Stateside Export Growth Envisaged

According to the General Department of Vietnam Customs, in 2015, Vietnam earned US$33.5 billion from exports to the US and spent US$7.8 billion on imports from the world’s largest economy, thus generating a trade surplus of US$25.7 billion for Vietnam. With the results achieved in 2015, Vietnam’s export growth to the US was quite high, averaging 21 per cent a year for the 2010 -2015 period, and the growth rate has accelerated in the latest two years.

 

Vietnam’s main exports to the US included garments and textiles, footwear, wooden products and agricultural products. Its garment-textile and footwear exports ranked second and third by value in the world’s largest economy. Vietnam is expected to take US$38.5 from exports to the US in 2016. However, the two-way merchandise trade value accounted for a tiny market share in the US’s import value (just 1 per cent). In trade with the US, Vietnam is ranked 23^rd among exporting partners and 40^th among importing partners.

 

Mr Ha Duy Tung, Deputy General Director of International Cooperation Department under the Ministry of Finance, said the TPP Agreement provides many tax supports for Vietnam’s exports to the United States. Particularly in agriculture, the US will immediately eliminate 55.4 per cent of agricultural tariff lines (equivalent to 97.7 per cent of its agricultural product import value from Vietnam, valued US$950 million) as soon as the agreement comes into effect. Vietnam’s major exports such as rice, honey, coffee, tea, pepper, cashew nut, fruit and vegetables will be granted immediate tax exemption.

 

In its 10^th year of the TPP, 97.4 per cent of agricultural tariff lines will be lifted. The US will apply tariff quotas on 35 tariff lines of sugar and sugary products.

 

Regarding industry (except for garment and textile), 85.6 per cent of tariff lines on industrial products will be abolished immediately when the agreement goes into force, equivalent to 74.2 per cent of Vietnam’s industrial export turnover to the US, or US$6 billion). In its 10^th year in the TPP, the US will eradicate practically 100 per cent of industrial tariff lines.

 

As for processed seafood, the US will get rid of import tariffs immediately or after three years the TPP enters into force (import duties on processed tuna will be eliminated in the 10^th year of the TPP).

 

Up to 85 per cent of tariff lines on footwear will be repealed immediately (equal to 39.7 per cent of Vietnam’s footwear export turnover to the US, or US$1.15 billion) and 3.2 per cent of high-valued tariff lines (equal to 58 per cent of export turnover, or US$1.7 billion) is pledged for immediate reduction of 40 - 55 per cent from the current rates and for complete elimination of tariffs in the 12^th year of the TPP enforcement.

 

Up to 50 per cent of tariff lines on plastic products are abolished as soon as the agreement takes effect, while the rest will be removed to the maximum in the 5^th year of the TPP effect.

 

About 80 per cent of tariff lines on electrical and electronic appliances will be eliminated immediately, most remaining items will be disposed of taxes from the third to the fifth year of the TPP, and taxes on a very few items will be removed in the 10^th year.

 

Most importantly, the TPP commitments on garments and textiles allow the immediate abolition of 73.1 per cent of tariff lines (1,182 lines) as soon as the agreement takes effect, accounting for 46.1 per cent of the export value (equivalent to US$3.5 billion) and additional 7 per cent of tariff lines will be removed in the fifth year of the TPP enforcement.

 

“Right at the start of the agreement enforcement, 19.7 per cent of tariff lines on highly valued items, accounting for 51.3 per cent of Vietnam’s total garment and textile exports to the US will be slashed by 35-50 per cent from the current levels and be repealed completely in the 12^th year of the TPP effect,” said Ha Duy Tung.

 

By joining the TPP, Vietnam - US partnership is elevated to a new high. Opportunities and challenges arising from the entry to the TPP is enormous, thus requiring the business community to more actively engage for effective development and integration.

 

Tran Quoc Khanh, Deputy Minister of Industry and Trade, pointed out that when the TPP comes into force, some kinds of agricultural products that the US is strong at, for example pork and chicken, will pose substantial competitive pressures on Vietnamese products when import duties are brought to zero. Vietnam can produce these items but their competitiveness is weak. Some other agricultural products will also face difficulty but their effect will be likely lighter since Vietnam still has to import in big volumes, including milk, soya bean, maize and raw materials for animal feed production.

 

Some industrial products that the TPP signing countries are strong in can also pose difficulty for production in Vietnam, including paper, steel and automobiles. However, it is reasonable to assume that competition will not be large because Vietnam’s products are the mid-market segments while products from the TPP countries tend to fall into upmarket segments.

 

Mr Vo Tri Thanh, former Vice President of the Central Institute for Economic Management (CIEM), said domestic companies must have strategies to raise localisation ratios in their products to promote export and seize opportunities from FTAs.

 

Exporters need to have an export marketing strategy for the US market at first. To become equal partners in international relations and with US businesses, Vietnamese exporters should form large economic groups or interlink local businesses for this purpose.

 

Vietnamese companies should fully understand technical elements to meet requirements under US laws, minimise losses in negative cases and take precautions against business disputes that may occur at any time and with higher frequency.