Vietnam’s exports to the eu Situation and recommendations.doc

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TABLE OF CONTENTS
Acknowledgement......................................................................................................4
List of abbreviations...................................................................................................5
List of tables...............................................................................................................6
Introduction................................................................................................................7
CHAPTER 1: THEORETICAL FRAMEWORK................................................................8
1.1 EXPORTING AND THEORIES OF INTERNATIONAL TRADE.............................8
1.1.1 Definition of exporting......................................................................................8
1.1.2 Theories of international trade..........................................................................8
1.1.2.1 Absolute advantage ............................................................................8
1.1.2.2 Comparative advantage.......................................................................9
1.1.2.3 Factor proportion theory......................................................................9
1.1.2.4 National competitive advantage.........................................................10
1.1.2.5 International product life cycle..........................................................10
1.2 THE VITAL ROLE OF EXPORTING...........................................................11
1.2.1 To the country.............................................................................................11
1.2.2 To the company..........................................................................................12
1.2.2.1 Expand sales.....................................................................................12
1.2.2.2 Excess production capacity ..............................................................12
1.2.2.3 Gain experience................................................................................13
1.3 METHODS OF PROMOTING EXPORT......................................................13
1.3.1 Subsidies.....................................................................................................13
1.3.2 Export financing.........................................................................................14
1.3.3 Special government agencies......................................................................14
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CHAPTER 2: REAL SITUATION OF VIETNAM’S EXPORTS TO THE EU ............15
2.1 ESTABLISHMENT AND DEVELOPMENT OF THE EUROPEAN UNION.........15
2.2 VIET NAM EXPORT TURNOVER .............................................................................16
2.3 REAL SITUATION OF SOME MAIN EXPORT ITEMS TO THE EU ..................19

2.3.1 Textile fabric goods .....................................................................................19
2.3.2 Footwear.......................................................................................................20
2.3.3 Art and handicrafts ......................................................................................21
2.3.4 Seafood and aquatic products........................................................................22
2.4 SOME ACHIVEMENTS AND CHALLENGES OF VIETNAM’S
EXPORTS TO THE EU..........................................................................................23
2.4.1 Achievements..............................................................................................23
2.4.2 Challenges..................................................................................................23
CHAPTER 3: RECOMMENDATIONS TO FURTHER PROMOTE
VIETNAM’S EXPORT TO THE EU MARKET ..............................................................25
3.1 RECOMMENDATIONS TO VIETNAM ENTERPRISES ........................................25
3.1.1 To select the suitable method to actively penetrate into the distribution
channels in EU market .............................................................................................25
3.1.2 To reinforce investing activities and perfect management work to
produce goods suitable with EU market....................................................................25
3.1.3 To step up applying e-commerce in business..............................................26
3.1.4 To improve the operating capacity and competitiveness with their
rivals to produce the suitable produce with EU market.............................................26
3.2 RECOMMENDATIONS TO THE GOVERNMENT ...............................................28

3.2.1 To construct and perfect economic and commercial policies to promote
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export.......................................................................................................................28
3.2.2 To restructure the economy, schedule production operations forward
towards export, fully exploit the advantages to enhance the competitive
capacity and reduce the disadvantages......................................................................28
3.2.3 To restructure the state-owned enterprises...................................................29
3.2.4 To support credits for the export enterprises................................................29
3.2.5 To innovate administrative machinery and import-export machinist............29

3.2.6 Other recommendations ................................................................30
CONCLUSION ......................................................................................................................31
REFERENCES .......................................................................................................................32

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LIST OF ABBREVIATIONS
EU: European Union
CESC: Community of European Steel and Coal
EEC: European Economic Community
CEEA: Community of European Energy Atomic
EC: European Community
USD: United States Dollar
US: The United States
WTO: Word Trade Organization
GDP: Gross Domestic Product
ISO: International Organization for Standardization
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LIST OF TABLES
Table 1: Vietnam – EU import and export turnover ……….
Table 2: Vietnam – EU export turnover …………………..
Table 3: Vietnam – EU turnover ………………

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INTRODUCTION
2005 marked the 15th anniversary of diplomatic relations between the European
Community (EC) and Vietnam. Diplomatic ties were established in October 1990. The
Delegation of the European Commission to Vietnam was officially opened in 1996

The EU is one of Vietnam's largest trading partners and export markets. EU
companies have also invested considerably in Vietnam, bringing stocks of EU FDI to USD
4 billion, which makes the EU the second largest source of FDI into Vietnam.
* Objectives of the report
First, I would like to give out of brief a theoretical framework about exporting and
international trade. Then, in the next part, I will review and analyses the real situation of
Vietnam export to the EU. Finally, I would like to give some recommendations of my own,
in the last, to enhance export activity of Vietnam enterprises in the time to come.
* Scope of report
Due to the limited time and knowledge, my research can not cover all the export – import
activities of Vietnam enterprises but it only focuses on the Vietnam enterprises’ export
activity. Some recommendations are to the Vietnam enterprises and State only.
* Methodology of the report is a combination of
_Method of statistics
_Method of analysis
_Method of comparison
_Method of synthesis
* Outline of the report
Apart from an Introduction and Conclusion, the report consists of three chapters:
_Chapter 1: Theoretical framework
_Chapter 2: Real situation of Vietnam’s exports to EU
_Chapter 3: Recommendations to strengthen Vietnam export activities in EU market.
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CHAPTER 1
THEORETICAL FRAMEWORK
International trade has occurred for thousands of year and there have been a numbers
of theories discussing the reasons why countries take part in the international trade and
what gains and benefits counties have from international trade. As this report focuses on
the exporting activity of the Hung Thinh Company, exporting and theories of international

trade will be discussed in the following part of the chapter.
1.1 EXPORTING AND THEORIES OF INTERNATIONAL TRADE
1.1.1Definition of exporting
“Exporting is the act of sending goods and services from one nation to others”.
Relatively, exports would be defined as” all goods and services sent from one country to
other nation” . Companies export products when the international market place offers
opportunities to increase sales and in turn profits. Those companies may be small, medium-
size or large multination firms, but they all engage in exporting. However, not all
companies get involved in export activities to the same extend. Some companies perform
few or none of necessary activities to get their product a market abroad. Instead, they use
intermediaries that specialize in getting products from one market to another. Other
companies perform all of their activities themselves with an infrastructure that bridges the
gap between two markets.
1.1.2 Theories of international trade
To understand the nature of exporting, how it is based on related economic factors
and what the gains from exporting are. The theories of international trade are studied
below:
1.1.2.1 Absolute advantage
Scottish economist Adam Smith (1776) first put the trade theory of absolute
advantage as follow:” Absolute advantage is the ability of a nation to produce a good
more efficiently than any other nation”. In other words, a nation with an absolute
advantage can produce greater output of a good or service than other nations using
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the same amount of, or fewer, resources. Therefore, a country could concentrates
on producing the goods in which it holds an absolute advantage. It could then trade with
other nations to obtain the goods it needed but did not produce.
And despite the power of the theory of absolute advantage in showing the gains from
trade, there is one potential problem. What happens if one country does not hold an
absolute advantage in the production of any products? Are there still benefits to trade, and

will trade event occur? To answer these questions, let’s take a look at an extension of
absolute advantage, the theory of comparative advantage.
1.1.2.2 Comparative advantage
An English economist name David Ricardo developed the theory of comparative
advantage in 1817. He proposed that if one country (in the example listed here of two-
country world) held absolute advantage in the production of products, specialization and
trade could still benefit both countries. A country has a comparative advantage when it is
unable to produce a good more efficiently than other nations, but produces the goods more
efficiently than it does any other goods. In other words, trade will be beneficial even if one
country is less efficient in the production of two goods, so long as it is less inefficient in the
production of one of goods.
And economic researchers continue to develop and new theories to explain the
international purchase and sale of products. Let’s now examine one of these, the theory of
factor proportions.
1.1.2.3 Factor proportions theory
In the early 1990s, an international trade theory emerged that focused attention on
the proportion (supply) of resources in a nation. The cost of any resource is simply the
result of supply and demand: Factor in great supply relative to demand will be less costly
than factors in short supply relative to demand. Factors proportion theory states that
countries produce and export goods that require resources in short supply. The theory
resulted from research of two economists, Elle Heckscher and Bertil Olin, and is therefore
sometimes called the Heckscher-Ohlin theory.

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Thus factor proportions theory differs considerably the theory of comparative
advantage. Recall that the theory of comparative advantage states that countries specialize
in producing the good that it can produce more efficiently than any other good. Thus the
focus of the theory (and absolute advantage as well) is on the productivity of the
production process for a particular good. In contract, factor proportions theory says that a

country specializes in producing and exporting goods using the factors of production that
are the most abundant, and thus cheapest – not the goods in which it is most productive.
1.1.2.4 National competitive advantage
In 1990, a new theory was put forth by Michael Porter to explain why certain
countries are leaders in the production of certain products. His national advantage theory
states that a nation’s competitiveness in an industry depends on the capacity of the industry
to innovate and upgrade. Porter’s work incorporates certain elements of previous trade
theories but also makes some important new discoveries.
Porter is not preoccupied the export and import patterns of nations, but with explaining
why some nations are more competitive in certain industries. He identifies four elements:
. Factor condition
. Demand conditions
. Related and supporting industries
. Firm strategy, structure and rivalry
1.1.2.5 International product life cycle
Raymond Vernon’s international product life cycle states that a company will begin
by exporting its product and later undertake foreign direct investment as the product move
through its life cycle (from new to maturing standardized product) to determine where it
will be produced.
In the new product stage, stage 1, the high purchasing power and demand of buyer
in an industrialized country spur a company to design and introduce a new product concept.
Because the exact level of demand in the domestic market is highly uncertain at this point,
the company keeps production volume low and based in home country. Keeping
production where initial research and development occurred and staying in
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contact with customers allows managers to monitor buyer preferences and modify the
product as needed. Although initially there is virtually no export market, exports do begin
to pickup late in the new products stage.
In the maturing produce stage, stage 2, the domestic market and markets abroad

become fully aware of the existence of the product and its benefits. Demand rises and is
sustained over a fairy lengthy period of time. As exports begin to account for an increasing
greater share of total product sales, the innovating company introduction facilities in those
countries with the highest demand. Near the end of the maturity stage, the product begins
generating sales in developing nations and perhaps some manufacturing presence is
established there.
In standardized product stage, stage 3, competition from other companies selling
similar products pressure companies to lower price in order to maintain sales levels. As the
market becomes more prices sensitive, the company begins searching aggressively for low-
cost production based in developing nations to supply a growing worldwide market.
Furthermore, as
most production now takes place outside innovating country; demand in the innovating
country is supplied with imports from production in developing and other industrialized
nations. Late in this stage, domestic production might even cease altogether.
From these theories, the core necessity of exporting can be drawn out. As for
Vietnam enterprises, the products, which combined absolute advantage and national
competitive advantage, are what they aim at. And by considering the product life cycle
theory, domestic companies will find suitable product strategy for each kind of their
products.
1.2 THE VITAL ROLE OF EXPORTING
1.2.1 To the country
So as to understand why a country exports, let’s have look at the international trade
and the importance of international trade. It is defined as the purchase, sale or exchange of
goods and services across national borders. This is in contrast to domestic trade, which
occurs between different stage, regions, or cities within a country. And as being stated,
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regions, or cities within a country. Exporting, therefore, can be called a core function of
international trade, which brings benefits to a country as follows:
Firstly, exporting, in company with importing, provides a country’s people with a

great choice of goods and services. For example, because Finland has a cool climate, it can
not be expected to grown cotton. But it can sell paper and other products made from
lumber (which it has abundance) to the US. It can then use the proceeds from sales to buy
Pima cotton from the US. Thus, people in Finland get cotton they would otherwise not
have. Although the US has vast forests, the wood-based products from Finland might be of
certain quality or price that fills a gap in the US marketplace. Importing these products
from Finland might also allow workers in the US to work in other industries that pay higher
wages.
Secondly, exporting is an important engine for job creation in many countries. For
example, the Department of Commerce of the US estimated that for every $1 billion
increase in exports between 1993 and 1997 created more than 6,5 million jobs in the US.
More over, the US Trade Representative’s office report that trade-related jobs pay 13
percent to 17 percent more than jobs not related to international trade.
1.2.2 To the Company
As the matter of fact, companies are now increasingly selling goods and services to
wholesalers, retailers, industry buyers and customers in other nations. Generally speaking,
there are three main reasons why companies export
1.2.2.1 Expand sales
Companies that have a certain status in the domestic marketplace tend to export as a
means of expanding total sales when the domestic activities, certainly not all for going
international must take into account many factors like: Political environment or culture,
etc. Greater sales volume allows them to spread the fixed costs of production over a greater
number of manufactured products, thereby lowering the cost of production each unit of
output. In short, exporting is one way of to archive economies of sale.
1.2.2.2 Excess production capacity
Sometimes companies produce more goods and services than the market can absorb.
When that happens, resource sit idle. But the firm can find new international resources of
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demand; it can spread its cost over grated number of units produced, so that can lower the

cost per unit and increase profits.
If it passes on these benefits to customers in the form of lower prices, the firms
might also capture market share from competitors. A dominant market position means
greater market power, providing the firm with greater leverage in negotiating with both
suppliers and buyers.
1.2.2.3 Diversify sales
Exporting permits companies to diversify their sales. In other words, they can offset
slow sales in one national market (perhaps due to recession) with increased sales in other.
Diversified sales can level off a company’s cash flow-marking it easier to coordinate
payments to creditors with receipts from customers.
1.2.2.4 Gain experience
Companies often use exporting as a low-cost, low-risk way of getting started
international business. For example, owners and managers of small companies, which
typically have little or no knowledge of how to conduct business in other cultures, use
exporting to gain valuable international experience.
1.3 METHODS OF PROMOTING EXPORT
Countries often in trade by strongly supporting their domestics companies exporting
activities though they all know that it brings both pros and cons. There are three most
common instruments that governments use to promote export:
1.2.1 Subsidies
Financial assistance to domestics produces in the form of cash payments, low
interest loan, tax breaks, product price supports, or some other forms is called subsidy.
Regardless of the form a subsidy takes, it is intended to assist domestic companies in
fending off international competitors. This can mean become more competitive in the home
market or increasingly competitive in international markets through export.
Because of many forms a subsidy can take, it is possible to calculate the amount of
subsidies any country offers its producers. One of the most popular forms in the world today is a
media and entertainment, especially in developed countries. In Vietnam, this type of
subsidy only appears in tourism sector.
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Nevertheless, when offering subsidies, governments should pay more attention to
arguments over unfair subsidies settled by WTO. Critics charge that subsidies cover cost
that truly competitive industries should be able to absorb on their own. In this sense,
subsidies simply encourage inefficiency and complacency. Because government generally
pay for subsidies founds obtained from income and sales taxes, it is widely believed that
subsidies benefits companies and industries that received them but harm consumers.
1.2.2 Export financing
Government often promotes exports by helping companies finance their export
activities. They can offer loans that company could otherwise not obtain or charge them an
interest rate that is lower than the market rate. Or the government can guarantee that it will
replay the loan if a company should default on the repayment-called loan guarantee.
However, receiving financing from government agencies is often crucial to the success of
small businesses just beginning export. Export financing programs are not immune to
controversy. Few criticize government support of small business exporting activities. But
support for large Multinational Corporation is often controversial.
1.2.3 Special government agencies.
The government of the most nations has special agencies responsible for promoting
exports. Such agencies can be particularly helpful in obtaining contracts or small and
midsize businesses that have limited financial resources. Government trade-promotion
agencies also often organize trips for trade officials and business people to visit other
countries to meet potential business partners and generate contracts for new business. They
also typically trade officers in other countries. These officers are to promote the home
country’s export and introduce business to potential partners in the host nation.
Government trade promotion agencies typically do a great deal of advertising in the other
countries promote the nation’s export.
The above trade theories have given an overview of what exporting is, its rationales,
and what gains that a company can benefit from talking export activities. From these
theories, Vietnamese companies may draw out an exporting pattern in which they can take
use of the countries international advantages for achieve high manufacturing and trading

productivity.
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CHAPTER 2
REAL SITUATION OF VIETNAM’S EXPORTS TO THE EU
2.1 ESTABLISHMENT AND DEVELOPMENT OF THE EUROPEAN UNION
The European Union (EU) now consists of 15 member countries, including France,
Germany, Italy, Belgium, Holland, Luxembourg England, Ireland, Denmark, Greece,
Spain, Portugal, Austria, Swede, and Finland. The EU total area is of 3.3 million square
kilometers, with the population of 400 million, and Gross National Product of USD 8.000
billion. The head office is located in Bruxelles (the capital of Belgium). EU is managed by
a range of general Institutions (including European Parliament, Assembly, and
Committee…)
The foundation process of EU was marked on 04/18/1951 when Belgium, France,
Italy, Holland, Luxemburg and Federal Republic of Germany (Western Germany) jointly
signed Paris Treaty, establishing a Community of European Steel and Coal (CESC) in
order to form a common market for a coal, steel and iron ore products. Next, all member
countries of CESC signed Roma Agreement on 07/25/1957 setting up an European
Economic Commodity (EEC), which aimed to establish a common market of agricultural
and industrial goods. And then they came to form a Community of European Energy
Atomic (CEEA) as to control the use of energy and study of atomic in cooperation. From
the date of January 07, 1976 on hall head offices of the organizations including CESC,
EEC, and CEEA were brought together and called with a common name-European
Community (EC).
In December 1991 in Maastricht (Holland), the heads of states of the EC countries
unanimously arrives at a decision of renaming European Community (EC) to European
Union (EU) on 1
st
December 1992 when European Union Treaty (normally called
Maastricht Treaty) was signed. European Union was officially founded on 10

th
September,
1993.
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