Vietnam’s CPTPP ratification signals good news for economy
The Vietnamese National Assembly has unanimously ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and related documents. Vietnam is seventh among the 11 signatories of the Pacific Rim trade deal to ratify the pact, after Mexico, Japan, Singapore, Australia, New Zealand and Canada.
Since the CPTPP has been ratified by more than half its member states, the agreement can take effect on December 31, with tariff cuts to start on January 1, 2019.
More exports, jobs
The CPTPP is a high-quality trade deal that will reduce market entry barriers and promote trade in a common market with 500 million consumers and annual trade value exceeding US$10 trillion, which accounts for 13.5 percent of global gross domestic product (GDP).
Access to this large market will benefit the Vietnamese economy by gradually eliminating all import taxes, including those applied by countries that have yet to sign bilateral free trade agreements with Vietnam, such as Canada, Mexico, Chile and Peru. The CPTPP is also expected to create new opportunities for Vietnam to boost exports to major markets, such as Japan, Australia, Canada and Mexico.
A government report to the National Assembly suggests the CPTPP can help Vietnam increase its GDP and export value respectively by 1.32 percent and 4.04 percent by 2035. The import value is also expected to grow 3.8 percent.
Given these forecasts, the government foresees the CPTPP will have a positive impact on Vietnam’s trade balance. The government also expects the agreement will help generate more jobs, increase worker incomes and contribute to hunger eradication and poverty reduction. Specifically, the CPTPP is expected to help generate an additional 20,000-26,000 jobs annually; reduce the number of poor people, i.e. those earning US$5.5 or less a day) by 0.6 million.
Answering reporters’ questions after the ratification vote, Minister of Industry and Trade Tran Tuan Anh said that the agreement was a source of encouragement for Vietnam to increase its internal strength and diversify export markets to cope with the adverse impacts of changes in the global economy, especially in the context of growing trade protectionism by major economies.
Major beneficiaries
Export sectors are expected to be the first to benefit from the CPTPP. These include seafood, textiles and garments, leather and footwear, electronics assembly, food processing, beverages, and confectionery, followed by logistics and manufacturing infrastructure.
The pact is likely to challenge other sectors, such as pork, chicken, paper, steel and automobile, due to their low competitiveness. However, the government affirmed that various measures would be taken to help them cope with challenges.
“Despite numerous challenges and obstacles, the CPTPP will enable Vietnam to seek and make the most of global opportunities and turn them into a driving force of its development,” Minister Tran Tuan Anh said.
The CPTPP is also expected to help Vietnam improve its business and institutional environment, encouraging it to amend policies and laws according to international standards in order to promote domestic investment and attract more foreign investment.
Data from the Ministry of Planning and Investment’s Foreign Investment Agency show that except for Peru, all CPTPP member states have invested in Vietnam. They have invested a total of about US$123 billion, accounting for nearly 37 percent of total foreign direct investment (FDI) registered in Vietnam over the past more than three decades. This considerable amount reflects the significance of CPTPP members’ investment to Vietnam.
At the CPTPP signing ceremony in March 2018 in Chile, the ministers of the 11 member economies released a statement affirming that the CPTPP would benefit all parties involved, and that domestic procedures would be accelerated for the agreement to be ratified at the earliest possible. CPTPP ministers also expressed their willingness to welcome any other economies that want to join the agreement.
The UK, the Republic of Korea, China, Indonesia, Thailand and the Philippines have shown an interest in the agreement. The US, the initiator of the deal’s initial version, TPP, still leaves open the possibility of coming back after President Donald Trump withdrew from the pact last year.
The CPTPP was formerly known as the Trans-Pacific Partnership Agreement (TPP). After the US withdrawal in early
2017, the size as well as the attraction of the agreement decreased. Although negotiations sometimes reached an
impasse, the 11 remaining members carried on their efforts and finally signed the deal on March 9, 2018.