27 February 2019
Why Vietnam is winning the agriculture trade war
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If you were going to guess which country in Asia was rising above all others in international trade in the East, it is unlikely that Vietnam would be the first great name to spring to mind. Surely, they are overshadowed by the powerful economy and seemingly unstoppable advance of China? Not since the US-china trade war. In fact, among other important factors which we have outlined below, it is exactly this conflict which has given Vietnam a springboard to success in the agricultural trade wars.

The conflict between the US and China

The trade conflict between the US and China has been simmering for some time. The Americans have for a long time alleged that China abuses the international trade system by taking part in unfair trading practices and by violating intellectual property rights. Previous presidents such as Bush, Clinton and Obama have done little to right the situation, but Trump has created various tariffs to penalise and fine China’s exploitations. These actions have had a detrimental effect on China’s global trade and like many Asian countries, Vietnam have been quick to try to fill the supply gap. But Vietnam has much to offer above its competition.

Statistics from Natixis

Vietnam was ranked No. 1 among seven emerging Asian countries as manufacturing destinations by Natixis (French bank specialising in international corporate investment management).   Trinh Nguyen, a senior economist at Natixis said “Vietnam is poised to capture some of China’s global market share in labour-intensive manufacturing and it is the clear winner from the trade war”

In the trade world “cheap labour” speaks volumes. According to Natixis, a worker in Vietnam is paid an average of $216 a month. This compares quite significantly with China where a monthly salary is double this figure. The reason for cheaper labour in Vietnam may well be partly due to its huge resource of labour. It still has one of the largest labour forces in south East Asia.

Assets at reduced costs

However, it is not only labour that can be obtained at reduced costs – other assets such as electricity can also be found to be a great deal cheaper than neighbouring Asian countries. Overall of course this explains why Vietnam can offer food products at highly competitive prices internationally.

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Export deals and the home market

The extra factor which must always be taken into account when selling abroad, is the presence of tariffs. Vietnam has done some great deals with both South Korea and Europe and joined 10 other nations in signing a Trans-Pacific trade pact. With Vietnam competing so successfully, strategically and robustly on an international level, foreign direct investment is subsequently surging.

And this is not just about exports. For the reasons stated above (i.e. low-cost production), international companies are being attracted to Vietnamese shores to base their company production. For instance, Han Hoi Industry co., the Taiwan manufacturer for such organisations as Apple, are considering shifting a large part of it’s production to Vietnam.

Close to China’s borders

Logistics is always important. Geographically, Vietnam is very close to China. This in turn is likely to lead to less costs in distribution and a more stable consistent supply than countries which are at a greater distance such as Malaysia, the Philippines and Indonesia.

As the trade war continues between China and the US, the former country is having to look to other countries for raw materials it would normally source from America. Again, proximity and reduced costs make Vietnam a great partner in production in this respect.

Vietnam is attracting investment

The political and economic world can be very fickle. One minute a country is riding high and the next minute the bottom has fallen out of the production line. Investment in Vietnam and food and agriculture is buoyant because it remains one of the world’s fastest growing economies. The Vietnamese economy is predicted to expand by a massive 7% in 2019.

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