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EVFTA alone is not enough for pepper to conquer the European market

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VIETNAM, December 31 – HÀ NỘI — Although the Vietnam-European Union Free Trade Agreement (EVFTA) appears to be a boon for Vietnamese pepper, expanding market reach in Europe requires much more than the tariff advantages induced by the FTA.

Hoàng Thị Liên, president of the Vietnam Pepper Association, estimated that Vietnam exported approximately 211,500 tons of pepper in the first 11 months of 2022, grossing $911 million. Europe remained a major importer of Vietnamese pepper, with around a quarter of the pie.

As the country has signed a free trade agreement with Europe, the pepper has gained a better position in the market. In the short term, EVFTA is expected to give it huge tariff advantages over its main competitors, including Indian and Malaysian pepper.

However, the president urged pepper companies not to take the benefits for granted, as Europe has begun to raise the bar for imported pepper. Furthermore, some countries are slated to sign their own FTAs ​​with Europe in the coming years, further eroding the advantages.

“Companies need to constantly improve to adapt to the highest standards of the market,” said Liên.

The president also forecast that demand for Vietnamese pepper would skyrocket in the second quarter of 2023 thanks to China’s less restrictive stance on COVID-19.

Nguyễn Nhật Minh, representative of Vietnam Insight, said that Europe is one of the world’s largest pepper importers, consuming a third of the world’s pepper exports. Over the next five years, the market is expected to grow by around 2 percent per year.

Việt Nam is one of the four countries in Asia that have signed FTAs ​​with Europe. With the entry into force of EVFTA, Vietnamese pepper enjoys a preferential tariff of 0%, giving it a huge advantage over pepper from non-FTA countries.

However, tariff cuts are only part of the story. In fact, NAFTA-induced advantages usually come with specific technical barriers to trade. Such barriers include strict regulations on Maximum Residue Limits (MRL) and Sanitary and Phytosanitary Measures (SPS) applicable to pepper.

“Pepper imported into European markets is required to meet European standards. It must be safe for consumer health, clearly labeled and free of impurities,” Minh said.

Lương Phước Vinh, Tentamus Group’s Southeast Asia regional manager, said a closer link between companies and farmers is needed to keep production stable and increase the proportion of processed peppers in total exports.

He urged Vietnamese farmers to shift from a quantity-focused to a quality-focused mindset to help Vietnamese pepper gain ground in demanding European markets.

He also said that it is difficult to bring Vietnamese pepper to Europe, but it is more difficult to get it onto supermarket shelves, as supermarkets set the bar for imported pepper higher than that set by European authorities.

“For example, European authorities set maximum residue levels for certain agents in pepper at 0.1 percent. Meanwhile, supermarkets require maximum residue levels of 0.07 percent,” Vinh said.

Phạm Minh Thông, CEO of Phúc Sinh JSC, believed that a commitment to sustainable development would be the key to commercial success in Europe. This is because European consumers prefer a sustainable way of production and consumption.

“If companies don’t have a sustainability mindset, consumers will turn their backs on them,” Thông said.

The CEO urged Vietnamese companies to shift their focus to widely processed pepper to strengthen their position in global markets. He took as an example freeze-dried pepper, which can sell for six times the price of ordinary black pepper. —VNS

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