Vietnam-EU Trade Forum: Opportunities to expand supply chains with European partners.

This information was presented at the Vietnam-EU Trade Forum, organized by the Ministry of Industry and Trade in coordination with the People's Committee of Ho Chi Minh City, within the framework of the "Connecting International Goods Supply Chains" (Viet Nam International Sourcing 2023) event series.

Vietnam ranks 11th among countries supplying goods to the EU.

In her opening remarks, Ms. Nguyen Thao Hien, Deputy Director of the European and American Market Department (Ministry of Industry and Trade), stated that in recent years, despite market instability, supply chain disruptions, and difficulties facing the EU economy , bilateral trade between Vietnam and the EU has still recorded good recovery and growth, significantly supported by the Vietnam-EU Free Trade Agreement (EVFTA).

Currently, the EU is one of Vietnam's leading trading partners, ranking as its third largest export market and fifth largest import market. Conversely, Vietnam is the EU's 16th largest trading partner and its largest trading partner within ASEAN. In terms of exports alone, Vietnam ranks 11th among the largest suppliers of goods to the EU.

According to statistics from the General Department of Customs, in 2022, bilateral trade between Vietnam and the EU reached US$62.24 billion, an increase of 9.2% compared to 2021, and accounted for 8.5% of the country's total import and export turnover. The trade balance showed a surplus in favor of Vietnam.

In 2022, exports to most markets within the EU bloc increased significantly. Notably, many markets achieved double-digit growth rates, such as Ireland (up 45.9%), Denmark (up 40.0%), the Netherlands (up 35.8%), and Germany (up 23.1%).

There is still much potential to expand exports to the EU market.

The market structure has also witnessed a positive shift, not only maintaining and developing exports to major gateway markets within the bloc such as the Netherlands, Germany, Belgium, and France, but gradually expanding to smaller, niche markets in Eastern Europe, Northern Europe, and Southern Europe with impressive growth rates (typical examples include Poland, Sweden, the Czech Republic, Slovenia, Ireland, Denmark, and Romania...).

According to calculations from the General Department of Customs, 2022 saw nine product categories exceeding $1 billion in export value, with many experiencing double-digit growth. The product structure is also becoming increasingly diversified. Exports are not limited to key items such as: telephones and components; computers and electronic products; machinery, equipment and spare parts; footwear; and textiles, but are also being boosted to include many agricultural, forestry, and aquatic products to the EU.

Entering 2023, the risk of economic recession, inflation, and high interest rates persisted, leading to a decline in consumer demand and imports of goods in the EU, significantly impacting trade between Vietnam and this market region. According to statistics from the General Department of Customs, in the first eight months of 2023, two-way trade between Vietnam and the EU reached US$38.8 billion, a decrease of 8.6% compared to the same period in 2022, of which exports to the EU reached US$29 billion, a decrease of 9.5% compared to the same period in 2022. However, the rate of decline has shown signs of slowing down.

At the same time, the continued positive adjustment of inflation in the EU will be a supporting factor for consumer spending in the region in the coming period; imports will also gradually improve as inventories decrease and demand for shopping increases during the year-end season. Therefore, Vietnam's exports to the EU are expected to recover from the fourth quarter of 2023.

Furthermore, the trend of shifting supply chains and investment flows presents significant opportunities for Vietnam to increase its competitiveness in attracting investment and technology transfer from EU partners, enabling deeper participation in sustainable and mutually beneficial supply chains with the EU. In particular, Vietnam's advantages in capital and technology, coupled with the EU's priorities on "green and digital" transformation, will support its transition to a green and circular production model. This will give Vietnamese goods a quality advantage, meet EU regulations and standards, and align with current sustainable development trends.

What opportunities are there for businesses?

Mr. Jean Jacques Bouflet, Vice President for Policy at the European Chamber of Commerce in Vietnam (EuroCham), stated that Vietnam is emerging as an increasingly important destination in the global supply chain. With its strategic geographical location, stable economy, young workforce, and sound policies, these factors combine to make Vietnam a leading destination for European Union companies.

“The Free Trade Agreement between the European Union and Vietnam (EVFTA), along with effective pandemic control measures, has increased Vietnam’s credibility as a reliable destination in the global supply chain shift,” Jean Jacques Bouflet emphasized.

According to Mr. Jean Jacques Bouflet, since the EVFTA agreement was signed, companies from the European Union have invested more than $26 billion in approximately 2,250 projects in Vietnam. Notable examples include the Danish Lego Group, which invested over $1 billion in a 44-hectare green, sustainable, and environmentally friendly factory in Binh Duong . Similarly, the German Adidas Group has partnered with 51 suppliers in Vietnam. This demonstrates the rapid and profound development of the relationship between EU and Vietnamese businesses, stemming from geopolitical factors and the need to expand into Asian markets.

However, the Vice President of EuroCham added that global consumers are increasingly favoring environmentally friendly products, and companies are focusing and investing more in green logistics. In this context, Vietnam is facing challenges related to green transition and sustainable development.

"Vietnam faces a dual challenge: not only must it integrate into these global supply chains, but it must also transform its model into a green supply chain," shared the Vice President of EuroCham.

To address these challenges, Jean Jacques Bouflet suggested that Vietnamese businesses need to ensure compliance with green standards by implementing stricter environmental regulations; investing more in research, development, and infrastructure improvements; and enhancing logistics capabilities and human resource training.

On behalf of EuroCham, Mr. Jean Jacques Bouflet stated that EuroCham is committed to contributing to unlocking the potential of the EVFTA by implementing awareness campaigns about the agreement's benefits. Simultaneously, they will organize workshops to promote direct links between Vietnamese suppliers and European consumers. In particular, they will focus on capacity building and training to raise awareness of the EVFTA among members, along with providing knowledge-sharing platforms to ensure they are adequately equipped to take advantage of the agreement's benefits.

Within a strategic alliance, EuroCham is working closely with various partners to promote the Sustainable Development Goals (SDGs) in the region. “EuroCham acts as a bridge between the Vietnamese Government and European businesses in open policy dialogues and collaboratively develops policies that promote mutual benefits. In particular, promoting digital transformation in administrative procedures plays a crucial role, ensuring that trade activities are efficient and transparent,” emphasized Mr. Jean Jacques Bouflet.

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