On 15 November 2021, the Government of Vietnam issued a decree eliminating or reducing tariffs on some agriculture products. Tariffs on corn, wheat and planting seeds were revised on 30 December 2021. Tariffs on frozen pork will be reduced on 1 July 2022.
Implications for Australian exporters
Australia has preferential tariffs to Vietnam through existing trade agreements. By reducing tariffs for other countries, the decree will reduce or eliminate Australia’s tariff advantage.
Most importantly, Australia’s 3% wheat tariff advantage over the US and Argentina was eliminated on 30 December 2021.
The impact of this change on Australian wheat exports will be partially mitigated in the short term. This is due to poor seasonal conditions and high wheat prices in North America. High sea freight costs have also highlighted the importance of proximity to market. Australia has a competitive advantage over North American exporters in Southeast Asia.
Australia’s 15% frozen pork tariff advantage over the US and Brazil will be reduced to 10% on 1 July 2022.
The impact on Australian pig meat exports will be mitigated by increased global demand for pork. This is due to African Swine Fever in China and other markets.
Overview of decree 101/2021
Decree 101/2021 reduces or eliminates Most Favoured Nation (MFN) tariff rates for imports to Vietnam. MFN rates are applied to all World Trade Organization members who do not have separate preferential trade agreements with Vietnam.
The US, Argentina and Brazil will be the major beneficiaries of the decree. These countries are large agricultural exporters to Vietnam, but do not have preferential trade agreements with Vietnam.
Vietnam issued similar decrees in 2020 and 2017 (USDA 2020).
Table 1: Tariff rates for major suppliers of wheat and frozen pig meat to Vietnam before and after Decree 2021/101
|Commodity||Exporter||2020 exports Vietnam ($m)||Current tariff||Under decree 2021/101||Impact of decree 2021/101|
|Frozen pig meat1||Russia||142||0||0||0|
1 Vietnam temporarily reduced the MFN rate for frozen pork from 15% to 10% from 21 July 2020 to 31 December 2020. Source: ITC TradeMap.
Between January and November 2021, Australia exported $1.06 billion of wheat to Vietnam (Source: ABS 2021). This was a 329% increase on the same period in 2020.
Australia exported $4.1 million of pork to Vietnam between January and November 2021 (Source: ABS 2021). This was a decrease of 45% on 2020, which was a peak year.