Window to Europe: expanding the free trade area

In early 2015, an agreement on a free trade zone of Vietnam with the Customs Union will begin to work, which will become a "bridge" for a subsequent agreement with the ASEAN bloc (Vietnam is one of the participants). Next in line are India and Malaysia. How will such a decision for fashion retail turn out: will it spur sales or, on the contrary, will the prices on the market collapse? Let's try to figure it out!

As you know, the creation of an FTA implies the abolition of customs duties, fees, as well as quantitative restrictions on mutual trade for the countries participating in the zone. “The authorities of Vietnam and Russia have set the task of ensuring a steady growth in trade turnover. And, of course, we discussed what is the reason for its reduction in the first half of this year, as well as the directions in which our mutual trade should develop more actively. Mechanisms were also considered that would allow introducing the national currency into the calculations of trade turnover, ”says Igor Shuvalov, First Deputy Prime Minister of the Russian Federation. According to members of the Russian government, Vietnam's participation in the free trade zone between the member states of the Customs Union will lead to an increase in trade with Russia to $ 10 billion by 2020.

Salvation recipe

World trade is not going through the best of times. For a long time, it was the driver of world economic growth and the pace of its development was approximately two times higher than the rate of general growth. However, in recent 5-6 years, speed has been reduced. Therefore, countries are trying to give a new impetus to the development of international trade, removing some restrictions from it, for example, tariff ones.

Trying to fit into the existing economic trend, Russia is now organizing a NWT zone with Vietnam. At the same time, the growth of trade between Russia and Vietnam has now exceeded the 16% indicator (which is four times higher than the growth of the world economy) and continues to increase.

Further, if we take not growth percentages, but the volume of commodity circulation and correlate it with the volume of GDP of countries, it turns out that this value is relatively small. So there is room to grow. In the total volume of imports from Vietnam, the share of light industry products is equal to 30%, with half being shoes. Accordingly, it is possible to calculate how much the supply of high-quality genuine leather shoes to the country can increase while reducing prices by about 15-20% due to the abolition of customs duties.

Pros and cons of FTA for retail

1. Less risk. Along with the conclusion of an agreement on NWT, countries will abandon the dollar when conducting transactions and will carry out settlements in national currencies. This will allow retailers to reduce the risks associated with sharp jumps in prices and the continued growth of the dollar and the euro against the ruble.

2. Reduction of bureaucratic barriers. The FTA Agreement provides for a simplification of the legal framework for trade and economic relations between countries that have joined it. It is a question of replacing a number of multilateral and 100 order of bilateral documents regulating today the free trade regime in the space of the Commonwealth of Independent States. Existing restrictions in the framework of previously signed bilateral agreements are reduced by more than 600 points. Thus, bureaucratic red tape in the implementation of economic cooperation within the framework of the FTZ will be noticeably reduced.

3. New markets. Companies will now be able to trade in the Vietnamese market without duties, quotas and licenses. Compared to previous bilateral agreements, this agreement was a step forward, as new markets are opening up for us.

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4. Stimulus for the development of the economy. The expansion of markets and the removal of all kinds of customs barriers will contribute to the development of the country's economy.

Of the obvious minuses, several can be noted:

1. Cancellation of customs duties for goods from Vietnam will negatively affect the flow of money to the state budget, which may prompt the government to introduce some additional domestic taxes to compensate for these losses. Second, a sharp increase in the volume of imports of high-quality and at the same time cheap products from Vietnam can strike a blow at domestic footwear manufacturers who work in conditions of minimal margins. How serious it will be - time will tell.

2. Lack of agreement details. And, finally, the most important point that the media does not write about. The fact is that the details of the agreement being prepared are still unknown. The signing of the agreement does not mean the opening of borders and automatic zeroing of customs duties. As a rule, duties on certain groups (the choice of specific groups depends on the protectionist policy of the government) of goods are not zeroed, but set at a certain level, albeit lower than before. Let's say that earlier “shoes with genuine leather soles and an upper made of genuine leather straps passing through the instep and covering the big toe” were subject to a duty of 18%, which will be 11,5%. Or, for example, it will be levied with a flat tax like "4,5 euros per pair". And this will immediately affect the potential profitability of different shoe segments. But in any case, for shoe retail as a whole, NWT with Vietnam is a positive event!

EXPERT OPINION

Daria Nuclear, CEO of Esper Group

“If we talk about Vietnam, we will rather talk about the growth of competition in the segment of casual and fashionable footwear in the budget price segment, which will primarily hit domestic manufacturers, which are now competing in price, but often lose in style of performance. With a large flow of cheap shoes from Vietnam, stylistically diverse and not inferior in terms of lasts and materials, the share of Russian shoe manufacturers will definitely decrease.

But the consequences of the FTA with India for shoe retail will be more significant, since a colossal amount of shoes of sports brands is produced in this country, in particular Nike, which is so popular in Russia. This is unlikely to lead to a real price reduction, since it is influenced by too many other factors, but the fact that this will negatively affect the sales of sports shoes from other countries, and especially Russian sports shoes, is a fact. "