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

The TPP: A Win for Vietnam’s Workers

An article in The Diplomat (April 20, 2016) titled “The TPP: A Win for Vietnam’s Workers” (http://thediplomat.com/2016/04/the-tpp-a-win-for-vietnams-workers/) describes the relevance that the TPP commercial deal represents for Vietnam’s workers and community. Vietnam has refused to commit to labor requirements until now. The TPP is the first agreement that subjects Vietnam to important labor commitments such as freedom of association, minimum work conditions, and collective bargaining. The TPP parties are required to comply with the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, giving the chance to Vietnam’s workers to finally organize unions independent from the Vietnam’s General Confederation of Labor (VGCL). In this way, it is expected that the TPP will push for a better civil society in Vietnam. What tradeoffs may these actions have on the overall Vietnam’s economy? Will more freedom be translated into more productivity in the country?

How the Trans-Pacific Partnership benefits Vietnam’s economy

An article in Thanhniem News (March 28, 2016) titled “How the Trans-Pacific Partnership benefits Vietnam’s economy” (http://www.thanhniennews.com/commentaries/how-the-transpacific-partnership-benefits-vietnams-economy-60650.html) describes the impact that the TPP will have on Vietnam’s future growth. Three main benefits are analyzed: 1) Large trade volumes with the US and Japan, 2) Competitive manufacturing environment, and 3) Tariff cuts of key export and import products. It is expected that thanks to the TPP, Vietnam’s total export will increase by USD 68 billion by 2025, and that the Foreign Direct Investment to Vietnam will reach around USD 20 billion by 2020. As the TPP agreement is implemented, key export manufacturing sectors such as textile & garment, footwear and fishery will enjoy rapid growth. How will lead industry players define strategies to capitalize on Vietnam’s manufacturing sector as the Asian country boosts its economic growth thanks to the TPP?

 

An Experienced Ally

In a recent article in the Nikkei Asian Review, the subject of counterfeit goods under the TPP deal is discussed, specifically, goods that are produced and imported into Vietnam. Japan has stepped in to help Vietnam bolster their copyright protections and reduce the amount of ‘knockoff’ products. All of this is part of an effort to help emerging economies like Vietnam, comply with the new rules of intellectual property under the TPP. Japan also plans to help countries such as Malaysia. What can Japan do to help Vietnam? In what ways will this help Vietnam’s economy? In what ways may it hurt Vietnam’s economy?

TPP forced Labor unions a good news or bad news?

An article by Kenneth Kim titled “What the Trans-Pacific Partnership Means For Investing In Vietnam” (http://www.forbes.com/sites/kennethkim/2015/11/07/what-the-trans-pacific-partnership-means-for-investing-in-vietnam/#60ac42c97733, dtd. Nov 7, 2015) comments on the forced creation of Union rights for Vietnamese people. While agreeing that Vietnam is perhaps the biggest gainer in the deal and that the deal will fast track its economy (which is currently is a very good shape) to be among top 20 soon, he also mentions concern of some groups that by forcing creation of union rights, we are taking away Vietnamese Sovereignty. The author also mentions about the concerns that unionized labor in Vietnam will be ineffective and would be ignored in the name of profits. The author dismisses these concerns by taking example of China, which despite being a communist country, has strong provisions for unionization of workers. The author states that unionized workers in China earn more and work lesser hours than their non-unionized counterparts. Will unionization of workers have intended effects for Vietnam? And would the results seen in China be replicated in Vietnam?

 

Trans Pacific Partnership impacting Vietnamese Pharma industry?

An article titled “How might the TPP impact Vietnamese pharma?” dtd Oct 29, 2015 (http://www.vir.com.vn/how-might-the-tpp-impact-vietnamese-pharma.html) explores how TPP might make the situations difficult for Vietnamese Pharma industry. The article mentions how the stricter Intellectual Property Rights protection clauses may delay the entrance of generic drugs in the Vietnamese market. The result would be higher cost of essential drugs in a country where insurance plans do not have a high reach and drug prices are a sensitive issue. Also, stricter rules regarding data exclusivity, patent linkage and lower patentability criteria would mean less access of data and formulae to generic drugs manufacturers leading to delay in development of generic drugs. What impact will this have on Vietnamese population? Will this be a rise for the insurance companies in Vietnam? Will this impact the Vietnam’s cost of living and consequently take away the benefits of Vietnam’s low costs?

 

The US-VN Plan for Enhancement of trade and labor relations

There has been some time since the TPP full text has been in the public view. If we look closely, there is a separate section for labor relations with Vietnam (https://ustr.gov/sites/default/files/TPP-Final-Text-Labour-US-VN-Plan-for-Enhancement-of-Trade-and-Labor-Relations.pdf), Malaysia and Brunei. Of all three, Vietnam is the most expansive plan clearly signaling how important Vietnam is to US for trade deals. In many blogs, there has been criticism of current Labor practices in Vietnam and also the supposed US soft stand on those issues(Article credit: “After Trans-Pacific Partnership Text Released, Labor Advocates Say Human Rights Protections ‘Not Enforceable’”, by Abigail Abrams, 11/05/15 http://www.ibtimes.com/after-trans-pacific-partnership-text-released-labor-advocates-say-human-rights-2171278). But if we see from a normal standpoint (I am not commenting on the legality of the agreement or enforceability), TPP can usher in a bevy of reforms in Vietnam. The agreement calls out for a variety of reforms, especially for formation of labor unions, their autonomy and effectiveness, formation of ministry and department of labor, abolishment of forced or debt labor, provide capacity for labor department, child labor and the implementation of the same. Also, Vietnam will have to be transparent on its budget, inspection and status of unions. Most of these articles need to be implemented by the time TPP is in force. Only one article regarding enactment of laws for formation of labor unions across enterprises and verticals has to be implemented in five years, which is currently being contested by International Labor Organizations. However, is getting in 90% of reforms better than having nothing at all? Can the pressure of having these reforms be considered a violation of Viet Nam’s sovereignty? And which courts will the violations be addressed in?