New trans-Pacific pact raises hopes and concerns

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Vietnam's early involvement might garner some benefits, but the challenges are daunting, experts say

A farmer rakes through corns inside her house in the northern province of Son La. The Trans-Pacific Partnership would allow more imports of farm produce to enter Vietnam, experts said.

Vietnam has, along with eight other nations, completed the 10th round of negotiations for the Trans-Pacific Partnership (TPP), but the jury is out on whether the agreement, touted as a new breakthrough in international trade, will turn out to be a blessing or a curse.

The TPP is said to tackle conventional trade concerns in new ways and deal with cross-cutting issues not previously addressed in trade agreements as also emerging trade challenges.

The 21st-century agreement is expected to open opportunities for Vietnam, but could pose greater challenges as well, experts say.

On the sidelines of an APEC meeting in Honolulu in November, leaders of the nine TPP members Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, the US and Vietnam said they have reached the broad outlines of the trade deal, and expect to complete it in 2012.

The TPP talks got a shot in the arm in November when Japan, the world's third-largest economy, announced its interest in joining in the pact.

The deal, with Japan included, would create a regional economic group about 40 percent larger than the 27-nation European Union. Canada, Mexico, the Philippines, Papua New Guinea and South Korea are seen as potential TPP participants.

Comparing with bilateral trade agreements, the ASEAN Free Trade Agreement of the regional bloc, and the World Trade Organization's agreements, TPP aims to cover a larger number of issues. It not only deals with all the main pillars of a free trade agreement, including trade in goods, rules of origin, and trade remedies, but also issues such as the role of state-owned enterprises in trade, government innovation policies, cross-border data flows and supply chain management.

"Joining the TPP is of strategic significance, it will not only help Vietnam boost trade relations with its largest export market, the US, but also integrate into an economic community that will carry benefits in competiting with other countries in Asia," said economist Le Dang Doanh said.

Vietnam should, therefore, still negotiate the TPP although it has not yet made full use of bilateral and multilateral trade agreements already signed earlier, Doanh said.

The TPP aims to phase out tariffs on most goods traded between the member countries over 10 years, while other free trade and bilateral agreements allow open markets and cut taxes on a more limited range of goods.

By joining the TPP, Vietnam is expected to get easier entry into the US for its products. Despite signing a bilateral agreement with the US, Vietnam has not yet been part of the Generalized System of Preferences, a US trade program providing preferential tariffs for products from designated countries and territories, Doanh said.

Now, goods from Vietnam face the risk of anti-dumping lawsuits if they are exported in large amounts and competitive prices, he added.

Vietnam-US trade rose to over US$20 billion by December 20 from $1.5 billion when the two sides signed BTA 10 years ago, according to the US Embassy in Vietnam.

Nguyen Van Nam, former head of the Institute for Trade Research, said: "The TPP would help increase Vietnam's exports. Local consumers could purchase imported goods at lower prices, and the economy can attract more foreign direct investment."

According to some experts, in fulfilling TPP commitments, transparency would improve, helping reduce corruption.

Economist Pham Chi Lan said that Vietnam, because it has joined TPP negotiations from the very beginning, would be able to consider the benefits and challenges to take the initiative in negotiating TPP rules instead of accepting rules set up by others.

This is a big advantage for Vietnam compared with WTO negotiations, Lan said. When negotiating its WTO entry, Vietnam had to make new commitments, but was not able to add any new rules to the existing ones, she noted.

Stiff challenges

Nam cautioned that the new deal not only covers trade and services, but also non-trade areas such as intellectual property, the environment and labor. Thus, the pressure of TPP on the Vietnamese economy and businesses would be very hard, he said.

With the partnership, Vietnam will have the chances to access export markets with tariffs at zero percent. However, the opportunities may be neutralized by barriers like technical and hygienic requirements, or other safeguard measures, according to the Vietnam Chamber of Commerce and Industry.

Besides, the strict requirements on labor and the origin of materials may also make Vietnamese manufacturers unable to take full advantage of the low tariffs, the Chamber said.

Once Vietnam has to commit to lower import tariffs on the majority of product groups from other countries in the partnership, tax collections to the state budget will decrease, while more imports will infiltrate the country because they become cheaper. The risks seem to be very high for farm produce, which would hurt farmers badly, experts said.

"However, we shouldn't think they are disadvantages. The most important thing is that we should strengthen reforms to compete well in the new context," said Doanh

Nam said technical barriers are indispensable, and would be used more and more. "Without the TPP, our export goods will still face the barriers. The best way is to improve the quality of goods and services to overcome the barriers, not to worry about them."

Vietnam should also not worry about the penetration of more imports which could hurt local production, he said.

"Most of the consumer goods imported to our country now are actually low-quality products coming from Southeast Asian countries and China, not from TPP members," Nam noted.

But even as it negotiates the new deal, Vietnam should help its enterprises prepare well to grab opportunities when the pact takes effect, Nam said. "Vietnamese firms have not yet made full use of the incentives we gained when we implemented the WTO agreement. We should draw lessons from that in dealing with the new pact."

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