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How did Vietnamese wood exporters exploit market opportunities after the UKVFTA took effect?
Before Brexit, the UK was an important market for Vietnamese wood products, which accounted for 30-40 percent of Vietnam’s export value to the EU. While Brexit raised exporters’ concerns, the UKVFTA, taking effect in May 2021, helped increase Vietnam’s wood export value to the UK to more than US$265 million in 2021, up over 18 percent from 2020. More than 90 percent of wood exports to the UK are furniture products.
According to the agreement, refined furniture exports to the UK are subject to a 1.2-2 percent tax that will be gradually reduced in the near future, while wood product and intermediate material exports to this market are subject to a 2-10 percent tax, which will be also gradually reduced according to the agreed roadmap. The export growth shows that wood enterprises have taken advantage of UKVFTA opportunities. The EU and the UK are discerning markets and without the UKVFTA’s tax incentives, wood enterprises would find it hard to increase exports to the UK, as similar products from other countries like China have carved a major niche in this market.
What difficulties do timber exporters face under the UKVFTA?
Vietnam is gradually becoming a wood processing center as a result of free trade agreements (FTAs) in general and the UKVFTA in particular. However, Vietnamese products accounted for only 7.2 percent of the UK's wood and wood product import value, while the UK represents only two percent of Vietnam’s wood export value.
The UK has a long-established wood industry and has strict standards on product quality, design, environmental protection, climate change control, green growth and greenhouse gas emissions, obliging Vietnamese businesses to pay special attention to the legality of wood origin if they are to enter supply chains to this market.
Businesses have not made good use of digital platforms to introduce and bring wood products to British customers. Vietnamese producers need to improve product design and marketing if they are to enjoy bigger export opportunities. If Vietnam maintains export growth to the UK, the country will improve its prestige and attract the interest of customers from other markets.
What solutions do businesses and management agencies need to implement?
Wood enterprises need to make a breakthrough by making products with higher added value, using less labor and less input materials. They also need to better corporate governance and apply modern accounting software to ensure input and output transparency and avoid trade remedy-related lawsuits.
It is necessary to promote Vietnam as a capable, competitive and sustainable wood processing center, and identify opportunities and challenges related to the UKVFTA’s exploitation. Particularly, the Government needs to consider signing a Voluntary Partnership Agreement on Forest Law Enforcement, Governance and Trade (VPA/FLEGT) with the UK to ensure that exporters to the UK meet environmental and forest protection standards.
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