Weighing up the costs and benefits of the TPP

How important is the TPP to Vietnam’s growth and Vietnamese-US trade and investment ties?

The US, Vietnam, and 10 other Pacific Rim nations reached a final agreement on the largest trade agreement in history last week. I believe this is welcome news for American and Vietnamese companies, investors, workers, farmers, and consumers. AmCham views the TPP as extremely important to the bilateral economic relationship and to US-Vietnamese relations overall. The TPP will have a transformative effect on Vietnam’s business climate and offers new opportunities to help Vietnam’s strategic drive to industrialise, modernise, and globalise. Vietnam’s Ministry of Industry and Trade predicts that the TPP will raise the country’s GDP by an additional $23.5 billion in 2020 and $33.5 billion in 2025. Vietnam’s key export sectors, including garment-textiles, footwear, and seafood products, are expected to see great growth under the TPP. The Eurasia Group predicts that Vietnamese exports will grow by an additional 28 per cent by 2025 compared to not participating in the TPP. The TPP also makes Vietnam a more attractive destination for foreign investment.

It is said that the TPP will theoretically expand Vietnam’s export markets. Do you think that it will play out differently as, for instance, other TPP countries will apply technical barriers that will make entry difficult for Vietnamese export products?

It is important to remember that one of the TPP’s key goals was to remove some of the non-tariff barriers that prevent trade and investment between partner countries. Unlike previous free trade agreements that mainly focused on lowering import tariffs, the TPP sets standards that will shape commerce in the 21st century and addresses many non-traditional issues, such as climate change, collective bargaining rights, music piracy - even rules about how your online data is stored.

It is often said that Vietnam will benefit the most from the TPP. Why is this? Which particular sectors do they mean?

With a population of almost 800 million and a combined GDP representing over 40 per cent of the world total, the 12 negotiating parties - including Vietnam as well as its neighbours Brunei, Malaysia and Singapore - can expect to reap immense economic benefits from increased trade volumes and stronger economic ties within the TPP grouping. As the least developed country in the TPP, Vietnam has the most to gain and its economy will get the biggest proportionate boost because of its relatively small per-capita GDP. The TPP will also make Vietnam a more attractive spot for foreign investment and should quicken its pace of long-needed reform. I expect the deal will be quite significant for Vietnam in the future.

Will the TPP make Vietnam press on with its policy reforms, especially in creating a level playing field for private investors?

The TPP is a high-standard trade agreement that will not be easy for Vietnam to implement. Many changes will be needed. The US and others stand ready to help Vietnam with technical assistance programmes to help overcome some of the challenges in the deal. Among the biggest challenges for Vietnam will be to fulfil the strict terms of the TPP’s labour chapter, which, for the first time, would make any country’s violations of International Labour Organisation standards subject to trade penalties. Anytime a country integrates into the world economy, there are winners and losers. When markets open-up, less competitive companies can have a difficult time adjusting and we are likely to see some difficulties in the Vietnamese livestock sector, for example. AmCham continues to encourage the government and the Vietnam Chamber of Commerce and Industry to engage with local businesses to best help them prepare for the opportunities and challenges that the TPP will bring, as the TPP’s positive aspects far outweigh the negative consequences.

Vietnamese firms should modernise, use better technology, and become more efficient in order to capitalise on TPP opportunities. AmCham members believe that the government should speed up reform efforts and focus on building world-class infrastructure, intensifying its effort on upgrading workforce skills, and improving the ease of doing business. Ultimately, complying with the TPP’s demands will make Vietnam a more competitive and attractive place to do business and will create more opportunities for the 91 million Vietnamese people who want more choice and better value for themselves and their families.

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