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TPP – Vietnam’s new game in the global integration: Part 2
Vietnam has announced that it will join the negotiations for the Trans-Pacific Partnership Agreement (TPP). The Vietnamese business community has agreed that Vietnam needs to join the new game in the global integration, though it well understands that the new agreement will bring both great opportunities and challenges.
* The US will be a tough negotiator in TPP?
TPP seems to be a completely new concept in Vietnam. Therefore, people may still do not have sufficient information about the agreement, about the opportunities Vietnam will have and the challenges Vietnam will face, as well as the relation between Vietnam and the TPP’s members in the future.
A lot of questions have been raised about TPP. As planned, Vietnam will have to wrap up the negotiation with the US – the most important partner, next autumn. How has Vietnam been preparing for the negotiation and what position Vietnam is now in? Will Vietnam be able to grab the opportunities and cope with difficulties in the future?
Tran Huu Huynh, a Vietnamese Lawyer, Head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), Eric Emerson, a Lawyer from the US, and Pham Chi Lan, former Member of the Prime Ministerial Research Team, a well known economist, gave the answers to the questions, and provided necessary information and showed their viewpoints about TPP and Vietnam’s opportunities and challenges with the agreement at an online roundtable talk on November 30
Here is the second part of the roundtable talk
A reader from greenlabel@yahoo.com.vn: Would potential benefits of Vietnam by TPP be neutralized/nullified by other factors?
Lawyer Eric Emerson: There is always a risk that hoped-for benefits under a free trade agreement will not be realized, either because of AD/CVD cases, non-tariff barriers, and the like. In the case of the United States, some of our worst trade problems, like imports of softwood lumber from Canada, are with countries with which we have an FTA.
Still, while trade under a TPP might not be fully free, statistics tend to show that free trade agreements increase the volume of trade. While it’s always possible that a country might invoke a safeguards provision, or might try to erect a non-tariff barrier, the TPP will make that more difficult and will almost certainly provide for some dispute settlement mechanism to address these concerns. One way for Vietnam to address this problem in advance is to ensure that TPP’s rules in this area are as strong as possible – recognizing, of course, that these rules would also be used against Vietnam if it tried to protect any of its local industries from competition.
Phong Vu, a reader from Quang Binh: Vietnam has joined many multilateral trade agreements, including AFTA and WTO. State officials all mention the long term benefits of the agreements, and emphasise that joining the agreement is inevitable . However, it seems that Vietnam still cannot take full advantage of joining those two agreements, while other countries doas they export bring their goods to Vietnam. So the question is whether Vietnam should think of joining other agreements at this moment?
Pham Chi Lan: What has happened with Vietnam in the last 25 years of doi moi (Renovation) shows the big benefits of internnational integration. If Vietnam does not ingrate into the world, its renovation process will not succeed, and vice versa, if we do not conduct a doi moi, we will not be able to successfully integrate into the world.
Of course, in the process of our international integration, we still show some shortcomings and we should draw lessons from them. Especially, in import-export and foreign direct investment, we still cannot take full advantage of the agreements and overcome the difficulties.
However, the difficulties should not be the reason to refuse to join international treaties, while the world is witnessing a tendency whereby countries and regions are pushing for negotiations in order to reach new agreements with important economic partners.
In international economic cooperation, bilateral and multilateral relations are all very important. An economy like Vietnam does not have enough capacity establish the same relations with all partners.
Though we have trade relations with more than 200 countries and territories, and we have attracted investment from 70 countries, the biggest trade and investment partners focus on some countries and territories.
Le Hanh Khan, a reader: To what extend TPP is more beneficial to Vietnam than a bilateral FTA with the US?
Lawyer Eric Emerson: My opinion is that if Vietnam is interested in having more open trade relations with the United States, a multilateral approach would be better than a bilateral approach.
It is surely true that a multilateral approach will be harder to negotiate. However, at this stage, it seems as if Vietnam is generating the most concern and opposition in United States, especially in the areas of labor rights and textile/apparel exports. If the United States and Vietnam were to negotiate a bilateral agreement, I believe that it would be much harder for the groups that favor more open trade with Vietnam to overcome this political opposition.
However, if the United States can negotiate a multilateral TPP deal that is viewed by many sectors in the United States as being a “good” deal – that is, greater market access in all TPP markets, greater IP protections in TPP countries, greater opportunities for regulatory coherence in all TPP countries, etc. – then their support for a multilateral agreement will be greater than the opposition to Vietnam’s inclusion.
Nguyen Hung, 27 from Hai Phong City: As an experienced lawyer who has been working on international trade policy and strategy for many years, what do you think are the most common mistakes that developing countries like Vietnam often make when negotiating to join international trade organizations? Could you provide us with some advice to avoid these mistakes?
Lawyers Eric Emerson: When Vietnam sits down at the negotiating table, Vietnam’s representatives will be negotiating against representatives who receive substantial support from their domestic business communities. In the United States, for example, industry associations, ad hoc coalitions, and individual companies routinely provide USTR with documents, drafts and ideas for use in the negotiation process. My sense is that the business communities in many developing countries, including Vietnam, are not as actively engaged in the negotiation process as they are in developed countries. To be sure, Vietnam has very capable negotiators, but they will be able to do an even better job if they are fully supported by the business community.
Do Nam Huy from Binh Duong Province: It seems that the opinions of experts about the benefits of the TPP for Vietnam remain not concrete. Has Vietnam listed the production branches and the business fields which it believes will be able to enjoy benefits from TPP? What do you think Vietnam needs to do to prepare for TPP?
Lawyer Tran Huu Huynh: As far as I know, at this moment, negotiators are analyzing and listing the production branches and business fields which will enjoy benefits from TPP
I have to emphasise that, the benefits are not always the same within the same production branches. For example, farm produce export may get benefits, but farm produce imports will be the big challenge for Vietnamese producers and distributors. While exporters will have more opportunities to access the world market on more favourable conditions, domestic products and services providers will have to compete more fiercely on the domestic market.
However, we can see challenges in opportunities and we can see opportunities in challenges. Even export products, which, in principle, will enjoy benefits, will also have to face a lot of challenges, such as technical barriers, the regulations on origin, and trade safeguard remedies. Meanwhile, domestic producers, while having to compete fiercely, will have the chance to improve and upgrade their business.
Ha Van Tam from Lang Son province: On joining TPP, Vietnam will have to reform some regulations, labor law for example, to meet the standards of other member countries. What should we prepare for this issue?
Lawyer Eric Emerson: If it has not done so already, Vietnam should assemble groups of stakeholders in the key areas where regulatory reform will be required. These stakeholders could include government officials, industry associations, academics and other experts, leaders of both local Vietnamese businesses and foreign invested businesses, and non-governmental organizations (Particularly for issues such as labor and environment). Once assembled, these stakeholders could identify areas where Vietnam’s current regulatory practices do not meet international standards, and what specifically would be required to bring them up to that level. This process will start to give negotiators a sense of where the country is lagging, and what the alternatives are to bring the country’s regulations up to an acceptable standard.
Cao Thanh Binh, Civil Engineer in Quang Ninh province: TPP will create favourable conditions for Vietnamese enterprises to export their products and bring more opportunities for economic cooperation with other countries. However, Vietnam will have to solve a difficult question: what to do to ease the challenges of competition on the home market?
Lawyer Tran Huu Huynh: You have every reason to raise the question. “Being defeated on the home market” is a real risk. However, I have to remind you of two issues.
First, foreign made products have been accounting for biggest market shares in Vietnam already. Therefore, it is likely that with TPP, the problem will lie in the re-dividing of the market shares for foreign exporters in Vietnam. If the TPP’s regulations can create more favourable conditions (Offering tax incentives, simplifying customs procedures, making procedures more transparent and well protecting intellectual property) than other commitments, it is very likely that the goods from the countries with modern production technologies and reasonable prices will become more attractive to Vietnamese customers.
Second, Vietnamese enterprises can be confident that their products will be able to dominate some market segments with the advantages in prices.
Pham Chi Lan: TPP, like other international agreement in which Vietnam is a member, aims to expand the economic cooperation among countries, boost export and foreign investment. And like the other treaties, TPP can help Vietnam obtain these objectives.
However, in all games, only the people, who have the capability to overcome challenges in the competition and grab opportunities, or who can cooperate with other partners, can become the winners.
Nguyen Mai Thu from Ba Ria-Vung Tau province: The countries in TPP have not recognized Vietnam as a market economy. Therefore, TPP will not help eliminate the anti-dumping lawsuits to be raised by the US. Is this the important factor Vietnam needs to consider while negotiating for TPP. What should Vietnam do to protect its interests?
Pham Chi Lan: Of the countries which join the TPP negotiations, some have recognized the market economy of Vietnam, including Singapore, Brunei, Australia, New Zealand and Malaysia. The toughest negotiator for Vietnam – may be the US.
In an organization, where the majority of members recognize Vietnam’s market economy, like TPP, it would be less difficult to negotiate with the US than in a Vietnam-US bilateral negotiation. The US itself also wants to see Vietnam joining TPP.
Lawyer Eric Emerson: For political reasons, I highly doubt that the United States would agree in the TPP to grant market economy status to Vietnam. However, Vietnam could seek to have the TPP include a process for transitioning Vietnam to a market economy country before 2018, which is the date for its graduation under its accession agreement. Vietnam might also seek to have certain industrial sectors be treated as “market oriented industries,” so that the U.S. Department of Commerce would be required to use their market economy methodology for those cases. There may be other strategies by which Vietnam could try to reduce the negative impact of the current non-market economy status.
To be continued
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