How to Take Advantage of CPTPP amid U.S.-China Trade Tension?

11:48:40 AM | 9/6/2019

To improve the enforcement of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), grasp all opportunities and get prepared for challenges arising from CPTPP enforcement amid U.S.-China trade tensions, the Vietnam Chamber of Commerce and Industry (VCCI), in collaboration with the Ministry of Industry and Trade (MoIT), organized the forum on advantages and disadvantages of Vietnam in CPTPP enforcement amid U.S.-China trade escalation.

The forum was among a series of communication events on new generation free trade agreements (FTAs) to which Vietnam is a signatory, including CPTPP Agreement and the EU - Vietnam Free Trade Agreement (EVFTA), significantly raised awareness of businesses and the community of commitments and supported them to take advantage of opportunities to expand markets in partner countries. This forum was also a channel connecting the Government with businesses for better FTA implementation. With highly interactive approaches by officials, experts and the business community, the forum was attended by representatives of government agencies, embassies, business associations, Vietnamese businesses, and central and local media.

Raising awareness, fostering communications

Dr. Doan Duy Khuong, Vice President of VCCI, said U.S.-China trade tensions have produced great impacts on Vietnam's foreign trade, especially as the country has important trade relations with these two markets. For the U.S. market, Vietnam exported US$27 billion worth of commodities in the first six months of 2019, up 28% year on year. The U.S. continues to be Vietnam's largest export market. Meanwhile, China is still Vietnam's largest import market, taking US$15 billion from the latter in the reviewed period, up 9.7% from a year earlier. Vietnam’s key imports from China included electronic devices, computers and components (up 49%); machinery, equipment and parts (18.4%), and fabric (7.1%.)

CPTPP is considered a high-quality free trade agreement. While protectionism is hindering global trade growth and U.S.-China trade tensions are at risk of escalating, the CPTPP enforcement is expected to generate a new driving force for regional and Vietnamese economic growth. This is also an opportunity for Vietnamese importers and exporters to expand their markets and improve export competitiveness.

He said, in international economic integration, one basic principle is transparency, which requires countries to transparently disclose all kinds of procedures, policies and regulations to member states, and eliminate ambiguity about rules and procedures. In addition, trade law and policy changes and amendments should be implemented in a certain direction that member countries can predict.

“Businesses must raise their insight about integration commitments and a sense of legal responsibility to fulfill them. Consumers must raise their understanding to protect their rights. This principle ensures fairness and balance among countries in trade relations in order to mitigate a situation where countries with bigger trade scale, stronger technological and financial potential can impose forces for smaller countries or vice versa,” Dr. Khuong added.

Boosting communications and delving into the contents of FTAs that Vietnam joined on the basis of ensuring that economic entities will grasp contents and understand integration principles and commitments will be an important step to improve the quality of sustainable business environment. This not only mitigates risks for Vietnamese goods on international markets, but also ensures the interests of domestic people and consumers. Moreover, to ensure fair and robust competition for businesses and avoid short-term profiteering, transparency will help sustain Vietnam’s development in international economic integration.

Low rate of CPTPP-knowledgeable businesses

According to the Ministry of Industry and Trade, Vietnam's export value to CPTPP markets grew in the first six months of 2019, featured by 32.9% growth with Canada and 23.4% growth with Mexico. In addition, some exports surged with CPTPP. For example, machinery, equipment, and parts to Canada jumped nearly 125%, while telephones and components to Mexico leaped more than 331%.

Although many businesses know how to take advantage of CPTPP for export growth, statistical data show that a very low rate of enterprises know how to utilize preferences. For example, commodities exported under the CPTPP form accounted for only US$190 million out of a total of US$16.4 billion of exports to CPTPP countries, or just 1.17% of the total. According to surveys on CPTPP sentiment of 8,600 enterprises, up to 26% of respondents studied CPTPP but over 70% did not understand clearly about CPTPP.

Currently, the clash between the world's two largest economies - the U.S. and China - is becoming increasingly complicated, from the trade war to technology and currency wars, and causing great pressures on businesses and governments. In this context, according to the Ministry of Industry and Trade, Vietnamese enterprises need to continue to take advantage of new-generation FTAs to diversify trading partners, avoid reliance on one market, and most importantly, to be more active to search and comprehend CPTPP information and commitments to have appropriate business plans and strategies. For its part, the Government necessarily promotes the effective and timely CPTPP implementation, improves the business environment to cope with risky developments of global economy; accelerates CPTPP communications and dissemination; supports businesses to understand the agreement accurately and deeply; and take advantage of CPTPP commitments to bring practical benefits to the economy.

Dr. Nguyen Thi Thu Trang, Director of WTO and Integration Center, VCCI

VCCI's survey on CPTPP sentiment of 8,600 companies showed that only 26% of respondents are interested in CPTPP, while more than 70% are still unclear about it. 84% of companies see lack information about commitments and enforcement methods as the biggest obstacle. 81.48% point at enforcement capacity of State agencies, followed by low competitiveness or difficult rule of origin.

The activeness of authorities is not high. Our research results showed that action plans by ministries, branches and localities are six months behind schedule. Agencies responsible for informing public officials and businesses of CPTPP are slow in their actions. The path to enhance business competitiveness is still rough due to inadequate tax policies and customs procedures.

CPTPP commitments are not fulfilled by the Government and central agencies, but mainly by local authorities and enterprises. How can businesses take advantage of CPTPP opportunities if they do not understand them? Locally, it is also necessary to inform authorities of CPTPP to avoid infringing commitments, harming and hindering businesses.

The government needs to properly, firmly and effectively comply with CPTPP and needs to consult businesses on it. As for businesses, it is necessary to actively grasp information, learn about opportunities, take advantage of CPTPP, and actively report their emerging difficulties to work out solutions together.

Mr. Ngo Chung Khanh, Deputy Director of Multilateral Trade Policy Department, MOIT

Since the CPTPP took effect, only 12 questions concerning this pact have been sent by businesses to the Ministry of Industry and Trade and they are mainly from FDI enterprises. This is still too modest a number.

Although many businesses know how to take advantage of CPTPP for export growth, statistical data show that a very low rate of enterprises know how to utilize preferences. For example, commodities exported under the CPTPP form accounted for only US$190 million out of a total of US$16.4 billion of exports to CPTPP countries, or just 1.17% of the total. Only two items - footwear and steel - cash in on 10% of opportunities. Much-expected garments and textiles can utilize just 0.03% of opportunities.

We have received almost no questions about CPTPP from central and local authorities and agencies. So far, most of them have made action plans only after the Prime Minister asked them to do it. Action plans of most provinces and cities have no detailed implementation for specific agencies and programs.

Mr. Au Anh Tuan, Director of Customs Supervision Department, General Department of Customs, Ministry of Finance

When fulfilling CPTPP commitments, we also warn businesses of fraudulent origin. We also warn against the fact that many companies import finished products but deliberately declare them as semi-finished products or that they set up many different companies and each of them imports certain parts for assembling into finished products or selling them to other companies or that they print “made in Vietnam” or “originated from Vietnam” on export labels. Furthermore, foreign commodities may be transshipped to Vietnam by legalizing export dossiers or applications for certificates of origin; replace labels with “made in Vietnam” ones; and legalize documents for C/O.

To deal with these issues, customs authorities will have to intensify customs inspection and supervision of exported goods. At the same time, they need to ease customs procedures to promote Vietnamese goods to access the U.S. market and CPTPP countries; and strictly comply with international commitments on origin of commodities.

Customs authorities should coordinate and exchange information with the Ministry of Industry and Trade and the Vietnam Chamber of Commerce and Industry (VCCI) to implement consistent solutions and strictly control goods posed to high risks of fraudulence and origin counterfeiting like customs inspection and case-based investigation.

Domestic companies need to boost their production capacity, join supply chains led by foreign corporations, increase production and export, and develop supporting industries. They also need to raise their awareness and their compliance to laws.

Quynh Chi