Apr 2, 2013

Vietnam - TPP: challenges and chances for Vietnam

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While many experts believe that Vietnam will be the nation that will enjoy the most benefits compared to other countries that are negotiating for the Trans-Pacific Partnership (TPP) agreement, taking part in the TPP also poses a considerable number of challenges.

Vietnam, along with 10 other TPP nations, finished Round 16 of the TPP free trade discussions in Singapore in mid-March.

While the nations expected the negotiation to be finished by the end of this year, it may be prolonged into 2014 with the additional participation of Japan.

Vietnam has to take part in negotiations on thorny issues such as origin norms and social matters relating to labor and environment, but the agreement will open up a huge market for Vietnam to export more to TPP members, said Professor Peter A. Petri from the US-based Brandeis University.

The country, however, will enjoy the most benefits in terms of export-import performance, foreign direct investment flows and closer ties with international production chains, the professor added.

Vietnam’s gross domestic product is expected to increase by US$26.2 billion, or 7.7 percent, from now to 2015, in case the number of TPP nations remains at 11.

The figure will be $35.7 billion and 10.5 percent if Japan officially joins the TPP, he added.

“Vietnam is in the best position to take advantage of the TPP,” he added.

The current 11 TPP members include Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam.

The benefits will come from the US, and Japan in the future, which are currently the country’s largest exporting markets, according to Professor A. Petri.

“Many industries are leaving China, and where would they switch to? India, or Southeast Asia, where Vietnam has emerged as an important destination?” he said.

Once the TPP negotiations are successfully concluded, the country’s garment and textile exports to the US are expected to increase 12 to 13 percent, raking in some $30 billion a year, according to the Vietnam Textile and Apparel Association (Vitas).

Then, the US market will account for 55 percent of Vietnam’s total exports of garment and textiles, the association said, adding that the current proportion is 49 percent.


While local businesses agreed that the TPP will create new opportunities for their growth, they all admitted that it is not simple to make good use of these golden chances.

While the Vietnamese textile and garment sector can enjoy zero duties for their exports to the US instead of the current 17.2 percent following the TPP, it still depends greatly on the product origin requirements applied by the US, Vitas said.

Vietnam still imports most of its raw material for textiles and garments, and most of the imports are from China, the association admitted.

“It’s also comprehensible that the importing countries will set up new technical barriers once the exporting duties are lowered,” Vitas head of international relations Tran Viet told Tuoi Tre.

Diep Thanh Kiet, deputy chairman of the Vietnam Leather and Footwear Association (LEFASO), said the TPP can generate 1 million new jobs for the footwear industry, while also increasing export volumes to the US, which currently accounts for 47 percent of the sector’s total export turnovers.

However, reality shows that local footwear businesses cannot well take advantage of the chance.

“The handbag manufacturing sector has to import up to 90 percent of its raw materials from China, which will hinder Vietnam’s making use of the lowered taxes under the TPP,” he explained.


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