EU Shifts Strategic Pivot to Asia

43.5% of enterprises have analyzed the risk of exchange rate fluctuations when using foreign currencies in transactions and 27.42% of enterprises use Euro in export transactions with the EU at the request of partners. Enterprises using Euro also unanimously assessed the advantages of using Euro in export transactions such as: convenient payment methods, unified between EU countries; reduced transaction time; reduced dependence on USD; reduced transaction costs; reduced currency conversion costs and no worries about Euro shortage in transactions.... With the strong economic foundation of Euro, with the convenience of being the EU's domestic currency and to insure against risks due to exchange rate fluctuations in international trade, enterprises will have the opportunity to diversify their means of payment by increasing the use of Euro in export contracts with the EU in particular and exports in general [10].

In recent years, the EU market has been large and open with nearly 500 million consumers, high and diverse purchasing power, this market has great attraction for many countries, especially for our country, which has traditional economic and trade cooperation relations with all old and new EU member countries. The large EU market will create conditions for Vietnam to increase the volume of exports to Europe, especially thanks to the EU's common tariff schedule which is lower than the previous tariff schedule of many new members that were bilateral partners of Vietnam. This is clearly seen through processed products from tea, coffee and some other agricultural products. These items were subject to an import tax of 15% when exported to Central and Eastern European countries in the past, but will now not be taxed within the framework of the expanded EU, signaling a new growth potential for Vietnam-EU trade opportunities.

Furthermore, once goods have been cleared in any EU member country, they will be free to move throughout other EU members without having to go through customs again, which is a good condition.

so that Vietnamese businesses can save on shipping costs and avoid cumbersome customs clearance procedures when having to move to many different countries.

The Vietnamese community doing business and living in Central and Eastern Europe, especially in the three new member countries of the EU that joined in 2004, Poland, Hungary and the Czech Republic, is very large and has established a strong business and trade network for many years. In recent years, although Vietnam-EU trade has increased sharply, according to the European Commission (EC), 10 to 45% of Vietnam's export turnover to the 15 old EU countries is still through intermediaries. When Eastern and Central European countries join the EU, Vietnam's import and export activities to these markets will play a quite important role, because the export items to these markets will be direct exports. Thus, although the export volume and proportion have not increased immediately, the profit rate is high. Moreover, because the EU is a unified market, Vietnamese goods that have penetrated the markets of these countries will also penetrate the markets of other EU member countries [8]. These are certain advantages of Vietnam that not every country has. Therefore, we need to take advantage of these advantages to gain market share in the EU market.

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1.4. EU's strategic shift to Asia

In the EU's Asia strategy, Southeast Asia is identified as the focus, in which the EU considers Southeast Asia, first of all Vietnam, as a breakthrough to penetrate other markets in Southeast Asia. Vietnam is now increasingly having its own strategic position in Southeast Asia. In trade relations, the EU considers Vietnam a large market with more than 82 million people with great potential. Currently, all 27 EU member states have relations

trade with Vietnam, in which France, Germany, the UK and the Netherlands are the largest trading partners. Since 1995, the two-way trade turnover between Vietnam and the EU has increased continuously and quite steadily.

During his visit to Vietnam on 21-22 April 2006, Commissioner Ferrero-Waldner stated: “For the European Union, Vietnam is an important partner in Southeast Asia. Development cooperation and trade continue to be important pillars of the Vietnam-EU relationship, but we need to continue to strengthen and actively engage in dialogue on regional and global issues of mutual interest. The proposal for a Master Plan for the future relationship is a strong sign of the growing interest and importance that Vietnam attaches to its relationship with the European Union. We will make every effort to turn the objectives of the plan into reality and I am confident that we will witness a growth in both breadth and depth in the bilateral relationship in the future”.

Thanks to this strategic shift, Vietnam has an increasingly important position in this new EU strategy. Currently, the EU is gradually promoting development cooperation with Vietnam in all fields, especially the economy. The EU offers more incentives for Vietnam in economic development cooperation. The adjustment of the EU's trade policy has created a favorable legal corridor for Vietnamese enterprises when exporting goods to the EU market. In May 2000, the EU recognized Vietnam as applying a market economy mechanism, allowing Vietnamese goods to be on par with market economy countries in the investigation and implementation of anti-dumping measures. This helps Vietnamese enterprises to be treated more fairly in the EU market [2].

1.5. Advantages of joining the WTO

Becoming the 150th member of the WTO on November 7, 2006, Vietnam is expected to be successful - like China after joining the WTO -

in strongly promoting exports and strengthening its position in the international arena. With the large import demand of the EU and some other countries such as the United States, China, Japan and some Asian economies in recent years, Vietnam has a lot of potential to increase exports strongly, joining the WTO also allows Vietnam to improve its competitiveness thanks to the reduction of import tariffs and non-tariff barriers in importing countries. More importantly, Vietnam has the ability to negotiate and has the legal right to use WTO dispute settlement tools to protect its businesses. Thus, Vietnam's exports will be better protected against protectionist measures such as anti-dumping lawsuits... but of course this must take into account the fact that Vietnam must be recognized as a country with a market economy.

Joining the WTO, Vietnam will have to open its market to allow foreign enterprises to compete directly and equally with domestic enterprises. Accordingly, competition will be very fierce. Competitive pressure from foreign enterprises and subsidy cuts will force Vietnam to restructure its economy, carry out "Creative Destruction" (this is a term introduced by Schumpeter in 1942 to describe the process of industrial transformation to encourage radical innovation. In Schumpeter's view, creative market entry with new ideas from entrepreneurs and/or new companies plays an important role in ensuring long-term economic growth, even when it has to eliminate previously established enterprises with monopoly power), or in other words, it is a process of elimination, enterprises that are not competitive enough in the market will go bankrupt, leaving only room for enterprises that are competitive. This will encourage businesses to change themselves, have appropriate business strategies, and improve their competitiveness.

That way, businesses in general and import-export businesses in particular will find a foothold in the market and operate more effectively [6].

2. Challenges

2.1. Trade barriers

The EU strictly protects domestic production and increasingly imposes strict measures to limit imported goods. The EU's anti-dumping lawsuits and non-tariff barriers cause many difficulties for Vietnam's export goods. Tariff barriers are gradually decreasing in line with the world's integration trend as well as the conditions set by the WTO, but non-tariff barriers set by the EU are increasing and even becoming more stringent. Vietnamese exports must meet these barriers to penetrate the EU.

We certainly do not forget that at the end of 2004, over ten thousand catfish, tilapia and catfish exported by enterprises in An Giang, Dong Thap... were returned by the EU due to being found to be contaminated with the toxic substance Malachite Green - a chemical that can cause cancer. Two years before that, a series of shrimp shipments contaminated with Chloramphenicol were returned. In fact, in December 2003, Nafiquaved (Department of Aquatic Product Hygiene and Veterinary Quality Management) warned seafood exporting enterprises about this chemical Malachite Green, but Vietnamese enterprises were too indifferent and the reality is even clearer that many seafood processing enterprises do not have equipment to test the quality of Malachite Green. This example has shown us the shortcomings in Vietnam's food hygiene assurance as well as the quality management of exported products.

As an official member of the World Trade Organization (WTO), Vietnamese enterprises have many opportunities to trade with countries around the world on the basis of low tariff and non-tariff barriers. However, the expansion of trade in recent years means that enterprises in

Vietnam's leading export industries have continuously had to face anti-dumping lawsuits. If there were 4 lawsuits from mid-1994 to 2000, there have been 20 since 2000. The important lawsuits are all related to the European Union (EU) and the United States. Most Vietnamese enterprises have been found to be dumping with high anti-dumping taxes. The lawsuit with the United States on tra, basa and shrimp has caused thousands of farming households to fall into debt and many households to fall back into poverty. The lawsuit with the EU on leather shoes has caused hundreds of workers to lose their jobs and affected the lives of nearly one million workers in the leather shoe industry, 80% of whom are women.

According to statistics from the European Commission (EU), in 2005, the number of Chinese leather shoes exported under anti-dumping investigation was 206 million pairs, accounting for 16.5% of the total number of shoes exported from China to the EU market, while the number of Vietnamese leather shoes subject to anti-dumping investigation was 119 million pairs, accounting for 45% of the total number of shoes exported from Vietnam to this market. This shows a huge difference in the number of leather shoes imported from China and Vietnam to the EU market. The number of leather shoes exported from Vietnam is 4.8 times smaller than that of China, but the number of shoes subject to anti-dumping investigation is more than twice as high.

The reason for the unfair rulings for Vietnam is that Vietnam was imposed a market economy status by the EU, the United States and some other countries. According to bilateral negotiations with the United States, Vietnam had to accept being a non-market economy for a maximum of 12 years after joining the WTO. This imposition is completely unreasonable because it is not based on an analysis of Vietnam's reform achievements but is just a "political bargain", the United States is concerned that Vietnam's exports will increase significantly in their market like China's exports. The non-market economy status makes it easier for their businesses to win dumping lawsuits and impose high anti-dumping duties on Vietnamese businesses.

because the WTO dispute settlement mechanism (DSM) will not provide an opportunity for Vietnam to challenge discriminatory anti-dumping rulings until Vietnam is no longer considered a non-market economy. Until the non-market economy status is removed, Vietnam will continue to be subject to arbitrary anti-dumping accusations.

Despite going against the WTO’s “immediate and unconditional non-discriminatory treatment” for all WTO members and violating the WTO’s most-favored-nation (MFN) treatment for Vietnam’s textile industry, the Bush administration proposed establishing an anti-dumping monitoring program for Vietnam’s textile exports to the United States to gain the support of Senators Elizabeth Dole and Lindsey Graham for granting Vietnam Permanent Normal Trade Relations (PNTR) status. The Bush administration made it clear that this monitoring mechanism would use the assessment method applied to non-market economies. This would certainly lead to the Bush administration, on behalf of these two industries, initiating lawsuits and imposing anti-dumping duties on Vietnam’s textile exports at any time it wanted.

The WTO forces countries to reduce tariff and non-tariff barriers, so protectionist measures such as anti-dumping duties are often applied. Before 1995, when the WTO was officially established, the number of anti-dumping lawsuits was only about 100, but since 1996, the number of lawsuits filed annually has increased to 300 cases a year. This inequality is much deeper for transition economies, which are forced into non-market economy status. The anti-dumping laws of the United States and the EU do not use the domestic production costs and prices of the non-market economy to calculate the selling price of products in their markets, but use the prices and costs of a chosen market economy as a substitute. As a result, the selling price of products in the domestic markets of non-market economies is often assessed

much higher than the actual price and thus leads to a finding of dumping and high anti-dumping duties.

The market economies chosen as substitutes are often more developed than the transition countries. For example, in 2004, Vietnam's GNI per capita in purchasing power parity (PPP) terms was $2,700, but that of Mexico, the substitute country for Vietnam in the bicycle dumping case, was $9,640, and of Brazil, in the footwear case in the European market, was $7,940.

Most of Vietnam's current export products compete mainly on the basis of low labor costs. When choosing a more developed economy, their labor costs will certainly be much higher than those of Vietnamese manufacturers. The EU believes that Vietnam is a non-market economy, so it does not have a free labor market and therefore does not consider low labor costs as a comparative advantage for Vietnam. Therefore, when choosing a replacement country, the EU does not pay attention to the difference in labor costs. It is worth mentioning that when evaluating Vietnam's economy, the US Department of Commerce (DOC) stated that Vietnam has a relatively developed free labor market.

In another absurd way, DOC also imposed labor costs on Vietnam by regression values of wages and national income of many market economies, including the world's leading economies such as Switzerland, the United States, the United Kingdom and Canada. By imposing wages of 0.63 USD/hour for pangasius and basa farmers and 0.70 USD/hour for shrimp farmers while their actual monthly remuneration is only about 500,000 VND/month (32.3 USD), it has pushed the production costs for Vietnam's exports to a much higher level than in reality.

The difference in economic level is always accompanied by a difference in production technology level and self-sufficiency in raw materials, leading to competition in export market segments of different values.

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