4:08:20 PM | 12/17/2013
Japan and the United States (US) intensely squabble about tariffs on agricultural products and automobile trading. This disparity is the main obstacle to the conclusion of the much-expected treaty. Apart from tax issues, representatives of participating countries agreed to resume discussions next year on outstanding issues such as intellectual property rights and reform of State-owned enterprises (SOEs).
Participating economies have conducted 19 rounds of talks but disagreements still exist as said above. Hence, all parties decided to open an additional negotiation round which was not included in the 2013 Negotiation Agenda. This negotiating session took place in Salt Lake City, US in late November with the determination of all parties to conclude negotiations in Singapore meeting in December this year. Unfortunately, the final round of talks disappointingly failed.
TPP negotiation results were closely tracked by Vietnamese economic analysts and business community because TTP is likely to cause huge impact on many industries in the country as well as on SOE operations.
TPP is a large economic area with a population of over 790 million and a total GDP of US$27,000 billion. It contributes 40 percent of global GDP and 30 percent of global trade. The signing of this agreement will be the opportunity for signatories to increase exports, expand production scale and attract investment.
Vietnam’s key exports are garments and textiles (US$7.5 billion in 2012), footwear (US$2.3 billion), woodwork (US$1.8 billion) and seafood (US$1.2 billion). If the US alone abolishes import duties on these items, Vietnamese exporters will be greatly benefited because textiles and footwear, for example, are being levied very high tax rate, ranging from 12 percent to 48 percent. Of course, exports must satisfy certain TPP conditions.
United States Trade Representative Michael Froman expressed his high optimism that, according to many independent analyses, Vietnam will benefit most among TPP-participating countries. Washington-based Peterson Institute for International Economics, an independent researcher, predicted that when TPP comes into effect, Vietnam's exports will increase up to US$68 billion and the GDP will expand by 20 percent. Vietnam will have the right to access new markets with a combined value of US$15,000 billion and other markets like Canada, Mexico and Peru, with a total value of US$3,000 billion.
In reality, TPP brings both good opportunities and challenges, depending on perspectives. For example, TPP is not good news for SOE leaders. Dr. Le Xuan Nghia, Director of the Business Development Institute (BDI) and Vice Chairman of the National Advisory Council for Financial Monetary Policies, said, TPP has very strict regulations on SOEs and requires them to be fair with other companies in terms of competition and trade as SOEs use public capital. TPP’s requirement for absolute transparency of budget use prevents them from hedging profit and loss - a serious disease of SOEs.
But, this is a positive long-term effect and a strong boost to the currently stagnant reform and restructuring of SOEs.
Signing TPP not only provides an opportunity to boost export growth or accelerate SOE restructuring but also bring about challenges. TPP requires immediate elimination of all import tariffs right after the agreement comes into force, except for merchandises stated in 3-5-year roadmap and 10-year a roadmap at a maximum. Many domestic production industries must immediately confront the imported goods on the weak side.
Indeed, TPP is not the first free trade agreement (FTA) Vietnam has signed but TPP requires a much higher and broader level than FTAs with ASEAN and ASEAN with partner countries (ASEAN+). TPP is not only extended to services, investment and intellectual property sectors but also has regulations on labour, environment and government procurement.
These difficulties also posed to seafood sector in particular and agricultural sector in general as all exports must meet sanitary and phytosanitary (SPS) measures. Vietnamese farmers will be also at a disadvantage when they only do smallholding farming which usually requires more costs than advanced agriculture. For example, pork export was worth US$6.3 billion in 2012. If import tariff is lifted, Vietnamese consumers will have more choices for pork but local farmers are surely affected.
TPP is expected to be a liberalisation agreement of the twenty-first century with intensive and extensive commitments to market access in the realm of banking, insurance and securities. In these fields, Vietnam is vulnerable to external pressures because of low development level. However, Vietnamese economy must go on this path of economic integration. Challenge and opportunity go hand in hand. In TPP, the US is the most important strategic partner. The country is the biggest export market of Vietnam, which imported US$17 billion a year on average from Vietnam in three years (2010-2012), representing an annual growth of 17.5 percent. TPP participation helps Vietnam to formulate a bilateral FTA with the US.
However, the latest round of TPP talks did not come to final agreement. Opportunities and challenges for Vietnamese economy and business community are temporarily shelved. But, the trend of deepening integration into international economy is irreversible. TPP negotiations will be restarted in the coming time.Bao Chau
Vietnamese
