From 2014 Vietnamese non-sensitive footware products exported to theEuropean Union will enjoy zero tax rate, while tax rates applied forproducts in that list will decrease by 3.5 percent from the formerrates. According to the Vietnam Economic News, this is seen as a goldenopportunity for the country's footwear industry but the newspaper alsowarned that it is not easy to seize that opportunity.

The EU iscurrently still a large export market of Vietnam’s leather and footwearindustry, only behind the North America market. In 2013, export revenuesof Vietnam’s leather and footwear products to the EU reached 3.41billion USD, of which the revenue of footwear products was 2.88 billionUSD, accounting for 8.5 percent of the EU’s market share.

Notably,right after the new Generalised System of Preferences (GSP) regulationsofficially took effect, export revenues of Vietnam’s footwear productsto some EU markets in January 2014 increased sharply compared to thesame time last year like Poland up 173.53 percent, Spain 29.35 percent,Czech Republic 14.13 percent and Italy 9.54 percent.

VietnamLeather and Footwear Association Secretary General Phan Thi Thanh Xuansaid the prospect for Vietnam’s footwear export to the EU in the comingyears is quite open as some products that are out of the sensitiveproduct list exported to the block will enjoy zero tax rate, while taxrates applied for products in that list will decrease by 3.5 percentfrom the former rates.

Tran Ngoc Quan, Deputy Head of theEuropean Market Department under the Ministry of Industry and Trade saidaccording to EU’s new criteria, the market share of Vietnam’s footwearproducts will be widened, which means Vietnamese footwear businesseswill have opportunities to boost exports and sources of FDI capitalflowing into the industry will also increase significantly.

However,Phan Thi Thanh Xuan also warned that GSP is a golden opportunity butnot easy to seize and the footwear industry needs to be aware of severalissues before implementing the new GSP regulations. GSP helps Vietnamraise its exports to the EU but also worries producers inside the blockabout the possible decreased market shares. Therefore, they might putpressure on the EU to impose new rigid protection regulations ornon-tariff technical barriers. Moreover, the GSP original rulesencourage the import of materials from EU member countries at higherprices compared with those from China or the Republic of Korea,resulting in lower competitiveness and production efficiency. Meanwhile,the material localisation rate of domestic footwear businesses is aboutmore than 50 percent.

In addition, the GSP Plus will allowPakistan's exports, including footwear products to the EU at zero tariffand are not subjected to the “mature” mechanism. This will surelycreate high competitive pressure for the Vietnamese products.

TranNgoc Quan pointed out that Vietnam’s real footwear export is quite highand predicted to grow strongly in the coming period. Meanwhile, theChina’s market share has reduced (not enjoying the GSP regulations)therefore Vietnam is very likely to surpass the “mature” mechanism limitand by then it will no longer enjoy preferential treatment under thebloc's GSP.

Footwear businesses have been recommended to findevery possible ways to gain more EU’s market share, keep regularcontacts with Ministry of Industry and Trade (MOIT) to update theEU-Vietnam Free Trade Agreement negotiation process (EVFTA) for flexibleadjustments and campaign the EU for further GSP grants to Vietnam.

Toensure a long-term export growth for the leather and footwear industry,Vietnam Leather and Footwear Association petitioned the MOIT and otherrelevant units to complete the EVFTA soon to replace the GSP, with aroadmap to reduce import tax rate to zero percent which ensures footwearexport stability to the EU.-VNA