Non-tariff barrier of EU market: a case study of Vietnam's exporting Fruits.

I. Definition and Classification, Trend and Impact of NTBs

Definition:
Non-tariff barriers (NTBs) are restrictive regulations, policies, or measures imposed

by a government or regulatory authority on imports or exports, which are not in the

form of tariffs or duties. These barriers can take various forms such as quotas,

licensing requirements, product standards, subsidies, customs procedures, sanitary and

phytosanitary regulations, technical barriers to trade, and other bureaucratic hurdles.

The aim of NTBs is often to protect domestic industries, ensure compliance with

safety and quality standards, or achieve other regulatory objectives. However, they

can also hinder international trade by increasing costs, reducing market access, and

impeding the flow of goods and services across borders.

Impact:

NTBs can have significant negative impacts on international trade, with data
supporting these effects:

● Reduced Trade Flows: NTBs can make exporting and importing more
expensive and time-consuming, discouraging trade activity. A World Bank
study suggests that eliminating NTBs could increase global trade by up to
15%.
● Higher Prices for Consumers: NTBs can lead to higher prices for consumers
as they restrict competition from imported goods. A 2017 study by the OECD
found that NTBs can increase import prices by 3-8%.
● Slower Economic Growth: Reduced trade flows can hinder economic growth
by limiting access to new markets, technologies, and competition. The OECD
estimates that NTBs can reduce global GDP by up to 2%.

-Positive :

Improved Product Quality and Safety: Stricter product standards, while potentially
creating hurdles for foreign producers, can ensure a higher quality and safer selection
of goods available to consumers.

Maintaining Domestic Standards: NTBs can help a country uphold its own social,
environmental, or safety standards, preventing a race to the bottom where producers
prioritize lower costs over responsible practices.
Public Health Safeguards: Sanitary and Phytosanitary (SPS) measures, though
obstacles to trade, can prevent the spread of diseases or harmful organisms through
imported food and agricultural products.

Understanding NTBs and their impact is crucial for anyone involved in international
trade. By working towards harmonization and transparency in regulations, countries
can create a more efficient and fair global trading environment.

II. Non-tariff barriers (NTBs) of the EU in general.

The European Union (EU) promotes free trade but also enforces various non-tariff
barriers (NTBs) that can affect imports and exports. These NTBs go beyond just taxes
(tariffs) and create a layer of regulations that goods and services need to comply with
to enter the EU market. Here's a breakdown of some common EU NTBs:
● Technical Barriers to Trade (TBTs): These are product standards and
regulations that ensure safety, health, and environmental protection. While
necessary, they can make it difficult for foreign companies to comply if their
products are designed according to different standards. Examples include
authorization requirements and mandatory testing for certain products.
● Sanitary and Phytosanitary (SPS) measures: These focus on protecting human,
animal, and plant health. They involve inspections, certifications, and specific
requirements for food, animals, and plants entering the EU. For instance, the
EU has strict regulations on the maximum levels of certain substances like
cadmium in food products.
● Packaging and Labeling Requirements: The EU has specific labeling
requirements for many products, including information on ingredients, origin,
and potential allergens. This ensures consumer protection but can add
complexity for foreign producers who need to redesign packaging for the EU
market.
● Other NTBs: These can include complex administrative procedures,
government procurement policies that favor domestic companies, and
bureaucratic hurdles related to value-added tax (VAT). Additionally,
differences in national implementation of EU regulations across member states
can create further obstacles.

III. NTBs of EU to Vietnamese commodities

3.1. European-Vietnam Free Trade Agreement (EVFTA)

The Vietnam-EU Free Trade Agreement (EVFTA) took effect on August 1, 2020.
- Concerning Vietnam's exports, upon the agreement taking effect, the EU will
eliminate import tariffs for approximately 85.6% of tariff lines, equivalent to
70.3% of Vietnam's export turnover to the EU.
 - Seven years after the agreement's entry into force, the EU will eliminate import
tariffs for 99.2% of tariff lines, equivalent to 99.7% of Vietnam's export
turnover. For the remaining 0.3% of export turnover, the EU commits to
providing Vietnam with tariff rate quotas with a tariff rate of 0%.
For Vietnamese goods to enjoy the preferential tariff advantage when exporting to the
EU, two basic conditions need to be met.
- Firstly, the goods must meet market standards, specifically sanitary and
phytosanitary (SPS) measures and technical barriers to trade (TBT) related to
the products.
- Secondly, the products must comply with the rules of origin.

3.2. The opportunities for Vietnamese commodities.

EVFTA is forecasted to offer numerous opportunities for Vietnam to expand its
market, boost the export of goods to the EU market, have more opportunities to import
advanced technology machinery and equipment, improve production processes and
product quality, access investment capital and modern technology, and access other
markets with trade agreements with the EU.

In terms of exports, despite the EU being one of Vietnam's largest export markets,
Vietnam's market share for goods in this region remains modest, largely due to limited
competitive capacity (especially price competitiveness). Therefore, with tariffs
eliminated on over 99% of goods, businesses will have the opportunity to enhance
price competitiveness when exporting goods to this market. The industries expected to
benefit the most are textiles, footwear, and agricultural products.

Regarding imports, Vietnamese businesses will benefit from importing goods and raw
materials with better and more stable quality at a reasonable price from the EU. For
machinery and equipment, which are currently imported heavily from China, the
complete elimination of tariffs will help reform import structures, and businesses will
particularly have the opportunity to access high-tech machinery, equipment, and
technology from EU countries, thereby enhancing productivity and improving product
quality. At the same time, goods and services imported from the EU into Vietnam will
create pressure for Vietnamese enterprises to strive to improve their competitiveness.

3.3. Identifying non-tariff barriers when Vietnam exports goods to the EU

market.
According to statistics from the Vietnam SPS Office in 2021, Vietnam received 40
notifications (SPS), with 18 notifications related to seafood products and 22
notifications related to agricultural and food products. The main violations were
primarily related to chemical residue levels with 19 notifications, unauthorized
radiation exposure, and food additives with 8 notifications, biological contamination
with 7 notifications, and antibiotic residue levels with 5 notifications.
From January to May 2022, Vietnamese exports of agricultural, seafood, and food
products received warnings for violating EU food safety regulations - SPS,
specifically: seafood: 7 notifications; fresh fruits: 5 notifications; rice: 4 notifications;
herbs: 2 notifications; instant noodles: 10 notifications, and 8 notifications for other
products. The increasing number of warnings as export turnover increases indicates
that SPS and TBT measures continue to pose challenges for Vietnamese businesses.

The EU is implementing a set of policies and actions known as the European Green
Deal, with the goal of achieving a more sustainable and carbon-neutral European
economy by 2050. The action plan also sets targets to reduce the use of plant
protection products by 50% and increase the proportion of agricultural land used for
organic farming to 25% by 2030. This means that many types of plant protection
products will be banned in the EU, and residue levels will gradually decrease in the
coming years.

=> Alongside opportunities, Vietnam also faces several challenges such as domestic
market competition pressure, strict rules of origin requirements, regulations on food
safety and animal/plant quarantine, environmental standards, technological processes,
and a lack of information about the EVFTA agreement.

Imported goods into the EU must meet strict rules of origin requirements. Typically,
to enjoy tariff preferences under FTAs, the goods must meet a certain percentage of
local content (originating from the EU and/or Vietnam). This poses a significant
challenge for Vietnamese businesses as the raw materials for exporting goods are
mainly imported from China or ASEAN.

Opening up the Vietnamese market to goods and services from the EU means
Vietnamese enterprises will face tougher competition in the domestic market. In
reality, this is a major challenge as EU businesses have significant advantages in terms
of competitiveness, market experience, and utilization of FTAs.

Technical barriers to trade, sanitary and phytosanitary measures, and customer

requirements: The EU's mandatory requirements for food safety, labeling,
environment, etc., are very stringent and challenging to meet. Therefore, despite
enjoying tariff benefits, Vietnamese goods must significantly improve in quality to
overcome these barriers.

When tariff barriers are no longer effective protective tools, import markets tend to
use more trade defense measures such as anti-dumping, countervailing duties, or
safeguards to protect domestic industries. The EU is also known for using these
measures.
 In the agricultural sector, non-tariff barriers include requirements for hygiene,
quarantine, packaging, traceability, and strict customs procedures. The standards
imposed by the EU are among the highest in the world and are difficult and costly to
achieve. This presents a significant challenge for Vietnam's exports.

IV. Choose a case study of a VNese commodity

● The EU’s application of non-tariff measures on Vietnamese fruits

- According to UNCTAD TRAINS, the EU imposes 34 non-tariff measures on
Vietnamese fruits, comprising 26 Sanitary and Phytosanitary (SPS) measures
and 8 Technical Barriers to Trade (TBT) measures. This places the EU among
the import markets with the highest number of SPS and TBT measures
affecting Vietnamese fruit exports. Given the multitude of measures, this study
focuses on the most impactful ones, including SPS measures such as hygiene
requirements, regulations on pesticide residues and contaminants, plant health
controls, and conformity assessment. TBT measures of significance include
labeling requirements and marketing standards
1. The EU’s major SPS measures on Vietnam’s potential fruit exports
- The European Union (EU) implements stringent Sanitary and Phytosanitary (SPS)
measures to protect human, animal, and plant health, in line with WTO guidelines.
While most SPS regulations are harmonized at the regional level, some individual
member states may have additional measures for specific products. Despite adherence
to international standards and recommendations, the EU often sets higher standards
than global organizations suggest, particularly in food safety. Fruit exporters to the EU
must also meet additional requirements from importers or buyers, making EU SPS
measures challenging for foreign exporters, especially those from developing
countries like Vietnam.
2. Hygienic requirements
- The EU regulations on food hygiene, encompassed in Regulations No. 178/2002 and
No. 852/2004, require food business operators to ensure food safety throughout the
food chain. Foreign exporters must adhere to these regulations to export products to
the EU market. A key requirement is the implementation of food safety management
procedures based on the Hazard Analysis and Critical Control Point (HACCP)
 principles. While HACCP is not mandatory for primary production like growing fresh
fruits, all production processes after harvesting must follow HACCP principles.
Although HACCP certification is not required at the border, exporters must keep
records and evidence of compliance. EU importers often request processed fruit
imports to be accompanied by HACCP certification, while fresh fruit imports may
require other food safety certifications like GLOBALG.A.P.
2.1 Regulations on pesticide residues and contaminants
- Pesticide residues
- The EU applies Maximum Residue Levels (MRLs) on fruits exported from Vietnam
through Regulation No. 396/2005, which sets common standards for all EU member
states. This regulation, while aiming to ensure food safety, poses significant
challenges for Vietnamese exporters. Imported fruits, including those from Vietnam,
must adhere to these stringent MRLs to access the EU market. However, compliance
can be complicated by the frequent updates and amendments to EU regulations, as
well as the possibility of some EU buyers demanding even lower MRLs. This
variation in standards across countries further complicates the exporting process for
Vietnamese fruit producers, who must navigate differing requirements from the EU,
the US, Japan, and other markets.
2.2 Contaminants
- The European Union (EU) imposes strict regulations on contaminants in food
products, including fruits imported from countries like Vietnam. Governed by Council
Regulation No. 35/93/EEC and Commission Regulation No. 1881/2006, these
regulations set maximum allowable levels for contaminants such as mycotoxins,
heavy metals, and microbiological agents. Compliance can be challenging for
Vietnamese exporters, as EU maximum levels are often lower than other international
standards like Codex. Additionally, while irradiation is accepted in many countries for
treating contaminants, the EU restricts its use for processed fruits and vegetables,
necessitating heat treatment, which can accelerate fruit deterioration during long
shipping times. Adhering to EU standards is crucial for Vietnamese exporters seeking
access to European markets.
2.3 Plant health controls
- The EU enforces stringent plant health regulations on imported fruits, outlined in EC
Directive 2000/29/EC, to protect crops and the environment from harmful organisms.
Imported products must meet strict plant health conditions and be free from specified
dangerous organisms. Certain fruits from Vietnam, such as mangoes, lemons,
passionfruit, and guavas (fresh only), require a phytosanitary certificate issued by
Vietnam's National Plant Protection Organization. Wood packing materials must also
meet IPPC standards. While import permits aren't required, importers must register
with an EU member state and declare each consignment at customs. The new 2016
Plant Health Law will impose stricter measures, mandating phytosanitary certificates
for all living plant materials and potentially imposing temporary restrictions on
imports with unknown pest risks, enhancing plant health controls for Vietnamese
fruits exported to the EU.
2.4 Conformity assessment and penalty measures
- The EU applies strict conformity assessment and penalty measures to ensure the safety
and compliance of exported fruits from Vietnam. Through checks at entry points and
throughout the food chain, including documentary, identity, and physical inspections,
the EU maintains traceability to swiftly address any safety concerns. Violations may
trigger the Rapid Alert System for Food and Feed (RASFF), leading to potential
import suspensions or consignment removal. Repeat offenses may result in increased
controls or stricter conditions. Despite these measures, the EU's rate of agrifood
product rejections remains lower than some other high-income countries, reflecting its
commitment to both food safety and trade facilitation.
 -

- Among the four trade partners, Vietnamese fruits and vegetables faced the lowest rate
of rejection per USD$1 million of exports in the EU market during the 2002-2010
period . However, while the unit rejection rate of Vietnam in the US, Japan, and
Australia had a decreasing trend, in the EU market it had an increasing trend over the
period. Moreover, Vietnam also fell into the top five of the EU’s partners with the
highest unit rejection rate of agrifood products in the same period (UNIDO, 2015).
The 53 main two reasons for Vietnamese fruit and vegetable rejections in this market
are the violation of pesticide residue and contamination limits.
3. The EU’s major TBT measures on Vietnam’s potential export fruits
- The European Union (EU) imposes Technical Barriers to Trade (TBT) measures on
Vietnam's potential fruit exports, which encompass regulations, standards, and
procedures for compliance assessment. Unlike Sanitary and Phytosanitary (SPS)
measures, which focus on health aspects, TBT measures cover a broader spectrum of
policies. While both SPS and TBT measures are permitted by the WTO, they must be
non-discriminatory and avoid unnecessary trade barriers. In the case of fruit exports,
while many requirements relate to food safety and phytosanitary concerns (SPS
measures), TBT measures such as labeling rules and marketing standards also affect
market access to the EU.
 - 3.1 Labelling rule.
- Exported fruits from Vietnam to the EU must meet rigorous labeling requirements

outlined by EU regulations. For fresh fruits, cartons must display essential information

including packer and dispatcher details, product name, country of origin, size, class,

and a unique lot number for traceability. Processed fruits face even stricter guidelines,

with packaging mandated to adhere to specific formats concerning font, color, and text

size. Labeling must cover general information like product name, producer, country of

origin, and expiry date, alongside nutrition declaration and allergen information.

Additional specifications exist for different fruit types, such as indicating freezing or

drying methods. Compliance with these detailed regulations is crucial for exporters to

ensure market access, given the EU's strict enforcement and limited tolerance for

deviations.

3.2 Marketing standards

- The EU enforces marketing standards for fresh fruits, including those exported from
Vietnam, under Regulation 543/2011. These standards ensure quality and maturity
consistency, with Specific Marketing Standards (SMS) and General Marketing
Standards (GMS) categories. Both require compliance with EU quality and maturity
criteria, but SMS products have additional requirements and must be accompanied by a
conformity certificate. While some countries have voluntary standards, EU compliance
is mandatory. Imported fruits undergo EU border checks, with countries able to request
EU conformity checks. Currently, no Vietnamese fruit holds EU-approved conformity
status, with only lemons subject to SMS standards, while others adhere to GMS criteria.
Compliance is crucial for access to the EU market.