The Vietnam-EU Free Trade Agreement (EVFTA), although providing tax incentives and new preferential tariffs, will not create new incentives to improve competitiveness and open a wide market for Vietnam's timber products to be exported to the EU in the future.

The total value of Vietnam's wood and wood product exports
to the EU is about US$500 million per year. Photo: Nguyen Thanh

The EVFTA, which officially came into effect on August 1, is expected to be one of the important drivers to promote market expansion for Vietnamese goods, including wood and wood products exported to the EU.

However, according to the assessment of many wood associations across the country, although the EVFTA offers tax incentives, it will not create new incentives to improve competitiveness and expand markets for wood products.

The report "The impact of the EVFTA on Vietnam's wood products exported to the EU" has just been announced, stating that Vietnam currently exports a total of 253 wood items to the EU with a turnover of over US$500 million each year.

Before the EVFTA took effect, 117 items (equivalent to 46.2%) had import duties on the EU at 0%.

It is worth noting that, although accounting for less than 50% of the total number of wood products that Vietnam exports to the EU every year, the annual export turnover of these products is about US$500 million, equivalent to approximately 90% of the total exports of all wood products of Vietnam to this bloc.

"This means that in terms of taxation, the enforced EVFTA will have no impact on these groups of goods," said Do Xuan Lap, Chairman of the Vietnam Timber and Forest Products Association.

Next, among the 253 items exported to the EU, there were 104 items with tariffs ranging from 1.7% to 6% before the EVFTA. Tariffs for this commodity group will be reduced to 0% right after the EVFTA takes effect.

However, according to Do Xuan Lap, the annual export turnover of wood and wood products in this group is only about US$50 million, equivalent to less than 10% of the total annual export turnover of all wood products of this group.

Therefore, bringing the tax rate to 0% when the EVFTA is in effect will not make much sense for this group of 104 items.

In addition, there are two items of Vietnam's wood export groups that are subject to a tax rate of 6% before the EVFTA is signed. This tax rate will be reduced to 0% within four years from the effective date of the EVFTA.

However, the export value of this group of products accounts for less than 0.4%, equivalent to about US$2 million of the total export value of wood and wood products from Vietnam to the EU. Changing the tax rate to 0% for this group will not make much sense in expanding the market for this group.

Finally, there are 30 wood products of Vietnam exported to the EU subject to tariffs in the range of 7-10% depending on the item before the EVFTA comes into effect. These taxes are brought back to 0% within six years after the EVFTA comes into effect.

However, the annual export value of these products is very small, about US$5 million, equivalent to less than 1% of the total turnover of wood products of Vietnam exported to the EU.

"Similar to the above commodity groups, tax changes when the EVFTA comes into effect will not make sense for this product group," Lap said.

Looking back at the overall picture of exporting wood and wood products to the EU, Chairman of the Vietnam Timber and Forest Products Association said that the export turnover of products will enjoy tax incentives when the EVFTA comes into effect(around 10% of total export turnover).

This means the EVFTA will not create many positive effects in enhancing competition and expanding markets for Vietnamese wood products in this market in the future. However, Lap also emphasized that these are only assessments in terms of tax.

The contents of the EVFTA include broader areas of taxation such as sustainable development, removing barriers in business operations, expanding public investment, intellectual property.

Therefore, the EVFTA implementation has the potential to change these areas in the future. In addition, the implementation of the EVFTA also creates potential in promoting market expansion for Vietnamese wood products.