Long-awiated CPTPP presents opportunities and pitfalls
With the eagerly anticipated conclusion of talks on the Comprehensive Partnership and Trans-Pacific Partnership’s (CPTPP) in late January, Viet Nam embarked on a still more difficult path. The country must improve productivity and administration and demonstrate an overall commitment to the free trade conditions of the agreement, lest its benefits are wasted on a workforce and business community that are not yet ready to meet global standards.
Deputy Minister of Industry and Trade Tran Quoc Khanh, leader of Viet Nam’s negotiation delegation for CPTPP, said on the Ministry of Industry and Trade’s online portal in late January that he expected the agreement to represent a new generation of freedom of commerce, high standards and trade balance.
Khanh said it would be sending a strong message of determination to accelerate economic growth, create jobs, improve social well-being, facilitate trade development and strengthen economic cooperation between countries in the Asia-Pacific region, especially in the context of globalisation and the countervailing rise of global protectionism.
An official announcement on the General Department of Customs’ (GDVC) online portal on January 30 stated that following the US withdrawal from the Trans-Pacific Partnership Agreement (TPP), the signatories to the CPTPP now consider Japan as the agreement’s leading country, retaining its predecessor’s overall outlook on the trade agreement.
As an improved replacement for the now-defunct TPP, the CPTPP accounts for nearly 13 per cent of world GDP and 15 per cent of total trade volume. Its ultimate goal is to create an Asia-Pacific free trade area comparable to the European Union, stated the GDVC.
Nguyen Duc Thanh, Director of the Viet Nam Institute for Economic and Policy Research said in its 2017 Macroeconomics fourth quarter report that after the APEC Summit’s success, CPTPP should open up many opportunities and challenges for the Vietnamese economy in the future.
The initial removal of tariff barriers will enable Vietnamese goods to gain easier access into other CPTPP markets. However, the opposite holds true as foreign goods will also pour into Viet Nam, posing greater competition for domestic enterprises and forcing them to improve production efficiency and product quality or perish.
He warned that economic growth dynamics in Viet Nam are still lacking from low labour productivity and over-dependence on the world economy and the foreign invested sector, especially when the advantage of cheap labour costs will diminish due to the 4.0 industrial revolution.
Hoang Van Cuong, Vice Rector of the National Economics University, told the GDVC at the end of December 2017 that the delay in the CPTPP is actually an opportunity for Viet Nam and its firms.
“Overall, the CPTPP retains the old TPP provisions, but it allows member countries to withdraw from a number of issues, mainly intellectual property commitments. Thus, the CPTPP’s changed or delayed terms have somewhat slowed down the integration process between countries,” said Cuong.
However, this is a good opportunity for Viet Nam, as the country no longer has to become integrated immediately into all CPTPP conditions. “Postponement means more time for our firms and policymakers to prepare”, he said.
He also admitted that the US withdrawal lessens the agreement’s potential for economic returns to Viet Nam. Without the US, the CPTPP loses access to a $12 trillion consumer market.
Had the US stayed in the agreement, all 12 member states would account for 26.6 per cent of global trade, of which about 11.4 per cent would come from intra-regional trade among member countries, added Cuong.
Le Dang Doanh, former Director of Central Institute for Economic Management (CIEM), added to Cuong’s opinion that though many companies have not fully grasped the CPTPP’s impact, they can overcome its challenges with enough effort.
‘Even without the US’s import demand, the 10 remaining CPTPP member markets in the CPTPP are also full of potential for Vietnamese firms to tap into,’ said Doanh.
He was certain the CPTPP would contribute positively to Viet Nam’s economic and administrative reform.
Meanwhile, Tran Van Linh, chairman of Thuan Phuoc Seafood and Trading Corporation said to the GDVC that domestic enterprises sincerely desire fundamental change in institutions to meet the requirements of global integration.
He said the most important thing upon joining the CPTPP is for Viet Nam to become a full market economy. This means Vietnamese enterprises will be free from trade impediments imposed by other countries, which so far have refused to acknowledge it as a market economy.
Having addressed outstanding issues since its conception at the 2017 APEC Summit in Da Nang City, delegations from the CPTPP’s 11 member economies, including Australia, Brunei Darussalam, Canada, New Zealand, Chile, Malaysia, New Zealand, Japan, Peru, Singapore and Viet Nam, are working in preparation for its March 2018 signing in Chile.
Speaking at the 48th Annual World Economic Forum in late January, Deputy Prime Minister Vuong Dinh Hue stressed that in 2018 Viet Nam hoped to fulfill its trade liberalisation commitments and accelerate the ratification of the CPTPP.
In December 2017, at a meeting with Toshimitsu Motegi, Japan’s Economy Minister, Prime Minister Nguyen Xuan Phuc suggested that Viet Nam and its major strategic partners should take the lead in accelerating the conclusion of the CPTPP.