Vietnam-EU Trade Surplus Underlines Growing Trade, Relations

Through the first six months of 2022, Vietnam loved a big commerce surplus with the EU, at US$15.5 billion – a powerful indicator of Vietnam’s financial restoration post-pandemic, and rising Vietnam-EU bilateral commerce. Vietnam Briefing analyses rising Vietnam-EU commerce relations and the top-performing industries between the 2 companions.

Vietnam and the EU have engaged in growing bilateral commerce for greater than three a long time. Either side have been trusted companions in lots of areas, together with financial growth, commerce, inexperienced economic system, and peacekeeping.

Vietnam is the EU’s 15^th trade-in items companion and the EU’s most outstanding buying and selling companion in ASEAN as of 2020, in addition to Singapore. The nation can be the 11^th greatest exporter to the EU, with a share of 1.8 p.c within the total EU’s imports worth.

Supply: Eurostat

Vietnam and the EU have signed a number of agreements on selling commerce, and safety.

When it comes to safety, in October 2019, Vietnam and the EU signed a Framework Participation Settlement (FPA) to tighten bilateral safety and protection insurance policies. In the meantime, the Funding Safety Settlement (IPA) was accepted by the EU in 2020 and can enter into power as quickly as all member states ratify it. As of February 2022, 12 EU Member States have ratified the IPA.

In August 2021, the EU-Vietnam Free Commerce Settlement (EVFTA) got here into power, which boasts a new-generation free commerce settlement (FTA) between Vietnam and the EU. The EVFTA has additional facilitated elevated commerce between individuals.

Within the first six months of 2022, Vietnam loved a US$15.5 billion commerce surplus with the EU, up practically 40 p.c yr on yr. This can be a optimistic signal of recovering bilateral commerce after the pandemic performed down Vietnam’s exports to the EU in 2019 and 2020, as could be seen under.

Supply: Eurostat

Vietnam-EU commerce surplus as of June 2022

By June 2022, Vietnam’s export worth to the EU was US$23.6 billion whereas imports from the EU have been price US$8.1 billion, constituting a commerce surplus of US$15.5 billion. This was 39 p.c larger than the worth throughout the identical interval in 2021.

The commerce surplus of Vietnam to the EU has been on a gradual rise for 20 years, ranging from a low of US$1.3 billion in 2002, and up 21 occasions by 2021 to US$27.9 billion. The excess worth through the years could be noticed under.

Vietnam-EU commerce surplus over the previous couple of years

In Q1 and Q2 of 2022, Vietnam witnessed enhancements within the export worth of products to the EU, in comparison with the identical interval in 2021.

Vietnam’s most traded items with the EU embody telecommunication tools, footwear, electronics, textiles, and furnishings.

Supply: Eurostat

It’s clear that the EU witnessed a commerce deficit with Vietnam on a number of commodities/items. One of many only a few items that confirmed extra balanced commerce was the class of rotating pland and elements thereof.

The implementation of EVFTA has generated an impetus for the export of many items to the EU from Vietnam, together with seafood, rice, and cashews.

Below the EVFTA, many of the 220 tariff traces on Vietnam’s seafood, with tariffs of as much as 22 p.c, have been diminished to zero p.c. The remaining tariff traces will likely be phased out over the course of three to seven years.

As per the Vietnam Affiliation of Seafood Exporters and Producers (VASEP), seafood exports to the EU have witnessed a startling leap in each worth and amount. Within the first 5 months of 2022, tuna exports to Germany soared to US$10.5 million, up by 100% yr on yr. In the meantime, Vietnam’s shrimp export to the EU as of 15^th June 2022 reached US$338 million, up 51 p.c yr on yr.

Cashew is one other good to witness robust progress in export worth. As of April 2022, Vietnam’s cashew exports to the EU was up 21 p.c in worth and up 22 p.c in amount, at 49,000 tons, in comparison with the prior month. The leap in export worth has been attributed to the 0 p.c tariff on Vietnam’s cashew, as regulated by the EVFTA, in comparison with a 7-12 p.c tariff earlier than the EVFTA.

Below the EVFTA, damaged rice enjoys commerce liberalization when getting into the EU market, citing the utmost imported amount to 100,000 tons, in parallel with the dedication to scale back the tariff line on damaged rice to zero p.c in three to 5 years from the date EVFTA grew to become legitimate. This may put Vietnam’s rice producers at a aggressive benefit within the EU market.

The Netherlands, Germany, and Italy are the highest three merchants with Vietnam among the many EU member states.

Supply: Eurostat and GSO

A degree to notice is that these EU member states additionally noticed essentially the most important commerce deficits with Vietnam. But Finland is the one EU Member State that had a commerce surplus with Vietnam in 2021, at US$ 31.6 million.

What does Vietnam’s commerce surplus with the EU indicate?

Commerce between Vietnam and the EU is forecast to succeed in new highs because the EU steadily fulfills the dedication to deliver down tariff traces for numerous Vietnamese items and commodities through the subsequent three to seven years. Buyers throughout industries ought to make the most effective of the tariff benefit below the EVFTA to scale up their enterprise operations and exports from Vietnam to the EU.

Potential stays for a lot of sectors, together with espresso and cashew exports to the EU. At the moment, 80 p.c of cashew and occasional exported is uncooked as Vietnamese producers have but to make processed cashew and occasional merchandise that greatest go well with EU tastes. Most significantly, the main target is on the telecommunications and digital industries because the EU’s demand for semiconductors and elements soar amid the worldwide enter scarcity.

Nevertheless, uncertainties stay for EU-Vietnam commerce because the euro has depreciated not too long ago. Mr. Tran Thanh Hai, Deputy Director of the Division of Import-Export (Ministry of Trade and Commerce), expressed his concern concerning the affect on the revenue of companies within the brief time period by the depreciation of the euro, particularly companies that interact in contracts with cost in euros. That’s, for exporters, the identical quantity of euros earns much less in VND, thus affecting earnings.

As well as, the depreciation of euros will drive up inflation in European nations, which can undermine the shopping for energy of customers and result in restricted spending on non-essential items. 

Analysts count on that whereas the EU could mood inflation, the Russia-Ukraine disaster will make it considerably difficult.