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Nguyen Viet Thang, head of X26 JSC’s Planning Division based in Hanoi, greeted the news on November 12 that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will be officially adopted by the National Assembly (NA).
Vietnam will be the sixth nation to ratify this milestone deal, after Australia, Japan, New Zealand, Mexico, and Singapore. Last week, New Zealand adopted this deal. Brunei, Canada, Chile, Malaysia, and Peru are also expected to ratify the deal in the near future.
“Our company has been awaiting the adoption of the CPTPP for a long time. If the deal is adopted by all 11 member states, we will be able to export more due to the import tax exemption, which will become true upon the deal’s entry into force,” Thang told VIR.
Currently, the average rate is 12-18 per cent, depending on the market and product, Thang said, adding that the company has been “seeking more partners in other CPTPP nations, and contracts will be materialised right after the CPTPP takes effect.”
The NA last week announced that after thorough discussions, on November 12, 2018, it will adopt a resolution approving the CPTPP and related documents.
“This is an important agreement which will have significant impacts on almost all sectors of politics, economy, society, and foreign affairs of Vietnam, especially in the sectors of agriculture and employees’ rights,” said an NA document released last week.
Minister of Industry and Trade Tran Tuan Anh said, “The CPTPP will have a comprehensive, positive impact on Vietnam’s investment and trade as a whole, with the garment, footwear, foodstuff, and beverage sectors to be the biggest beneficiaries, because the majority of import taxes on almost all of these products will be reduced to 0 per cent when the CPTPP takes effect.”
Statistics show that Vietnam’s garment and textile export turnover from Australia, Canada, Mexico, New Zealand, Chile, and Peru – despite high import tax rates – has been fluctuating around $40 billion a year, which is 3.5 times higher than the turnover from the US, and 11 times higher than that from the EU.
In another case, according to the Economist Intelligence Unit (EIU), a British business providing forecasting and advisory services through research and analysis, the CPTPP is expected to help Vietnam’s steel producer Hoa Sen Group to boost exports to CPTPP nations, including Mexico, Chile, and Peru. This is because the group currently faces import tariffs as high as 25 per cent in Mexico, 6 per cent in Chile, and 5 per cent on some products in Peru.
Hoa Sen Group also sees the CPTPP as Vietnam’s best chance to move up the value chain in global manufacturing. The trade deal would encourage greater investment in Vietnam from Australia and New Zealand. This would help especially in areas where Vietnam wants to make headways, such as high-tech industries, industrial development, services, and agriculture, enabling Vietnam to better participate in the regional and global value chain, according to the EIU.
Recently, HSBC released a comprehensive survey of global businesses, with 200 respondents in Vietnam, about the CPTPP’s expected impacts on them. Results showed that 63 per cent of businesses in Vietnam believe the CPTPP will have a positive impact on their business, while 50 per cent said it is very relevant to their business.
HSBC Vietnam’s general director Pham Hong Hai said that with the US not present in the CPTPP, Vietnam’s benefits may be less than with the original Trans-Pacific Partnership (TPP). For instance, GDP will only move up by 1.32 instead of the 6.7 per cent, and exports will increase by 4 instead of 15 per cent. “However, in general, industries like garments and textiles, leather footwear, and labour-intensive production will still benefit. Vietnam will be able to take advantage from its enhanced access to member markets, especially those on the other side of the Pacific like Canada and Mexico,” Hai said.
According to the World Bank’s recently-released update on Vietnam’s economic developments, the CPTPP covers 11 economies that together account for 13.5 per cent of the global GDP, and a $10 trillion comprehensive market that spans over 500 million people.
“Better access to a market of this size clearly creates significant opportunities for
Vietnam’s export-oriented economy. Vietnam has unique comparative advantages even among the 11 economies in the CPTPP,” read the update.
Under conservative assumptions, the CPTPP is estimated to result in a cumulative increase of 1.1 per cent in Vietnam’s GDP by 2030. Assuming a modest boost to productivity, the estimated increase of GDP would amount to 3.5 per cent from the CPTPP. Meanwhile, Vietnam’s exports are projected to grow by 4.2 per cent and imports by 5.3 per cent, with larger increases of 6.9 and 7.6 per cent, respectively, assuming productivity gains.
The largest growth in output is estimated to be in food and beverage and tobacco, clothing, leather, and textiles, along with more modest growth in several manufacturing sub-sectors and services. Export growth is expected to be strongest in food and beverages, tobacco, clothing, chemicals, leather and plastic, transport and machinery, and other equipment. Imports are expected to grow across all sectors, according to the World Bank.
“Aside from the direct gains stemming from trade liberalisation and improved market access, the CPTPP is expected to stimulate and accelerate domestic reforms
in many areas, such as competition, services (including financial services, telecommunications, and temporary entry of service providers), customs, e-commerce, the environment, government procurement, intellectual property, invest-ment, labour standards, legal issues, market access for goods, rules of origin, non-tariff measures, and trade remedies,” said the update.
The CPTPP was inked in Chile on March 8 this year without the US, which withdrew from the TPP in January 2017.