LookAtVietnam – It is still early to talk about what Vietnam will gain and lose when it joins the Trans-Pacific Economic Partnership Agreement (TPP). However, analysts say that TPP will be a challenging game until the US recognises Vietnam’s economy as market economy.
The story about the origin of goods
Since November 13, 2010, Vietnam has officially began the negotiations for TPP. Of the nine members the US proves to be the toughest partner for negotiating favourable TPP terms for Vietnam.
The US has set up disadvantageous conditions for a small economy like Vientam, and analysts say Vietnam would not enjoy benefit from tariff cuts and increase exports to the US.
Let’s talk about what will happen to Vietnam’s four key export products, garment, footwear, seafood and wooden furniture.
Jay L.Eizenstat, lawyer from Miller & Chevallier, who once joined the US’ negotiations for free trade agreements (FTA), said that in TPP, the US may use the frame tax of 0-6 percent on seafood, 0-32 percent on garment, 0-37.5 percent on footwear and offer tax exemption on wooden furniture products.
However, Vietnam’s seafood and wooden furniture exports to the US are enjoying tax exemption already.
The other two key products, footwear and garment, are are subject to high tax rates when entering the US market. These two industries are not included in tariff reductions within TPP.
Eizenstat said that the US may apply very strict rules on the origin of the products. For example, the imports to the US must be made of fibre mateiral from TPP’s members. And if Vietnamese garment and footwear products are made of materials from third countries which are not members of TPP, the products will not be able to enjoy TPP’s tax preferences.
The third countries include China.
It is clear that with the materials now mostly imported from China, Vietnam will find it difficult to take full advantage of TPP.
Dr. Nguyen Thi Thu Trang, from Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI) said that the above given example shows that for Vietnam, TPP will not be beneficial, unless it manages to negotiate some good terms.
The challenges in “playing” with big countries
Trang stressed that everyone knows that the US always applies very strict technical barriers. “Even when the tariff is low, whether exporters can take full advantage of the low tariff would be another story,” Trang said.
“If Vietnamese products cannot meet the technical requirements set by the US, while the US sometimes sets up new requirements, the advantages in TPP will be neutralised,” Trang said.
“Supposed that we can meet all the requirements, and we can enjoy the zero percent tariff and we hope to boost exports to the US, there will still be one more risks to face – the anti-dumping lawsuits.
“There are always a degree of risk and lawsuits may be raised at any time, when Vietnam’s exports to the US increase sharply,” Trang said.
Meanwhile, since Vietnam still has not been recognised as a market economy, it does not have many opportunities to win the lawsuits.
Eizenstat also admitted that TPP will not help reduce the risk of facing anti-dumping lawsuits from the US, unless Vietnam can meet the standards of a market economy.
Meanwhile, the US viewpoint is that there will not be two “regimes” in TPP, which means that the roadmap for market opening will be the same for all members. In other words, Vietnam will not get any preferential treatment and it will have to play on the same field with big economies.
96 percent of Vietnamese businesses say “yes” to TPP negotiations
Despite the big anticipated challenges, 96 percent of businesses polled by VCCI said that Vietnam should be a member of TPP.
It is clear that TPP would not be a perfect solution for Vietnam in the global economic integration. As for trade, maybe TPP would not bring a large advantage to the national economy. However, businesses believe that TPP can bring many smaller advantages. while, if Vietnam does not join TPP, there won’t be any advantages at all.
Businessses said that with TPP, they can see the opportunities to import technologies at reasonable prices from the US instead of importing technologies from neighbouring countries at high prices.
Pham Chi Lan, a well known economist, said that with TPP multilateral negotiations, Vietnam should put the issue of asking the US to recognise Vietnam as a market economy on the table, the thing which will be unattainable in Vietnam-US bilateral negotiations
Why does the US urge Vietnam to join TPP?
As for the US, TPP would be a “century’s agreement”, because this will be the only channel to get involved in the FTAs, the number of which has been increasing sharply in Asia Pacific
In particular, TPP proves to be the best solution for the US to increase its benefits in the economic and external policies with South East Asia. Only with TPP, the US will be able to strengthen its position as the counterpoint to China, the second biggest economy in the world.
looking at current TPP’s members, Chile, Peru, Singapore and New Zealand, one can see that the four countries already have FTAs with the US. Therefore, in TPP negotiations, the four economies will not be the targets of the US. This means that Vietnam will be an important partner in trade negotiations.
The US has been continuously urging Vietnam to sit for the negotiations for TPP. The recent visits of the US Deputy Trade Chief of Representative and US Secretary of State Hillary Clinton are the evidence.
It is clear that Vietnam is not an unimportant target for the US, and that Vietnam’s position is quite different from the positions of other countries that the US has FTAs with.