English ver Chính sách trợ cấp của Châu Âu đối với hàng nông sản và bài học dành cho Việt Nam

EU Governments subsidy polices towards their
agricultural products and the application to Vietnam


CONTENTS

WTO
EU
GSP
MFN
CAP
AEC

World Trade Organization
European Union
Generalized System of Preferences
Most Favored Nation
Common Agricultural Policy
ASEAN Economic Community


INTRODUCTION
Today, thanks to the global integration, the world is becoming smaller and
smaller with many FTAs connecting countries together. An international market will
bring about opportunities of changes and sustainable development to Vietnam.
However, along with the bright side, we should be aware of upcoming challenges
confronting us, especially in the battle of exporting. Thus, with the comparative
advantages in agriculture products, it is urgent tasks that Vietnamese government
should enforce subsidy policies to boost its exporting activities so that we can keep
pace with our partners all over the world
On the other hand, Vietnam and EU have built up a long-last relationship for

years, cooperating in many aspects including economics, politics, culture and societies
Therefore, in the current circumstances, we have more golden chances to learn from
their experiences, especially from their exporting subsidy policies . Besides, it is
obvious that the EU government has always been clever and determined at passing
polices that can support their agricultural export. The effectiveness of their policies has
been proved by the stable growth of EU’s economies. Thus, seeing what EU have
accomplished and applying to Vietnam is of great importance if we want to raise the
trade surplus and enrich our country.
All things considered, we decide to choose the topic “EU Governments
subsidy polices towards their agricultural products and the application to Vietnam”
to analyze in our thesis under the construction of PhD Vu Huyen Phuong – Lecturer
of International Trade Policy
We do hope thanks to this thesis; we can have the general outlook about the
trade policies of both EU and Vietnam. In addition, we can see how EU countries
motivate its free trade activities through appropriate subsidy policies and how we can
apply to better the situation of free trade in Vietnam
This thesis comprises four main parts:
I. Overview of EU market
II. Overview of agricultural subsidy policies in EU
III. Current situation about EU’s subsidy policies and their impact on Vietnamese
market
IV. The application to Vietnam
3


I.

OVERVIEW OF EU MARKET

1 The foundation and development của EU

The EU (European Union), is a politico-economic union of 28 member states
that are located primarily in Europe. It covers an area of 4,324,782 km 2, with an
estimated population of over 508 million.
The foundation of EU is illustrated by the graph below:
European Coal and Steel
Community (ECSC)

European
Economic
Community in 1957

in 1951

European Atomic Energy
Community (Euratom)
in 1958

European Community
(EC) in 1967

European Union in 1993

In addition, EU is the leading economic center of the world. The position of EU
is expressed by the table below
Index

EU

US

Japan

Population (million - in 2005)
GPD (billion USD - năm 2004)
The proportion of export in GDP (% - in2004)
The proportion of EU exports in world exports
(% - in 2004)

464.1
12690.5
26.5

296.5
11667.5
7.0

127.7
4623.4
12.2

37.7

9.0

6.25

(Source: Statistics in 2004)
 EU is one of the three largest economic centers in the world (the US, Japan and
EU) with GDP of about 12690.5 billion in 2004.
 Its covers 7,3% of world population, 2.2% area of the world but the economic

value accounting for 31% of world economic values.
EU is not only the leading economic center of the world but also the leading
internatonal organisation. The EU export makes up 37.7% the share of world exports,
while that of the US is only 6.0% and Japan is 6.25%.
 Through the characteristics of the foundation and the development of the EU, it
can be considered as the most successful model of regional integration today
4


2 Some characteristisc of the EU’s market.
Firstly, each country always has its own consuming customs because the need
of all members in the EU is abundant and diversified. EU consumers want to choose
the products with well-known brands in the world. They speculated these products will
adapt to customers’s requirement and make them feel secure. EU market show that
very few people choose the products from less prestigous brand or less well-known
brand. Thus, price’s negotiation seems not an optimal solution to approach this hot
market. EU Market is a difficult and highly selective market. Importers from EU tend
to have high expectation for products imported from other countries.
Secondly, to EU, the distribution network is an important element when
importing and exporting products. Corporational distribution channel is that
manufacturers and importers of a corporation provided goods for only its system stores
and its supermarkets. That is main consuming trend. The second distribution is noncorporational distribution channel. Manufacturers,

importers of a corporation

provided goods not only for retail systems of its coporation but also provided goods of
other independent retail stores.
Finally, as EU is the most developed market in the world, everything about
consumers' health and safety always comes first. To keep the consumers safe, they
examine the products right at the producting places. EU has made national or

european-standard regulations to prohibit selling products from nations that have
producting conditions that do not meet EU standards.

5


II.

OVERVIEW OF AGRICULTURAL
EXPORT SUBSIDY POLICIES IN EU

1. Agricultural products
EU market divided agricultural products into four main groups:
Group 1 - Very sensitive product: consists mostly of agricultural products and
a few industrial consumer products such as fresh bananas, dried banana chips ,
pineapple, pineapple box, readygarments, raw tobacco pipe, silk,... This group of
products is taxed in GSP, equaling 85% of MFN export tax. This is a group of
products which EU limit to export.
Group 2 - Sensitive products: mainly food, beverages, chemicals, materials,
crafts (tiles and porcelain), footwear, consumer electronics, bicycles, cars, toys ... are
taxed in GSP, equaling 70% of MFN export tax. This is a group of items that the EU
does not encourage to import.
Group 3 - Less sensitive products: including frozen seafood (shrimp, crab,
squid. frozen, fresh chilled fish) some ingredients and chemicals (Air conditioners,
washing machines, refrigerators) enjoy GSP tariff rates by 35% tax rate MFN. EU
encourages to import these products.
Group 4 - Insensitive products: mainly some foods, drinks, (water minerals,
beer, wine), raw materials (coal, crude oil, rubber), agricultural products (coconut
shell, cashew nut),... are taxed in GSP tariffs equaling from 0% to 10% of MFN rates.
This is the group which EU totally encourage to import.

2. Agricultural subsidies in EU
The Agreement on Agriculture has three pillars—domestic support, market
access, and export subsidies. Agricultural subsidies are divided into 2 groups:
domestic supports and export subsidies.
Reason for the division into 2 groups is of purpose of usage of such support. If
the support aims to stimulate exports, it is called export subsidies. But the general
support for agriculture, for specific products or a certain number of agricultural areas
known as domestic support. The mechanism applied to each group is different, so
determining a form of subsidy is crucial.
a. Domestic support

6


The first pillar of the Agreement on Agriculture is "domestic support". The
WTO Agreement on Agriculture negotiated in the Uruguay Round (1986–1994)
includes the classification of subsidies into "boxes" depending on their effects on
production and trade: amber (most directly linked to production levels), blue
(production-limiting programmes that still distort trade), and green (minimal
distortion). Domestic support includes the measures and the policies which
government uses to maintain the price of the agricultural products. So, the domestic
producers receive the price at the level higher than the market price. In WTO
terminology, subsidies in general are identified by “Boxes” which are given the
colours of traffic lights: green (permitted), blue (reduced), amber (forbidden).
• The green box
The green box includes subsidy measures in one of 05 groups identified and
must fully satisfy the 3 specific conditions.
Group 1 - Subsidies for General Services
Group 2 - Subsidies aimed at food security reserves
Group 3 - Subsidies domestic food

Group 4 - Support for Disaster Reduction
Group 5 - Direct support to producers: Income support, Financial support to
the program of the State Security, income insurance for farmers, support to offset the
damage caused by natural disasters; support pension for agricultural producers.
To be considered as "green box subsidies," subsidy measures must fall into one
of five groups mentioned and must meet the following conditions: As measures with
little or no impact squeeze trade distortion; through programs sponsored by the
government; no effect of subsidies for producers.
• The blue box
The blue box includes direct payments from the state budget that are associated
with the production. The countries are not committed to cut down these measures,
which means that the domestic support of this group does not need to be cut off or
terminate. Although these measures are put in the blue box which can distort trade, it
is still allowed to be maintained (still green) because of belong in the narrow
framework of agricultural production. However, it will have to sustain the adjustment
(should be blue).
7


These subsidies based on fixed surface or yield.
The maximum subsidy equal to 85% or less than the level of production basis
Livestock subsidies based on a fixed number of head.
This is the form of subsidies that many developed countries applied in
production limitation programmes.
• The amber box
Subsidies of the amber box are all the subsidies in a country that's not belong
the green box and the blue box.
b. Export subsidy
Export subsidies are the third pilla. For developing countries, the required cuts
were 14% (by volume) and 24% (by value) over ten years.The government

expenditure for the producer or exporter in the country to export their goods or
services is called export subsidies. According to the 1995 agreement on agriculture,
developing countries must reduce 21% subsidies (in the amount of subsidies) and 36%
(in cash) within 6 years, developing countres is 14% (by volume) and 24% (in cash)
within 9 years. The process of cutting, the countries can be flexible depending on the
volatility of the market from 2 to 5 years, allowing the country can continue to export
subsidies. However, if this happens, the amount of subsidy in subsequent years must
be cut further to ensure that the total reduction in the whole process is not affected.

8


III.

CURRENT STUATION ABOUT EU’S SUBSIDY POLICIES AND
THEIR IMPACT ON VIETNAMESE MARKET

1. The implementation of agricultural subsidies policy of the EU
In 2009, subsidy to agriculture in EU increased to approximately 10000 EUR
and it decreased about 7% and 16% for the industry which received subsidies of
300000 euro. In trade policy, EU enhanced the protection of agriculture,
environmental protection and protection of consumer health. Beside subsidy policy for
agricultural production, EU applied high taxes and impose quotas on some agricultural
imports such as rice, sugar, bananas, cassava. The requirement standards safety of food
was strict implementation. The market-opening commitments of agriculture in the
WTO, EU countries maintain using tariff quotas for some products, descending the
value and quantity of the products which are subsidized to export.
EU Union had set the Common Agricultural Policy - CAP, from the early 1960s to
protect the border and created the mechanism subsidy for the agricultural sector. It was
introduced in 1962 and has undergone several changes since then to reduce the cost

(from

71%

of

the

EU

budget

in

1984

to

39%

in

2013)

(Source:

and to also consider rural
development in its aims. This policy split most domestic subsidy from production in
EU, which means subsidy paid to farmers do not for producing or farming and prices
for the products that farmers produce. With this reform, 90% of EU agricultural

support have been transferred to Green Box. On export subsidies, the EU proved to
reduce the support in recent years (although that value is still quite large in some
sectors, such as dairy products, sugar and beef). To beat against the strengthening
narrow agricultural export subsidies, the EU offer to negotiate conditions tightened
regulations on food aid and on the promotion of US exports. CAP support for
agriculture through three forms: support domestic prices, export subsidies and direct
assistance (supply money) to compensate the lost income. The aim is to make more
money available for environmental quality or animal welfare programmes. “For more
detail, each cows receive $ 2.70 subsidies per day, which is more than double the
salary of a poor farmer. Thus, milk production in EU become surplus lead to the cheap
export price, which affect milk production sector in a number of developing countries
such as India, Jamaica... (2003). In the autumn of 2007 the European Commission was
9


reported to be considering a proposal to limit subsidies to individual landowners and
factory farms to around £300,000. Some factory farms and large estates would be
affected in the UK, as there are over 20 farms receiving £500,000 or more from the
EU. In 2012, the budget for the CAP is also about 50 billion euro. The tools of the
CAP application include export subsidies, direct payments and high import duties. 50
billion euro budget of the CAP is used to support the domestic industry
unconditionally. For some European farmers, even 50% of their income comes from
the CAP subsidies.” (Source: )
EU claims to have an open export markets for agricultural products with
developing countries, allow 50 developing countries free to access the markets and
import agricultural product of developing countries. The European Commission is now
discussing the next reform of the CAP, which will coincide with the next financial
perspectives package, as from 2014. The Commissioner responsible for Agriculture
and Rural Development Dacian Cioloş, has outlined seven major challenges that the
future CAP needs to address: food production, globalization, the environment,

economic issues, a territorial approach, diversity and simplification. This agreement
will have a strong impact on overall global trade, including Vietnam. It is probably
regarded as a great benefit for developing countries. Besides, EU promised to end the
whole agricultural subsidies, had market opening to the developing countries .
2. The impact on agricultural subsidy policies of EU to Vietnam:
Generally, the Vietnam - EU relationship is developing in a positive direction
especially on commercial economic which is in line with Vietnam strategic interests.
In the framework Vietnam is a member of ASEAN and WTO, EU policy to Vietnam is
clearly established and completed step by step in recent years. EU support Vietnam in
many aspects, especially development assistance, the majority of Vietnam's export
products receive GSP preferences but actually, EU do not admit Vietnam as a country
has market economy.
To assess the impact of EU agricultural subsidy policy affecting to Vietnam, first,
we need to see the dependence of agricultural products in Vietnam on EU market. We
have a table:

10


Vietnam’s agricultural products export turnover to EU
Unit: Million USD
Year
Agricultural
products export

2000

2001

2002

2003 2004

379.7

319.5

162

577

2005

649.5 795.2

200
6
968

2008
1271

(Source: )
Vietnam mainly export agricultural products such as coffee, rubber, rice, tea,
fruits and vegetables to the EU market. The production value of agricultural, forestry
and aquatic products reached 219.887 billion, increase 3% from 2008. Recently,
Vietnam exported agricultural products to the EU accounted for 18-19% of our export
agriculture sector. That indicates the important role of EU market in export activities
of Vietnam. Since 1997, according to trade relations between EU and Vietnam,
Vietnam gain export benefit from EU market.

With coffee export, EU is the largest market for Vietnam's coffee, in 2008,
coffee export to the EU reached 820 million USD. In 2011, the volume of exported
coffee to EU was 490 thousand tons accounting for 39% total Vietnam's exported
coffee.
And tea, EU is a potential market for Vietnam's tea industry, the highest year
exported 74,800 tons (2002). Export into the Polish market increased by 8 times,
bringing the proportion of exports to the market tea of Poland from 1.92% in 2008 to
2.6% in 2011.
Wood products are identified as potential products developed because the EU
market is the largest furniture. The export of Vietnam's wood products to the EU
market in 01/2008 reached 112 million.
Moreover, EU is the biggest aquatic consumption in the world, with annual
turnover export increase to 34 billion dollars. In 2008, exports Vietnam's seafood to
the EU reached 275 thousand tons with a turnover of 910 million USD and the figure
increase to 846 million USD in 2012.

11


All trade details above indicate the strong influence of EU market to
Vietnam's export, thus, each subsidy policy in EU also has an appreciate effect on
the economy of Vietnam.
2.1.

Effect of subsidy policy for agricultural products of EU:

Although the policy is applied to support the producer in EU, it also creates the
barriers for products from export countries. Export subsidies of the developed
countries is one of the main reasons causing the dumping on the world market in 1980.
Agricultural policy keep EU agricultural goods prices low, so it is hard for Vietnamese

farmer to compete. This direct influence on the growth and distribution of income
between developing countries. In addition, in the context of world food price volatility,
the CAP instruments can exacerbate the negative effects on developing countries. If
CAP succeeded in stabilizing the European market, this means that the risk of price
fluctuations will turn to the world market.
In contrast, expert Gail Soutar in Farmers Association UK and Wales argues
that CAP actually bring many benefits to the developing countries. “Each year nearly
60 billion euro EU import agricultural products from the developing countries,
accounting for about 70% of the total value of EU agricultural imports. The EU is also
the largest importer of agricultural products from the developing countries, more than
the US, Japan, Canada, Australia and New Zealand combined” (Source:
). In particular, agricultural products imported from
49 countries are exempted from tariffs and quotas, the remaining developing countries
enjoy preferential access to EU markets. In addition, the importer to benefit from trade
policy transparency and stability of the EU.
Argues that "over 90% of domestic subsidies separated from production and
therefore are not considered trade distorting" more research was rejected, said separate
payments for farmers has led to excess liquidity in the credit markets and this is a
proof of the phenomenon of "trade-distorting".
2.2.

Agreement with WTO to decrease export tax and subsidy and effect

of Doha Development Agenda to Vietnam
EU agree to WTO that EU will have open market for 50 developing countries to
free access EU market. This agreement has a strong influence to global commercial
12


economic and directly affect Vietnam. In general, the elimination of export subsidies

and domestic support on export markets would help developing country like Vietnam
significantly increased competitive advantage compared, contributing to boost exports,
particularly if export subsidies in the agricultural focus that Vietnam currently has the
strength or potential exporters such as rice, coffee, cashew, pepper, vegetables, etc ..
However, the elimination export subsidies and domestic support in major exporting
countries like Vietnam can also adversely impact exports. The table below summarizes
some forecast John S. Wilson (2002) related to the main theme of world agricultural
trade
• Effect on export:
Certainly agricultural products in Vietnam will increase volume and expand the
market to foreign markets. The competitiveness of Vietnam's agricultural products in
the world market also improved significantly when the countries commitment to
eliminate export subsidies, returned to the world agricultural trade fair competitive
ground based primarily on comparative advantage. Moreover, once the domestic
support and export subsidies are decreased, the world prices for agricultural products
will reflect the actual cost of production and will be higher than before. Thus, the
value of agricultural exports of Vietnam will also increase respectively.
“According to this document of UNCTAD, a study by the World Bank shows
that if all WTO member countries lifted import tariffs and subsidies, the agricultural
exports of developing countries could increase 15% while imports increased by 12%.
World rice prices from this study is expected to increase to 16%” (Source: EUMUTRAP III). Thus, the annual revenue from Vietnam's rice exports will be further
improved thanks to the beneficial changes of the terms of trade. In the long term, the
reduction of support distort production and trade will contribute to a global
agricultural markets more stable, less volatile and less distorted than.
• Effect on import:
The limit of domestic support under the Amber Box is still quite widely so that
we can continue to maintain subsidies, although it cannot easily convert values from
product support to other products. Imports of agricultural products in Vietnam could
be affected by the price increase (when exporting countries decrease support and
subsidies) led to imports into the country may decline.

13


IV. THE APPLICATION TO VIETNAM
1. Overview of agricultural subsidy policy in Vietnam
Vietnam is an agricultural economy with rural residents accounting for 70
percent of population. Agriculture’s share in GDP is about 24%. As a key economic
sector, agriculture plays an important role in development and economic stability of
the whole economy; it is also simultaneously a sector that Government has supported
much for many years. In any country, support in agriculture tends to increase in
accordance with the level of industrialization and modernization. Vietnam is not
exempted. The main agricultural products include rice, coffee, tea, cotton and
vegetable.
a. Domestic support – Production subsidy
Domestic support policy in Vietnam focuses mainly on “Green Box" and “Blue
Box” which WTO member countries freely apply.
• Green box
For many years, Government has mainly invested in agriculture through these
measures. From 1996, 6,850 billion VND was annually invested into through this box
agriculture (84.5% of total domestic support), focusing on: Science research;
Agriculture training; Production scale extension (staffs, training courses and
administration cost); Agricultural infrastructure; Public Stockholding for food security
purposes: National stockholding activities for food securities include: rice, reservation
of some varieties of maize, vegetables, veterinary drugs, pesticides, etc....;
Environmental programs; Payments under regional assistance programmes; Food aid;
Payment for relief from natural disasters; Plant protection and veterinary; Job creating
program.
•

Blue box

Subsidy policy in this box represents 10.7% of total domestic support, classified

into: Investment support; Input subsidies generally available to low-income or
resource-poor producers and those who live in difficult areas; Support to encourage
diversification from growing illicit nacrotic crops.
During the period 1996 - 1998, annually, Government has granted VND 532
billion in agriculture through these support measures.
b. Export Subsidy
14


In 1998, export subsidy was given to canned pineapple exported to US
(assistance for importation of pineapple bud was put in domestic support measures).
Under the Decision No178 of Prime Minister, the Government provides interest rate
support to enterprises which export some farm products (meat, vegetables) in the form
of granting loans at preferential lending interest rate of 0.2 percent per month lower
than the normal interest rate applicable for export credit loans that commercial banks
are generally imposing.
Since 1999 onwards: Export Supporting Fund was established. Some kinds of
subsidy from this Fund are as followed: Rice: Interest rate support for purchasing rice
for temporary reserve and compensate lost on rice export; Vegetables and fruits:
Support to import pineapple bud and export canned cucumber, pineapple and plum;
Coffee: Compensate lost on coffee export in 1999-2000 and Interest rate support for
purchasing coffee for temporary reserve; Pork: Support to export pork meat;
Sugarcane and tea: Support to import varieties. Between 1999 and 2001, Vietnamese
Government used rewards export policy on seven agricultural products: rice, coffee,
tea, vegetable, etc…, however, Vietnam rejected this direct export subsidy under the
context of WTO.
2. Achievements and Limits of subsidy policy in Vietnam
2.1.

Achievements of subsidy application

“Vietnam ranks 26th in world exports, represents 1.1% of world exports for all
products. To be more specific, some leading agricultural products stand a high ranking
such as coffee (7.9% of world export), rice (only behind China, Philippines, Malaysia,
Hong Kong and accounting for 6.95%).” (Source: ). Vietnam
has been focusing mainly on tropical products, fisheries and gradually improving the
quality of products, especially meeting import developed countries’ requirements
about food safety like EU, United State, Japan. In recent years, a large proportion of
our agricultural products has been accepted by EU – a market with high demands for
food safety and sanitation. The development of export markets represented a
significant achievement in opening to a new market and exploiting an existing market
as well. Overall, the structure of the export market has shifted positively.
Agricultural subsidies match with the rule of WTO: Apply “Green Box” with a
view to supporting for special training field, scientific research, expansive program,
15


protection and quarantine of animal and plant, infrastructure. Moreover, the trade
barriers for agricultural products has been gradually removed, becoming more suitable
with international standards: Agreement on Agriculture and Bilateral agreement
between countries; development of policies related to production, processing, export;
innovation of management measures of agricultural lands; increase in capital of state
investment for agriculture. These subsidy measures are consistent with the term of
WTO about assisting farmers and producers.
2.2.

Limits of subsidy application

Supporting the number of agricultural products depends mainly on the
situations arises simultaneously without any specific criteria for policies. For instance,
import restriction: Vietnam always applied prohibitive measures or restricted import
licenses to protect domestic production. Obviously, Vietnam export subsidy and
domestic support are only on short term basis, so it is difficult for policy makers to
work out long term plans.
Controlling measure on commodities is believed to protect people health and
environment. However, this measure lacks of specification and the commodities’
management of hazardous chemicals, fertilizer, pesticides is inappropriate.
Target group entitled to support are enterprises, mainly State owned enterprises
(SOEs). The discrimination between SOEs and other economic sectors still remains
due to lack of criteria to create equality between them. Direct support to producers
(farmers) is very limited, especially for poor people, and those in difficult areas (while
other countries such as Malaysia, Thailand...) apply this kind of support on a large
scale.
Some support policies WTO allows to use as a way of helping producers in
retirement age and supporting income as the price of goods becomes low are unused
by Vietnamese government. The margin of subsidy is large, therefore, to increase
opportunities and reduce challenges, government should promote other subsidy
policies that WTO allows to enhance agricultural competitiveness in the international
market.
Whereas some policies which are not permitted by WTO were applied like
reward export based on export turnover and export performance for 4 commodities:
rice, coffee, pork, and canned vegetable. This subsidy is a kind of direct subsidy that
16


government give a sum of money for producers when exporting. Export subsidy
measures are committed to reduce under the rule of Agreement on Agriculture.
Vietnam standard system has yet to meet the management requirement of

export & import and circulation of commodities. Agriculture has 768 standards, but
many documents are out of date and incompatible with the demands of the Agreement
on Technical Barriers to Trade and the WTO Quarantine.
The level of export subsidy for agricultural products is low because Vietnam is
still poor compared to other countries in Asia and the ability of government subsidy is
limited. Even direct investment for agriculture production is far lower than the level
WTO allows. However, the trend to rise export subsidy in terms of both commodities
and volume subsidized is existing. For example with rice: the quantity subsidized has
increased from 1 million tons to 2 million tons. Similarly, coffee has been added to the
list of commodities subsidized with a large volume, compensation of loss in coffee
trading. Moreover, Vietnam will not have access to the special safeguard mechanism
(minimizing the impact of the mutation of import price) for breeding commodities
such as pork, beef, etc…
3. Causes of these drawbacks
3.1.

Downside in the “Export Credit Regulations”

a. Definition of “Export Credit Regulations”
Decree 75/2013/ NĐ- CP by Vietnamese Government
 Term 1: Export Credit Regulations are favor by the State to help individuals,
associations and enterprises to develop production and commercial activities of
exporting products according to Exporting policies of Vietnam
 Term 2: Forms of Export Credit Regulations
− In medium and long term (> 1 year):
 Allow investment loans
 Assist in interest rate after investment
 Act as a guarantee for investment
− In short-term (< 1 year):
 Allow short-term loans

 Act as a guarantee for the performance of the exporting contracts
b. Downside
17


Since the demand for money loaned always exceed the supply, a limited
number of enterprises and industries can approach to these government’s loans. In
addition, industries that need more support in order to enhance their competitive
capacities (for example: agricultural processing) usually cannot meet the requirements
of being loaned due to the drawbacks of small scale. Besides, SME also find it difficult
to converge on these loans, for they do not have the ability of mortgaging their assets
Therefore, this phenomenon lead to the issue of irrationality: Who need money
most do not have it while those who have great financial ability do
3.2.

Unnecessary administrative procedures
Today, administrative procedure is still a controversial problem in our society,

especially the Export licensing Procedures. The law and order system of Vietnam still
have some holes putting the red-tape on the way of exporting. To specify, the
procedures have to go through the party local hierarchy from district to province and
nation levels. Moreover, the local authority usually makes difficulties for local
citizens, enterprises, or deal with it with irresponsibility when they ask for license. As
a result, this gives rise to the matter of bribery and embezzlement, which puts hinders
on the development of export in general despite the subsidy policies of the
government.
3.3.

Vietnamese Enterprises’ indifferences towards global integration

In 2015, 20 FTAs were successfully signed, including FTA with EUEA, TPP,
ACE. Among these important ones, ACE is supposed to be the one with great, direct
influence on Vietnamese enterprises. However, according to the survey by the
Ministry of Industry and Commerce:
•

76% Vietnamese enterprises do not know about AEC

•

94% do not know about the terms signed in AEC

•

62% are not aware of challenging and opportunities when joining AEC
While the leaders of Vietnam are eager on the negations, enterprises show no

interest in the FTAs that will significantly affect on them. Consequently, the subsidy

18


policies of the government make no means. Should action not be done, sooner or later,
Vietnamese enterprises will lose the battle right in our battlefield.

19


4. The applications of EU’s subsidy paving the way for Vietnamese
agriculture export to EU

4.1. Enhance the competitive capacities of Vietnamese agriculture product
Improve the quality of our product by learning the advance in technology from
developed countries
Promote commercial activities by holding more trade fairs to display
Vietnamese goods and introduce our products to EU. Moreover, thanks to practical
activities like this, our enterprises can access to valuable information about our
competitors’ products like prices, designs, quality or their marketing strategy.
Vietnamese Representative offices in EU need to keep pace with changes in EU
market and make forecasts about the consumption trends so that Vietnamese
enterprises can adopt to these changes on time as well as being flexible on the
exporting strategy
About the trade name: The majority of our exporting products are in forms of
process and FOB, so we do not have famous trade name. Therefore, if we form a jointventure or cooperate with prestigious ones, we can create our name gradually.
4.2. Improve the non-tariff protective system towards leading agricultural

products
We can learn for EU’s subsidy policies by using different boxes suitable for the
current conditions of Vietnam
• Blue box:
Vietnam should extend the scale of investment and raise the preferential
investment rate, especially investment in modernizing equipments in processing and
preserving agricultural products. This is a essential stage in enhancing the value of our
exported products. Support the low-living condition areas by supplying them seeds,
materials needed freely. Simultaneously, we need to provide them with short-term
training courses about modern agriculture techniques as well as how to use their
resources effectively.
• Green box:
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Government should invest in agriculture through constructing infrastructure.
For example, the “Nong thon moi” program 2011-2015 have concreted millions of
kilometer road all over country, making the transportation system in agriculture
regions become convenient.
Government should lunch “Innovating programs” in breeders, supporting
scientific activities and motivate individuals and enterprises to be more creative, adapt
to continuous changes
4.3.

Improve and environmental standard system

EU has 2 environmental standards: ISO 14001 and EMAS. ISO 14001pased in
1993
ISO 14001 is applied in common both inside and outside EU while EMAS ISO
14001 is only for inside EU. These strict standards are good at improving the quality
of the product and also restrict the commodity imported- motivating commodity
exported.
For Vietnam, to raise our capacity and boost exporting activities, Government
should impose and improve environmental standard systems like EU governments did.
For example, due to the downside in our environmental standard system, many
foreign enterprises do severe harm to the environment with just very light punishment
or event without. This will affect directly our production in general. Therefore, more
or less, the exporting quality will also be negatively affected as an inevitable result.
Besides, if we want to raise the export output in EU market, we need to be
aware of the regulations of EU so that suitable methods can be taken from the
beginning stage to the finishing ones
4.4.

Improve the competitive capacity to Vietnamese enterprises

From the data survey, we can see that many enterprises are not ready to the
wave of global integration. The incompetence and indifferent attitudes will be the
hinder to the development, which makes all the effort of the Government through
export subsidy be meaningless.
To make our export be fruitful, we have to raise the awareness of enterprises
about upcoming integration by holding summits about the FTA that have been signed
recently so that they can fully understand what are confronting them in the future.

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Government should also take advantage of the media to spread the latest
information about our current economic conditions, about new-signed FTA to the
country so that every citizen can feel that they are a part of this integration.
If the competitive capacities are enhanced, along with the subsidy policies from
the Government, in near future, Vietnamese agriculture product can travel around the
world, not only around EU.

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CONCLUSION
Vietnam – EU relation has been transformed from political and diplomatic
status to a both bilateral and multilateral form of cooperation about economy, trade,
investment, science & technology on the basis of mutual benefit. Obviously, EU is a
difficult but promising market of importing agricultural products from Vietnam. EU
subsidy policies has a considerable impact on Vietnam trade situation. Especially
when Vietnam joins WTO, the domestic market will face many competitors.
Therefore, Vietnam has to implement the suitable commitments to dismantle tariff and
non-tariff barriers followed a beforehand schedule. To be consistent with international

practices, Vietnam should increase the number of export products in EU market,
provided that Vietnam confirm sustainable agricultural development, rural
development and poverty reduction. Moreover, agricultural subsidy policies should be
adjusted completely, taking into account liberalization commitments such as ASEANIndia, ASEAN-Japan, ASEAN-Korea, ASEAN-Australia, ASEAN-New Zealand. In a
nutshell, our assignment partially helps us have an overall knowledge about EU
agricultural subsidy policies and more understanding about Vietnam market, as well as
shows possible measures to solve controversial issues of agricultural products in the
economic integration period.

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REFERENCE
Europa (web portal) (20 July 2010) The CAP after 2013' Brussels
Farmers Guardian (1 September 2006) Top 20 cap payments
Human Resource Club - Foreign Trade University (2015) Promotion clip “AEC, WE
ARE READY”
PhD Nguyen Thuong Lang (October 2010) Assignment “Agricultural subsidy policies
in EU”
Rpa.gov.uk (17 August 2006) Rural Payment Agency "Farm Payments by value 2003–
2004"
VTV3 (December 2015) Report “Tap chi kinh te cuoi nam 2015”
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