As the third largest seafood exporter in the world, Vietnam has focused on sustainable development of the seafood industry in recent years. However, characterized by a small capturing fisheries sector, the country is facing a big challenge of yellow card warning issued by the European Commission (EC) in October 2017 for not making enough efforts to combat illegal, unreported and unregulated (IUU) fishing.

Seafood is Vietnam's fifth largest export by value, accounting for about 4% of the country's export value. The nation’s seafood value ranged from US$8.5 to nearly US$9 billion annually in recent years, of which aquaculture accounted for 60 - 65% and capture fisheries made up 35 - 40%.

The EC's IUU yellow card caused Vietnam's seafood exports to this market to continuously contract since 2017. Comparing export results from 2017 to 2019, after two years of impacts from the yellow card, the decrease in seafood exports to the EU market is even more clearly in decline, at 12% or US$183.3 million. Accordingly, two years after the issuance of the yellow card, total marine product exports had decreased by over 10%, an equivalent decline of US$43 million. Of these, cephalopod plunged the most with a 37% drop, bivalve mollusk decreased by 11%, tuna decreased by nearly 2%, and crabs decreased by 11%. The exports of farmed products to the EU also decreased by 13% from 2017 to 2019.

This downward trend is expected to continue further in 2020, especially in the context of the COVID-19 pandemic, IUU yellow card and Brexit, resulting in a turnover of only US$959 million, a decrease of 5.7% compared to 2019. 

Since 2019, the EU has dropped from its position as the second largest of Vietnam’s seafood import markets to the fourth place, ranking behind the United States, Japan and South Korea. However, the EU is still a large directional and dominant market for others and an important partner for Vietnam's seafood industry.

In addition, Vietnamese seafood is at risk of losing the EU market in the event that Vietnam's capture fisheries industry is fined by the EC if there are no solutions and drastic actions to comply with IUU fishing regulations.

For a detailed assessment of these risks, the Vietnam Association of Seafood Exporters and Producers (VASEP), in collaboration with experts from Nha Trang University and Copenhagen Business University (Denmark), cooperated to make the “A Trade Based Analysis of the Economic Impact of Non-Compliance with IUU Fishing: The Case of Vietnam.”

The research showed that captured products are directly affected by IUU Fishing Regulations and IUU yellow card warnings, while farmed products are indirectly affected. In the event of being assigned a red card by the EC, the most immediate impact on Vietnamese seafood will be the EC's trade ban if Vietnam fails to meet IUU fishing regulations.

At that time, Vietnam's seafood industry is estimated to drop US$480 million a year if it loses the EU market. In particular, the estimated loss of captured seafood, including tuna, swordfish, mollusk, squid, octopus and other varieties, is US$387 million a year.

Indirect impacts on farmed seafood are risks to reputation, burdensome customs control by import authorities, and especially, missing the opportunities to take advantage of the EU - Vietnam Free Trade Agreement (EVFTA)’s preferential tariff levels. Aquaculture could lose US$93 million due to indirect impacts. In the medium term, if the ban lasts for 2-3 years, it may cause disruption to Vietnam's seafood exports, with commercial fishing to shrink by at least 30% in output.

The report also assesses new challenges for the seafood industry caused by the COVID-19 pandemic. However, if Vietnam soon removes the IUU yellow card, takes advantage of tariff preferences and changes institutions from the EVFTA, it is likely for Vietnam to recover and increase seafood exports to the EU to US$1.2-1.4 billion in the coming years. This shows that Vietnam needs to have reasonable and effective solutions to soon remove the yellow card, bring the annual export growth to 7-9% and export value to US$16-18 billion by 2030.