Us–china trade war: Opportunities and challenges for vietnamese wood products and exported wood products

Nội dung text: Us–china trade war: Opportunities and challenges for vietnamese wood products and exported wood products

1. US–CHINA TRADE WAR: OPPORTUNITIES AND CHALLENGES FOR VIETNAMESE WOOD PRODUCTS AND EXPORTED WOOD PRODUCTS Ph.D Nguyen Thi Thuy Hong – Pham Nguyet Anh – Dao Duc Duy Nguyen Trung Hieu – Nguyen Nhu Kien1 Abstract: The core object of this article is to clarify and analyse the trade war between The US and China then points out its implication to Viet Nam's export of wood and wood products. For this purpose, we concentrate on investigating general export situation and reality of Viet Nam’s exporting wood to both US and China. The research subject is “US–China trade war: opportunities and challenges for Vietnam’s wood products and exported wood products”. It will be conducted in September and November 2020 by survey, assess and research the fluctuation in numbers of different economic expenditure in Vietnam; the data used in this article are secondary data, and its mainly from the official websites and articles. This study covers the time– period from 2015 to 2020. Trade war is considered as one of the remarkable points for the global economic growth in general and Vietnam in particular. Some analysts said that Vietnam is one of the countries that are supposed to become "winners" when the war between the world's two largest economies takes place if they can make good use of their exports goods. Negative impacts, positive impacts and measures will be provided for Vietnamese businesses. Keywords: Trade War, US–China, Wood, Wooden Products, Vietnam. 1. INTRODUCTION The US–China trade war affects not only Vietnam but also the global economy. Like many other countries, the direct benefit of Vietnam comes from this trade war, when the door for Chinese goods to the US gradually closes with import tax rates of up to 25%, is to be able to take advantage of the opportunity. The association exports many strong products to the US market, one of which is wood products and wood products. In this research paper, we will analyze and clarify the opportunities, challenges and solutions to help Vietnamese businesses when exporting wood and wood products to the US and China markets during the war trade broke out. 2. THE BACKGROUND OF THE US–CHINA TRADE WAR The United States and China are great trade and investment partners. The US–China economic relationship has grown significantly over the past three decades, with the total trade between the two countries increasing from $ 2 billion in 1979 to $ 636 billion in 2017 according to data from the US Department of Commerce. The US trade deficit with China amounted to 375 billion USD in 2017 (this figure was 10 billion USD in 1990). Specifically, China was the third–largest US merchandise export market in 2017 with a value of $ 130 billion. According to data from the United States International Trade Commission (USITC), the main categories of exports to China include grain wheat, fruit, aircraft, electrical machinery, electronics, machinery equipment and means of transport. In contrast, the US is China's largest export market with the total value of goods exported reaching 505 billion USD in 2017. The leading groups of the list include Electronic machinery, industrial machinery, furniture, toys, sporting equipment and footwear. Despite the development of commercial relations, the relationship 1 Institute of International Trade and Economics. 821
2. between the world's two leading economies has become increasingly tense. The US announced that there would be concrete measures to reduce the bilateral trade deficit between the two countries, enforce US trade laws and agreements, and promote free and fair trade. The United States Chamber of Commerce (USTR) issued a report, called Section 301 (Section 301), accusing China of using non– economic measures to dominate US technology, including piracy of intellectual property, or forcible transfer of technology when investing in China. That is the basis for the US to impose punitive tax packages on imports from China. 3. ANALYSIS OF VIETNAM'S EXPORT OF WOOD PRODUCTS AND WOOD PRODUCTS TO THE US AND CHINA MARKETS 3.1. General export situation Vietnam's wood production and processing industry have always been one of the spearheads, contributing a great deal to the country's export turnover. Since 2013, Vietnam has become the leading country among ASEAN countries, ranking second in Asia and 6th on the world map of exporting wood and wood products. Based on data from the General Statistics Office, the wood export turnover of our country over the period we can see that the export of wood products in our country tends to increase rapidly over the years. Chart 3.1. Export turnover of wood and wood products of Vietnam in the period 2010–2019 Unit: billion USD Source: GSO According to the General Department of Customs, the export turnover of wood and wood products of Vietnam in 2016 reached approximately $ 6.9 billion, ranking 7th in turnover among export products/groups import of Vietnam in the same year. In which, the export turnover of wood products reached 5.1 billion USD, accounting for 73.6% of the total export turnover of wood and wood products of the whole industry in 2016. 2018 was one of the years that witnessed the success of the industry. Vietnam's export wood processing industry in many ways including strong expansion in export turnover, with export turnover reaching 8.4 billion USD (General Department of Customs), increasing 14.5% of the turnover in 2017 and many new national policy mechanisms such as the signing of the Agreement on a Voluntary Partnership FLEGTVPA with the EU create opportunities to expand exports. Wood industry 2018, a year of looking back and 2019 trends, the three commodity groups with the largest growth rates in 2018 include pellets, wood chips and plywood/laminated wood, in which the export value of pellets increased nearly 2 times, wood chips increased 1.2 times, plywood/grafted wood increased 1.7 times. The turnover of these three commodity groups in 2018 was 741.9 million USD 822
3. higher than the turnover of the whole 2017, accounting for 69% of the growth in exports of all products in 2018. The export turnover of wood products continued in 2019, in particular, the export turnover of wood and wood products in October 2019 reached 1.04 billion USD, up 20.3% compared to September 2019 and 22.7% higher than October 2018. In addition, the growing trade deficit between the US and Vietnam will lead to the US Government imposing policies to protect the domestic wood industry, anti–dumping and anti–subsidy lawsuits could happen. This will greatly affect the wood processing industry of Vietnam. By 2020, due to the rewards of the global epidemic Covid 19, almost all Vietnam's exports to the world market will face difficulties. For the wood industry, the impact of the Covid19 epidemic has a strong impact on the wood industry and wood processing in Vietnam in both export and import directions. The Vietnam Timber and Forest Products Association predicts that in 2020, for the first time in nearly 10 years, the wood industry will not grow. By the end of February 2020, the export of timber and wood products of Vietnam reached 1.578 billion USD, up 13.8% over the same period in 2019, of which wood product exports reached 1,137 billion USD, up 13.9%. In general, through the analysis of the above data, we can confirm that Vietnam's export wood processing industry is one of the key and extremely promising industries in Vietnam. The export revenue increasing rapidly over the years and the growth rate is almost always double digits every year, Vietnam has established itself on the world furniture market, ranking first in Southeast Asia, second in Asia and ranked 5th in the world. 3.2. The situation of Vietnam's exports to the US and China markets 3.2.1. Export to the US market The United States has always been one of the major trading partners of Vietnam in recent years. Vietnam is one of six countries where the United States has the largest trade deficits. The United States is the most important export market for Vietnam in recent years. The value of export turnover of wood and wood products to this market tends to increase up to now. The export turnover of the wood industry alone to the US market as of 2017 reached over US $ 3.2 billion and accounted for 7.8% of the total export turnover to the US market (calculated based on data from Vietnam Customs). In 2018, the total export turnover of wood and wood products of Vietnam to this market reached 3.6 billion USD, up 17% compared to 2017 turnover, higher than the average export growth rate of the whole industry in this market in the same year. At the same time, exports to the US account for 43% of the total exports of all Vietnamese wood products to all markets. By 2019, the value of export turnover to the United States grew rapidly, reaching 5.3 billion USD, the highest level ever, accounting for 8.6% of the export value to this market and accounting for 50% of the total exports of all wood products of Vietnam in the same year. In 2016 and 2017, over 95% of the total turnover of wood products and wood products exported by Vietnam to the United States were in the group of wood products. Wood material products account for less than 5% of the total export turnover of Vietnam to this market in the above 3 years. This structure tends to change in the next 2 years, in the direction of reducing the proportion of wood products and increasing the proportion of raw wood. 3.2.2. Export to the Chinese market China is one of the major markets for Vietnam's export wood processing industry, playing an important position as both a consumer market and a source of a number of raw materials for Vietnam. However, imports from China are increasing sharply, while exports are slowing down. 823
4. Generally, the value of export turnover of wood and wood products to the Chinese market has increased steadily over the past 5 years. Since 2016, export turnover has always reached over $ 1 billion, with an average growth rate of approximately 4% per year. However, in 2018, export turnover to China showed signs of slowing down with the growth of only 0.1% compared to 2017. The reason for this, according to the 2018 report, the slowdown in exports of Wood products from Vietnam to China may be due to the decline in growth momentum in this country caused by the US–China trade war. By 2019, the wood processing industry for export received a prosperous year as China continued to rank third among the top wood import markets of Vietnam. The growth value in 2019 will reach 1.2 billion USD, an increase of 277 million USD compared to the turnover in 2018. Among the products exported to China, wood chips are one of the important items that account for a high proportion of the total export turnover of wood and wood products. In 2019 alone, the export turnover of this item reached 972 million USD, an increase of nearly 1.3 times compared to 2018, accounting for nearly 80% of the total turnover to China. 3.3. Opportunities and challenges for Vietnam's export of goods in the context of the trade war 3.3.1. Opportunities It can be said that Vietnam has a great opportunity to gain more market share from China in the US market as well as to attract more FDI in the wood, seafood and textile industries. Thereby creating more opportunities to find jobs, increase exports, improve the balance of trade. First, the US–China trade tension is considered an opportunity for Vietnamese businesses to squeeze into these two big markets when the two sides reject each other. For example, furniture and furniture originating from China and when these Chinese products are restricted from entering the US market, there is a good opportunity for Vietnam to dominate market share. Second, the US–China trade war opens up opportunities for Vietnam to welcome investment shifts from abroad. Foreign direct investment FDI inflows will tend to flow out of China to Southeast Asian countries when the relationship between China and the US becomes strained because investors always need a stable environment. In particular, Vietnam has an abundant and cheap labor source in the manufacturing and processing sector, cheaper than China because Chinese wages are increasing significantly and policies to attract investment are strong, meanwhile, when withdrawing capital from China, Vietnam can become one of the top choices for investors. In addition, export companies in China, fearing that Chinese goods are highly taxed in the US (with items up to 25%), may look to invest in other markets to avoid, this tariff barrier. This also has the effect of shifting capital out of China to other countries in the region. In the short term, the impact of this change in FDI inflows on Vietnam may not be really large, but if this tension takes place in the long term, the inflow of FDI from China to Vietnam may be strong and stronger. Third, when Chinese goods are difficult to export to the US, this country will boost exports to other countries, including Vietnam. This is an opportunity for businesses, especially FDI enterprises in Vietnam when they can buy cheap raw materials, components, details and spare parts, thereby increasing their competitiveness when exporting to the US to partially replace Chinese goods. In addition, some Vietnamese goods can take advantage of the open market opportunity from tax imposition to increase exports to both countries, especially the US, which is Vietnam's largest export market. For the wooden furniture segment, in 2017, Vietnam exported $ 7.6 billion of wood and wood products, of which the US market reached $ 3.2 billion. Meanwhile, China last year exported to the US 824
5. up to 20 billion USD of this item. As a result, furniture orders will likely shift from factories in China to other countries in Southeast Asia, including Vietnam. 3.3.2. Challenges The US–China trade tension has created a number of new risks in investment and in the structure of export products. FDI projects especially project with Chinese capital invested in Vietnam in the past time, maybe a strategy for Chinese companies to avoid export taxes to the market. America. The FDI projects from China to Vietnam in the past have had a small capital scale, this may be an indicator of the tax avoidance strategy of these companies. If this is true, it will be a big risk for Vietnam's wood industry as it is related to trade fraud. In addition, there have been some signals that the FDI inflow from China to the Vietnamese wood industry is expanding through channels such as expanding production in Vietnam, or through trading activities. Importing Vietnamese enterprises, or by hiring Vietnamese companies to process and process, with wood products produced from these projects labeled with products from Vietnam before being exported to the US market. This report does not have specific information about these new forms of FDI. This is a new type of risk for Vietnam's wood industry, a direct result of the US–China trade war. The risk in goods exported from Vietnam to the US is formed when products from China are imported into Vietnam, through preliminary treatment, or not preliminary processing, and then get a certificate of origin from Vietnam to export to the US to avoid taxes. Currently, the US authorities are opening an investigation into 5 US companies importing plywood products from China with origin from Vietnam. Taking advantage of Vietnamese origin is trade fraud that can cause enormous harm to the wood industry. Increasing FDI investment from China in our country's wood industry, especially investments in the plywood segment, may be related to this cause. The increasing deficit in the balance of trade, including the deficit in trade in timber products between Vietnam and the US, may also lead to new risks for Vietnam in general and the wood industry in particular. Statistics of the General Department of Customs show that the trade deficit of timber products between Vietnam and the US is about 2.7 to 2.8 billion USD per year. Increasing trade deficits between Vietnam and the US, with Vietnam leapfrogging in the ranking of major wood suppliers to the US in 2019 could draw the attention of the Trump administration. The impact on Vietnam's economy will be enormous if the Trump administration introduces tax tools to solve the trade deficit problem with Vietnam. 4. SOLUTIONS TO BOOST EXPORTS FOR VIETNAMESE ENTERPRISES Firstly, Vietnamese businesses need to follow up with the government's announcements to actively adjust production and actively research the types of goods in the sanctioned list from both the US and China. to seek opportunities to diversify, expand, and promote the export of goods to the US and China. Enterprises need to be calm, avoid confusion, and need to actively seek information, early warn developments on the trade war, to have solutions to respond; at the same time, ready to adjust production, business, supply, and market as flexibly as possible. Secondly, Vietnamese businesses need to research and forecast that some Chinese and US products are likely to increase imports into Vietnam in case of Chinese exports to the US and US exports to China. Nations are restricted to take control measures and promptly respond. Market research is essential in a competitive market where there are too many products with fierce competition. Therefore, the better understanding of the market and potential customers, the more opportunities there are. In addition, knowing your target audience in a locality and their buying habits will help you find the right way to successfully bring your product to market. The survey will provide very important details to 825
6. assist businesses from discovering "niches" to formulating an effective export marketing strategy. Thanks to research, businesses don't have to waste money and effort on false hopes. On the other hand, market surveys will help Vietnamese businesses avoid many wrong decisions. Thirdly, Vietnamese businesses need to pay more attention to enhancing the exploitation of the domestic market, and constantly struggle to preserve and develop market shares in Vietnam's international export markets. Strengthening national branding, product brands for export and corporate brands in export markets. In addition, the Vietnamese government should encourage and support businesses to build export products with national brands and build brands for businesses. Complete policies to support enterprises in establishing and protecting intellectual property rights in the domestic market and in export markets. For example, in the Chinese market, Vietnamese seafood products have the advantage of low cost, enterprises need to consider this as a highly competitive tool and try to reduce production costs and reduce post–harvest losses, standardize costs related to the process of exporting goods in order to lower product costs. Enterprises need to continue to reduce business costs, improve the quality of products and services, re–evaluate the ability to provide services and service prices to reduce production costs to create a favorable environment and reduce input costs, intermediate costs for businesses. Access to information and adjust production to meet origin standards to take advantage of tariff opportunities. Promote trade promotion, increase exports to China: It is necessary to diversify the portfolio of products exported to China and should consider the development and development of new products to suit market demand; Focusing on copyright, the trademark of domestic products (need to be registered), especially for traditional goods that have a name; Limiting arbitrage business from Chinese traders according to the unofficial quota 5. CONCLUSION Trade tension is considered one of the biggest risks to global economic growth. Recently, the trade war between the US and China is at the heart of economic tensions around the world. The above review analyzes the effects of the war on the status of exports of wood and wood products in our country. If businesses know how to take advantage of the opportunity, this tense context between the US and China will be a big–ticket for Vietnam to reach closer to integrate with other developed economies in the region. The aim of the solutions proposed by the authors is towards a deeply integrated international economic integration Vietnam in general, and boosting the export turnover of wood and wood products in particular; at the same time are also directions for Vietnam as well as Vietnamese enterprises in the escalating context of the trade conflict between the two giants of the world. REFERENCES A. Vietnamese 1. Nguyễn Hương Liên – Lê Kim Anh – Nguyễn Thụy Phương (Tạp chí Công thương tháng 4/2019 – số 4), Ảnh hưởng của cuộc chiến thương mại Mỹ–Trung đến Việt Nam, tr.68–72. 2. Tô Xuân Phúc–Trần Lê Huy –Cao Thị Cẩm (2019), Cuộc chiến thương mại Mỹ – Trung: Cơ hội và rủi cho cho ngành gỗ Việt Nam. 3. Lê Huy Khôi (2019), Cuộc chiến thương mại Mỹ – Trung leo thang: Cơ hội nào cho kinh tế Việt Nam. Truy cập tại –cuu–trao–doi/cuoc–chien–thuong–mai–my–trung– leo–thang–co–hoi–nao–cho–kinh–te–viet–nam–307169.html. 826
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