TPP is a free trade agreement between countries along the Pacific coast, towards the target removing from at least 90 percent of tariff barriers for goods or services of partners involved in the agreement. “Vietnam is expected to benefit from the TPP, but difficulties are waiting ahead” is the warning by Vietnam Chamber of Commerce and Industry (VCCI) at a workshop on the issue held on August 21st.
To be able to benefit from the agreement, Vietnamese businesses have to make efforts to become the winner. WarningEconomic expert Pham Chi Lan said that currently, the TPP is being negotiated for the 18th round and expected to reach agreement by the end of 2013. In addition, by the end of 2015, the ASEAN Economic Community and ASEAN +6 Free Trade Area will have been formed. When joining a series of trade agreements like that, if not carefully prepared, it is possible that Vietnam will become a springboard for non-TPP members to be taken advantages to enter into TPP agreement. As such, the challenge for Vietnam businesses will be huge because there are not only the liberalisation of goods and services but also the liberalisation of capital and skilled labour.
According to other economic experts, Vietnam exports increase nearly 20 percent a year, but FDI enterprises account for two thirds of the export value of Vietnam. This shows that Vietnamese businesses are not prepared to step into a new playground attractive but challenging like this. Warning about the future of Vietnamese enterprises joining the TTP, Mr Luong Van Ly, Deputy Chairman of Saigon Entrepreneur Club, expected that there are a significant number of Vietnam enterprises to cease operations.
However, some foreign experts are more optimistic, Mr Herb Cochran, President of the American Chamber of Commerce in Vietnam (AmCham) said that strengthening the implementation of WTO commitments and engagement in the TPP will help significantly solve the economic problems that Vietnam has confronted in recent years. Joining TPP and actively implementing commitments can enhance the value of bilateral trade between Vietnam and the United States up to US$ 64.7 billion by 2020.
According to Mr Ray Nayler, Acting Head of the Economic Section of the US Consulate General in Ho Chi Minh City, joining TPP would promote market reforms, modernisation and integration of Vietnam. Any areas of Vietnam exports which are subject to high import tariffs in one of TPP markets would benefit considerably.
Efforts to solve the own problems
When joining TTP, the main export products of Vietnam such as garment, fisheries and furniture will be exempt from tax when exported to 11 member markets. Currently, fisheries and furniture are subject to duty-free when exported to the United States so joining the TTP will not bring significant impact. TTP still imposes anti-dumping duty. Thus, only textile and leather of Vietnam will be the industries which benefit most from the TTP. In 2012, Vietnam’s textile and garment exports reached US$17.2 billion; particularly, exports to the U.S. and Japan were US$9.5 billion. Combining textile exports to Australia and Canada, the volume of Vietnam’s exports to TPP markets is 58 percent. Through the TTP, the tax rate for Vietnam textile firms exporting to the US market will be reduced from 17-20 percent to 0 percent. To be entitled to tax incentives, Vietnam enterprises have to meet the requirements of "rules of origin" which specifies that the materials for garments must originate from the TTP members. Currently, there are only a few Vietnamese qualified firms to invest in production of raw materials; most of the remaining firms in the industry are not proactive for materials. So competitiveness in purchasing raw materials and auxiliary materials and labor make many Vietnam businesses not benefit much from the TTP.
According to the survey results of the Textile Association, almost all companies in the sector do not create linkages and exchange information with each other. Despite being engaged in the same area, the difference between the enterprises in labor efficiency, production capacity, labor prices ... are the causative factors of labor competition, the difference in price order, creating barriers for the overall development of the industry.
Vietnamese enterprises need to overcome the weaknesses mentioned above if they want to fully benefit from this Agreement.
Nguyen Thanh
Vietnamese
