Many Vietnamese businesses have promoted environmental products.

Vietnam should adopt both mitigation measures and adaptation measures. This is because Vietnam is a growing carbon emitter but is also expected to see impacts of climate change on productivity and output in its top tradable sectors - manufacturing, agriculture, and transport services. Because of the geographic concentration of economic activity in the lower coastal regions, investment in climate-resilient infrastructure is a cost-effective option.

In WB’s opinion, Vietnam should take the following measures to promote environmental goods:

First, trade policy can help facilitate mitigation and adaptation. For example, reducing tariffs on technological goods and liberalizing regulatory policies can facilitate access to agricultural digital technologies and services from advanced economies, and foster innovations to increase yields while reducing the potential for adverse land-use change.

Second, the policy regulatory framework in Vietnam includes extensive NTMs that may constrain the trade of goods, including environmental goods. Because these NTMs are applied on all products, systematically monitor them with a view to streamlining and reducing compliance costs. This would help boost trade flows and encourage entry of more firms into the sector.

Absence of appropriate measures to regulate the products, such as technical standards, can raise barriers to trade in environmental goods. So, it is needed to review the regulation on these goods and services and compare with best practices in the region and globally; and to explore opportunities to harmonize standards or pursue regulatory equivalence for environmental goods within exiting trade agreements such as ASEAN and mutual recognition of testing and conformity assessment for such products where feasible. On environmental services, it is recommended to pursue with other countries mutual recognition of qualifications of environmental engineers, to streamline visa and work permit procedures for environmental specialists.

Third, policies to promote trade in environmental goods and services should be complemented by national activities to build local production capacity, increase domestic value added in environmental goods, and integrate with regional production networks and value chains. During Covid-19 and due to U.S.-China trade friction, Vietnam has emerged as one of the top candidates for new relocation of production, away from China. This has attracted investment from China, other Asian countries, and the US.

Emission intensity of key products in Vietnam

Fourth, Vietnam should seize opportunities associated with FTA and global value-chains memberships to promote sustainable green growth across all its export products. Agreements such as the EU-Vietnam FTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) include environmental commitments by all members in their trading practice for all their exports. For instance, as a member of the CPTPP, Vietnam has committed to take measures to control the trade of certain substances that can significantly affect the ozone layer. Under Chapter 13 on Trade and Sustainable Development of the EU-Vietnam Free Trade Agreement (EVFTA, in force since August 2020), Vietnam agreed with the EU to consult on their mutual interests such as promotion of energy efficiency, low-emission technology, and renewable energy.

Fifth, Vietnam should seize FTA opportunities to promote environmental products and services and development of renewable energy. Vietnam’s trade in environmental products has demonstrated its competitiveness in North America and East Asia, particularly in renewable energy products. Such adherence would enhance the opportunities for inward FDI into Vietnam and/or transfer of new technologies to Vietnamese firms, and further integration into the global and regional value chains.