TPP: What’s in it for Vietnam?

In this article we will discuss the impact of TPP on Vietnam.

Vietnam is likely to be the biggest winner of the Trans-Pacific Partnership. Vietnam’s economy relies largely on exports and TPP slashes an estimated 18,000 tariffs among the dozen participating countries. In a decade, the country’s gross domestic product will be boosted 11 percent and exports may soar 28 percent in the period as companies move factories to the Southeast Asian country.

FOREIGN INVESTMENT- Vietnam’s low-wage economy means a lot of foreign firms would look to relocate their operations here. Key industries for this are- logistics, industrial parks, fisheries and garments.

APPAREL– Reduced import duties in the U.S. and Japan will benefit the country’s apparel manufacturers. Vietnam may have a 50 percent increase in apparel and footwear exports in 10 years, according to the Eurasia Group.

SEAFOOD– Elimination of import taxes on shrimp, squid and tuna, now averaging 6.4 percent-7.2 percent will benefit this industry. However, Vietnam will still face strict rules-of-origin on materials, which could limit these benefits.

GLOBAL COMPETITION– Vietnam’s agricultural industry, particularly livestock, and pharmaceutical companies are expected to struggle with the more efficient global operators.

Current Situation

Overall, the TPP is very favorable for Vietnam; it is aggressively seeking economic partners to balance its relationship with China. However, the agreement still needs to be passed by the governments of the 12 nations. The failure of TPP would leave Vietnam more economically isolated and dependent on China. The uncertainty of the TPP is holding Vietnam from committing to the deal.

Source- http://www.bloomberg.com/news/articles/2015-10-08/more-shoes-and-shrimp-less-china-reliance-for-vietnam-in-tpp

Trans-Pacific Partnership Deal is Reached

According to the article, (http://www.nytimes.com/2015/10/06/business/trans-pacific-partnership-trade-deal-is-reached.html?_r=0), the 12 Pacific Rim countries involved in the TPP reached a final agreement on Monday, preparing President Obama for what could be the toughest fight of his final year of presidency: securing approval from Congress.

Now that negotiations of the TPP have come to an end, the deal will face months of scrutiny in Congress, where opposition is imminent. Regardless, for President Obama the deal could be a legacy-making achievement; the TPP draws together countries representing 40% of the global economy, and spins them into a web of common rules governing trans-Pacific commerce. The argument that the TPP will be key in limiting China’s power in the global economy is Key to the President’s hard sell of the act to Congress. Obama stated: “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”

TPP: Why it’s too early to pop the champagne

According to the article, (http://www.cnbc.com/2015/10/06/tpp-why-its-too-early-to-pop-the-champagne.html), it will take many years before the economic benefits of the TPP are actually felt. To start, there are several hurdles to overcome before it is implemented.

First, the deal must be ratified by each country’s legislature, which is looking to be very difficult in the US; both Democrats and Republicans are opposed to the deal, meaning it is possible that the TPP will be blocked in Congress.

Second, and finally, tariffs are due to be lowered and market access increased only gradually, meaning the effects of the deal will be insignificant in the near future. However, the long-term significance of the deal still should not be downplayed.

Trans-Pacific Free Trade Deal Agreed Creating Vast Partnership

According to the article, http://www.bbc.com/news/business-34444799, the Trans-Pacific Partnership (TPP), the biggest trade deal in decades, was struck on Monday after five years of bitter and tense negotiations. The TPP cuts trade tariffs and sets common standards in trade for 12 Pacific Rim countries and covers about 40% of the world economy. However, although negotiations have been finalized, the deal is yet to be ratified by law makers in all 12 countries.

For President Obama, the TPP trade deal is a major victory. He stated: “This partnership levels the playing field for our farmers, ranchers, and manufacturers by eliminating more than 18,000 taxes that various countries put on our products.” In opposition, however, US Senator and US Democratic presidential candidate hopeful Bernie Sanders argues that Wall Street and big business have “won again,” stating that the TPP deal will cost US jobs and hurt consumers.

Additionally, China was not involved in the TPP agreement, however the Obama administration is hoping that it will be forced to accept the majority of the standards outlined by the TPP. He was quoted: “When more than 95% of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”

Furthermore, the final round of TPP negotiations were delayed over how long pharmaceutical companies should be permitted to maintain a monopoly on their drugs. The US wanted twelve years of protection, while Australia and New Zealand argued for five. A compromise was reached, however the definitive protection period has yet to be confirmed.

Finally, the auto industry as well as the agriculture industry were also areas of intense negotiations. In regards to the auto industry, countries agonized over how much of a vehicle must be manufactured within a TPP country in order to qualify for duty-free status. Agriculture was another sticking point, as countries such as New Zealand wanted more access to markets in Canada, Mexico, Japan, and the US; Canada wanted to keep access to its dairy and poultry markets strictly limited, however.

Canadian Leader Harper says auto industry won’t like all TPP reforms

The article published by CBC on 18th September  (http://www.cbc.ca/news/canada/windsor/trans-pacific-partnership-harper-says-auto-industry-won-t-like-it-all-1.3233779) states that According to Leader Stephen Harper, the Canadian auto industry may not be happy with all the elements of the TPP.

The TPP will allow Japanese companies to export cars to North America with substantially less North American content than currently required. Canada and Mexico are angry that the United States wants to let Japan export cars to North America with substantial content from non-TPP nations. This could make Canadian and Mexican autos too expensive.

Harper doesn’t want to shut his global supply chains for auto industry and wants to get the best deal as possible for the auto industry.

Negotiations are going to occur at the end of this month, and we will learn more about this issue after the next round of negotiations.

Will the Canadian Auto industry make compromises for opening their auto industry to the world? Or, will they refuse this deal?

Thailand to join the TPP?

The article published in the Diplomat ( http://thediplomat.com/2015/09/does-thailand-really-want-to-join-the-tpp/ ) on 16th September 2015 talks about the idea of Thailand joining the TPP. Thailand’s Deputy Prime Minister Somkid Jatusripitak wants to weigh the advantages and disadvantages of TPP.

The U.S officials have believed that Thailand will eventually sign the TPP and that this news is nothing new.

Thailand have expressed its unequivocal intention under former Prime minister Yingluck Shinawatra back in 2012. Although Thailand could eventually join the TPP, it should focus on the ongoing Regional Comprehensive Economic Partnership (RCEP). Thailand needs to carefully wok their way towards TPP analyzing all the pros and cons. Thailand would still benefit immensely in an overall sense in spite of these sector-specific challenges. Studies predict that Thailand would have the second-largest percentage gains among potential members with a TPP agreement, with incomes rising by 7.6 percent – second only to Vietnam.

Will Thailand go ahead with the TPP or is it just another dead end agreement between the TPP and the government? Will the civilians benefit from TPP?

Update on TPP following Maui Meeting

The US agriculture officials reported that the exports for the 2015 fiscal year are expected to fall 8%. The agriculture trade in particular has been one of the major points of focus in TPP, and this estimate has sent a sense of urgency on the negotiating table.

On the other hand according to the trade officials, the recent negotiation meeting  has reached substantial progress on the charter in terms of environmental and labor laws.

To read more please go to the link -“http://farmfutures.com/story-ustr-offers-update-tpp-following-maui-meeting-0-131898

Despite the recent fast track status, the question is – will the US be able to get the TPP accepted by the end of this year?