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Vietnam promotes negotiations of FTA with MERCOSUR

Vietnam Net - 02 October 2023

Vietnam promotes negotiations of FTA with MERCOSUR

Vietnam is taking measures to promote the negotiations of a free trade agreement (FTA) with the Southern Common Market (MERCOSUR), which is expected to be a driving force for Vietnam to tap the Latin American market.

Currently, MERCOSUR members, including Brazil, Argentina, Uruguay, and Paraguay, do not have free trade agreements with countries whose export structure competes directly with Vietnam. Accessing this bloc market via an FTA will create a significant boost for Vietnamese export goods to them.

MERCOSUR is a dynamic, competitive, and developing economic region. It is the fifth-largest economic region with a total GDP of US$4.58 trillion in the world and is also one of the leading food raw material and energy production regions.

Moreover, MERCOSUR is a potential market, with nearly 300 million consumers, about 70% of the South American population, for Vietnam’s export products such as garments, footwear, handicrafts, and processed foods.

MERCOSUR is Vietnam’s 13th largest trading partner, with bilateral trade value rising from US$2.45 billion in 2011 to US$12 billion in 2022. Of this, Vietnam’s goods exports to MERCOSUR reached US$3.3 billion, while imports from this region amounted to about US$8.7 billion.

Trade value between MERCOSUR and Vietnam accounts for nearly a quarter of the total trade value between MERCOSUR and ASEAN, according to the Ministry of Industry and Trade.

However, logistics costs for goods from Vietnam to this market are high due to the long distance, language differences, and lack of direct freight or passenger transport routes. Most importantly, the two sides have not yet established a free trade agreement (FTA).

According to the ministry, MERCOSUR countries excel in producing and exporting farm produce, animal feeds, industrial materials, and minerals. In contrast, Vietnam’s main exports to the bloc are electronic and telecommunication devices, apparel, and footwear. Such a complementary structure of goods without direct competitiveness is a strength for Vietnam in approaching this market.

Furthermore, the four South American nations have not signed any trade agreements with countries whose export structure directly competes with Vietnam. As such, access to this market will significantly boost Vietnamese goods.

MERCOSUR Parliament (PARLASUR) leaders have also expressed a keen interest in Vietnam being the gateway for MERCOSUR to enter ASEAN.

They support the early launch of the Vietnam - MERCOSUR FTA negotiations to open markets for each other. This will facilitate goods trading activities, diversify the structure of import and export products, and promote the growth of bilateral trade value in the future.

As one of the MERCOSUR countries, Brazil is now Vietnam’s largest trading partner in South America and vice versa, Vietnam is Brazil’s largest trading partner in Southeast Asia. The trade turnover between the two countries in 2022 was about US$6.78 billion, marking an increase of 6.6% compared to 2021 and threefold over the past decade.

Speaking at the discussion between Vietnam-Brazil businesses during Prime Minister Pham Minh Chinh’s visit to Brazil last month, Minister of Industry and Trade Nguyen Hong Dien emphasised that Brazil could become a bridge to help Vietnam’s goods access Latin American countries’ markets as well as the MERCOSUR market.

Similarly, Vietnam can serve as a bridge to help Brazil access the ASEAN market with over 650 million people and the even larger market of 800 million people of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Minister Dien stated that investment from multinational companies into Vietnam is expected to increase as the country becomes a primary production centre in the global supply chain. Consequently, Vietnam’s demand for raw materials will surge, offering Brazil opportunities to expand its supply of raw materials to Vietnam, especially those for emerging industries.

The minister suggested that both sides intensify the exchange of business delegations to explore investment and business opportunities in the two markets, fostering trade and investment ties between the countries.

Minister Dien also urged Brazil to provide more favourable conditions for Vietnamese businesses to access the Brazilian market, especially in sectors like agriculture, footwear, wooden furniture, handicrafts, and seafood.

Brazilian business representatives praised Vietnam’s development potential and recognised the vast cooperation possibilities in fields like agriculture, processing, manufacturing, aviation, mineral mining, technology, and renewable energy.

Regarding economic and trade relations, Vietnam and Brazil have the potential to boost their bilateral turnover to US$10 billion by 2025 and $15 billion by 2030, as noted by Minister of Foreign Affairs Bui Thanh Son.

Vietnam hopes Brazil, a founding member and the current rotating president of MERCOSUR, will continue to support and expedite the commencement of FTA negotiations between Vietnam and MERCOSUR, Son added.

According to statistics, trade between Vietnam and the Americas, comprising 35 countries including MERCOSUR members, reached US$153.9 billion last year, growing by 10.7% annually.

Of this total, Vietnam’s imports and exports were valued at over US$128 billion and US$25.7 billion, marking increases of 12.2% and 3% year-on-year, respectively. This led to a record trade surplus of more than US$102.5 billion.

Trade values with major regional markets experienced stable growth: the US (11%), Brazil (6.6%), Canada (16.5%), Mexico (7.1%), Chile (9%), and Argentina (8.3%).

Ta Hoang Linh, director of the MoIT’s European-American Market Department, believes that Vietnamese goods can establish a stronger foothold in the Americas when businesses leverage existing FTAs.

The ministry’s strategy emphasises maximising the benefits of the 15 existing FTAs and advocating for the negotiation of new agreements, including one with MERCOSURr.

Furthermore, as Linh highlighted, Vietnam has pledged to achieve net-zero emissions by 2050, driving the nation to champion green production and environmental protection. This commitment will give Vietnamese exports a competitive edge in the future, especially as demand for eco-friendly products rises in European and American markets.

 source: Vietnam Net