The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade deal has been signed in Chile and is expected to provide benefits for Vietnamese enterprises that are proactive in responding to the changes in the business environment and innovative in their business approach.
In addition to the prospects for promoting exports to the other members, the CPTPP trade deal will help Vietnam to accelerate its institutional reform and create a more attractive and open investment and business environment.
Caution and expectation
Without the US, many enterprises remain cautious in assessing the prospects available from the CPTPP. General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP) Truong Dinh Hoe said that the US’ absence reduces the benefits for the fisheries sector compared to the TPP. However, there are many opportunities for domestic fisheries as the CPTPP countries have imported nearly US$2 billion of Vietnamese seafood annually, equivalent to 23% of the total export turnover of the sector.
According to Chairman of the Board of Directors of Seavina Joint Stock Company Ngo Quang Truong, enterprises that have exported a lot of products to the US, such as Seavina, would not receive as many benefits as per the TPP agreement. However, currently the company is enhancing its exports to new markets, including Australia. Therefore, the CPTPP will certainly help it to promote growth in exporting its seafood to this country.
With weak finance, technology and equipment, Vietnamese enterprises have poor competitiveness. Therefore, in order to develop and seek opportunities in new markets, they should pay greater attention to enhancing their investment in machines, equipment and workshops, as well as improving their management and the quality of human resources.
Le Tien Truong, General Director of the Vietnam Textile and Garment Group (Vinatex) cum Vice chairman of Vietnam Textile and Apparel Association (Vitas), previously shared that the Vietnamese textile and garment sector was highly dependent on the US as it was the main export market. Despite the country’s absence from the CPTPP, new markets, such as Canada and Australia, are predicted as potential future markets with strong growth in the near future.
In addition to these opportunities, Vietnam will have to open the door for products and services from the other partners, creating more fierce competitions for domestic enterprises.
New playground for long-term benefits
According to a new World Bank report, announced on March 9, multilateral trade agreements such as the CPTPP will help to boost Vietnam’s growth driven model based on investment and exports. All income groups in Vietnam are expected to benefit from this new trade deal, although highly-skilled workers may reap more benefits. Furthermore, the anticipated increase in foreign direct investment is expected to lead to a further expansion of the services sector and boost productivity growth. It will create opportunities for private domestic firms to integrate into global value chains and promote the development of small and medium-sized businesses.
Sebastian Eckardt, the World Bank’s chief economist for Vietnam, said that it will directly benefit Vietnam, from trade liberalisation and improved market access. Most importantly, the CPTTP would accelerate domestic reform in many areas, such as intellectual property, labour standards, and the rules of origin. Delivering the commitments under the CPTPP will promote transparency and the creation of modern institutions in Vietnam.
According to the Ministry of Industry and Trade, despite being without the US, the CPTPP has the potential to bring specific benefits to all of its members, opening a new playing field with a market size accounting for 13.5% of the global GDP and including 500 million people. Vietnam joined the pact from the beginning, so the country will have more advantages in protecting its benefits.
In addition to commercial values and tax rate reductions, the CPTPP will contribute to changes in economic institutions in order to meet the requirements for international economic integration. The agreement will also create favourbale conditions for domestic producers to develop and expand their markets.
Dr. Tran Toan Thang, Head of the World Economy Department under the National Centre for Socio-Economic Information and Forecast, noted that the benefits for Vietnam from the CPTPP without the US will be lower than the previous TPP. However, Vietnamese enterprises can take advantage of the markets across the Pacific including Canada, Mexico, Chile and Peru, which have not yet signed bilateral trade agreements with Vietnam. In addition, the commitments moved from the TPP to the CPTPP are almost unchanged, which will put pressure on institutional reform in Vietnam.
The largest member is now Japan, which has a good relationship with Vietnam, while other countries such as Canada and Chile are more developed economies. The regulatory framework and issues mentioned in the CPTPP are considered as a new paradigm, and the agreements in the CPTPP are also valid beyond the framework of the 11 members; therefore it is considered as an international agreement model.
Many experts have also stated that the CPTPP members expect the US to join the pact again in the next couple of years. It is also forecast that the number of its members will increase as the Republic of Korea, Thailand, Indonesia and the Philippines have expressed their willingness to join, which would significantly increase the economic benefits for the parties involved, even greater than the original TPP agreement.
