As one of the 20 largest economies in the world, Australia has become an export market of great potential for Vietnam. The implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will therefore present Vietnam with a great opportunity to promote exports to the country. However, the trade situation between the two remains limited. A conference entitled “The Australian market potential from the CPTPP”, organized by the Vietnam Chamber of Commerce and Industry (VCCI) on April 12 raised issues in Vietnam - Australia trade cooperation for discussion.

According to Ms. Phung Thi Lan Phuong, Head of the FTA Department, WTO, and Integration Center at VCCI, Australia is one of the 20 largest economies in the world and one of the ten most attractive destinations for global FDI. The country, therefore, has become a potential export market for Vietnam. Australia is also a partner of Vietnam under the ASEAN - Australia / New Zealand Free Trade Agreement (AANZFTA), signed in 2010. Yet Vietnam’s export value to Australia is still quite limited.

Export turnover to Australia accounted for only 1.84 per cent of Vietnam’s total export turnover in 2018; a relatively small rate given the size of Australia’s market. Compared with other export partners, Australia was only the 13th largest export market of Vietnam in 2017, with export value much lower than key export markets such as the US, China, Japan and South Korea.

On the Australian side, Vietnam is only the 14th largest importer to Australia, accounting for just 1.74 per cent of the total in 2017. Of the ten ASEAN countries covered by the AANZFTA, Vietnam ranked fourth after Singapore, Thailand and Malaysia in export turnover to Australia.

In particular, Vietnam’s export structure is not complementary to Australia’s import structure. Comparing the top 10 imported products in Australia and the top 10 exports by Vietnam in 2017, only three imported products to Australia matched Vietnam’s largest export products. Moreover, some of Vietnam’s traditional key export products, such as agricultural products and textiles, are products Australia imports very little of.

Vietnam, however, can still take opportunities from the CPTPP to export goods to Australia. Ms. Phuong said the CPTPP has the highest degree of liberalization and scope of commitments ever, and became effective early this year. Australia commits to opening up its market for goods, services, and investment from Vietnam more so than the AANZFTA did, making this a new opportunity for Vietnam’s exports to the country.

There are opportunities from Australia’s tariff reduction commitments in the CPTPP. It has committed to eliminating 93 per cent of tariff lines immediately after the agreement is in effect. Nearly all remaining tariff lines will be removed within three to four years. Thus, within the next few years, all Vietnamese goods can be exported to Australia with a tariff of zero per cent. To enjoy these preferential tariffs, of course, goods from Vietnam must meet the rules of origin prescribed in the CPTPP.

In addition to commitments on tariff reductions, the CPTPP also includes a number of commitments to reduce non-tariff barriers, making it easier to export Vietnamese goods to Australia.

In order to take advantage of the opportunities from the CPTPP when penetrating into Australia, according to Ms. Phuong, the first and foremost thing is that local enterprises must understand the content of the agreement, especially matters pertaining to their products. For example, enterprises that wish to export goods to Australia need to determine the preferential tariffs in the CPTPP that Australia applies on goods from Vietnam, as well as rules of origin that apply to such goods, in order to enjoy tax incentives and the benefits of other related customs regulations.