TPP may upset local agricultural firms

The United States Department of Agriculture (USDA) has released an update on opportunities for US agriculture in Vietnam arising as a result of slashes in import tariffs under the Trans-Pacific Partnership (TPP) (see table).

According to the USDA update, Vietnam’s average tariff on agricultural products is 16 per cent, while the average US tariff is 5 per cent. Under the TPP, signed in February 2016 and expected to take effect in early 2018, Vietnam will reduce and eventually eliminate tariffs across a broad range of food and agricultural products, “helping put US exports on a level playing field, and giving the US a leg up on its non-TPP competitors.”

David Lennarz, vice president of the US’ Registrar Corp, which assists businesses with US Food and Drug Administration compliance, warned that the TPP could negatively impact Vietnam’s agricultural products.

“Amid the prevalence of unsafe products in Vietnam, Vietnamese consumers’ demand for foreign products – including those from the US – is rising. This offers bigger opportunities for US firms to do business in Vietnam,” Lennarz said.

At a recent “Meet the USA” conference in Hanoi, representatives from many US agriculturally-linked firms such as Cargill, Coca-Cola Southeast Asia, Pacific Basin Partnership, Starbucks Coffee, and Suntory PepsiCo said that the TPP would enable them to expand their businesses in Vietnam thanks to reduced import tariffs.

Coca-Cola is reported to be planning to invest another $300 million in Vietnam over the next few years. Between 1994 and 2015, the popular brand invested $700 million into the country. Of this figure, some $300 million was invested during 2013-2015.

Le Ba Lich, chairman of the Vietnam Animal Feed Association, said that Vietnam’s agricultural products would be heavily affected by foreign products due to various free trade agreements and the TPP.

“For example, the removal of tariffs for corn and soybeans under the TPP has prompted many US firms to expand their production of animal feed in Vietnam,” he said.

One such example is Cargill, which will begin the operation of its 11th feed mill in the central province of Nghe An in 2016. Recently, Cargill invested $7 million in the expansion of its existing animal feed mill in the southern province of Dong Thap, while announcing that it would extend its investment in Vietnam by another $40 million, bringing the total investment in the country to $180 million.

According to the USDA, Vietnam remains one of the fastest-growing markets for US food and agricultural products, with US exports totalling $2.3 billion in 2015 – a whopping 357 per cent increase from 2007, when Vietnam joined the World Trade Organization. Vietnam now ranks as the US’ 11th-largest agricultural export market, with top products including cotton, nuts, soybeans, and dairy.