Behind TPP Hype

Although the negotiations were concluded successfully, there is still one final step before TPP can become a reality, which is the approval of the Congresses of the 12 members, of which the biggest concern lies in the US seeing how many voices have been raised against the new-generation free trade agreement, both from the Democratic and Republican sides. However, congressional approval, though it may take some time, is actually just a procedure.

 

Theoretically speaking, this initial hype is understandable. Joining the TPP is promised to help Vietnam further promote trade and investment, as the market will not stay confined anymore, but extend to the countries currently hold 40 percent of GDP and 30 percent of merchandise trade globally. But not only trade and investment, the benefits that can come Vietnam’s way from the TPP could be even greater than that. According to Dr Nguyen Dinh Cung, President of the Central Institute for Economic Management (CIEM), TPP was also an opportunity for Vietnam’s institutional reform, as this agreement would set out general game rules and for Vietnam to be able to get into this playground, there was no other way but to implement reforms in all areas.

 

If that happens, it’d be the right thing for Vietnam to rejoice over. Because after some faltering steps of the economy in recent years together with the concern about getting caught in the middle income trap and falling behind, bringing Vietnam to stand in front of a second reform opportunity, with a wide-open economic space stretching before us, TPP is expected to create a momentum for Vietnam to step into a new stage of development, competing using productivity, quality and efficiency.

 

The question is whether Vietnam can take advantage of it or not.

 

Deputy Minister of Industry and Trade, Chief Negotiator of Vietnam’s TPP delegation Tran Quoc Khanh seems quite optimistic, as indicated by his confirmation to the media at a press conference announcing the results of TPP saying that joining TPP “mainly are favourable, the risks can be controlled”. Meanwhile former Minister of Trade Truong Dinh Tuyen said: “We are having emotional days, just like the old days after joining the WTO we were so happy we celebrated by walking”.

 

But emotions do not hold much meaning in the story of economic development. Because ultimately, in order to turn opportunity into reality, both the state and businesses, even the whole society, have to act in unison and decisively, and act fast, “walking” would be too slow.

 

From this perspective, it is clear that we cannot celebrate with TPP just yet!

 

It is not unreasonable that many Americans are not happy with TPP. Even veteran economist Paul Krugman protests the agreement. He said that the TPP was not really a trade agreement but more of a treaty strengthening intellectual property monopoly and the power of businesses in resolving disputes.

 

It should also be noted that Paul Krugman’s statement came from American perspective. So if we are viewing this from Vietnam’s side, a country where the legal system isn’t yet strong enough, the business community is still too weak to compete “fairly” on an international playground, how big the favours from TPP could be and what kind of risks the businesses, government and also the economy would have to expect?

 

At this point, the detail of TPP has yet to be disclosed, but recent information from the Ministry of Industry and Trade showed that TPP is indeed not only about trade, of which one element the Vietnamese media has been advertising constantly is the elimination of tariff and tax of many items down to zero percent, but also includes various commitments involving intellectual property, investor protection and so on.

 

Mr Nguyen Tu Anh, Director of the Research Department on Macroeconomic Policies (CIEM), in an interview after the conclusion of the TPP negotiation, warned that the Vietnamese government now risked being sued more than ever before. The reason is that TPP is a mechanism that allows the use of problems of democratic institutions, governments and enterprises can file lawsuit against each other.

 

For years in Vietnam, such cases are very rare. The South Fork lawsuit against Binh Thuan province over the dispute over a tourism project and a titanium mining project can be considered a unique example. Additionally, the commitments to investment protection also emphasise the principle of non-discrimination. Joining TPP means no imposing requirements of localization rate, prohibiting asset recalling that does not serve a public purpose. These commitments will likely lead to a significant change in Vietnam’s current mechanisms and policies of investment attraction.

 

Similarly, the commitment to intellectual property protection is expected to cause many challenges for Vietnam, although in practice it would bring benefits for Vietnam. Failed to meet these commitments, lawsuits may occur left and right, business to business, business-to-government.

 

Mr Andrew Wells-Dang, a senior adviser of Oxfam Vietnam, speaking to Vietnamese media, even mentioned a scenario where U.S private pharmaceutical companies were allowed to sell their “Intellectual Property Rights” at a high price for 5-8 years before other countries could be licensed to produce products of the same category with cheaper prices. But if a Vietnamese company wished to export new drugs to the US, they must get permission from the US government first and even if overcoming this barrier, they’re likely to face accusation of “dumping” by US companies.

 

“That's how the rich countries protect their markets, while Vietnam's economy is open to all imported goods,” said Andrew Wells-Dang. This is the risk that comes with TPP. And that means we are celebrating too soon!

 

Supposedly, TPP can pass the parliament of all the member states by next year, then it still would take another long while for new commitments to be fully implemented and show results in practice. But that might be fortunate for Vietnam, because that means we will have more time, though not much, to prepare. This preparation process is going to be a major challenge for both the government and the business community in Vietnam.

 

Clearly, this heady excitement about TPP right now does not make much sense. What’s important is to prepare and to get ready for the game, at which Vietnam still seems too weak. Looking at the WTO lesson still has its value today!