US urged to avail of CPTPP promise

In the first 10 months of 2021, the US was Vietnam’s largest export market with total turnover of $76 billion, Photo: Le Toan

Five years ago, in his first few days in office, President Donald Trump withdrew from the Trans-Pacific Partnership (TPP), which was a pillar of Barack Obama administration’s pivot towards Asia. The remaining 11 Pacific-rim countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam – have since reframed the agreement as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The agreement includes provisions for enlargement. In addition to China, the UK, and Taiwan, other markets expressing interest in joining an enlarged CPTPP include South Korea, Indonesia, Thailand, and Colombia.

Currently, the American Chambers of Commerce (AmCham) for Vietnam, Singapore, Malaysia, and New Zealand are seeing first-hand how US companies, farmers, and investors have been at a disadvantage since the United States pulled out of the TPP.

As US President Biden prepared to attend his first Asia-Pacific Economic Cooperation (APEC) summit hosted online by New Zealand last week, the chambers have been calling on him to announce that the US will begin the process of joining the CPTPP.

Becoming valid in Vietnam in January 2019, the CPTPP remains the highest-standard multilateral agreement in existence, a result of the drafting process when the US served as one of the lead negotiators. Even after the US withdrew from the agreement, the remaining countries kept the cornerstones of the agreement intact by including tough rules of origin, reducing tariffs, making supply chains more resilient, and agreeing on accession procedures for new candidates.

“The longer the US remains on the sidelines and debates how to move forward on trade, the further it falls behind and cedes leadership in the region as the trade architecture continues to develop, such as with the Regional Comprehensive Economic Partnership coming into force in January,” said a statement sent to VIR by AmCham Hanoi. “US companies face competitive disadvantages on their exports to this fast-growing consumer market, and more American workers pay for the products their families need.”

AmCham Hanoi’s executive director, Adam Sitkoff, told VIR, “Just as we were the first US business association to call for the Obama administration to join the TPP as we saw the strategic and economic imperative to do so, we now call on the Biden administration to join the CPTPP, as the strategic and economic imperatives are even greater now.”

During a visit to Singapore in August, US Vice President Harris announced that the US would offer to host the APEC meetings in 2023. American business associations, based in countries which have all hosted APECs, recognise this rare opportunity for the US to set the agenda and build consensus on issues that affect US growth, exports, and jobs, as well as influence the region’s trade and sustainability agenda.

“The United States cannot provide this leadership absent from the region’s most important trade agreement. We call on President Biden to announce that the United States will join the CPTPP, with a goal of achieving the necessary domestic and international consensus,” read the AmCham Hanoi statement.

Great benefits

Right after taking office as US president, Joe Biden committed to rebuilding relations with allies, and this has sparked speculation about the US returning to the fold. If this comes true, more benefits are expected to be given to both the US and Vietnam.

“Biden stated in 2019 that the US should renegotiate parts of the CPTPP and re-assemble a coalition to counterbalance China’s perceived expansionist policies,” said analysts Fitch Solutions. “The Trump administration withdrew from the TPP in 2017 under the pretext that it would harm US workers. If the US rejoins, the CPTPP would deliver substantial tailwinds to Vietnamese exports to the US from lower tariffs in major export categories.”

The CPTPP may also offer great opportunities to the US. Statistics from law firm Duane Morris Vietnam LLC showed that the CPTPP countries account for 44.8 per cent of US total exports and 37.6 per cent of US general imports in 2014. By removing over 18,000 taxes in regard to the CPTPP, there would be a great benefit for American importers and exporters by enabling them to enter new markets.

As the US international trade commission estimates, the US exports of goods and services to the world would expand by $27.2 billion by 2032 thanks to the CPTPP, while US imports would increase by $48.9 billion.

The statement by AmCham Hanoi sent to VIR said the chambers stand ready to work constructively with the US government to achieve and demonstrate the benefits of joining the CPTPP to US businesses, workers, farmers, and consumers by ensuring a level playing field and addressing key needs to operate in the digital economy and conduct business sustainably.

Beefing up ties

A quarter of a century ago, the Vietnam-US economic relationship was nearly non-existent. Now, Vietnam is one of the US’ top 10 trading partners in the world, and its economy is critical to the supply chains that the US relies on. Many big American companies have also been investing in Vietnam.

“We have deepened our economic ties as Vietnam’s second-largest trading partner and its top export market worldwide, and our support for one another is mutually reinforcing,” said a recent White House statement. “A vibrant Vietnamese economy is critical to the supply chains Americans depend on, a point that COVID-19 has made clear when production shutdowns abroad have led to difficulties in shipping goods at home.”

Vietnam’s Prime Minister Pham Minh Chinh met with US President Joe Biden in Glasgow on November 1 as the two leaders arrived there for the COP26 climate summit. Both leaders agreed to foster the comprehensive partnership between Vietnam and the US, including bilateral cooperation in addressing climate issues, and welcomed US businesses’ investment in green growth and sustainable development in Vietnam.

During his time in New York in September’s 76th session of the UN General Assembly, Vietnam’s State President Nguyen Xuan Phuc hosted separate receptions for leaders of major US companies which want to increase investments in Vietnam. These enterprises included GE Group, CFM International, Cantor Fitzgerald, Weidner Asset Management Steelman Partners, and UPC Group.

The groups agreed that Vietnam is a dynamic market with great potential, and they hope to expand their business and investment in the country moving forward.

The Vietnamese leader also witnessed the signing of an agreement worth nearly $2 billion between Vietnam’s Bamboo Airways and General Electric’s GE Aviation. Under the deal, the airline will purchase GENx engines to power its Boeing 787-9 Dreamliner aircraft and a maintenance package for its Boeing 787-9 fleet.

Bamboo Airways also announced the launch of its direct Vietnam-US route. If conditions permit, the flight service will begin in early 2022 with three weekly flights initially.

According to Vietnam’s Ministry of Planning and Investment, as of October 20, US investors registered $9.71 billion in Vietnam for 1,134 valid projects, making the US the 11th-largest foreign investor in the Southeast Asian nation. In the first 10 months of 2021, the US ranked ninth in investment in Vietnam, with total newly registered capital of $440.1 million.

Figures from Vietnam’s General Statistics Office showed that in the first 10 months of 2021, the US was Vietnam’s largest export market, with total turnover of $76 billion, up 21.9 per cent on-year, and the US was also Vietnam’s sixth-largest import market, with importers using $13 billion to purchase goods from the US, up 13.5 per cent on-year.