opportunities?

Opening Japan’s market for farm produce from Vietnam is one of the biggest benefits Vietnam has obtained from VJEPA. Japan will slash the import tax to 0%, which will be applied to 70%, right when the agreement becomes effective, and then 86% of the values of the farm produce exports to Japan. This is the highest opening level Japan has ever committed to an ASEAN country.

Of the 30 farm produce items that have the biggest export turnover to Japan, 23 items will enjoy a tax rate of 0% within 10 years. The products that are advantageous for Vietnam, such as shrimp, crabs, bee’s honey, durian and litchis, will enjoy sharper tax cuts than the products of other ASEAN countries.

Vietnam is exporting to Japan more than it is importing from the country

According to the Ministry of Planning and Investment, in the first ten months of the year, the Vietnam-Japan import-export turnover reached $14.2 billion. Of this amount, Vietnam exported $7.2 billion, and imported $7 billion worth of products.

Japan is also the foreign investor that had the biggest implemented capital in the first 10 months of 2008 ($5.1 billion), though it only ranks third among foreign investors in terms of registered capital (after Taiwan and Malaysia).

It will not be easy to export products to Japan, even with the tax cuts, as Japan always sets very high technical barriers for imports. Have the two countries reached any agreement which will allow Vietnam-made products to penetrate Japan’s market more easily?

Japan sets technical requirements for all products coming from all countries, not only from Vietnam. Therefore, Vietnam and Japan have discussed a cooperation program in order to help heighten Vietnam’s capability in terms of the application of sanitary and phytosanitary measures (SPS).

The agreement includes a separate chapter on SPS cooperation, under which Japan will help Vietnam establish an EPS centre to heighten the quarantine capability. Besides, Japan has also committed to continue discussions about the two sides, step-by-step, recognizing each other’s standards, and thus creating more favorable conditions for the farm produce trade of the two countries.

As far as I know, rice was not included in the negotiations for the agreement, which spells that the tax rate and technical barriers for rice exports will not see any changes. Why?

Japan has never committed to cut taxes on rice imports and it has not done this to any countries, including Vietnam. In general, every country has its ‘sensitive field.’ However, as for rice exports, we believe that Vietnamese enterprises still can keep exporting to the market under the normal trade conditions.

Vietnam’s durian will go to Japan

Vietnam is now exporting to Japan more that it is importing from Japan. However, experts said that the current trade surplus will turn into a trade deficit as Vietnam has opened its market too widely, offering the tax rate of 0% to many Japanese industrial items. What do you think about this?

If we want our partner to open its market, we also have to open our market. I think that the final results of the negotiations can bring benefits to both parties.

Could you please tell me about the opening level Vietnam has committed, under VJEPA, in comparison with WTO commitments?

In terms of the commodity market, the opening level under VJEPA is higher than the WTO’s commitments, and it is quite reasonable. VJEPA is a free-trade agreement, therefore, in principle, it needs to have a wider opening level than WTO. This is true for both Vietnam and Japan.

In terms of services, Vietnam’s commitments are nearly the same with WTO commitments. Meanwhile, Japan made much higher commitments in comparison with its WTO commitments. In the long-term, when Vietnam’s service providers grow and become stronger, they will receive big benefits from the commitments.

How do you think Vietnamese businesses need to prepare to be able to boost exports to the Japanese market?

I do hope that Vietnamese businesses can take full advantages of the opportunities VJEPA brings. With the tax cuts under the agreement, Vietnamese businesses will be able to compete in prices with other rivals on the Japanese market.

However, if only relying on prices, the competitiveness of Vietnamese businesses will not be long-lasting. The most important things they have to do are improving corporate governance skills, and building a competitive edge and quality products, the factors that ensure long-term and sustainable success.

The agreement acts as a ladder that can bring you to a more advantageous position, but whether you can stay firmly in that position will depend on you.

(Source: Tuoi tre)

Update from: http://english.vietnamnet.vn//interviews/2008/12/820583/

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