How Can Businesses Utilize CPTPP?

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into force for Vietnam on January 14, 2019, has produced positive effects after two years. What matters now is how businesses can maximize the effect of CPTPP.

The report released by the WTO and Integration Center (VCCI) showed that, after two years of CPTPP enforcement, Vietnam’s export value to CPTPP countries expanded well. In 2019, the export value to six CPTPP countries reached US$34.3 billion, up 8.1%.

In 2020, although the Covid-19 pandemic was complicated, Vietnam’s exports to six CPTPP countries grew as much as that in 2019, reaching US$34 billion, up 12.02%. Two emerging markets in the picture of Vietnam's exports to CPTPP were Canada and Mexico.

Specifically, Vietnam’s exports to Canada in 2020 were valued at nearly US$4.4 billion, an increase of 12% - much higher than the country’s export growth (7%). Machinery, equipment, tools and parts accounted for over 62%.

Mexico is Vietnam’s third-largest trading partner in Latin America. In recent years, the two-way trade increased by an average of 14.6% a year and Vietnam’s export growth averaged 18.8% a year.

In the context that almost all CPTPP partners have reduced imports, Vietnam still achieved this growth, showing that CPTPP is creating initial impacts, more or less positive. However, comparing the common ground, benefits from CPTPP are still modest. The export growth to CPTPP markets was 7.2%, lower than the 8.4% growth of exports to the world in the same period.

Ms. Nguyen Cam Trang, Deputy Director of the Import and Export Department under the Ministry of Industry and Trade, Vietnam's export market share in CPTPP partner countries was largely low, specifically, Japan (3.1%), Australia (1.9%), New Zealand (1.6%), Mexico (1.3%), Canada (1.1%) and Singapore (1%.)

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said that many businesses think that the inferiority of their own competitiveness to competitors will hinder the realization of opportunities expected from the CPTPP and other future agreements. The next is market volatility and uncertainty. The third group of obstacles is related to factors from the perspective of authorities such as lack of information about commitments, delays, lack of flexibility as well as other limitations in enforcing CPTPP. The final is some technical reasons such as rules of origin and FTA commitments that are detrimental to businesses.

Regarding the level of CPTPP awareness among enterprises, 69% of businesses reported to have heard about knowledge, higher than all other FTAs, and 25% had certain knowledge. However, just one out of every 20 companies knows clearly about CPTPP business-related commitments.

To prepare for the distant future where CPTPP and FTAs can be an effective aid, up to three quarters of respondents said they had planned to adjust their business to take advantage of these agreements. The first was changing to consolidate and improve business competitiveness. Then, they carefully weighed up the use of direct market opportunities from the CPTPP and other FTAs. Ultimately, there were plans to be prepared for distant opportunities.

Mr. Phan Huu Minh, Vice President and General Secretary of Thai Nguyen Business Association, said that, joining CPTPP, in addition to advantages, it is necessary to standardize and follow general regulations on origin. Companies should streamline production and build up the capacity to ensure output and quality.

Dr. Vu Tien Loc said, business support programs and activities should focus on enhancing product competitiveness, boosting trade promotion at the national level in a systematic manner, especially in new markets, updating market information and linking supply and demand sides.

Last but not least, it is essential for businesses to more actively explore opportunities and realize CPTPP benefits. At the same time, improving competitiveness, starting from investing in product competitiveness, is not only a regular job but also a key for businesses to seize opportunities from the integration process.

By Thu Huyen, Vietnam Business Forum