Enterprises failing to protect themselves against foreign competition
09/09/2024 07:52
As Vietnamese exports face increasing trade defense lawsuits and non-tariff barriers abroad, the country’s import regulations remain surprisingly lenient. While local industries struggle with competition from foreign products, the number of trade remedies Vietnam has implemented is relatively low. Is there a lack of effort in protecting domestic businesses?
In 2009, Vietnam saw its first significant attempt by local businesses to address this issue. Viglacera Float Glass Company (VIFG) and Vietnam Float Glass Company (VFG) filed a request with the Ministry of Industry and Trade to investigate trade defense measures against the influx of imported float glass. After seven months of investigation, however, the Ministry concluded that no safeguard measures were necessary. Although the case did not result in a favorable outcome, it was notable because it marked the first time that a domestic enterprise had proactively sought protection under World Trade Organization (WTO) regulations.
Since this inaugural case, the use of trade remedies by Vietnamese companies has remained limited. According to a report from the Ministry of Industry and Trade, by June 2024, Vietnam had initiated 28 trade defense investigations and imposed 22 trade remedy measures on imports. The ministry had also reviewed seven cases that had been initiated in 2023, launched a new investigation, and processed seven additional requests for investigations or reviews.
While these numbers might seem significant, they pale in comparison to Vietnam’s regional peers. Indonesia, Thailand, and the Philippines, for example, have initiated hundreds of trade remedy investigations. This discrepancy raises a crucial question: Does Vietnam have fewer industries affected by imported goods, or is there a deeper issue at play?
The reality is that many Vietnamese industries are feeling the strain of imported products and are eager for protection. Take, for instance, the cashew industry. In 2023, the Vietnam Cashew Association made an urgent appeal to the government, the Ministry of Industry and Trade, and other relevant authorities. They called for a 25% import tax on raw cashew nuts, similar to the tariffs India imposes on Vietnamese cashew imports. The association argued that such a tax would create a fairer market and prevent the domestic cashew industry from being suffocated by foreign competition.
Another sector experiencing pressure from imports is the livestock industry. In March of that year, four key associations—Vietnam Livestock Association, Vietnam Animal Feed Association, Vietnam Poultry Association, and Vietnam Large Livestock Association—jointly submitted a petition to the Prime Minister and the Chairman of the National Assembly. They urged the government to enforce stricter regulations on the import of livestock products, citing the unfair competitive pressure that foreign imports were placing on local producers. The associations recommended building technical barriers and enacting trade policies that would reduce the official import of these products.
Trade remedies, such as anti-dumping and safeguard measures, are designed to protect entire domestic industries, not just individual companies. This requires a strong, unified effort from local businesses to meet the legal conditions set forth by both Vietnamese law and WTO guidelines. Unfortunately, the lack of solidarity among local enterprises often undermines these efforts.
The challenges faced by the cashew industry in 2023 illustrate this point. While the Vietnam Cashew Association urgently called for government intervention, some businesses within the sector argued that imported products were not the primary issue. Instead, they cited the industry's internal lack of unity and direction. This fragmentation, they claimed, was the real root of the problem. Despite being the world’s leading exporter of cashew nuts, Vietnamese businesses have consistently failed to capitalize on their dominant market position, choosing instead to compete against each other. This disunity prevents them from effectively coordinating their efforts to seek protection through trade remedies.
For Vietnamese companies, the process of filing a trade defense case is complex and costly. Initiating an investigation requires substantial financial resources, a deep understanding of trade laws, and access to comprehensive industry data. Most Vietnamese enterprises lack the experience and the financial capacity to gather the necessary evidence and build a compelling case for the Ministry of Industry and Trade to investigate. Without these critical elements, even industries feeling the brunt of foreign competition struggle to protect themselves.
For Vietnam to catch up, businesses need to foster greater collaboration within their industries. The lesson from the cashew industry, where internal competition has weakened the sector’s overall position, is an important one. Enterprises must come together to present a united front when seeking protection through trade remedies. Without this collective effort, individual businesses will struggle to navigate the complexities of the system on their own.
Moreover, the government should continue to play an active role in supporting these efforts. By providing technical assistance and training to businesses, Vietnam can build the capacity of its domestic industries to better utilize trade remedies. Additionally, the government could create more streamlined processes for submitting requests and offer financial support to industries that need help initiating investigations.
Source: Sai Gon Giai Phong News
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