Vietnamese firms fail to use trade protection measures

By Ngan Anh, Thanh Nien News (The story can be found in the March 28 issue of our print edition, Vietweek)

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The failure to understand and make use of the trade protection measures at their disposal have cost Vietnamese firms dear, experts say.
Workers arrange stainless steel roll in a steel factory in southern Vietnam

The failure to understand and make use of the trade protection measures at their disposal have cost Vietnamese firms dear, experts say.

While businesses in other countries have done it aggressively and effectively, Vietnamese enterprises have not been able to protect themselves in their home market, and this can have significant consequences, they add.

Trade protection measures, which include anti-dumping, anti-subsidy, anti-tax avoidance and other safeguards, are indispensable tools in international commerce, but Vietnam has ignored them. Meanwhile, the country has faced many anti-dumping lawsuits abroad, causing big losses to local enterprises, said Pham Tat Thang, an expert from the Trade Research Institute under the Ministry of Industry and Trade.

“Our enterprises have not yet used the trade protection measures available to increase their competitiveness in their home market,” he said.

“Seldom have they filed lawsuits against foreign rivals, creating easy opportunities for imported products with too low prices to infiltrate the local market, causing losses to domestic production.”

Thang said that although Vietnam has enacted three ordinances on anti-dumping, anti-subsidy and safeguards – against an unusual rise in import volumes - to create a legal foundation for local firms to protect themselves, only three lawsuits involving safeguards in two cases and anti-dumping in the other have been filed by local enterprises.

Imported stainless steel

The latest case is the anti-dumping lawsuit filed, last May, by two major stainless steel producers, Hanoi-based Inox Hoa Binh and South Korea's Posco VST, against imports from China, Taiwan, Malaysia, and Indonesia.

The companies, which have an 80 percent share of the local stainless steel market, demanded a 20-40 percent anti-dumping tax on the imports which cost up to 25 percent less than local products.

Dinh Thi My Loan, chairwoman of the Vietnam Chamber of Commerce and Industry's consultation council for international trade defense, said data compiled by her agency shows that Vietnam's five major imports from neighboring countries –  electronics, machines, fuel, iron and steel, and plastics – are subject to many lawsuits around the world.

"So it is highly likely that these products are being sold cheap in Vietnam at the expense of local businesses," Loan said.

She also pointed out that the World Trade Organization's top 10 defendants in anti-dumping lawsuits include China, South Korea, Taiwan, Thailand, the US, Japan, and Indonesia, all major exporters to Vietnam.

They could be taking unfair advantage in Vietnam, but the country's businesses have failed to protect themselves, she said.

Facts and figures

Thang said local firms don’t want to file lawsuits against imports as they are worried about that the high cost of lawsuits and possibility of failure.

Thus, Vietnam lags behind many other Asian countries like China, Thailand, Indonesia and Malaysia, which have got more experience in taking trade protection measures. These countries file some 5-35 anti-dumping lawsuits each year, he said.

Loan said local firms are not the only ones to blame for the situation. She said they have not been able to use protection measures effectively because authorities have not facilitated their access to quality information.

“The most important thing in filing a lawsuit is that  local enterprises have to get accurate information in time, but this does not happen,” she said.

Businesses require import and export figures which are available with the customs department but not accessible, Loan said.

“It will be very difficult for local firms to win a lawsuit if they have not enough figures to demonstrate that foreign products are being sold at dumping prices in the domestic market.”

To help local enterprises effectively use trade protection measures, authorities should build an accurate database of import volumes and local consumption of foreign products, and facilitate domestic firms’ access to this information, she said.

Act together

Thang said another reason for the current situation is weak cooperation among the firms themselves. Unfair competition from imported products can affect local businesses differently, with some suffering greater losses than others, but they should act together to have a common voice and pool their resources better, he said.

He said business associations should have been more proactive in protecting their members’ rights. Instead, they seem to have resigned themselves to suffering from unfair competition in the local market and making losses, he added.

The situation can get much worse, as imports are set to increase from this year as Vietnam gradually reduces tariffs on goods from Southeast Asian countries on the way to removing them completely in 2018 under the ASEAN Free Trade Agreement. Among the increasing imports, unfair competition including dumping is bound to happen, so it is incumbent on Vietnamese firms to take measures to better protect themselves, bound to be unfair imported products in the market, Thang said.

He also said that to ensure Vietnamese firms have a good chance to win lawsuits, they need to be supported by lawyers well versed in international law as well as the English language, but Vietnam lacks this. This weakness should be addressed soon.

For now, local enterprises could hire foreign experts to provide them with sound advice on implementing trade protection measures, Thang said.

Failure abroad

According to the Vietnam Competition Authority, Vietnamese exporters have faced 73 lawsuits, including 43 anti-dumping ones. Most of the products involved are those earning export revenues, like shrimp, fish and footwear.

In recent years, while the US and EU have filed the largest number of lawsuits against Vietnamese products, other markets such as South Korea, Canada, India, Turkey, Poland, Columbia, and Peru have been doing so as well.

But many Vietnamese businesses are not fully aware of international laws on dumping and subsidies, the authority said.

Another problem is the weak auditing and accountancy system in Vietnam. Many businesses do not preserve and maintain documents including contracts and invoices, making it difficult to compile legal evidence.

In addition, most exporters lack experience in dealing with such lawsuits and have not developed plans on how to respond to them.

Several experts said local exporters should develop long-term strategies for doing business, ensure access to updated information, and be proactive in understanding, predicting and responding effectively to lawsuits as well as other trade barriers erected in foreign markets.

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