Viet Nam will be among the countries enjoying the most opportunities from the CPTPP though there will also be big challenges. — Photo vietnambiz

On January 14, the Comprehensive and Progressive Agreement for Trans-Pacific Partner (CPTPP) came into effect in Viet Nam, two weeks after six Pacific Basin Countries, Australia, Canada, Japan, Mexico, New Zealand, and Singapore, adopted it.

It comes as a reminder that trade liberalisation efforts continue and that trade patterns are constantly shifting, irrespective of trade disputes.

The CPTPP is a sweeping accord that liberalises trade and investment in 11 economies in the Pacific Basin: Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Viet Nam.

Ultimately it will remove 95 per cent of the current tariffs on trade between the partners.

It is considered an important milestone in Viet Nam’s global integration.

According to analysts, Viet Nam will be among the countries enjoying the most opportunities from the CPTPP though there will also be big challenges. If the country can overcome the challenges, it will have a chance to make great strides with private enterprises playing the key role.

Viet Nam can expect to benefit immediately in trade, with the majority of members eliminating tariffs on textiles and footwear upon entry.

In Canada, for instance, Vietnamese textiles and footwear products have already had tariffs scrapped.

This is of great significance to Viet Nam’s textile and footwear industries since it would help them increase exports to lucrative markets like Canada and Australia, whose textile imports were worth US$13.86 billion and $9.01 billion in 2017, respectively.

But imports from Viet Nam were worth only $814 million and $256 million.

The opportunities these countries present, especially with the CPTPP taking effect, are thus obvious.

Truong Dinh Hoe, secretary of the Viet Nam Association of Seafood Exporters and Producers, said the CPTPP offered Vietnamese seafood enterprises an important opportunity to expand their exports, especially to CPTPP member countries.

The largest increase expected is in tuna products.

Viet Nam’s only rivals in exports of the fish were Thailand and China, but the countries are not CPTPP members.

Pham Hong Hai, CEO of HSBC Viet Nam, said: “While awaiting the outcome of the current trade truce, the CPTPP’s entry into force proves that Viet Nam’s Government is determined to opt for an open, liberal and rules-based trading system.

“The CPTPP is indeed comprehensive and progressive in how it facilitates trade and investment in the 21st century as it tackles issues such as e-commerce and data protection. Businesses are certain to benefit from greater clarity at a time of trade-policy turbulence as well as from improved access to 600 million consumers.”

Readiness

HCM City accounts for a full third of the country’s textile exports.

Like their counterparts in other industries, the city’s textile businesses are ready to grab the opportunities thrown up by the CPTPP to increase exports.

Many of them are actively preparing to expand exports to CPTPP member countries such as Canada and Mexico.

Tran Huu Phuoc, director of the Tran Hiep Thanh Textile Joint Stock Company, said his company has invested VND1 trillion in a fabric plant with an annual capacity of 77 million metres to take advantage of the CPTPP.

It has provided training to its staff to ensure product quality is high, he said.

Pham Xuan Hong, the chairman of the HCM City Association of Garment, Textile, Embroidery and Knitting, said most members are ready with everything from technology to workforce for the CPTPP.

Many of them have also carefully studied the treaty’s rules on the environment, product quality and traceability, he said.

TNG Investment and Trading Joint Stock Company is the biggest exporter of apparel products in the northern province of Thai Nguyen and employs over 13,000 workers at its dozens of factories.

It too has made necessary preparations for the CPTPP after starting five years ago.

The company has switched to importing raw materials from CPTPP member countries and also built a factory to produce its own feedstock to halt imports from non-member countries.

Not only businesses but also authorities around the country are in readiness to implement the CPTPP.

They have outlined strategies and policies to support local enterprises and enable them to fully exploit the opportunities thrown up by the CPTPP and overcome its challenges.

Nguyen Thi Thu Trang, director of the WTO Integration Centre at the Vietnam Chamber of Commerce and Industry (VCCI), said most Vietnamese enterprises are keen on the CPTPP, and many have made careful preparations.

But they, especially small and medium-sized businesses, need to do more if they want to tap the opportunities and overcome the challenges, she warned.

A VCCI survey identified three main hurdles that would prevent Vietnamese businesses from enjoying the benefits created by the CPTPP.

Firstly, many businesses are yet to get a good grasp of the commitments the trade deal entails because they are simply too difficult and complicated.

Consequently, 80 per cent of Vietnamese enterprises know about the CPTPP but not its impact on their business, according to a report from the Ministry of Industry and Trade.

The WTO Integration Centre also revealed that Vietnamese enterprises now enjoy only 30-35 per cent of tariff preferences offered by various free trade agreements the Government has signed due to a lack of knowledge about rules of origins (ROO), which are the condition that helps them get preferential tariffs.

Analysts said the only solution is for them to fully understand the legal provisions in the agreement.

Secondly, enterprises do not have much confidence in authorities’ capacity to implement the CPTPP and help them take advantage of the trade deal.

The CPTPP requires strong institutional reforms from the Government to help businesses take advantage of the opportunities and limit the costs of integration, they said.

Finally, Vietnamese enterprises lack competitiveness in terms of resources and technology.

Analysts said that to fully tap opportunities arising from the CPTPP and be ready for participation in a “new playing field” Vietnamese enterprises needed to take the initiative to study the country’s commitments to other CPTPP member countries.

They should use the pressure from the CPTPP as a factor to renovate and develop, they suggested.

The CPTPP would bring opportunities to those who take the initiative to adapt to changes in the business environment, they said.

This is because during the country’s global economic integration the enterprises were required to adjust or build their business plans for long and medium period in ways that could push up commodities flows in potential partner markets.

It is also imperative for them to tie up with companies in partner markets to attract investment and technology enabling them to enter deeper into regional and global supply chains, they said.

The Ministry of Industry and Trade said the Government would soon issue an action programme to implement the CPTPP with focus on educating the public about the treaty’s content, opportunities and likely impacts.

It would also continue to make necessary legal changes to implement Viet Nam’s commitments.

Administrative reforms and creation of a co-ordinated system between various government agencies is also a must to improve the competitiveness of the Vietnamese business environment, the analysts added. — VNS