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(NHAN DAN ONLINE)According to the Ministry of Industry and Trade, trade ministers of the 12 TPP members, who met for five days (instead of three days as planned) in Atlanta, the US on October 5 reached an agreement on contentious issues - including market liberalisation, intellectual property, labour regulations and state-owned enterprises - officially concluding negotiations for the ambitious and comprehensive trade pact.
Vietnam’s negotiating delegation, led by Minister of Industry and Trade Vu Huy Hoang, took an active approach in working with other countries to conclude negotiations on bilateral and multilateral issues, contributing to the success of the Atlanta conference. The Vietnamese delegation had bilateral negotiations with US Trade Representative Michael Froman, Malaysian Minister of International Trade and Industry Mustapa Mohamed, Mexican Secretary of Economy Ildefonso Guajardo Villarreal, Peruvian Minister of Foreign Commerce and Tourism Magali Silva and ministers of a number of other countries.
According to Minister Hoang, the TPP is considered a model for regional economic cooperation in the early 21st century, with 30 chapters covering not only traditional issues such as trade in goods, services and investment, but also new issues such as e-commerce, supply chain facilitation and state-owned enterprises. The TPP will be a comprehensive and high-standard trade agreement, taking into account the diversity of levels of development of its member economies. It is also expected to boost economic growth in all TPP members; create jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty; and promote transparency, good governance, and strong labour and environmental protections.
The TPP membership will help Vietnam integrate deeper into the global financial market. The country will see a strong rise in foreign investment inflows, helping the local banking system increase liquidity and access foreign capital sources at a lower cost. The trade agreement is bound to stimulate foreign investment in Vietnam.
In addition to the above-mentioned benefits, the TPP also comes with considerable challenges. Although Vietnam’s export sector is growing rapidly, the structure of exported goods is not effective with the majority being low-tech and labour-intensive goods such as garments, footwear and furniture items. The export of raw materials without preliminary processing has weakened Vietnam’s competitiveness in terms of price, quality and added value. Vietnam’s exporters, most of which are small-sized, are unable to enter main distribution channels and play a bigger role in the market. Vietnam’s TPP membership will place domestic enterprises under the greater pressure of market opening. If no thorough preparations are made, many areas of production and services will face considerable difficulties.
More imports and less exports will leave Vietnam’s agricultural sector in dire straits. In order to protect domestic goods, Vietnam will also have to resort to non-tariff barriers but if these barriers are unavailable or not strong enough, Vietnam will be flooded with inferior products. One more challenge is the rule of origin which requires a TPP member to use materials sourced from inside the trade bloc to be able to receive preferential tariff benefits. This rule is a major headache for Vietnamese enterprises, especially exporters of garment and footwear products. The government must provide full information to enterprises so that they can understand and take advantage of this agreement.
In order to expand production and exports, and mitigate the negative impact of market opening, the government and enterprises should work together immediately. Government agencies need to conduct further research into the impact of the TPP on trade in goods, investment and services as the basis for long-term policy establishment and adjustment.
Vietnam also needs to introduce polices to develop industries where it sees potential and has strengths in the TPP region and support domestic enterprises to get involved in regional supply chains. At the same time, necessary policies should be formulated to help increase value in all sectors of the economy through capacity upgrading, technology, long-term cooperation with strong partners in respective fields, and diversifying and innovating products.
Vietnamese enterprises should be proactive in obtaining information about the TPP by actively taking part in the consultation process with the Vietnam Chamber of Commerce and Industry, negotiators and experts, so that they can come up with measures to take advantage of opportunities from the TPP. In addition, enterprises need to take action to enhance the skills of their staff, and map out effective strategies to deal with challenges arising from international economic integration. Domestic enterprises should also take the opportunity when cooperating with foreign partners to make the best use of their capital, human resources and technology. In the long term, local enterprises should closely follow the TPP implementation timeline and regulations on market opening to work out an effective investment and production plan, and enhance their competitiveness to seize the opportunity to participate in the regional supply chain.
