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Sustainable Exports to the EU Require a "Green" Approach

26/09/2023 14:31

From the third year of implementing the EVFTA (European Union-Vietnam Free Trade Agreement), the advantages have been somewhat affected, as the EU is imposing higher standards and increasing requirements for quality, particularly in the fields of environment and sustainable development, for imported goods.

Toàn cảnh tọa đàm

Rising EU Standards

At a seminar titled "Green Transition - Vital Requirements for Exporting to the EU" organized by the Vietnam Trade Magazine on September 19, Mr. Ngo Chung Khanh, Deputy Head of the Multilateral Trade Policy Department (Ministry of Industry and Trade), stated that the EVFTA includes a chapter on sustainable development. Sustainable development in the EVFTA pertains to two areas: the environment and labor.

Regarding the environment, the EVFTA addresses four main aspects: climate change, biodiversity, sustainable forest management, and the trade in timber and the development, conservation of marine species, and aquaculture.

According to Mr. Ngo Chung Khanh, the EVFTA is not just an ordinary trade agreement but a pact with a strong emphasis on sustainable development. "The EVFTA is largely about sustainable development, so companies seeking to export to the EU sustainably need to pay great attention to sustainable development, environmental issues, and labor," emphasized Mr. Ngo Chung Khanh.

The EVFTA is also the first agreement with a rather clear enforcement mechanism. Both sides agree to establish a Sustainable Development Committee with representatives from the governments and regulatory bodies of both parties regularly meeting to review the progress of implementation on both sides, sharing experiences, and addressing issues.

In addition, the EU will have regulations concerning environmental and labor matters. For instance, the Carbon Border Adjustment Mechanism (CBAM) and regulations related to anti-deforestation and, in the near future, supply chain legislation. These regulations generally target importers rather than exporters. That is, EU entities and EU-related entities will be responsible for managing their supply chains to meet EU requirements.

Simultaneously, Mr. Ngo Chung Khanh emphasized the trend among consumers in the EU market. Currently, consumers are increasingly concerned about how products are made, whether they have an environmental impact, whether they are sustainable, and how they treat labor. It's important to consider both aspects, from EU regulations and from consumer perspectives.

Ms. Nguyen Hong Loan, an expert in the project supporting the impact assessment of CBAM, added that the EU market has long had high environmental standards, and EU regulations related to domestic products and the environment have been in place since 1987. However, these regulations have recently become stricter, accelerating since the EU approved the Green Deal with the goal of reducing greenhouse gas emissions by 55% by 2030 compared to 1990 and aiming for a very ambitious target of achieving net-zero emissions by 2050.

"Alongside these regulations, the EU has proposed various comprehensive measures in all areas to achieve this goal, covering all sectors from agriculture, forestry, aquaculture, transportation, aviation, and when these regulations apply to European goods, they will also affect the entire supply chain for products exported to Europe, such as those from Vietnam," said Ms. Nguyen Hong Loan.

Especially, a recent regulation approved in May 2023, officially effective from October 1 this year, is the EU's Carbon Border Adjustment Mechanism (CBAM), which prices the EU's carbon and applies it to exported products. However, the EU has also introduced a transition schedule from now until 2026, and the proportion of CBAM certificates that we have to pay will gradually increase from 2026 to 2034.

According to Ms. Nguyen Hong Loan, European green standards are becoming more widespread and deeper. For businesses, these standards used to be applied on a voluntary basis, but now Vietnamese businesses exporting to Europe will have to comply more strictly.

Don't let the grass grow under your feet

Discussing the green transition, Ms. Nguyen Thi Thu Trang, Director of the WTO and Integration Center at the Vietnam Chamber of Commerce and Industry (VCCI), stated that undoubtedly, EU's green or sustainable standards will cover almost all of our products that are considered strengths when exporting to the EU market. For example, agricultural and aquatic products, wood products, textiles, and footwear. Therefore, it is certain that the number and scope of Vietnamese businesses and exported goods affected will be significant.

This is also a challenge for businesses because these standards are not a one-time requirement; they involve gradual "green" and sustainable changes. In other words, businesses that want to comply must continuously monitor to ensure compliance.

"This year, our exported goods may comply, but by next year, compliance with green and sustainable requirements is not guaranteed, as the requirements will increase over time," analyzed Ms. Nguyen Thi Thu Trang. She also emphasized that adapting to these standards requires significant effort, awareness, and costs for businesses.

Ms. Nguyen Thi Thu Trang shared that a survey conducted in August revealed that Vietnamese businesses have begun to show interest in this issue. Nearly 70% of surveyed businesses were aware of the EU's Farm-to-Fork Program in the green strategy applied to agricultural and food products, nearly 80% of related businesses were aware of EU anti-deforestation laws, and nearly 60% of surveyed textile and garment businesses knew about the strategy. However, there is less interest in CBAM, as the EU currently limits it to six types of products, most of which are not Vietnamese export strengths.

"These regulations are not applied immediately according to the schedule. This is the basis for awareness and preparation. We should not be too worried, but we should not do nothing either," said Ms. Nguyen Thi Thu Trang.


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