How to utilize advantages of UKVFTA to bolster exports to UK market

Exports to the UK market see drastic upturn

After the enforcement of the UKVFTA nearly two years ago, the UK market views Vietnamese businesses and Vietnamese products more positively, with the volume of goods imported from the nation increasing sharply.

According to the assessment made by the Ministry of Industry and Trade, despite starting in a difficult context due to the COVID-19 pandemic, last year’s two-way trade between reached close to US$6.6 billion, of which Vietnamese exports hit nearly US$5.8 billion, up 16.4%-on year.

In contrast, imports from the UK reached US$849 million, an annual rise of 23.6%, while the trade balance was in favour of Vietnam with a trade surplus of more than US$4.8 billion.

As of November, exports to the UK expanded by 9.5% compared to the same period from last year, thereby raking in US$5.2 billion, with the trade surplus standing at nearly US$4.6 billion.

Many Vietnamese export items to the UK boast strengths and enjoy preferential tariff commitments under the terms of the UKVFTA, including garments and textiles, leather and footwear, coffee, pepper, seafood, machinery, toys, and sports equipment. Indeed, fruit and vegetables, confectionery, and cereal products all enjoyed high growth in terms of export turnover.

According to details given by Christopher Jeffery, chairman of the British Chamber of Commerce Vietnam (BritCham Vietnam), despite facing initial difficulties caused by the COVID-19 pandemic, two-way trade has achieved high growth. This represents the clearest proof of the benefits that the UKVFTA has brought about to the economic and trade development of both sides.

There remains ample room to grow Vietnamese exports to the UK through the UKVFTA, particularly as local goods exported to this market account for less than 1% of the annual import demand of more than US$600 billion of the UK market.

Furthermore, along with the stronger presence of more UK investors in the country, the UK market will also improve the image of Vietnamese businesses, with export products being viewed as a good opportunity for Vietnamese businesses to boost exports to the highly lucrative market, assessed Nguyen Anh Duong, head of General Research Department under the Central Institute for Economic Management.

Capitalising on great advantages of UK market

Nguyen Thi Thu Trang, director of the WTO Center under the Vietnam Chamber of Commerce and Industry (VCCI), said that the recent export growth results to the UK market indicate that businesses know about the UKVFTA. Indeed, many have strived to make use of the first-mover advantage with Vietnam being the first country in ASEAN to have a bilateral FTA with the UK.

In a recent VCCI survey, 18% of businesses said they had learned about the UKVFTA's commitments related to their business activities, as well as the relationship between the two respective markets.

However, there has also been a host of difficulties for Vietnamese exporters, with many forecasts anticipating a decline in many major economies in 2023 such as the United States and EU, with the UK economy being no exception.

Accordingly, businesses are encouraged to come to the UK in order to participate in many fairs, direct trade promotion activities, and approach consumers and importers in a bid to outline a business plan in line with market changes of the overall economy.

This will also help firms to seek new customers, introduce their products, view competitors' products, and see how consumer trends change, as well as how their requirements differ.

Moreover, with a large market, the need to import goods of more than US$700 billion per year, along with high requirements for product quality and production standards, there are big barriers which face Vietnamese exporters.

Local enterprises must therefore carefully learn about the rules in order to be able to fully comply with commitments as they cannot rely on subsidy and support from state agencies, meaning they must deal with measures in the right way.

There are commitments that after six years of the UKVFTA taking effect the UK will eliminate import tax on 99.2% of tariff lines, equivalent to 99.7% of Vietnam's export turnover.

The utilisation of the UKVFTA, which is reflected in the use of preferential tariffs, also reached 17.2% in the first year of the agreement's implementation.

In comparison to other trade agreements in the first year of enforcement, the rate of 17.2% is not low, with positive signs ahead for the future of trade between the two sides.