Solutions needed to take advantage of TPP

Thursday, Feb 04, 2016 08:18

The Trans-Pacific Partnership (TPP) trade agreement will be signed today in New Zealand. Minister of Industry and Trade Vu Huy Hoang talked to Vietnam News Agency reporters Khanh Linh and Kim Anh about how the pact's conclusion matters for Viet Nam and domestic enterprises, before he travels to New Zealand for the signing ceremony.

How significant is the signing of the TPP in New Zealand on February 4?

Minister of Industry and Trade Vu Huy Hoang

After ministers met at a session in Atlanta, the United States on October 5, 2015, we agreed to review the contents of the agreement and officially sign it within 90 days. Countries have completed reviewing procedures with public promulgation during this period.

All parties are aware that concluding the agreement on schedule is extremely important because if any of 12 member countries face problems, it will affect other nations and may lead to a failure to conclude the agreement. This important milestone promises proper enforcement of the pact.

Has Viet Nam reached any bilateral agreements with TPP member countries, besides common commitments within the pact?

Over the last three months, Viet Nam has reached some bilateral agreements that significantly impacted on several areas that it was negotiating on. Specifically, the country reached an agreement with the United States on garments and textiles, and another with Australia related to people working in Australia. It also attained commitment from some countries considering the recognition of its market economy.

It has been said that, among member countries, Viet Nam will benefit the most and achieve the highest gross domestic product and export growth after the TPP takes effect. What is your opinion?

Member countries agree that the TPP is a new-generation and high-quality agreement that aims at a balance of benefits among all, taking the difference in their development levels into account. In comparison with other TPP economies, the Vietnamese economy is smaller scale with a lower development level. In the process of negotiating, signing and enforcing the TPP, many studies of domestic and foreign organisations said that Viet Nam will enjoy the most advantages from the pact, especially in the trade of goods and services and investment attraction. This is true.

However, in practice, the situation will much depend on how Viet Nam takes advantage and copes with obstacles related to this pact. Only with appropriate efforts will the country be able to realise its potentiality and deal with challenges.

Viet Nam's key exports such as garments and textiles, footware and agriculture-forestry-aquaculture products can grow strongly with opportunities opening up in major markets such as the United States, Canada and Japan, when tariffs are set to fall to zero per cent following TPP commitments. Can you anticipate the growth rates for these exports?

The growth of these key exports will largely depend on Viet Nam's ability to perform within the agreement, but initial calculations show that garments and textiles and footware can grow by at least 20 per cent per year.

Farm produce and seafood may see a little lower growth rates. Viet Nam's seafood exports to TPP markets, including the United States and Japan, have been quite significant. Should we aim at higher growth, enterprises must expand their cultivation areas and pay more attention to product quality to meet food safety and hygiene standards. If these factors are not properly met, there will be barriers to export growth.

Overall, if businesses assure quality and seriously conform with TPP regulations, these products are likely to see the highest export growth rates among Viet Nam's exported articles.

Which new opportunities will the TPP bring about for Viet Nam's trade with Australia and New Zealand, when the ASEAN – Australia – New Zealand Free Trade Agreement (AANZFTA) already exists?

Within the scope of AANZFTA, where Viet Nam is a member of the ASEAN, there are already regulations on market opening for goods, services and investment. Yet following Viet Nam's agreements with Australia and New Zealand within the TPP framework, the level of goods and services market opening is greater.

Australia will offer a zero per cent tariff for about 94 per cent of the total lines of tax it levies on Vietnamese products, meaning roughly 95 per cent of Viet Nam's current export values [to Australia] will enjoy such a tariff. Similarly, New Zealand will apply the zero per cent tariff for 93 per cent of the total lines of tax it imposes on Vietnamese goods, following which about 70 per cent of Viet Nam's current export revenues [to New Zealand] will enjoy the tariff.

When the TPP enters into force, Vietnamese enterprises will face extreme competition because they rank almost last in terms of technology levels, while both tariff and non-tariff barriers will no longer be a "life buoy" for them. What support measures will be used for domestic businesses, and what must they do to overcome the challenges and best take advantage of the TPP?

Viet Nam entered the World Trade Organisation (WTO) in 2007 and also performed a series of commitments within other free trade agreement (FTA) frameworks. Vietnamese enterprises have gradually prepared to take advantage of the WTO and other FTAs, as well as measures to cope with obstacles from them. Therefore, more or less, they have been prepared for the TPP.

Domestic businesses have already had to confront challenges in such areas as automobiles, mechanics, wholesale and retail. After the TPP is signed, some sectors may meet difficulties since Viet Nam still has low labour productivity with small-scale production modes and high production costs, while its ability to take part in global manufacturing and supply chains remains limited.

Following Government directives for TPP negotiations, the Ministry of Industry and Trade along with relevant ministries and sectors have proposed a suitable roadmap that enables Viet Nam to perform commitments step by step. This is a measure to protect domestic production. However, the protection time is limited, requiring domestic businesses, especially agricultural ones, to build plans to promote advantageous products and improve competition capacity now.

At the macro-level, the Government and State management agencies along with relevant ministries and sectors need to work out sets of criteria, which can guarantee the quality of goods circulating in Viet Nam and prevent unqualified products from being imported into the country. Finally, proper promulgation of TPP contents is very important in helping enterprises grasp the pact and deal with the specific conditions of Viet Nam. — VNS

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