How FTAs affect agricultural production?

Trade deals with the Trans-Pacific Partnership (TPP) partners, the European Union, and the Customs Union of Russia, Kazakhstan and Belarus offer advantages and pose challenges to Vietnamese agriculture.

Foreign agricultural products will flood the Vietnamese market in a couple of years, putting domestic products at a disadvantage.

VOV discussed the issue with Dang Kim Son, Director-General of the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD).

VOV: How will the trade agreements under negotiation affect Vietnam’s agricultural sector?

Dr Son: Vietnam has made use of international economic integration for national development over the years. Among key economic sectors, agriculture has enjoyed a trade surplus for many consecutive years, and its export value hit a record high of nearly US$30 billion, even at the heights of the economic crisis.

The agricultural sector is vulnerable to FTAs as soon as they are in effect

Research indicates policy reform and infrastructure investment, particularly for business development, would reap even greater success. Vietnam has only capitalised on a fraction of the opportunities stemming from World Trade Organisation membership. The same challenge is posed by the TPP and the six other trade agreements.

The markets for key agricultural products like seafood, coffee, and rice will expand as competition from foreign imports intensifies. Farmers will suffer the most if the sector and its businesses fail to adapt.

VOV: What are solutions the sector should adopt to approach the changes?

Dr Son: Integration cannot deliver immediate success to both big and small economies. Integration must proceed with reforms in State management and market transparency. A long-term strategy is needed to encourage investment from all economic sectors.

A healthy business environment means all economic sectors are treated equally, especially for farmers that still comprise the agricultural sector’s majority. Advanced technology should be applied to help agricultural businesses access international markets.

The State needs policies that attract investment into rural areas or else risk international business domination of the domestic agricultural market.

Finite resources cannot support the parts of the economy struggling to compete. Vietnam’s inherent competitive advantages deserve preferential treatment and the country should focus on producing those products of high competitive advantage.

VOV: Some imports, such as sugar, will soon enjoy zero tax. What should businesses do to hone their competitive edge ahead of this change?

Dr Son: We should use the last moments of tariff protection to raise competitiveness. Businesses specializing in sugarcane, oil producing crops, tobacco, animal feed, and temperate produce—all of which use imported input materials—need to play by the rules to consolidate their integration.

Vietnam will have to boost exports while continuing to rely on imports for materials it cannot efficiently supply itself. Sugar is a case in point  Vietnamese sugar prices are much higher than international market’s because of protectionism. Many other countries are in similar situations.

Poor farmers are most vulnerable and they deserve the most attention and assistance. The State should build new irrigation and cultivation systems to enable farmers to grow and breed higher-yielding varieties.