VietNamNet Bridge – In order to reduce the big trade gap, Vietnam needs to reduce the trade gap with China. But how can Vietnam do that if it still continues relying on cross-border exports?

High risks awaiting cross-border exporters

It seems that the majority of Vietnamese enterprises decide to export their products through the across-border channel, and the decision always brings high risks.

At a recent meeting, Nguyen Huu Dung, Chair of the Vietnam Association of Seafood Exporters and Producers VASEP, said that Vietnam just needs to reduce the trade gap with China in order to reduce the general trade gap. However, the problem is that China always applies special across-border trade policies, thus causing heavy losses to Vietnam enterprises.

The problem is that Vietnamese enterprises cannot anticipate the policies set up by the Chinese side and they are unable to adapt quickly enough to the new policies.

According to the Ministry of Industry and Trade (MOIT), China has been applying flexible policies in order to adjust the volume of products imported from Vietnam and control the prices of the products.

China only allows some types of products to go through some border gates. Fruits, for example, can only go through the Lao Cai border gate, Tan Thanh or Lang Son border gates, while rubber can be imported through Mong Cai or Luc Lam border gates, and machines can go through Huu Nghi border gate.

Especially, sometimes China changes its trade policies, but it does not inform the Vietnamese side of the new policies. Cassava starch once was allowed to go through Chi Ma border gate, but China suddenly decided that the product must go through Bao Lam border gate.

With such wise policies, it is clear that China controls the volume of imports from Vietnam and the import prices.

A question has been raised as to why Vietnamese enterprises still prefer exporting their products across the border? MOIT said that across-border export products are not required to be of high quality. Meanwhile, exporters do not have to follow complicated procedures and they do not have to sign contracts with importers in advance. Especially, exporters only have to pay across-border export fees which are much lower than the taxes they would have to pay if exporting products through the official channel.

Exporters told to think of exporting products through official channel

To date, the number of Vietnamese enterprises which can cement their firm positions on Chinese market remains modest. Experts all say that in order to conquer Chinese market, Vietnamese enterprises should try to export their products through the official channel.

Trung Nguyen Group, a famous coffee brand name in Vietnam, is trying to penetrate Chinese market. And it thinks that it would be impossible to bring G7 coffee to the center of the 1.3 billion-population market, if it relies on across-border export.

In 2010, Trung Nguyen earned 400 billion dong from exporting G7 coffee to China through the across-border channel. However, Huynh Van Ro, Managing Director of Trung Nguyen Group, said that only whenTrung Nguyen can export through the official channel, will it be able to bring G7 to Shanghai and Beijing. Presently, the biggest problem for the company is the high export tax rate of 15-20 percent which will make Trung Nguyen Coffee less competitive on the market.

Currently, Ro said Trung Nguyen is still looking for Chinese distribution partners and it has received some proposals for cooperation from big corporations.

Truong Dinh Hoe, Secretary General of VASEP also thinks that in the long term, Vietnam should not maintain cross-border export channels.

Pham Huyen