Exporting Vietnam’s agricultural and fishery products to EuropeanUnion market under green trade barriers
The number of environmental protection regulations, acting as
green trade barriers is increasing despite the fact that there is no common policy
framework or a powerful international organisation responsible for monitoring them.
The vague borderline between environment protection and trade protectionism has
fuelled many trade disputes and concerns over its negative impacts on exporting
countries. This research is done with a view to providing a comprehensive theoretical
framework on impacts of environmental trade barriers as well as exploring how they
work in reality, especially in Vietnam and European Union trade relationship. The
study finds one important result: Requirements to upgrade technology to meet the
precise technical regulations and expenditure for conformity assessment actually
increase production costs to small and medium companies in the short-term. However,
proper adjustments to these requirements will bring about long-term benefits. Specifically,
studying the case of applying good agricultural practices (GAP), one kind of voluntary
environment regulations reveals that GAP helps to improve products’ quality and
raise the productivity, which opens an access to developed markets to gain higher
profits.
Reference to this paper should be made as follows: Khoi, N. V.
And Thuy, L. T. T. (2013) “Exporting Vietnam’s agricultural and fishery products
to European Union market under green trade barriers’, Int. J. Diplomacy and Economy,
Vol. 1, Nos. 3/4, pp. 309–328.
Biographical notes: Nguyen Viet Khoi has been working for VNU
University of Economics and Business at Hanoi, Vietnam since 2001. In the academic
year 2012–2013, he works as Post-Doc Researcher under Fulbright Program Award at
Columbia University, USA. He also worked as Visiting Researcher and Professor at
University of Wisconsin – Eau Claire, USA in 2006 and 2008. His main research areas
are international economics, global value chain and e-commerce. His latest researches
have addressed some key issues in MNCs and trade, supply chains under globalisation.
Le Thi Thanh Thuy graduated from VNU University of Economics
and Business, Hanoi, Vietnam in 2010 with a major in international economics. While
at university, she paid interest on development issues such as environment, poverty
and disadvantaged people. Since 2011, she has been pursuing a joint Master programme
in Development Economics between Vietnam National Economics University (NEU) And
Institute of Social Studies (ISS), The Hague, The Netherlands. At the moment, she
is working for IUCN, International Union for Conservation of Nature – an international
organisation working in environment field. 1 Green trade barriers Environmental
protection regulations are aimed at raising the public and corporate’s awareness
of reducing environmental pollution. These regulations, however, have also been
used by some developed countries and others to control importing from developing
countries, where environmental standards are lower. It bears the nature of a non-tariff
barrier to trade. Nevertheless, there is no international organisation or a common
policy framework that is powerful enough to enforce green trade barriers. Although
the 1992 Earth Summit, the 1994 WTO Agreements, the 1996 World Food Summit and numerous
multilateral environmental agreements have comprised the major international frameworks,
they have not reach consistency or coherence in balancing the objectives – environmental,
economic and social – of the world’s diverse nations. Moreover, the difficulty in
monitoring environmental problems also creates many challenges in applying green
trade barriers. Despite the growth in debates and controversies, the trend for imposing
green regulations as a non-tariff barrier is upward.
Europe Union (EU), which is ranked the highest in terms of environmental
protection consciousness, is noted for its strict green barriers. This green rampart
has exerted a tremendous impact upon imports from many countries all over the world
including Vietnam. For example, in 2002–2003 alone, EU rejected as many as 72 vessels
of aquarium products from Vietnam on account of incompatibility with EU green regulations
on imported fish products. In spite of the public concern about these green barriers,
very few researches, especially on the impact of green barriers on Vietnam agricultural
and fishery trading with EU have been done. This study is therefore an attempt to
occupy this research space.
There is no clear-cut and widely accepted definition of what
it means by green trade barrier. In some contexts, the terms trade-related-environment
measures (TREMs) Or environment-related trade measures (ERTMs) Are preferred. For
example, in one survey on the reality of TREMs and ERTMs in APEC, the Economic Committee
of APEC defines these two measures as: “Trade-related
environment measures have a relatively wide coverage. They refer to environmental
measures with significant trade effects, including laws, regulations, and administrative
measures as well as regional and multilateral agreements that are formulated and
implemented or signed by APEC member economies. Environment-related trade measures
refer to national trade laws, regulations as well as administrative measures enacted
to achieve a specific environmental goal or for environmental purposes, including
trade-related measures adopted by individual economies pursuant to the multilateral
environmental agreements. Examples of ERTMs include bans, restrictions, or permit
requirements in respect of imports or exports”.
Thus, while trade-related environment measures are multilateral
and commonly agreed by parties concerned, environment-related trade measures are
national. Both types have been materialised in policies, which can be either internal
or bilateral level, and those policies are enforced through multilateral free trade
agreements (FTAs), and/or through multilateral environmental agreements (MEAs)
And controlled by the WTO. However, it is hard to distinguish between these two
measures. As explained in APEC study, “The impact of environmental regulation on
trade’ (2009) Is aimed to protect the environment, but the lack of recognised definitions
makes it difficult to differentiate them since some countries may have different
interpretations of these measures.
WTO and its precedence – GATT, though has no official definition
of TREMs, has often used this term in its documents and agreements. Because of this
popularity and in order to stand at a neutral and objective point, in this study,
green trade barriers are regarded as trade-related measures, which are all restrictions
imposed by one country or a group of countries on imported goods from other countries
based on environmental concern. This concern involves the threat to the environment
of both implementing country and the global as a whole. For example, European Union
(EU) Requires exporters to minimise the amount of packaging waste and use recyclable
materials in their products so that consuming these products do not create more
burden of solving trash and land degradation on them, which affects their own environment.
Besides, EU also issues the directives preventing illegal, unreported and unregulated
(IUU) Fishing to deal with its threat to the survival of coastal communities all
over the world. 2 Environment protection or trade protectionism
While consensus on the need of environmental protection through
the enforcement of green barriers has been reached, protection and protectionism,
in practice, are likely to be confused. Green rules can be abused and environmental
issues are used as an excuse for trade protectionism. There have been many disputes
around this issue in recent years. In such cases, some countries wanted to ban the
import on environmental grounds, while exporting countries invoked their rights
of non-discrimination in trade granted under the General Agreement on Tariffs and
Trade (GATT) And other agreements under the World Trade Organization (WTO). A central
issue in this conflict is the legitimacy of unilateral action and national decision-making
under WTO law, as opposed to multilateral decision-making. A second line of conflict-often
indistinguishable from the first-runs between the governments of the large developed
markets in the North, with their strong environmentalist movements, and the smaller
trading nations, in particular in the developing world (Biermann, 2001).
Regarding the former, it should be remembered that WTO is not
an environment agency and WTO jurisprudence has affirmed that WTO rules do not take
precedence over environmental concerns. Its main objective is to foster international
trade and open markets. However, WTO rules permit members to take trade-restricting
measures to protect their environment under specific conditions as mentioned in
Article XX of GATT: ”Subject to the requirement
that such measures are not applied in a manner which would constitute a means of
arbitrary or unjustifiable discrimination between countries where the same conditions
prevail, or a disguised restriction on international trade, nothing in this Agreement
shall be construed to prevent the adoption or enforcement by any contracting party
of measures:
(b) Necessary to protect human, animal or plant life or health; …
(g) Relating to the conservation of exhaustible natural resources if such
measures are made effective in conjunction with restrictions on domestic production
of consumption; …”
This exception can be ambiguous in some cases. According to Macmillan
(2001), a measure will be “necessary’ to protect human, animal or plant life or
health under the Article XX
(b) If there are no alternative measures
that are more consistent with GATT but WTO panel would be not suitably qualified
to assess those alternative measures and how to evaluate which measure is the least
trade restrictive?
Additionally, it is very difficult to interpret the expressions
‘arbitrary discrimination’, ‘unjustifiable discrimination’ and ‘disguised restriction
on international trade’ due to the absence of any chapeau criteria for assessing
arbitrariness, unjustifiability and disguise. Many people also have been confused
by the phrase ‘relating to’ in the Article XX
(g). ‘Relating to’ means ‘primarily
aimed at’ but how about measures that have more than one significant, although one
of which is conservation aim, if the non-conservation aim was regarded as being
of more significance than the conservation aim?
Besides WTO Agreement, there are also two non-binding instruments,
Agenda 21 and the Rio Declaration adopted at the 1992 United Nations Conference
on Environmental and Development (UNCED), which stand at the intersection of trade,
developmental and environmental issues. However, they face the same problems of
ambiguous information as Article XX. For example, Rio Principle 12, the heart of
the Rio Declaration provides: “States should
cooperate to promote a supportive and open international economic system that would
lead to economic growth and sustainable development in all countries, to better
address the problems of environmental degradation. Trade policy measures for environmental
purposes should not constitute a means of arbitrary or unjustifiable discrimination
or disguised restriction on international trade. Unilateral actions to deal with
the environmental challenges outside the jurisdiction of the importing country should
be avoided.”
What amounts to arbitrary or unjustifiable discrimination, disguised
restriction is still open to question. Moreover, the language of Principle 2 with
the use of “should’, not ‘shall’ is quite discretionary. Despite this ambiguity,
these words in GATT Article XX preamble were still utilised by other agreements
such as Article 36 of the Treaty Establishing the European Economic Community. One
conclusion may be drawn here is that the border line between protection and protectionism
is quite vague, which leads to the difficulty in monitoring them as well as settling
disputes. As Clinton Administration’s environmental review of NAFTA correctly point
out “the choice of the appropriate level of
protection is a social value judgment. There is no requirement for a scientific
basis for the level of protection because it is not a scientific judgment”.
When there is no concrete scientific evidence on these problems, each people will
have different points of view and these controversial issues may lead to disputes
and even trade wars, which affect both sides’ interest dramatically.
The second conflict between the governments of the large developed
markets in the
North and the smaller trading nations,
in particular in the developing world in the South is even more complicated. As
stated by Macmillan (2001), all developing countries are either strictly opposed
or at least most reluctant to accept MEAs due to costs they would face in complying
with these obligations. Their fear is that these will be used to restrict developing
countries’ access to developed countries’ markets. Qing (2007), a researcher from
China, a developing country is even more frank in claiming that green barriers are
a “disguised’ means of protectionism behind their morality facade. He asserts “… the rapid expansion of manufacturing industries
in these countries (developing countries) Rouses worries from developed countries.
In this context, the developed nations put in place green and technological barriers
one after the other in a bid to hold an advantageous position over the competition“.
He goes on to elaborate that green barriers weaken the competitive power of developing
economies by adding additional costs to their export goods. He concludes that the
green barriers are ”actually a new type of
trade barrier”.
Meanwhile, the developed countries, as Biermann (2001) Explained,
reasoned that MEA has been widely applied by that the vast majority of WTO members.
CITES, for example, has been ratified by 90% of WTO members (152 members) And is
thus almost universally recognised as the general standard of behaviour in this
issue area. Because of its wide application, one can safely assume that many WTO
members that are parties to these multilateral environmental agreements do not view
them as violating the spirit of GATT and being applied in a manner that would constitute
a means of arbitrary or unjustifiable discrimination or a disguised restriction
on international trade. This disagreement in using green trade barriers may root
from conflicts over standards. People in high-income country may have better awareness
of environment protection and require stricter compliance of products to environmental
rules. In addition, to non-transboundary environmental impacts, which do not cross
borders, each country has different optimal set of environmental standards from
others. An optimal set of standards in Europe, for example might be entirely different
from the optimal set in North Africa or Central Asia due to budgets constraint and
regulatory abilities.
However, as Neumayer (2001) Said, the hostility towards practically
any form of greening of multilateral investment and trade regimes is rooted in a
much deeper frustration with the distribution of benefits in these multilateral
regimes. In the view of developing countries, the developed countries benefit much
more from these than they themselves do. In particular, they believe that the developed
countries have benefited quite substantially from the Uruguay Round of trade negotiations
on topics that they favour: Intellectual property rights, investment, services,
telecommunications, restriction of production and export subsidies, strengthening
of anti-dumping measures, increased access to developing countries’ market, to mention
just a few. The developing countries on the other hand, have hardly benefited. Although
WTO guaranteed them “special and
differential” treatment, they
rightly complain that the special provisions of safeguarding their interests have
largely ineffectual in reality; The transitional periods were too short for them
to adjust to the requirements of the WTO agreements and that the promised technical
assistance was too little and too unsystematic to strengthen their capacity to comply
with trade obligations. Thus, it seems fair to say that developed countries have
benefited much more relative to developing countries from Uruguay Round.
Given this imbalance, it is understandable why developing countries
are desperate to seek access to developed countries’ markets and show their great
suspicion and outright hostility to any restriction of this access – even if it
comes in the name of saving “our common environment’. 3 EU green regulations on
agricultural and fishery products
3.1 Mandatory regulations
Environmental regulations on agricultural and fishery products
are mentioned in European Union Environment Product Legislation. Their goal is to
protect community health and environment. They can be divided into two types: Regulations
affect environment directly such as packaging waste, organic food labelling and
regulations have indirect impact on environment but relate to people’s health and
food sanitary such as allowed maximum of pesticide, residue used in products.
The followings are some of popular regulations imposed on agricultural
and fishery products. They are arranged from the most influential regulation on
environment to the least one.
Packaging waste: A directive followed the packaging note in December
1994 (94/62/EC) Require the exporters to minimise the amount of packaging waste
(transport packaging, surrounding packaging and sales packaging) And give preference
to materials that are re-useable or recyclable.
IUU regulation: The European Community adopted a Regulation to
prevent, deter and eliminate illegal, unreported and unregulated (IUU) Fishing on
1 January 2010. In order to ensure that no products derived from IUU fishing appear
on the Community market or on markets supplied from the Community, the Regulation
seeks to ensure full traceability of all marine fishery products traded with the
Community, by means of a catch certification scheme. The catch certification scheme
covers both processed and unprocessed marine products and will improve cooperation
between flag, market and processing states.
Maximum pesticide residue levels: It is necessary to ensure that
residues used in production should create no risk to humans. Maximum residue levels
(MRLs) Are therefore set by the European Commission to protect consumers from exposure
to unacceptable levels of pesticides residues in food and feed. These regulations
directly concern public health. Yet, they also influence the environment because
if pesticides are overused on food and plants, land cannot absorb these substances,
leading to degradation or contaminating water source. Hence, pesticide residues
are always of environmentalists’ concern.
Veterinary and zoo technical checks on live animals and products:
Products from third countries are subject to checks to protect the health of citizens
and animals inside the European Community. Based on Council Directive 97/78/EC of
18 December 1997, a documentary check by the veterinary staff
of the border inspection post or by the competent authorities must be carried out
for each consignment of products coming from third countries. The products then
undergo a physical check at the border inspection post situated at or in the immediate
vicinity of an entry point into the EU. This scheme is to ensure the verification
of compliance with feed and food law, animal health and animal welfare rules.
Authorised food additives: The Council Directive 89/107/EEC of
21 December 1988 draws up a list of substances the use of which is authorised to
the exclusion of all others; A list of foodstuffs to which these substances may
be added and the conditions under which they may be added, and restrictions which
may be imposed in respect of technological purposes and rules concerning substances
used as solvents including purity criteria where necessary. Food additives, like
pesticide residue and veterinary checks, though belongs to food hygiene regulations
have indirect impact on environment. Growing, producing and consuming products that
are overused these substances can cause land erosion, water pollution, affect natural
biodiversity and other serious environmental problems. Thus, to some extent, they
can be regarded as environmental regulations on products.
If products from third countries do not meet these above requirements,
EU imposes different sanction measures in the form of financial tools and administrative
tools. EU’s generalised system of preferences (GSP) Is a good example of financial
tool. According to 1154/98/EC, GSP has tax incentives scheme to encourage trading
environmental friendly products or the ones having good social performance (good
working conditions, not abused young labour). If firms export such products to EU
countries, they can get 10–35% tax off on agricultural products and 15–35% tax off
on industrial products. By contrast, to products violating EU environmental regulations,
basing on the level of violation, they can be levied higher tax or even removed
from the list of GSP’s goods. In case of breaking the law of forest and sea protection,
EU can even abolish all GSP priority. Examples of administrative tools are quota
cutting or ban on importing. For instance, when the EU imported shipment inspection
found violations that may result in severe consequences such as causing widespread
disease, these animals will be destroyed immediately at the port of shipment. To
more serious violations, the EU will return to 100% inspection of import consignments
from the breach.
3.2 Standards
In addition to compulsory requirements, EU also has many voluntary
environment standards like ISO 14000, EMAS
and non-legislation requirements like eco-labelling. Though they are
voluntary, without complying them, exporting firms will face many difficulties in
entering exporting markets. To agricultural and fishery products, organic food labelling,
good agricultural practices (GAP) And EMAS, ISO 14000 seem to be the most popular
ones.
Organic food labelling: Organic farming is an agricultural system
that seeks to provide the consumers with fresh, tasty and authentic food while respecting
natural life-cycle systems. To get organic products labels and logo, firms have
to follow a strict certification process. Conventional farmers must first undergo
a conversion period of a minimum of two years before they can begin producing agricultural
goods that can be marketed as organic. Both farmers and processors must at all times
respect the relevant rules contained in the EU regulation. They are subject to inspections
by EU inspection bodies or authorities to ensure their compliance with organic legislation.
After the two-year period successful operators are granted organic certification
and their goods can be labelled as organic.
GAPs: GAP is also one kind of organic farming but its benefits
are more than that.
It is a means to concretely contribute to environmental, economic
and social sustainability of on-farm production resulting in safe and healthy food
and non-food agricultural products. Each country has built its own GAP standards
like USGAP of USA, EUREPGAP of EU, INDON GAP of Indonesia and VietGAP of Vietnam
for example. EUREPGAP is a global scheme and reference for good agricultural practice
that bases on the following standards: A Food safety: The standard is based on food
safety criteria, derived from the application of generic HACCP principles. B Environment
protection: The standard consists of environmental protection good agricultural
practices, which are designed to minimise negative impacts of agricultural production
on the environment. C Occupational health, safety and welfare: The standard establishes
a global level of occupational health and safety criteria on farms, as well as awareness
and responsibility regarding socially related issues; However it is not a substitute
for in-depth audits on corporate social responsibility. D Animal welfare (where
applicable): The standard establishes a global level of animal welfare criteria
on farms.
Eco-management and audit scheme (EMAS): The EU EMAS is a management
tool for companies and other organisations to evaluate, report and improve their
environmental performance. The scheme has been available for participation by companies
since 1995 (Council Regulation EEC No 1836/93 of 29 June 1993). To receive EMAS
registration an organisation must comply with the following steps: A Conduct an
environmental review considering all environmental aspects of the organisation’s
activities, products and services, methods to assess these, its legal and regulatory
framework and existing environmental management practices and procedures. B In the
light of the results of the review, establish an effective environmental management
system aimed at achieving the organisation’s environmental policy defined by the
top management. The management system needs to set responsibilities, objectives,
means, operational procedures, training needs, monitoring and communication systems.
C Carry out an environmental audit assessing in particular the management system
in place and conformity with the organisation’s policy and programme as well as
compliance with relevant environmental regulatory requirements. D Provide a statement
of its environmental performance, which lays down the results achieved against the
environmental objectives and the future steps to be undertaken in order to continuously
improve the organisation’s environmental performance.
ISO 14000: The International Standards Organization, have developed
a series of voluntary standards and guidelines in the field of environmental management.
Developed under ISO Technical Committee 207, the 14000 series of standards address
the following aspects of environmental management: Environmental management systems
(EN ISO 14001), environmental auditing and related investigations, environmental
labels and declarations, environmental performance evaluation, life cycle assessment
and terms and definitions. 4 Impacts of EU green trade barriers on Vietnam exporting
4.1 Negative impacts
Environmental regulations have created many challenges for Vietnamese
firms because many companies do not have modern technologies that are friendly to
environment to meet EU green requirements. According to a report made by Tan Duc
Thao Company in Vietnam Trade and Investment Forum (January, 2008), among all factories
in Vietnam, there are only 10% having environmental friendly technology but 76%
still utilising old technology of 1960s, 75% of this technology has run out of depreciation.
During the period 2003–2005, the
Department of Science Technology and Environment inspected 2,893 factories
but 1,129 of which violated Environmental Protection Law.
Agriculture products fail seriously to meet maximum pesticide
level of EU. The inspection of Plant Protection, Ministry of Agriculture and Rural
Development in 2006 showed that among 4,600 inspected farms, 59.8% did not follow
chemicals using process, 20.7% did not meet the required time isolating; 10.31%
used substances not listed in permitted chemicals, 0.18% used restraint drugs; 0.73%
used unknown origin drug. Of 373 tested vegetable samples, there were 33 samples
(13.46%) Having amount of chemicals exceeding permitted level. In 2008,20% farms
abused pesticide; Nearly 60% did not follow prescribed technique.
To products relating live animals, according to the Department
of Livestock Production (MARD), at present, there is only 45% of slaughter cattle
and poultry houses that have permission but 65% have no sanitation facilities after
slaughtering. The number of houses that use tap water accounts for 25%. Meanwhile,
under the supervision of the National Assembly Standing Committee, up to 16,512
small slaughters do not comply with the requirements of food hygiene. The process
of testing antibiotic residues in meat of Management Department of Agriculture,
forestry and fishery (NAFIQAD) Also revealed that during first six months of the
year, there was still nearly 4.9% pork and 3.6% chicken, ducks having antibiotic
residues exceeding permitted level. In 2008, there were only 49 ISO 22000: 2005
certificates on food safety management issued to Vietnamese firms.
Because of such poor technology and awareness, many of our export
products have been inspected or even rejected by importing markets. In July 2002,
EU found imported fishery goods from Vietnam had the sign of violating veterinary
checks requirement and having the amount of antibiotics over the permitted level.
Thus, EU inspected 100% of our exporting products since September 2001. From
September 2001 to February 2003, EU destroyed and returned 76 fish vessels,
which did not meet maximum antibiotics level. They also warned that if this situation
happened again, imported products from Vietnam would be put in the third group,
which needs 100% inspection. To face with this threat, Vietnamese authority temporarily
banned six fishery suppliers who did not comply with EU rules and warned that any
firm having one vessel violating EU rules will be removed from the list of permitted
exporting fishery products companies to EU.
In 2008, Vietnam food was notified 51 times by Rapid Alert System
for Food and Feed in the threat of violating food hygiene regulations. In 2007, this
number was only 42, including 31 cases of fishery products and 20 of
agricultural products. The
RASFF does not always make the right decision based on scientific
evidence. In case of wrong conclusion, the cost will be great, especially for fishery
products, which are easily to be destroyed and have high cost of preservation. Moreover,
if information about the name of company is revealed, it will have serious impact
on firms’ profit. In ‘Clean Production for Better Products’ (CP4BP, 2008) Project
report, presently seafood companies have to pay USD 1,000 to get each consignment
examined before export, which is costly given the financial capacity of most seafood
companies. Moreover, seafood exporters have suffered big financial losses and have
suffered reputation damage due to chemical and antibiotic residue that was found
in Vietnamese seafood by foreign importers.
Many criteria tests are also very expensive and, therefore, make
a significant increase in the product cost. Take ISO 14001 for example. It is very
costly and time consuming to get this certificate. It takes at least eight months
to meet compulsory requirements. And the cost to implement it can reach hundreds
of millions dong, dependent on production scale, method and the number of labour.
Given that almost all Vietnamese firms are small and medium, the cost can create
great burden for them.
Therefore, until now, there are just few corporations getting
this certificate. Till 2008, there
were only 325 Vietnamese firms getting ISO 14001: 2004 certificates.
Meanwhile, this number was 39,195 in China, 997 in Malaysia, 773 in Philippine and
934 in Thailand.
Likewise, it is very costly to get EUREP GAP or Global GAP, approximately
5,000–7,000 USD/per certificate. With this cost, the price will rise notably, which
makes export products unaffordable to domestic and ordinary importing markets.
Suppose that a farmer has a pond with its own water supply and
drainage channel. In order to meet the requirements of GAP, this farmer has to invest
money to renovate the pond to kill germs, remove the transmission medium, such as
crabs, water filtration and water treatment pond to ensure no pathogens. At the
same time, he also has to spend more money to buy certified clean shrimp. Hence,
there is a significant growth in his cost. According to NAFFIQAVED in 2006,
applying GAP increases the cost by
2.352
dong/kg in Ben Tre. This cost is mainly for analysing chemicals residues and antibiotics
level in and on shrimp products. To farms having no separate water supply and drainage
channels, the expense is even higher, about 13.700 dong/kg in Khanh Hoa, for example.
This rise in cost will simultaneously raise the price by 20%.
Many farmers, therefore, are afraid that the revenue may not
cover the cost and they are under the threat of great lost. It also explains why
almost all 7,000 farmers registering to apply GAP are operating large business,
the small and medium enterprises just account for very small rate. Although there
are 1,198 farms having certificates of ecological shrimp growing with the total
area of 4,000 ha, this number just accounts for 1.1% of 369,094 shrimp growers in
2008. The
same pattern happens to agricultural products. In Binh Thuan, the first
province applying EUREPGAP in growing dragon fruit, there is only 1.2% of land certified
with EUREPGAP. This number is too small to guarantee for high valued contracts.
In Vietnam, there are only 3,000 companies were issued international certificates
like ISO, HACCP, SA 8000. They
companies accounted for only 1.5% of all operating businesses. Even in
Ho Chi Minh City, the biggest city in Vietnam, this number was just 3%. Although
these certificates are not mandatory requirements to enter EU markets, without them,
firms will face many difficulties, especially in verifying their products quality.
In this case, green barriers are really a burden for small and medium enterprises,
which have low technology, lack of capital to apply international qualified management
system.
4.2 Positive impacts
High cost, however, does not always have negative impact on enterprises.
On the other hand, if high cost adds more value to products, the producers will
have power to increase the price. And in this case, their profit will rise dramatically.
4.2.1 The case of GAP
To enter EU markets, it is necessary to produce agricultural
and fishery products following GAP. This certificate is somehow a green ticket to
enter to developed markets where there are strict requirements of products quality
and its impact on environment. Realising this trend, in December 2005,
Vietnamese government, in an association with USAID and AUSAID signed
a contract with Southern Fruits Research Institute (SOFRI) To implement a project,
which helps to introduce Europe GAP (EUREPGAP) To dragon fruit growers in Binh Thuan
and Tien Giang. The aim of this project is to improve the quality of Vietnam dragon
fruits complying with EUREPGAP so that our fruits are able to export to European
and Southern American markets. Since these markets have very strict requirements
of environment protection, safe for producers as well as consumers. Despite many
challenges and difficulties, the initial results show potential success. The price
of dragon fruit exporting to EU and USA has increased to 4–5 $/kg, while the ordinary
fruit is just sold at 2 $/kg, less than two to three times. As Mr. Tran Ngoc Hiep,
chairman of Binh Thuan Dragon Fruit Association as well as the Director of Hoang
Hau Company – the biggest dragon fruit exporting company in Vietnam said, during
seven months after receiving EUREP GAP, the number of his company’s consumers rocketed,
especially in European market. In the first six months of 2008, the
volume of exporting to EU was 500 tons, equivalent to total export of
2007. The
price is obviously higher than uncertified dragon fruit.
Table 1 Cost, revenue and profit from growing organic tomatoes
and cabbages
Type
Tomatoes Cabbages content Organic Ordinary “Revenue Cost
Profit Quantity“ ”40 million dong/sao
922.000 đ/field
38.780.000 đ“ “20 million dong/sao
945.000 đ/field
19.055.000 đ”
Source: Http: // kinhtenongthon. Com. Vn/printContent. Aspx?
ID=17204
Another case of the benefit of organic farming is about vegetables
growers in Soc Son. They made a comparison between the cost and revenue of the normal
farming and organic farming.
It is clearly that organic farming creates higher profit and
quantity for farmers. Because of terrible flood last November, the yield of organic
vegetable was just 400 kg cabbage/field but the selling price was 10,000 dong/kg.
Meanwhile, farmers harvested
1.4 tons of inorganic cabbage but just sold at 2.500 dong/kg.
For tea and other agricultural products, we also see the same pattern. As Ms. Nguyen
Thi Huong, director of Van Tai Co, Ltd, which produces “clean’ exporting tea following
GAP said about her company products of O Long and Hong Tra Tea, although they are
very expensive from 400,000 dong to 1 million dong, there is still an excess in
demand while the conventional tea is just sold at 80,000–200,000 dong. Organic farming
just utilises natural resources such as using remnants of plants, animal waste to
make fertiliser, making pesticide from herbs (wood vinegar, crushed leaves of Melia
azedarach) So it lowers the cost. To some products, the input cost of organic farming
is even 30% lower than normal method. Ms. Nguyen Thi Thinh, a farmer in Vinh Phuc
calculated that the cost of organic fertiliser for her vegetable crop is 70,000
dong/sao1, equivalent to half of chemical fertilisers. Organic farming also helps
to improve the productivity. According to Mr. Nguyen Moi, a grape grower in Ninh
Thuan who has used organic farming for three seasons, thanks to this new kind method,
his crop productivity has gone up gradually from 5 tons/ha,
9.5 tons/ha to 18 tons/ha and the quality of the fruit is also
better. In Binh Phuoc, it is also verified that the productivity of organic vegetables
is two times higher than ordinary products.
In 2006, with
the help of NORAD and Fishery Law Project, NAFIQAVED introduced GAP to
aquaculture industry, starting with shrimp farmers in Tra Vinh and Binh Thuan. The
initial result showed that the yield of households using GAP is 20–30% higher than
the conventional farming. Nha Be agricultural extension station, belonging to Ho
Chi Minh extension centre also applied GAP into shrimp farming semi-intensive model
at four households during four months from February 2009 to June 2009 within the
area of 3 ha. The density in pond was 15 units/m2, size 12 post, feeding with Tomboy
industrial food. And the result was that each household yields 2 tons/ha/crop, the
survival rate was 60–70%. Fishes, whose weight is 70–60 kg, were sold at 60,000–80,000
dong/kg and the average profit was about 50–60 million dong/ha/crop.
In addition to increase in profit, good agriculture practice
also helps enterprises expand their domestic as well as exporting markets. The food
scares in developed countries, combined with the increasing awareness of health,
diet and nutrition, has increased interest in organic food products. Sales of organic
products are increasing in almost all countries of the EU. Organic and other certified
products, as well as high quality specialties, are an especially good opportunity
because conventional products are mass commodities where traded quantities are large
and it is more difficult to compete. Take coffee for example. Coffee is mainly consumed
in the developed countries of the northern hemisphere and much less in the producing
countries in the South. It is estimated that consumers in 11 major EU member states
together used approximately
27.4 million kilograms of certified organic coffees every year
and this number has risen constantly.
All examples above are good illustrations for the profitability
of GAP to farmers and exporting companies. However, the benefit of GAP is more than
that. Organic farming not only helps to protect their industry from the unscrupulous
but also helps to strengthen vital skills among producers for whom organics offer
the chance to participate in competitive higher-value trade. Traceability and production
management are part of rigorous organic standards that can help smaller producers
to compete in agricultural trade. Moreover, if domestic companies are compelled
to apply green regulations like GAP, it will be fair to make foreign producers follow
these rules. In Vietnam, there is still lack of environmental regulations imposed
on import goods, leading to unsafe products for consumers and environment by many
foreign companies. Thus, it is necessary to have green regulations, which play as
technical barriers to protect our own benefit.
In addition, GAP and green regulations also help us reach goals
of sustainable development. According to agriculture specialists, organic farming
will keep the soil fertile for crop rotation, make the water source less pollutant,
protect wild animals and biodiversity, save energy and scarce natural resources.
Limited using chemicals also make the products safer for consumers.
In general, GAP helps to enhance the competitiveness of company’s
products, make the products reliable, create good image of brand in customers’ mind,
expand domestic and exporting markets, increase revenue, decrease cost to raise
profit and meet the goal of sustainable development.
From the case of GAP, we may draw a conclusion that if complying
environment regulations, our export products are not only eligible for entering
developed markets like EU but also able to take the advantage of modern production
methods to increase profit and develop sustainably. Moreover, amid globalisation
time, there is a tough competition between companies of different countries and
the awareness of environment protection of people have improved significantly, enterprises
should advance their technology to follow new rules of modern time instead of fighting
against them. If this situation happens, green regulation will be no more barriers
but a tool for companies to increase their profit. 5 Suggested countermeasures to
green trade barriers
5.1 To the government
5.1.1 Provide update information for firms
It is very necessary for firms to be informed update information
on regulations of their exporting markets. Moreover, trainings also improve their
awareness of environment protection and social responsibility, which leads to their
voluntary compliance to goals of sustainable development. According to UNCTAD, because
of lack of information and not understanding EU’s regulations, developing nations
just used up to 18% priorities of EU in generalised system of preferences (the system
provides developing countries preferential access to the EU market through reduced
tariffs). Therefore, the government should organise more and more training courses,
be proactive in finding markets information and then disseminate to domestic corporations.
The social survey of Binh (2005) Reveals that in Vietnam, firms
get information from various sources such as Ministry of Trade (52%), newspaper
and internet (52%), import partners (49%), VCCI (40%). And the quality of information
also varies. Ministry of Trade (now has changed to Ministry of Industry and Trade)
Is the most trustable and specific source of information. Other parties like trade
promotion agents, Vietnamese trade representatives in EU should play more important
role in providing market information for corporations. In addition to disseminate
information, these organisations should also give clear explanation and instruction
to facilitate companies’ applying new rules.
5.1.2 Build and complete regulations and national standards in
accordance with international standards
It is necessary to have common criteria to assess the quality
of products. For instance, until now, although organic farming has been applied
widely, there is no national standard for a good organic product. Consequently,
it is very difficult to assess whether products meet requirements of organic farming
or not. The consumers, as a result, feel very confused and not believe in the quality
of Vietnamese organic products. Therefore, the government should establish an assessing
system with specific criteria and standards.
In fact, Vietnamese Government has issues numerous standards
related to environment. Until now, there are 502 TCVN (Vietnam standard), 412 of
which were promulgated before 2002. This
number in 2002 was 49 and in 2003 was 52. In 2000, Vietnam issued TCVN:
ISO 14020 and STAMEQ is thinking of declare ISO certificate on eco-label as a basic
for granting eco-label for Vietnamese firms in the future. However, according to
one statistics report, the accordant level of our standards with international ones
is 20% (compared with Malaysia – 38%, Russia – 30%, China – 43%, Korea – 32.5%).
Therefore, it is advisable to increase this rate to 30%. In general, the STAMEQ
should gradually raise the compatibility of national standards with international
standards.
Another way to make our standards compatible with international
standards and widely recognised is to create bilateral negotiations. Once we can
reach these bilateral agreements, they will establish a mutual recognition of two
countries’ standards. With mutual recognition, products lawfully manufactured and
sold in one country may enter other countries-broadly implying the mutual acceptance
of one another’s standards. The advantage of mutual recognition is that it can remove
trade impediments arising from less essential standards and thus allow harmonisation
efforts to focus on narrower and better-defined set of standards. It has been proved
to save costs and have a positive and highly significant effect on trade volumes.
5.1.3 Boost trade promotion at macro level
Lack of information can be addressed by the help of trade representatives
and trade promotion agents whose activities are to introduce, market domestic products
to international markets as well as establish consultant services providing information
to enterprises. For many years, Vietnam has tried to establish many trade agencies
in foreign countries but it seems that their activities are not as efficient as
expected.
It has been proved that trade promoting at the macro level is
more efficient than at micro level when enterprises have to do promotion by themselves.
Vietnam exporting companies are small and medium enterprises so they do not have
much experience as well as financial capacity to implement big trade promotion events.
Hence, governmental trade promotion agents should give them a hand by organising
trade fairs and expos or Vietnam’s day in foreign countries. Through these activities,
firms will have chance to introduce their products and gain knowledge from the experiences
of exporting markets.
Vietnam has cooperated with EU’s Centre for the Promotion of
Imports from developing countries (CBI), called BSOD ITPC Vietnam (Business Support
Organization Development – Investment & Trade Promotion Center). The projects
purpose is to strengthen the capacity of the Investment and Trade Promotion Centre
of Vietnam in supporting the exporting community.
Besides, European Chamber of Commerce (EuroCham) Has participated
in a number of projects with European and Vietnamese partners with the general aims
and objectives of: Assisting the internationalisation of Vietnamese small and medium-sized
enterprises (SMEs) Through capacity building; Allowing for the transfer of know-how,
networking and matchmaking between European and Vietnamese SMEs, business and sectoral
associations; Raising the profile of Vietnamese businesses and business associations
amongst the European business community and vice versa.
However, these projects seem not to be utilised appropriately.
The number of Vietnamese firms joining these projects is still small. Therefore,
the authorities should make more effort in introducing and supporting firms participating
these projects.
Furthermore, with the sponsorship of large companies and the
permission of European countries’ government, Vietnam government should build commercial
centres in foreign countries where our exporting firms can introduce and sell their
products. It is one way to do marketing on sight very effectively. Though the initial
cost may be great, the benefit in the long term will be able to compensate these
costs because companies can save market research and marketing cost and have better
access to EU’s consumers. Moreover, when trade exhibitions happen, it will be economical
to deliver goods to these exhibitions on the ground that there is no clearance fee
and domestic transportation is cheaper. Currently, there is a Vietnamese commerce
centre in Poland. If in the future, there are two other centres in France and Germany,
they will promote our trade activities with overall EU.
5.1.4 Supporting mechanism for farmers and SMEs
Given the poor technology and cash flow of farmers as well as
SMEs, it will be very costly for them to meet EU’s requirements. There are different
ways to support firms such as financial aid through low interest rates or technology
aid via agricultural extension centres. Such centres should provide training courses
to instruct farmers how to apply new technology, advise them as necessary and assess
the quality of products before exporting. However, forms of assistance should gradually
shift from direct subsidies to support research and technological development because
of the threat of violation of WTO spirits and regulations of market economy. Furthermore,
to encourage farmers and domestic enterprises innovate their production methods,
the government should also make some incentives like presenting certificates of
merit for good producers, accompanied by strict sanction mechanism for firms breaking
rules like export suspension or fine.
Finally, the government should help SMEs in dispute settlement
on the ground that green trade barrier is a controversial issue and some countries
abuse it for protectionism. The government can support businesses to negotiate and
settle the case before judges make the decision, which may be adverse to the business
as well as the prestige of Vietnam export products. Thereby protecting the deserved
interests for our exports.
5.1.5 Long-term development plan
It is pity that Vietnam’s current model for growing and producing
agricultural products is quite fragmented and short-sighted. For example, some people
have advantage of large growing area but cannot use up all these land for organic
farming because of poor technology. Meanwhile, others, who are capable of adapting
new technology, do not have enough land for development. This problem happens not
only in organic farming but also in other fields of agriculture, which creates many
challenges for the authorities. It will take times to address it and hence, it is
necessary to have a long-term development plan. Again, take organic for example.
Although organic farming has been applied in Vietnam for several
years, it is still a new method for many farmers and businesses. Therefore, it will
be very difficult to conduct organic farming massively. Instead, we should first
focus on some key products like basil, coffee, pepper, cashew, etc. And production
process just starts with simple methods of organic farming such as using green manure
instead of chemical fertilisers; Taking advantage of natural enemies, poloculture
to prevent pests, protecting soil quality, not burning straw; Nutrient recycling.
In addition to a long-term development plan, it is also imperative to have a good
export strategy to avoid exceed growing when have favourable weather condition leading
to low price.
5.1.6 Improve people’s awareness of environment protection and
gradually change their consuming habit
Many sociology investigations show that Vietnamese consumers
are not of high opinion of buying eco-friendly products despite great effort of
environmentalists. Although there are advertisements of several brands marked with
eco-label such as detergents less harmful to environment, energy save cooks, recyclable
papers, it has not made deep impression on consumers. One survey revealed that there
are 34% respondents having heard about environmental-friendly products but only
4% prefer them than the ordinary ones. 72% said that they are aware of the environment
protection aim of eco-labelling but 64% thought such kinds of product are more expensive.
This situation can be explained by the fact that the income of consumers is not
high enough to be willing to purchase products that have good impact on environment
but may be more expensive. Moreover, their awareness of environment protection and
social responsibility is still poor. All these thoughts lead to low demand in environmental
friendly products, which may not create incentives for producers to comply with
green regulations. Therefore, the government should invest more in communication
and advocacy to go up the number of ‘responsible’ consumers. It can be done through
attractive advertisements on TV, newspaper, internet and other means of media or
organising contests like designing eco-friendly products. Students right from primary
school should be taught about responsibility with society and environment.
5.2 To farmers and businesses
5.2.1 Improve products’ quality
To overcome green barriers, it is obviously to meet green requirements.
Farmers and producers should improve their awareness of responsibility to environment
and society, which then leads to their voluntary compliment to green regulation.
In the future, when Vietnam is not in the list of GSP priority, there will be a
fair but tough competition between these enterprises and foreign corporations. Given
that foreign products have advantage of price, quality, large quantity, constant
supply, without meeting green regulations and getting certificates, it will be more
difficult for us to compete with the others. Moreover, quality control also creates
favourable conditions for the procurement process, processing, storage, preservation,
thereby ensuring quality for the entire chain of production of agricultural goods.
This is how Thailand has adopted and thereby there are fewer cases of Thailand agricultural
exports refused by EU than Vietnam.
The best way is to carry out actively the green management under
the guidance of the green concept; Apply actively for the ISO14000 environment management
system authentication, ISO 9000 for products quality, or SA 8000, HACCP. Cleaner
production (CP) Is also another effective measure. It is defined as the “continuous application of an integrated, preventive
environmental strategy towards processes, products and services in order to increase
overall efficiency and reduce damage and risks for humans and the environment”.
In other words, CP is a method and tool to identify where and why a company are
losing resources in the form of waste and pollution, and how these losses can be
minimised. By substituting inputs materials, changing technology, good operation
practices, product modification, reusing and recycling, the end result of CP not
only benefits the environment, but also the safety and health of staff, neighbours
and customers.
To implement such modern production method, the companies need
a highly qualified staff that have professional skills, experienced in using high
technology and have knowledge of market requirements. Another way is to hire professional
consultant companies.
5.2.2 Sign more technology purchasing and transfer from EU companies
Another way to meet EU requirements is to use technology made
in European countries. For years, Vietnam has just imported machines from Asian
countries, which may be cheaper but can use in long time. This poor technology contributes
partly to poor quality, harmful impact on environment and rejection from developed
markets. It is time to use modern technology made in developed countries to produce
high quality products.
However, it can be very costly to invest in such kind of technology
and for SMEs, it is even impossible to import expensive machines. One solution is
to take advantage of two sources: Government investment and foreign direct investment.
Firms can attract investment from EU partners or join projects of developing EU
export competence as mentioned above.
5.2.3 Investing in designing, producing and using eco-friendly
package
Vietnam firms face so many difficulties in meeting package requirements
of EU markets because they require not only materials made package but also using
and recycling these package harmless to environment. Thereby, we need to have good
package research and development scheme, which meet following requirements:
Design in the most economical way but still ensure the safety,
hygiene for consumers and suitability with the products it contains.
Increase the rate of reusable, recyclable and easily decomposed
materials making package such as glass, carton. Such kinds of materials are easy
to use and recycle with low initial costs and low recycling cost as well.
Limit using package made from wood and avoid straw in package,
which do not satisfy sanitation and epidemic prevention requirements.
Limit using chemicals mentioned in Directive 94/62/EC.
Participate in EU package program to improve competitiveness
of Vietnam products and impression in consumers’ mind.
5.2.4 Continuously find, collect and analyse market information
As mentioned before, information is of vital importance for business.
Apart from waiting for government’s help, each company should be proactive in finding
market information in order to have suitable export strategies. Market information
includes demand, consumers’ preference, and the suitable level of products to consumers
in each market segment. For instance, European people like fishery products but
these products must meet the requirements of sanitary and food safety and have chloramphenicol
antibiotics residue of less than 0.003 × 10–9. Furthermore, producers should have
hazard analysis and critical control point (HACCP) System certificate. They are
important market information that one fishery company should know and then have
countermeasures to these rules.
To do good market researches, enterprises should implement these
steps:
Train workers responsible for market researching. They should
be qualified with theory and practical knowledge, have ability to collect and analyse
information and then make correct forecast.
Have a special department to do market research. This department
will be responsible for finding information, write and implement strategies to have
better access to the exporting markets.
Enterprises should actively coordinate with trade promotion organisations
to grasp information and ask for their help in introducing, marketing products as
well as to have permission to join trade fairs, open show-rooms in foreign countries.
Currently, Vietnam has already trade representative offices in all courtiers of
EU. Since the middle of 2004, among
12 offices, there is only one in Brussels responsible for general trade
policy in EU. And the rest just does trade promotion activities. Hence, domestic
enterprises should be proactive in contacting with these offices and take advantage
of all of their supporting services.
If possible, producers should establish their own trade representative
offices in overseas markets. Such offices will regularly provide update information
to the headquarters, control operating business oversea and be responsible for finding
new business opportunities.
In another case, when it is impossible to open a trade representative
office, enterprises can sign contracts with professional consultant companies like
law companies whose main task is to find market information and support legal procedure
for firms. It is somehow a kind of specialisation that is promised to bring about
high efficiency.
5.2.5 Enhance building and promoting images of environmental
friendly products
Product image is an important factor in making the sale. To European
consumers who have high preference to environmental friendly products, an eco-label
or any sign on products showing their harmless effect on environment will put a
deep impression on them. Therefore, when companies have complied with green regulations
and gotten environment certificates, they should show off this preeminent feature
of their products.
Traditional marketing methods like advertisements on TV, newspapers
and other means of media are still very efficient. Besides, e-marketing and social
marketing are another useful tools.
5.2.6 Strengthen horizontal and vertical linkage
Horizontal linkage is the association of different companies
selling the same products. This linkage will increase the quantity produced, which
helps firms be capable to sign big contracts with foreign partners. Moreover, when
small firms cooperate with each other to build an association, this organisation
will be very useful in help firms find high value contracts as well as improve their
power in dispute settlement.
Accompanied with horizontal linkage is vertical linkage, which
creates the integration between different parts in production process from the inputs
suppliers, processors to exporters. This linkage helps firms to share cost burden
with others and specialisation also increases the productivity. If it happens, the
supply chain will also help firms verify the origin of goods, increase the domestic
level in the product, ensure operational efficiency, quality control as well as
ensure to meet environmental requirements. In export policy, increasing the domestic
level is very useful in gaining GSP priority and verifying the origin of products
is a determinant factor to increase the export volume, save time and money by facilitating
quality inspection process, proving the safe and environmental-friendly origin of
products. Another advantage of vertical linkage is to control the quality of products
and ensure that both inputs and production methods meet green regulations. According
to EU regulation, a product is certified as environmental-friendly only when all
stages in production it is verified to be ‘green’ from raw materials, processing,
storage and recycling after consuming. 6 Conclusions
Green trade barriers can induce higher costs for enterprises,
including the costs of complying the precise obligations and the conformity assessment.
However, if high cost adds more value to products, applying modern technology helps
improve products’ quality, obtaining ISO 14000 and other green certificate can attract
more consumers of high environment consciousness, the producers will have power
to increase the price and get more benefits. Thus, companies should be proactive
in applying advanced technology so as to meet green regulations and improve their
products competitiveness. Strengthening vertical and horizontal integration is also
another effective measure to share the cost burden and control products’ quality.
Government should also give enterprises a hand by informing them with update market
information, increasing trade promotion, building a common standard system and have
support mechanism. By doing so, our agricultural products will be able to break
through barriers, increase our export products’ competiveness in the world market,
leading high profit in the future.
References
APEC (2009) ‘The impact of environmental regulation on trade’,
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Biermann, F. (2001) ‘The rising tide of green unilateralism in
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of World Trade, Vol. 35, No. 3, pp. 421–448.
Binh, N. T. (2005) Thị trường EU, các quy định
pháp lý liên quan đến chính sách sản phẩm trong marketing xuất khẩu, Labor and Society
Publisher, Vietnam.
CP4BP (2008) Indication for the Selection of Relevant Industrial
Sectors for the Application of Sustainable Product Design in Cambodia, Lao PDR and
Vietnam, CP4BP Project Preparation Report.
Macmillan, F. (2001) WTO and the Environment, Sweet & Maxwell,
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Neumayer, E. (2001) Greening Trade and Investment, Environment
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Qing, H. (2007) ‘Green barrier disguises face of protectionism’,
China Daily. Notes 1 1 sao = 360 m2.
[1]
VNU University of Economics and Business, 144 Xuan Thuy, Cau Giay, Hanoi,
Vietnam
[2]
International Union for Conservation of Nature, 1st Floor, 2ABuilding, Van Phuc
Diplomatic Compound, 298 Kim Ma, Ha Noi, Vietnam
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