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Markets need more protection
Pham Quang Dieu from the Institute of Policy and Strategy for Agriculture spoke to Tuoi tre (Youth) newspaper about agricultural production since Viet Nam acceded to the WTO.
The WTO’s effect on Viet Nam during the financial crisis is still not clear. What lessons about economic integration has been learned since the crisis?
First, the crisis revealed the shortcomings of the economy and industries. Such shortcomings existed in the competitiveness of local products and the ability of companies to adapt. The crisis also emphasised the need for the application of international technical standards in import and export. The recession also shed light on the limited capacity of supervision mechanisms for imported goods such as vegetables and meats that are necessary to protect consumers’ health.
Secondly, the crisis sounded the alarm for the need for economic integration. After reducing the tax on import products under the WTO, several foreign countries often build a lot of technical barriers on imported goods so that they can promote their own products.
In Viet Nam, the lack of technical barriers last year gave way to an increased amount of imported beef entering the country, which affected domestic cattle production. Is this an example of the country’s poor preparation for economic integration?
In 2007 and 2008, Viet Nam has reduced the tariff on imported meat to a level even lower than the rate that the WTO had approved, even though it had tried to negotiate a higher tariff in order to protect local production.
Viet Nam wanted to ensure enough meat for domestic consumption during a time when local meat providers were predicted to be influenced by turbulent weather conditions that occurred during the winter of 2007 and early 2008.
After cutting the tax, Viet Nam was flooded with imported poultry and the rising domestic industry was badly influenced.
As a result, a large number of poultry producers went bankrupt, while local consumers were forced to purchase low-quality imported chicken. The functional agencies only changed their policies on import taxes after the mass media investigated the issue.
This event showed that State agencies were quite puzzled with improving tax policies and creating technical barriers for imported goods.
Even the garment and textile, footwear and food industries in Viet Nam still have advantages in the domestic market. Imported products are still spread out in Viet Nam. The consumers are only concerned about foreign products when they hear about imported clothes that contain toxic material?
This is another example of the insufficient preparation that the country has made for economic integration. In the past few years, Viet Nam’s export products have been influenced by non-tariff barriers from foreign countries, but Viet Nam has few technical standards in place to limit imported products and to supervise the quality of imported products in Viet Nam.
After joining the WTO, many people hoped to buy cheaper products. But cheap products should not be immune from being checked for quality. Checking and creating technical barriers for imported goods is necessary to protect the consumers and local production.
With respect to agricultural products, can Vietnamese exporters take advantage of the WTO?
There is still no evidence that proves that the growth in exports in the past few years was because of the WTO. The increase of agricultural exports in 2008 was mostly due to a "price fever". Last year, enterprises had new foreign markets that were engaged with. Market pressure is a bigger motivating factor for industries rather than the opportunities that enterprises gain from having lower tariffs or extended markets under the WTO.
Currently, enterprises still work within their old routines and do not take advantage of the WTO because they lack information. Recently, the Government and the media often provide information on how Viet Nam has worked with other countries to join the WTO, but there is less information about other countries’ commitments with Viet Nam.
Some enterprises exporting tea to the Middle East told us that if they had known that under the WTO’s commitment, these markets must cut import taxes for Vietnamese companies, then they would have addressed such issues during negotiations.
In the latest meeting to review the three years since the country joined the WTO, the Minister of Trade and Industry, Vu Huy Hoang, said that 20 per cent of the country’s enterprises would be able to take advantage of certain conditions.
Viet Nam will keep opening up its retail market under its WTO adjustment plan. Can you predict how farm products will be affected when foreign distributors join in this field?
People hope to be able to purchase cheaper products, especially food, from the tariff cuts, but local consumers will still pay higher prices for imported food. Milk products are a good example of this.
Companies from New Zealand, the United States, Australia and the Netherlands have taken advantage of the dairy market in Viet Nam. The import tax for these products are lower but the price of these products is still high in Viet Nam.
After opening up the retail market, the foreign distributors will dominate the local market with their strong financial potential and good management capacity.
Now even at local supermarkets, it’s hard for local agricultural products to be seen. If local farmers do not change their production methods and work to increase their products’ quality, then they might be the losers in Viet Nam after foreign distributors gain traction.
VietNamNet, VietNamNews
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