China-Vietnam food trade boost

Related tags Southeast asia International trade

Trade in food and beverage products is expected to grow
significantly on the back of an agreement made between China and
Vietnam which will end tariffs on nearly 500 seafood and
agricultural products during the course of the next four years.

Vietnam is obliged to make the tariff cuts under the ASEAN-China comprehensive economic co-operation agreement, which was first established in September 2002 as a forerunner to promoting ASEAN-China free trade.

Vietnam's deputy finance Minister, Lê Thi Bang Tam, said that eggs and poultry were two of the 26 products excluded from the first part of the programme, which officially took effect on 1 January this year. In turn, China has agreed to phase out import taxes on 536 Vietnams imports before January 1st, 2006, to reciprocate Vietnam's moves.

According to national newspaper reports, the Vietnamese government said that tariffs will be gradually phased out under the programme in order that producers have the time to ready administrative and accounting practices. This means that, for example, foodstuffs that are currently levied with a 5 per cent tariff, will then be reduced to 3 per cent in the 2007 tax year and finally a zero tax from 1 January, 2008. Similar strategies to reduce the rate of tax will also be introduced for higher tariffs, with foodstuffs levied with 20 per cent tax rate having the reductions introduced in two installments. The government also added that many of the country's agricultural and seafood exports to China may well qualify for the zero tariff rate with a more or less immediate effect.

Likewise the Chinese government has chosen to phase in the tariff reductions on its foodstuffs in a similar way, ultimately cutting all tariffs to zero by 1 January 2008.

Although many Vietnamese food traders have expressed worries over what they see as the potential for cheap Chinese food exports to flood the market, the Vietnamese trade ministry has reassured the traders by claiming that the trade - which will mainly be in fresh fruit, chicken - seafoods and mushrooms, would mainly be concentrated on the border areas in the north of the country and would not generally interfere with mainstream markets.

Currently Vietnamese imports of Chinese products are a trickle, compared to the exports it makes to the huge China market. Currently around 2 per cent of the total imports from China are actually foodstuffs, backing the governments claim that such trade is largely restricted to the border regions.

On the other hand, Vietnamese foodstuff exports currently amount to around $400 million worth of agricultural products a year. The ministry added that it expected total benefits from the programme to amount to a $389 million to trade, of which $200 million would come from the seafood market. ASEAN represents the interests of the ten leading southeast Asian countries, which include Vietnam, Malaysia, Myanmar, Thailand, Brunei, Philippines, Cambodia, Singapore, Indonesia and Laos. The body has been negotiating similar trade deals to reduce tariffs amongst all of its ten member countries in the hope of forging greater co-operation and promoting trade with the all-important China market.

Related topics Business Supply chain China East Asia

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