Businesses in the dark on Trans Pacific Partnership

Tuesday, Aug 11, 2015 08:12

Most Vietnamese companies have not heard of or have little understanding about TPP. According to Viet National Textile & Garment Corp, very few of the country's 2,000 textile companies have been preparing for TPP. — Photo

by Mai Huong

HA NOI (Biz Hub) — While trade ministers struggle to hash out a final agreement on the ground-breaking Trans-Pacific Partnership (TPP), Vietnamese companies are largely in the dark about the pact's potential benefits and drawbacks, business surveys have found.

Fewer than 30 per cent of Vietnamese companies had some knowledge about TPP, with mostly larger firms keeping track of negotiations through the Ministry of Industry and Trade (MoIT),said Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research (VEPR).

"General knowledge about TPP is still limited, especially among small and medium-sized enterprises (SMEs)," Thanh said, "Most of them have no idea about content and meaning of TPP."

The TPP is poised to become the world's biggest trade accord in more than a decade, accounting for 40 per cent of global gross domestic product and 26 percent of world trade.

It would include 12 nations on either side of the Pacific ocean, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Viet Nam. China, the world's second largest economy, is not part of the pact.

Talks deadlocked

12 countries involved in the Trans-Pacific Partnership (TPP). — Photo
Negotiators failed to reach a final agreement during meetings last month in Hawaii as talks deadlocked over protections for drug companies and access to agriculture markets.

Support for the pact is broad among the Vietnamese public. According to the 2015 Pew Research survey of nine of the 12 countries engaged in TPP negotiations, Viet Nam showed the strongest support with almost 90 per cent of 1,000 respondents backing the potential accord.

Trans-Pacific Partnership

The Trans-Pacific Partnership (TPP) is an expansion of the Trans-Pacific Strategic Economic Partnership Agreement (known as P4), which was signed by Brunei, Chile, Singapore and New Zealand in 2006. In the beginning of 2008, more nations agreed to enter the talks, including the United States, Australia, Canada, Japan, Malaysia, Mexico, Peru and Viet Nam, bringing the total number of participating countries to 12.

Viet Nam entered the accord in November, 2008.

Nineteen formal rounds of TPP negotiations have been held since March 2010, along with six ministerial meetings and numerous meetings of chief negotiators and technical groups. The latest talk took place in Hawaii, July 24-31, 2015.

According to the Viet Nam Chamber of Commerce and Industry's (VCCI) latest update on negotiations in May, nine of a total 30 draft chapters have been concluded. Competition, co-operation and capacity building, cross-border services, customs, development, legal issues, small- and medium-sized enterprises, telecommunication and temporary entry issues have been agreed to.

Viet Nam has largely finished bilateral negotiations with 11 partners in TPP, including the biggest one, the United States. Minister of Industry and Trade Vu Huy Hoang said, "Viet Nam and the United States have agreed on all terms of the TPP." Such negotiations covered sticking points like labour, market access for textile and clothing, and other services like telecommunications and distribution. — VNS

However, most Vietnamese companies have not heard of or have little understanding about TPP.

Even firms that are poised to benefit the most from the pact, such as the textile and seafood industries, lack clear information about TPP.

According to Viet National Textile & Garment Corp (Vinatex), very few of the country's 2,000 textile companies have been preparing for TPP. Only large corporations who are financially capable can afford information and preparation for integration into TPP.

Viet Nam Association of Seafood Exporters and Producers (VASEP) chairman Truong Dinh Hoe said that the association had limited knowledge about TPP and only a few big firms attended a recent conference about the trade pact.

According to a survey conducted by the Viet Nam Chamber of Commerce and Industry (VCCI) in mid-April, only 9 per cent of Vietnamese companies have ever voiced concerns about TPP.

The survey was included in the Provincial Competitiveness Index 2014 report which probed businesses' knowledge and attitude about TPP.

It reported about 70 per cent of domestic and foreign firms in Viet Nam have at least some knowledge of TPP, but very few firms have been closely following the negotiations or have detailed knowledge of opportunities for their businesses.

In developed countries, businesses usually seek information from trade associations or hire consultants who evaluate potential costs and benefits. However, this sounds like a luxury for many Vietnamese businessmen.

Some businesses argue that they are struggling to survive in difficult economic conditions and don't have time for TPP. Some thought the pact will have no impact on their business activities.

Ready or not?

According to Tran Huu Huynh, VCCI's deputy general secretary, after years of integration in world trade, Vietnamese companies have yet to take advantage of opportunities presented by free trade agreements. Foreign-invested firms are usually the ones who have benefited most from increases in exports.

"Domestic producers have weak capacity to promote trade, out-of-date technology and cannot afford sanitary and environmental protection costs that have held them back from further access to foreign markets," Huynh said.

"Not only exporters, Vietnamese producers are also in a weaker position compared with foreign rivals in their home market," he added.

TPP does not only involve tariffs but it also covers a broad range of issues, including labour rules, environmental protection, and sanitary standards. Poor knowledge of these regulations could be the biggest roadblock for the integration of Vietnamese companies.

Huynh suggested domestic companies link together to increase competitiveness while reducing production costs. — VNS

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