Marching towards Vietnam-Japan FTA
VietNamNet Bridge — Minister of Trade Truong Dinh Tuyen talks about the possible impact of the Vietnam-Japan Free Trade Agreement (FTA).
Vietnam is conducting comprehensive economic partnership negotiations in the period of deep integration with Japan. Please tell us, how far have the negotiations gone?
On June 26, I had a meeting with Akira Amari, Japanese Minister of Economy, Trade and Industry. Now Vietnam is negotiating with Japan in order to sign the FTA between Vietnam and Japan.
The two sides are trying to wrap up negotiations before November 2008. Personally I think that only as of 2003 did Japan begin advocating the FTA with Vietnam.
Japan has signed FTAs with many countries, especially ASEAN nations. If Vietnam cannot reach the agreement with Japan, its exports would face discriminatory treatment in Japan’s market.
In trade with Japan, Vietnam’s exports to the market are $300mil higher than imports. If the Vietnam-Japan FTA is signed, the trade balance will be improved.
How will the FTA influence Vietnam?
There will be breakthroughs in exporting goods to Japan. As for Vietnam’s exports, Japan wants to lower taxes to 2.8% on average by 2018 from the MFN tax rate of 5.05% as currently applied. In return, Vietnam will have to cut taxes to 7% by 2018 from the current MFN tax rate of more than 14%. It is obvious that the tax reductions for Vietnam will be sharper and faster than Japan, though the final tax rates Japan would apply would be lower than Vietnam’s.
Japan commits to lower 92% of categories of tax, of which, several thousand categories of tax would be cut to 0% immediately. The tax reductions would create good conditions for Vietnam’s exports to enter Japan’s market. However, if Vietnamese companies are not good in trade promotion, they would not be able to access the market and boost exports to Japan.
Meanwhile, Vietnam will also have to open its market to very dynamic Japanese enterprises. Currently, the import tax rates Japan is applying are relatively low already, and the tax rate will be lowered from over 5% to 0%, while Vietnam will have to cut from 14% to 0%. Japanese enterprises prove to be capable of easily accessing Vietnam’s market, while Vietnamese enterprises are still weak in trade promotion, which should be seen as a big problem.
What would you recommend to enterprises and state management authorities?
We are trying to join the global market. With the agreements on bilateral and multilateral market opening, Vietnam’s partner countries will open their markets for Vietnam’s goods, while Vietnam will also have to open its market for foreign companies.
As such, the door to the world’s market would be opened, but whether Vietnam’s goods could penetrate the market would still depend on many factors, especially the quality and price of goods. Even when we have good quality products and competitive prices, we need still push up trade promotion in order to bring Vietnam’s goods to foreign customers.