The UK market is becoming increasingly important to Vietnamese export enterprises due to the large import demand from this market. Below is some information related to trade, policies and recommendations for enterprises when trading goods with the UK market.

After more than 3 years of implementation, how has the UKVFTA impacted the trade and investment cooperation between the UK and Vietnam?

Vietnam and the United Kingdom of Great Britain and Northern Ireland celebrated the 50th anniversary of diplomatic relations last year (1973 - 2023) with a series of exciting and substantive activities. The good relationship and cooperation between the two countries have been formed, built and developed in many fields and levels; in which, economic and trade cooperation is always a bright spot. In 2023, the UK is the 9th largest export market in the world and the 4th largest of Vietnam in Europe and America.

In the economic and trade relationship between the two countries, since coming into effect in 2021, the UKVFTA has become an important growth driver promoting trade and investment cooperation between the UK and Vietnam over the past 3 years. Specifically, some of the following impacts can be seen:

1. In the field of Vietnam's exports to the UK

After more than 3 years of implementation, UKVFTA has contributed to creating conditions for Vietnamese goods exports to the UK market to grow continuously and strongly, even in the most difficult and "darkest" times of Vietnam's exports to the world, such as the COVID-19 period and the second half of 2023.

Let's return to the context of 2023, when Vietnam's trade with most key export markets in the European region witnessed an unprecedented sharp decline (at double digits) due to geopolitical tensions and general difficulties of the global economy, import and export turnover between Vietnam and the UK continued to grow steadily.

Last year, total trade turnover between the two countries grew by 4.5%, of which Vietnam's exports increased by 4.6%, while UK exports also increased by 3.2%. If including the first 3 years of implementing the Agreement, the total two-way trade turnover between Vietnam and the UK increased by an average of 8.9%/year; in which exports increased by an average of 9.35%. This figure is much higher than the average growth rate of similar indicators with the EU-27 region (5.9% and 8.2% respectively).

In the first 9 months of 2024, the total trade exchange between the two countries reached nearly 6.3 billion USD, an increase of 18.8% over the same period last year, similarly higher than the general growth rate of the EU27 region and Europe. Vietnam's trade surplus in the past 9 months reached nearly 5.1 billion USD, an increase of 24% over the same period last year.

On the other hand, the UKVFTA Agreement, with its maximum reduction of tariff lines, has also helped significantly increase the market share of some of Vietnam's strong export products in the UK market in recent times. According to statistics from ITC Trademap, by the end of 2023, Vietnam will be the world's largest export market to the UK with a number of items such as: the world's largest footwear to the UK (market share reaching 25.6%), pepper (22.5%), shelled cashews (88.6%), 5th largest seafood (accounting for 5.7%), 5th largest coffee (8.4%), 6th largest textiles (accounting for 5%)...

2. From an institutional perspective

Like the EVFTA, the UKVFTA has played a role in promoting institutional reform. Areas such as trade, investment, intellectual property rights, sustainable development, financial services and public procurement have all undergone many adjustments to institutions and legal documents, and the Vietnamese legal system is largely compatible with the commitments in the Agreement. This creates an increasingly favorable legal framework for multi-sectoral cooperation between Vietnam and the UK in the coming time.

3. From a business perspective

On the one hand, according to information from the Import-Export Department, the rate of granting preferential C/O according to the EUR.1 UK form is relatively stable, increasing steadily over the years. Currently, the rate of granting C/O according to this form accounts for over 30% of Vietnam's total export turnover to the UK.

On the other hand, a very positive point from the business perspective is that after more than 3 years of implementing the Agreement, we can see the maturity of many Vietnamese enterprises when participating in the big playground, especially the fact that enterprises have initially had a methodical market access plan, proactively in researching, selecting, investing, innovating technology in production lines, meeting many green standards, sustainable development, meeting extended responsibilities with manufacturers, tracing the supply chain... to be able to bring sustainable and long-term goods to the UK market, taking advantage of long-term incentives from the UKVFTA Agreement.

The British Labour Party recently came to power in the United Kingdom. What are the notable points of the UK's trade policy in the coming time and how will it affect relations with Vietnam?

1. Improve trade relations with the EU

Prime Minister Keir Starmer has made it clear that the UK will not rejoin the EU, nor will it seek to become an associate member or a customs union with the bloc.

However, the UK is keen to improve relations with the EU and has announced a review of the UK-EU Trade and Cooperation Agreement (TCA) – due in 2025-26.

In its election manifesto, the UK Labour Party made two specific commitments to improve relations with the EU. The first is to negotiate a “sanitary and phytosanitary agreement to prevent unnecessary border checks”. The second is to pursue a deal on the recognition of professional qualifications to “help open markets for UK services exporters”.

In particular, the first agreement on animal and plant quarantine will bring clear benefits to the UK, as this trade has been greatly affected by the application of border controls between the UK and the EU after Brexit. An important indicator to mention is the reduction in the value of UK agricultural and food exports to the EU.

For Vietnam, the warmer approach of the Starmer government in relations with the EU has generally not affected our relations with the UK, nor the EU. In the event that the agreement on animal and plant quarantine between the two sides is negotiated and implemented, Vietnamese goods will even benefit from reducing intermediaries or inspection costs at cross-border inspection points in the case of entering the territory of a third party. The UKVFTA has also ensured access for Vietnamese agricultural and food products to the UK market. Given the scale and increasingly good trade relations that we are maintaining, Vietnam should welcome the improvement in UK-EU relations.

2. Concretizing the Indo-Pacific strategy

Participation in the CPTPP and maintaining relationships with members of the Bloc, including Vietnam, continue to be priorities in the UK's Indo-Pacific policy.

In the relationship with Vietnam, the dual benefits of the UKVFTA and CPTPP will certainly be a strong driving force to promote the two-way economic - trade - investment relationship to continue to develop more strongly in the coming time. In addition to the obvious benefits for Vietnam such as in the field of trade in goods, strengthening economic security, enhancing domestic investment cooperation and promoting the digital economy and trade in services, the dual benefits from the above two Agreements can be clearly seen:

- Deeper integration of the supply chain: CPTPP will increase the attractiveness of Vietnam and the UK in sourcing inputs from each other, thereby each other's goods can be eligible for preferential tariffs from other CPTPP countries.

- Facilitate business between Vietnam and the UK: through the movement of natural persons, increasing security for investors, resolving disputes during investment and business.

- Create more growth potential: The Indo-Pacific - accounting for about half of the world's middle-class consumers in the coming decades, with a GDP size of £12 trillion, has more potential for countries to participate in the future.

- Creating common rules of the game: Vietnam and the UK can directly participate in establishing new CPTPP laws and regulations, which are considered the most modern laws and regulations in the world.

In the context of the world market in general and the UK market in particular, many new regulations and requirements are being set for imported goods. In addition to the support mechanisms and policies from state management agencies, in order to effectively utilize resources from the UK market, what conditions do Vietnamese enterprises need to meet and prepare?

1. Look up market information

Some useful sources of information for information lookup needs:

Access2Markets data system;

Trade Map tool - ITC Trade Map

Vietnam Free Trade Agreement Portal https://fta.gov.vn/

Website connecting with purchasing channels and distributors abroad: https://goglobal.moit.gov.vn/

Website connecting Vietnamese enterprises: https://connectviet.moit.gov.vn/

Vietnam Trade Office System abroad.

2. Recommendations to improve competitiveness

Strictly control the entire production process, ensure traceability, quality and food hygiene and safety to meet the requirements of the UK market.

Strengthen the application of science and technology, develop deep production/processing systems, thereby optimizing the production process to improve quality and added value for products, gradually approaching international standards and creating competitive advantages.

Promote chain linkages from production/processing to export; at the same time, it is possible to seek cooperation with foreign investment partners to take advantage of capital and technology from advanced developed countries.

Select market segments and distribution channels suitable for the products and scale of the enterprise; focus on understanding market tastes and characteristics. For example, in the agricultural sector, if the product already has a brand, it should approach the specialized retail market segment to get a higher price but require stable product quality instead of selling the product to branded retailers who will then package it under their brand, or sell the raw product. To export to the UK, it is necessary to have a plan to research and approach importers, distribution channels and retail systems here, thereby being able to penetrate the UK in particular and the European market in general.

Improve product design and packaging, focus on packaging and labeling that are suitable for European aesthetics and consumer habits; and increase product convenience.

Promote brand building and development.

Diversify forms of advertising and trade promotion, take advantage of online tools, but do not ignore traditional forms such as regional fairs.

3. Note to update SPS notifications – C/O certificate of origin, application of tariff preferences, Marking and labeling

For SPS notifications, they are updated daily through the search tools of the Vietnam SPS Office, WTO SPS, and the Electronic Information Portal of the International Plant Health Information Exchange and Notification Forum.

C/O and tariff preferences have also been internalized and have specific instructions in legal documents of the Ministry of Industry and Trade.

Marking and labeling: Enterprises need to proactively learn about the commitments on this group of measures in the UKVFTA to prepare for compliance, avoiding unnecessary troubles when exporting.

In addition, enterprises must also regularly update on changes in the UK's regulations on labeling and marking of goods to promptly respond.

4. Notes on goods trading

Recently, in some countries such as Northern Europe, Italy, France, the Netherlands, etc., there has been a situation of impersonating reputable import companies to defraud foreign businesses. Fraudsters (usually from the Middle East or Africa) take advantage of the mentality that European countries are developed countries, have strict legal systems, and reputable companies, and have set up websites impersonating real companies with fake office addresses in EU countries and the UK to increase the trust of businesses to defraud.

Fraudulent forms are increasingly sophisticated, diverse and difficult to verify. Therefore, Vietnamese export businesses need to be careful, cautious and carefully research their partners before signing and executing sales contracts. They can hire law consulting firms or contact the Vietnam Trade Office in the UK to verify and assess business information for first-time, high-value business contracts, etc.

Source: VASEP