UKVFTA: A driver for green trade and sustainable supply chains

The UK-Vietnam Free Trade Agreement (UKVFTA), along with other new-generation free trade agreements (FTAs), is promoting green trade in Vietnam through the restructuring of supply chains towards adaptation and sustainability.

[caption id="attachment_605670" align="alignnone" width="1280"] Farmers harvest oranges in an organically grown orchard in Cao Phong district, Hoa Binh province. Photo: Ly Ly/VNS

Following severe disruptions caused by the COVID-19 pandemic, the US-China trade war, the Russia-Ukraine conflict, and global climate change, green trade is emerging and becoming an inevitable trend in global trade.

According to Deputy Minister of Industry and Trade Dang Hoang An, commitments on sustainability, environment, and labor, as well as new-generation FTAs, including the UKVFTA, have given Vietnam a boost towards green trade to catch up with global sustainable development trends.

Vietnam is undergoing a green transition to fulfill its international commitments on sustainable development, energy conservation, and climate adaptation.

Green commitments create opportunities for businesses to participate in the supply chain with the UK by creating environmentally friendly products and goods that meet relevant environmental protection and climate change adaptation standards, Mr. An said.

The Deputy Minister also noted that the process toward carbon neutrality will shift the comparative advantage of exports from labor- and energy-intensive sectors to innovation- and technology-based ones.

Nguyen Canh Cuong, Vietnam's Trade Counselor in the UK, believes that the potential for promoting green trade with the UK is enormous.

According to Mr. Cuong, the prospects for exporting steel and iron products manufactured using decarbonization technology to the UK are very bright. The UK is also a pioneer in promoting decarbonization for the steel industry.

In addition, there are opportunities to increase exports of energy-saving appliances and household goods such as freezers, washing machines, and lamps, environmentally friendly products, and products made from recycled materials.

For agricultural products, green trade offers opportunities for organic products. Mr. Cuong noted that organic food is an advantage for Vietnam and a trend among British consumers.

He also stated that the two countries have great potential to enhance cooperation in green transition, including renewable energy development, sustainable agricultural production, waste management, emission reduction in transportation, and green finance.

Building a sustainable supply chain.

[caption id="attachment_605692" align="alignnone" width="665"] Dried cinnamon bark product of Son Ha Spice Company Limited, Van Yen district, Yen Bai province. Photo: Vu Sinh/TTXVN

Research results published earlier this year by Associate Professor Dr. Tu Thuy Anh of the Foreign Trade University indicate that global trade is moving towards sustainable development, forcing Vietnamese businesses to adjust their business strategies in order to participate more deeply in new value chains. This trend is further boosted by the implementation of new-generation FTAs, which incorporate regulations on environmental protection and sustainable development.

Another trend in global trade is the restructuring of supply chains towards adaptation and sustainability, which emerged after the COVID-19 pandemic caused severe disruptions.

"Consumer and commercial behavior is changing. Sustainability and efficiency are evolving," the study points out.

These trends present both challenges and opportunities for Vietnam to participate more deeply in global supply chains and achieve sustainable development.

The UK is one of the world's leading countries in environmental protection, emissions reduction, and sustainable development, including green and fair trade policies.

According to Ms. Nguyen Khanh Ngoc, Deputy Director of the European-American Market Department, Ministry of Industry and Trade, pursuing a green strategy will create a competitive advantage for businesses.

She argued that Vietnamese businesses need to innovate technologically and shift to green production to enhance their competitiveness.

Accordingly, Vietnamese goods must first meet the UK's stringent standards on food hygiene and safety, quality, and transparency of origin in order to take advantage of the UKVFTA. British consumers are particularly interested in corporate social responsibility and manufacturers' efforts to protect the environment.

A report on the impact of the UKVFTA on Vietnam's exports to the UK, by researchers from the School of Economics, Vietnam National University, Hanoi, shows that commitments to transparency regarding quality standards are essential drivers for improving production to meet market requirements for Vietnamese export goods.

"The UK market has very strict product standards. Products wishing to enter the UK market must meet requirements for information transparency and ensure they are produced using sustainable practices. Vietnamese businesses wanting to enter the UK market must ensure at least three things: standardization, health, and environment," the report stated.

Once the product meets the standards for entry into the UK, a market with high requirements, significant opportunities for increased exports to other markets will open up.

With 16 FTAs, Vietnam is one of the most open economies in the world, creating great opportunities to build new supply chains with partner markets.

Sustainability will help enhance the value and build a sustainable brand for Vietnamese products and businesses. However, the most important thing is a shift in mindset that living green is not an expense but an investment, according to Mr. Ngo Chung Khanh, Deputy Director of the Multilateral Trade Policy Department, Ministry of Industry and Trade.

Ly Ly