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Trade deals can handicap farmers

Update: November, 01/2013 - 08:40

Farmers harvest rice in Dai Ang Commune, Thanh Tri District, Ha Noi. The farm sector still faces challenges, including low competitiveness and low quantities of value-added products after six years as a member of the World Trade Organisation. — VNA/VNS Photo Dinh Hue

HA NOI (VNS) — Six years after Viet Nam gained full membership of the World Trade Organisation (WTO), its agricultural sector still had not taken full advantage of the economic integration, said Deputy Minister of Agriculture and Rural Development Nguyen Thi Xuan Thu.

Thu said the sector had a trade surplus for years, even during economic slowdowns, but still faced challenges. These included low competitiveness and low quantities of value-added products.

Thu blamed this on a shortage of proper studies, planning and legal or technical support - as well as outdated policies.

As part of free-trade agreements (FTAs) signed with 15 nations and economic communities since 1996, Viet Nam has been forced to introduce a tariff-cut road map for farm products. Since signing the biggest of these agreements, the WTO commitment, six years ago, Viet Nam has reduced 1,118 taxes on imported agricultural products, sending the average tax on these goods from 23.5 per cent in 2006 to 20 per cent in 2012.

For example, tariffs on products such as beef, dairy products and rice has been slashed from 10 per cent to zero.

In 2011, Viet Nam continued to reduce import taxes on dairy and confectionery goods. In that year, under the terms of the WTO agreement, foreign enterprises in Viet Nam were also allowed to import and export products on equal terms with Vietnamese companies.

At a workshop held on Wednesday by the agricultural ministry and Beyond WTO Programme, the director of the Institute of Policy and Strategy for Agriculture and Rural Development, Dang Kim Son, warned that agriculture could experience a trade deficit because of these deals.

He said this was likely to happen after 2020 if modern technology and systems were not introduced because tariff elimination would help foreign products enter the country with ease.

Last year, Viet Nam earned US$27.5 billion from exporting farm products, two-and-a-half times higher than in 2006. However, the sector's growth rate has slowed down.

During 2000-06 before Viet Nam joined the WTO, the yearly growth rate was 3.81 per cent, but after WTO accession, the rate fell to 3.26 per cent.

However, according to the agricultural institute, tariff elimination will eventually help lift the export value of four key products - rice, vegetables and fruit, cattle and dairy products as other farm products decline in value.

Meanwhile, the cost of economic integration is being felt as the prices of materials such as fuel and fertiliser increase. This will make production, particularly of fish and aqua farm products, more expensive.

In the past five years, the cost of fertiliser has more than doubled, helping push the cost of producing rice up 120 per cent. The increase in fuel prices have pushed the average cost of farm production up by 35-40 per cent.

Son, the director of the agricultural institute, said that to cope with the impacts of integration, the country needed more investment to process and export agriculture products.

Lack of information

He said that at present, support for farmers and enterprises was mostly concentrated on production. However, they still lacked market information, narrowing access to potential buyers.

He said that more links should be established between farmers and trade enterprises - and that public-private partnerships should be promoted.

According to the report, Viet Nam's sugar sector was hard hit by WTO accession. Eighteen of the 39 sugar factories surveyed were using low-tech automatic production lines, which were far more costly. This fact, together with import tax cuts, meant that sugar could be imported and sold at lower prices.

Do Thanh Liem, chairman of Khanh Hoa Sugar Joint Stock Company, said that the sugar industry provided jobs for about 1.4 million people, most of them low-skilled manual positions. This was a barrier to the introduction of higher technologies.

"Vietnamese farmers are finding it hard to adapt to changes brought about by so much integration, which has caught many of them unaware," Liem said. He suggested more time was needed to prepare for any further changes.

The report Assessments of impacts of implementation of WTO and regional commitment on agriculture and rural development is part of the Beyond WTO Programme funded by the Australian Agency for International Development and the UK Department for International Development.

It aims to strengthen Government capacity to manage Viet Nam's integration into the global economy and its transition to a socialist market economy. — VNS

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