Export to the UK – opportunities and chellanges

Bilateral trade has surged in the three years the UK - Vietnam Free Trade Agreement (UKVFTA) has been implemented, growing at an impressive average of 8.9 per cent annually. Vietnam’s exports have outpaced this rate, climbing 9.4 per cent each year; well above the country’s overall export growth.

Vietnam posted a remarkable $5.1 billion trade surplus with the UK in the first nine months of 2024, marking a 24 per cent leap from the same period of 2023. Sweeping tariff eliminations under the UKVFTA have also been pivotal in enhancing the market presence of Vietnam’s strongest product categories, solidifying its position in this competitive arena.

High standards, demanding market

The UK market places a premium on green products, posing significant challenges for Vietnamese exports. It enforces stringent standards, requiring that industrial and agricultural imports meet green criteria, have lower emissions during production, eliminate pesticide residue, and strictly comply with labor, environmental, and resource conservation regulations.

Addressing an online seminar entitled “Opportunities to Develop Green Trade Products Exported to the UK Market”, Dr. Le Huy Huan, Coordinator of the Vietnam Global Green Growth and Climate Change Program, said green trade policies today are not only relevant but also represent a long-term trend that is reshaping economies worldwide.

The rise of green trade is driven by several factors, he continued. Firstly, the pressing challenges posed by climate change demand immediate and substantial action. Secondly, many countries are seeking to restructure their economies towards greener, more sustainable development. And thirdly, strong international commitments, such as the Paris Agreement, have reinforced the need for these policies and accelerated their implementation. Currently, over 70 countries and territories have integrated green standards into their trade practices. Among them, the UK stands out as a leader, leveraging its position as a major global economy to pioneer and promote green trade policies.

The push for a green economy in the UK is supported by comprehensive strategies. For instance, the country’s Net Zero initiative, aimed at achieving carbon neutrality by 2050, requires that all imported goods meet strict emission reduction standards. While the EU’s Carbon Border Adjustment Mechanism (CBAM) is still being phased in, it already calls for businesses to measure and transparently report emissions for their products. Additionally, the UK strongly emphasizes bilateral agreements, such as the UKVFTA, which open significant opportunities for green products. Sectors like agriculture, consumer goods, textiles, and fisheries, where Vietnam holds competitive advantages, are particularly well-positioned to thrive in the UK under these policies.

For his part, Mr. Nguyen Canh Cuong, former Commercial Counselor at the Vietnam Trade Office in the UK, believes that sustainable development has become a core element of new-generation FTAs, evolving from an optional initiative into a critical requirement.

Initially perceived as voluntary, sustainability has gradually turned into an essential demand from distributors and importers, even without direct mandates from governments or UK regulations. When buyers seek new suppliers, meeting sustainability standards becomes non-negotiable. Exporters or manufacturers that fail to comply with these criteria are unlikely to succeed in entering the UK market.

UK importers and distributors often prioritized market needs over sustainability in the past. However, as the UK redefines its domestic industries, especially agriculture, post-Brexit and post-Covid-19, the demand for imports has lessened. With this shift, the focus has turned towards higher standards, particularly in green and sustainable practices.

While these heightened requirements pose challenges, they also unlock substantial opportunities. Vietnam has inherent advantages that position its businesses well for green product development. Compared to other countries, Vietnam offers unique strengths in this area, turning what might seem like an obstacle into a gateway for growth.

Building green branding

Businesses in Vietnam that adapt to greener, cleaner, and lower-emission production processes stand to gain recognition and acceptance from UK partners, Mr. Cuong emphasized. This shift isn’t just about compliance; it’s an entry point to tap into a market increasingly driven by sustainability-conscious businesses and consumers.

Beyond the benefits of reduced tariffs under the UKVFTA, the UK places a growing emphasis on sustainability, environmental protection, and corporate social responsibility. This shift offers Vietnamese enterprises opportunities to align with the UK’s evolving demands and embrace sustainable development and consumption.

Concerns about rising production costs and their impact on competitiveness, especially for small and medium-sized enterprises (SMEs), are perfectly valid, but the UK’s high-income consumer segment is willing to pay a premium for greener, cleaner products. This presents an opportunity for Vietnamese businesses to thrive in this segment, where sustainability is highly valued.

Though higher production costs may limit volume growth, premium pricing can offset these challenges. Businesses offering high-quality, sustainable products will find a receptive audience in the UK. This creates a pathway for Vietnamese enterprises to meet stringent sustainability requirements while capitalizing on the market’s willingness to support greener options.

However, Mr. Cuong noted, the UK, while a European country, stands out for its unique cultural and consumer traits distinct from the continent. To succeed in this market, businesses need to tailor their products and marketing strategies to meet British preferences, such as providing easily accessible and detailed information about products and their standards. British customers expect company websites to offer comprehensive information without the need to search elsewhere.

Unfortunately, however, many Vietnamese business websites currently fall short of such expectations. Mr. Cuong recounted instances where UK importers, after initial discussions, would quickly review the company’s website. Essential details, such as product standards, were often missing, eroding trust and hindering potential partnerships. “If you are targeting the UK market, ensure your website clearly highlights compliance with British standards,” Mr. Cuong advised. “British businesses take great pride in their standards, which serve as the benchmark for many national regulations worldwide. Seeing this alignment reassures them of the quality and reliability of Vietnamese products.”

In addition to refining their online presence, Vietnamese businesses should also collaborate with local distributors in the UK, who have a deeper understanding of market regulations. Navigating the UK’s complex and ever-changing regulatory environment from Vietnam can be difficult, but local partners are well-equipped to keep businesses informed and compliant. Partnering with these distributors not only streamlines market entry but also ensures that businesses remain aligned with the expectations and standards of the UK market.

Ms. Nguyen Thi Huyen, General Director of the Vietnam Cinnamon Anise Production and Export JSC (Vinasamex), shared her company’s own experience. “When we identified Europe as our target market around 2013, we began developing a value chain by partnering with approximately 1,000 farming households in northern Lao Cai, Yen Bai, and Lang Son provinces,” she said. “At that time, concepts like sustainable development, green growth, and organic farming were relatively new in Vietnam. We set up this value chain model to control product quality from the source, and as we sought international certifications, we saw our brand gain recognition, opening doors to the European market.”

As Vinasamex expanded into the UK, it quickly learned that the country’s quality standards were quite demanding. “Many of our business partners also prioritized working with suppliers who were committed to social impact,” Ms. Huyen went on. “Fortunately, we were able to participate in several projects with non-governmental organizations like Oxfam Netherlands and the Netherlands Development Organization (SNV), which helped us engage more deeply with farmer groups. These projects supported us in developing a sustainable business model while meeting the stringent standards of the European market.”

The implementation of the UKVFTA brought Vinasamex significant advantages. “Since our products are agricultural, our customers previously faced import tariffs ranging from 5 to 10 per cent,” she explained. “With the agreement in place, these tariffs were eliminated, providing a major competitive edge for Vietnamese agricultural products.”

Vinasamex therefore decided to focus on improving product quality and increasing value. As a result, when exporting to Europe and the UK, its products consistently sell at prices approximately 20 per cent higher than the standard market rate. Many of its customers are also willing to pay an additional 10 per cent, which is allocated to funds called Fairtrade and Fair for Life. These funds support community initiatives such as building homes for those in need, constructing schools for children in rural areas, improving local roads, and, most importantly, providing training to about 3,000 farming families in Lao Cai, Yen Bai, Lang Son, and Bac Kan provinces in Vietnam’s north, which helps farmers understand sustainable development practices and high-quality standards.

Ms. Huyen emphasized that entering major markets like the UK requires significant investments in marketing and participation in trade fairs to connect with potential customers. To support this effort, she urged the Ministry of Industry and Trade and commercial counselors to help businesses with trade promotion activities, ensuring access to impactful trade events.

Furthermore, authorities are encouraged to implement policies that support businesses focused on sustainable development. This includes facilitating access to low-interest loans tailored for value chain models, enabling companies to invest in advanced machinery, technology, and systems for maintaining quality standards and ensuring traceability. “Businesses also seek tools to support digital transformation, allowing production logs and raw material zone records to be shared quickly and transparently,” she added. “Such transparency will open new competitive opportunities.”