May 19, 2015

Vietnam - Risks to dog exporters as more FTAs signed

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HCMC – Vietnam’s foray into free trade agreements (FTA) will open up opportunities for local enterprises to tap new markets but these pacts might also expose exporters to more trade defense cases in member countries, heard a trade seminar last week.

At the seminar held by the law firm Mayer Brown and the HCMC branch of the Vietnam Chamber of Commerce of Industry (VCCI) in HCMC, Matthew J. McConkey, a partner at Mayer Brown, said FTAs would support Vietnam’s exporters to boost shipments.

But Vietnamese exporters will face more anti-dumping and anti-subsidy cases which producers in importing countries would file for fear that increased imports threaten their production.

According to Pham Chau Giang, head of trade remedies investigation at the Vietnam Competition Authority, when an economy feels hurt by increased imports, it will resort to trade defense measures to protect its manufacturers.

In the ASEAN grouping, FTAs will lead to more trade remedies cases, Giang said.

For instance, between 2007 and 2011, Malaysia took no anti-dumping defense measures. However, in the first year after the ASEAN Trade in Goods Agreement (ATIGA) became effective on May 2010, import tax reductions led to imports surging, thus threatening Malaysian producers. As a result, since late 2011, Malaysia has taken action to prevent an infux of foreign goods.

Malaysia filed 11 anti-dumping lawsuits in 2012 and eight in 2013. Last year it filed eight lawsuits against goods imports from Indonesia, China and South Korea, and partners of FTAs.

According to Giang, the U.S. and Russia, which will join the kind of FTA with Vietnam and others, have previously filed many trade defense cases against Vietnamese firms in a variety of sectors.

When shipping goods to these countries, Vietnamese enterprises should take caution. Meanwhile, South Korea is an export-oriented economy that imports material for domestic production, so it may not take action against exporters.

When a case is filed, enterprises involved would feel troublesome but if they decline to pursue the lawsuit, they might lose export markets and face similar cases in other markets, Giang explained.

In addition, according to McConkey, Vietnam has faced several lawsuits from Europe, the U.S. and neighboring countries. One of the reasons why Vietnamese goods are often sued is Vietnam is still considered a non-market economy. Therefore, the U.S. uses a surrogate country to calculate production costs, making export prices of Vietnamese goods lower than production costs.

In early 2019, the World Trade Organization (WTO) will recognize Vietnam as a market economy. However, McConkey said it was unsure if the U.S. recognized Vietnam’s market economy in 2019.

Giang said more free trade agreements have been and will be signed. In 2020, a large proportion of goods exported to Vietnam will enjoy a zero tax, except for sensitive ones like autos and some agricultural products. As a result, if no preparations are made from now such as increasing labor productivity and competitiveness, domestic enterprises will run into trouble.

In the coming time the U.S. can set up barriers against Vietnam’s textiles and garments, Giang said, adding no child labor is accepted and every production stage is required to use copyright software.

Tran Thu

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