China has agreed to eliminate tariffs on 97 percent of Lao goods, effectively making almost all Lao exports to China duty free, but sources in Laos are worried that the new trading rules only benefit China.
Unveiled following Chinese Foreign Minister Wang Yi’s visit to Laos in mid-October, Beijing’s Preferential Tariff Program will remove tariffs from 8,256 items starting Dec. 1. China recently signed similar agreements with Cambodia and Myanmar.
The ASEAN Briefing website said the new tariff status under China’s Least Developed Countries initiative was a big win for Laos, as it affords “plenty of room for export manufacturers in the smaller ASEAN economies to take advantage of the China market.”
Although the tariff reduction appears to help Lao producers and exporters on paper, Lao business owners say they fear unfair trade practices by Chinese companies will still give them advantages over Lao companies.
“Access to the Chinese market will still be difficult for us. Our agricultural products like cows and buffaloes are not exportable to China,” the owner of a trucking company in Laos’ Luang Namtha province, in the northwest of the country on the border with China told RFA’s Lao Service Nov. 12.
“Up to 90 percent of Lao products that get exported to China are agricultural, like bananas, sugar cane, rubber and vegetables. These goods are produced by Chinese investors who come to Laos and lease land to grow these crops for direct export to China. Most products from Lao-owned operations are denied entry,” she said.
“We are at a disadvantage in every way,” a representative of the province’s rubber producers told RFA. “The Chinese just come here and buy our products to export them to China, but we’re not allowed to export them ourselves.”
“We may be able to ship our goods through the Lao border checkpoints but not the Chinese ones. The Chinese need to come to the Lao border checkpoint to pick up our merchandise. We have addressed this problem to the Lao government many times, but nothing has happened,” the rubber advocate said.
The association of rubber producers in Luang Namtha includes about 1,000 operations that are barred from selling their output in China. They are forced to sell it at lower prices to Chinese companies.
A member of the Lao National Chamber of Industry and Commerce (LNCCI) told RFA that the new no-tariff policy would not suddenly open the Chinese market for Laos.
“The Chinese have high import standards, so our products must be of the best quality. Right now, we are not yet at that standard. Please understand that we have to be better about producing goods of high quality that are competitive on the market. Our producers still lack modern technology,” the LNCCI member said.
An official of the Lao Ministry of Industry and Commerce told RFA that Lao goods face significant obstacles in the Chinese market.
“The Chinese are very strict with our products, especially produce like vegetables, corn and sugar cane. They inspect these products very closely before letting them in,” the official said.
“They set a high standard and won’t accept Lao products so easily even with the zero-percent tariff policy. They can claim that our products are not good enough or not clean enough, effectively making all kinds of trade barriers,” said the official.
But the ministry believes that the tariff elimination will lead to more production in Laos and increase exports to China, the official said.
The ministry did not release a list of the 8,256 items that are no longer subject to tariff.
China has been either the largest or second largest export destination for Lao products according to data from the Observatory of Economic Complexity (OEC), with Thailand edging China out in some years. In 2018, total exports brought in $5.09 billion.
According to ministry statistics, in August 2020, Laos exported about 80 percent of its goods to the Middle Kingdom, and total exports that month brought in about U.S. $560 million.
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