Finding solutions for businesses to utilise FTA leverage

Several industries successfully leverage FTAs

As one of Vietnam’s key export sectors, textiles and garments are taking significant advantage of FTAs. According to Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association, textiles ranked fourth among the largest export sectors during the first 10 months of 2024, with revenue of 30.57 billion, marking a 10.5% increase compared to the same period last year.

Notably, textile exports to FTA markets have seen impressive growth, with the CPTPP market alone accounting for approximately 16%.

"The CPTPP agreement has shaped a truly global market. Following the agreement, Vietnam’s textile industry has penetrated several CPTPP markets, especially in South America, Canada, New Zealand, and Mexico — markets that were previously challenging to access. However, since the trade agreement came into effect, we have achieved exceptional growth in these areas," shared Vu Duc Giang.

According to the Ministry of Industry and Trade, Vietnam’s largest export markets over the past 10 months are those with bilateral and multilateral FTAs. Specifically, exports to China reached 50.8 billion USD, a year-on-year increase of 2.1%. Exports to the EU totalled 42.3 billion USD, marking a 16.4% increase (compared to an 8.9% decline in 2023).

Vietnam’s exports to the Republic of Korea reached 21 billion USD, a 6.9% increase (compared to a 3.6% decline in 2023), while exports to Japan were recorded at 20.1 billion USD, a 4.6% increase (compared to a 3% decline in 2023).

While these achievements are noteworthy, exporting to FTA markets is not solely an advantage. For instance, Australia, which has three FTAs with Vietnam (AANZFTA, CPTPP, and RCEP), is one of the world’s most demanding markets with stringent product quality standards and strict import procedures.

Australia, which imports fruits such as lychee, longan, dragon fruit, and passion fruit from Vietnam, imposes strict technical barriers, labelling, and food safety requirements — sometimes even stricter than those in the US and EU. For Vietnamese exporters, prioritising product quality over price is essential to penetrate this market.

Similarly, within the CPTPP bloc, exporting processed and manufactured goods, including textiles, is becoming increasingly difficult. According to Tran Thu Quynh, Trade Counsellor at the Vietnamese Trade Office in Canada, the challenges arise from declining market demand and intensifying competition. Additionally, Canada has been signing FTAs with other partners, such as South American countries and nations in the Indo-Pacific region (Malaysia, India, Indonesia, and ASEAN), whose export structures are similar to Vietnam’s.

Moreover, businesses are facing challenges in traceability, which is crucial for maximising the benefits of FTAs.

Overcoming barriers for businesses

To make the most of FTAs, businesses are focusing on improving product traceability. For example, the Vietnam Timber and Forest Product Association has emphasised the importance of ensuring the legality of raw materials in wood exports. Businesses must enhance accountability to ensure that raw materials are clearly sourced and do not contribute to deforestation or forest degradation.

Recently, the association has conducted training sessions on accountability practices and implemented programmes urging businesses to improve their management capabilities. Apart from the benefits of FTAs, businesses must also mitigate risks by thoroughly researching their partners before signing contracts in order to avoid unforeseen issues.

Regarding the government, efforts are underway to remove barriers for businesses to capitalise on FTAs in an effective manner. According to Ngo Chung Khanh, Deputy Director of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, the government has tasked the ministry with coordinating with other sectors and associations to develop an FTA ecosystem.

This ecosystem will connect all stakeholders across value chains. For example, in the seafood sector, the system will link farmers, procurement companies, processing firms, financial institutions, logistics providers, and relevant authorities.

Initially, the ecosystem will focus on six key sectors: textiles, footwear, seafood, coffee, cinnamon, and cashew nuts. The goal is to maximise the strengths of all stakeholders, identify priorities, and fully exploit FTA opportunities. Expected to launch by September 2025, the ecosystem will help address existing challenges while streamlining FTA implementation. By pooling resources from ministries and associations, the system aims to enhance FTA exploitation for greater efficiency.