Minh Phu unlikely to reap immediate benefits from trade deal with EU
The free trade agreement between European Union and Vietnam, the EVFTA, is not likely to offer an immediate benefit to Minh Phu, as tariffs on its cooked shrimp products will only be reduced gradually, according to the company, which is the leading Vietnamese shrimp exporter.
EVFTA, the “most modern, comprehensive and ambitious agreement ever concluded between the E.U. and a developing country,” according to the European Union, will come into force on 1 August.
About half of the import taxes on seafood products from Vietnam to the E.U. will be removed immediately after the agreement becomes effective, with the remainder eliminated within seven years from the effective date of the pact.
However, only the duty on fresh shrimp from Vietnam will be abolished immediately after the effective date, from current 4.2 percent, Minh Phu Chairman and CEO Le Van Quang said at the company’s annual stakeholders meeting on 27 June.
Taxes for Minh Phu’s cooked products – accounting for a much larger share of the company’s European sales – will be gradually reduced to zero in three to seven years after the deal enters into force. The products currently face a 15 percent tariff.
“Therefore, our exports to the E.U. will not benefit much from the EVFTA in early years following the execution of the deal,” Quang said.
Minh Phu considers the E.U. one of its important markets, and Quang said the company plans to increase its production of cooked shrimp for that market in coming years. On the back of the trade deal, the company is planning to increase the value of its sales to the E.U. to around 15 percent of its total export value this year, up from 12 percent last year. It is aiming to increase that total to between 20 and 25 percent of its total sales value in seven years from now, when the import taxes on cooked shrimp have been eliminated.
Vietnam’s shrimp export value to the E.U. fell 5 percent in May, but sales to the Netherlands and Germany rose 18.5 percent year-on-year and 14.5 percent year-on-year, respectively, Vietnam Association of Seafood Exporters and Producers (VASEP) said on 24 June, without providing the export value figures.
The exports to the bloc were worth USD 162.2 million (EUR 144.2 million) in the first five months, down 7 percent from the same period in 2019.