Vietnam farmers raise alarm bells over trade deals

It is not just the AEC that is causing alarm bells to sound, it’s the fact that other Free Trade Agreements (FTAs) such as those with the Republic of Korea (RoK), Eurasian Economic Union and EU will follow suit over the next couple of years.

There is also the potentiality that agreement may be reached on the now stalled Trans-Pacific Partnership (TPP) and much concern over the impact it might have on the nation’s economy, if ratified.

The agriculture industry group, for example fears that the influx of lower-priced agricultural products such as rice, chicken, pork and beef from foreign countries would deal them a death blow.

In addition, many small and medium sized companies in the furniture, automobile, textiles, and apparel industries could face their demise given the stiff competition of their global competitors and FTAs rules of origin.

“Very few Vietnamese companies have to date taken advantage of FTAs to improve their competitiveness and business growth,” said Director Nguyen Thi Thu Trang of the World Trade Organization (WTO) Centre.

Trang stressed there have been few in-depth studies of the impact of FTAs but the ones that have been performed show that upwards of 70% of domestic businesses haven’t attempted to take advantage of them nor address the competitive issues they raise.

Recently, the Vietnam Institute for Economic and Policy Research (VEPR) released a report addressing the impact of the AEC and TPP on agriculture, which was conducted under the sponsorship of the International Cooperation Agency of Japan (JICA).

In its report the VEPR concluded that companies in the agricultural industries group as well as those operating in the dairy, forestry, wood products and mining industries would suffer severely from the AEC and TPP.

For the livestock industry, the study stated its low competiveness, featuring mostly small scale farming and production, heavy dependence on imported breeds and feeds, common disease-stricken problems, limited slaughter hygiene and food safety and environmental pollution as the cause of its doom.

The VEPR concluded these features are prominent across all livestock industries such as swine, poultry, cattle, milk and dairy.

Others have said the highly controversial VEPR report failed to take into consideration that the problems it identified could all be overcome with adequate training and investment in modern technologies.

On its face, it doesn’t seem logical that Vietnam smallholders could not compete against their counterparts from, for example, Japan and the US.  Farmers in those countries are by and large smallholders that are simply equipped with better training and technology.

However, the economic impact of the AEC is insignificant when compared to that of TPP, the VEPR report concluded.

Although the report was purportedly designed to study the impact of the AEC and TPP on agriculture it concluded that the apparel, leather manufacturing and construction industries would receive advantages from the AEC and TPP without any mention of the impact of the rules of origin.

Specifically the rules of origin require that all production from the yarn stage forward must be performed in Vietnam or another of the 11 TPP member nations for domestic businesses to benefit from the TPP reduced tariffs as well as other non-tariff measures.

The rules of origin are the biggest obstacle the textile and apparel industries face in connection with the TPP, said  Vietnam Textile and Apparel Association (Vitas) Vice Chair Dang Phuong Dung.

Dung’s analysis is in direct contradiction to the VEPR report in that Dung asserts few domestic companies in the textiles and apparel industries would today be able to comply with the rules of origin and benefit from the reduced tariffs.

It is going to take large amounts of investment to develop the supply chain Dung said, adding that many are hesitant to pump money into textile mills because of the extremely high cost, particularly as it relates to complying with environmental standards.

Other leaders in the garment and textile industry agree that domestic businesses currently cannot comply with the rules of origin and benefit from the TPP reduced tariffs and other non-tariff benefits were it to be put in place.

They suggest the industry needs a specific 3-5 year plan to develop the supply chain and to bring it up to compliance with the requirements of the TPP as it relates to the rules of origin.

Currently there simply is an insufficient amount of domestic produced materials to meet those requirements, they have said, adding that more in-depth studies need to be undertaken to quell the alarm bells created by FTAs.