Itle opportunities and challenges when vietnam joins tpp

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FACULTY OF INTERNATIONAL ECONOMICS

<b>---</b> <b></b>

<b>---ACADEMIC WRITING</b>

COURSE: INTERNATIONAL ECONOMIC RELATIONS

<b>OPPORTUNITIES AND CHALLENGES WHEN VIETNAM JOINS TPP TUTOR : Ph.D Lam Thanh Ha </b>

Miss Nguyen Ngoc Ha

<b> STUDENT: </b>Group 8- QHKTQT(2) KTQT48C1<b> </b>

Tran Thi Thanh ThaoLe Thuy DuongThan Hoang DuongNguyen Thanh TrangTran Phu Vinh

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2.1. Opportunities in economic development...6

2.2. A strong boost for export...6

2.3. Promoting the investment...7

2.4. Opening up the opportunities in production...8

2.5. Creating favorable conditions to restructure institutional environment...9

2.6. Promoting the public procurement market...10

3.3. Great challenges to Vietnam's banking and financial services sector...14

3.4. Wide gap between the development level of TPP’s members with Vietnam ... 15

CHAPTER 4: MEASURES...16

4.1. Determine the economic institutional reform...16

4.2. Complete the statistical data system...17

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<b>I. INTRODUCTION</b>

About ten years ago, Vietnam officially joined the Trans-Pacific Partnership (TPP). While in the WTO, Vietnam has to accept existing commitments and has no right to demand , it is completely different in TPP, since Vietnam joined it from the beginning, had equal rights as other member countries, and the negotiation process ended only when all members reached an agreement. Joining the TPP, Vietnam has gained many benefits and opportunities in promoting exports, attracting investment, expanding the financial services sector, and facilitating access to the global market. However, besides these benefits, Vietnam also has to dealmany huge challenges. Our article will focus on researching, analyzing, and providing a comprehensive view on the opportunities for Vietnam, the challenges it is facing as a member of TPP, as well as our proposals and measures to those challenges, in the period from 2012-2016. So, we will not mention the cancellation of the TPP as well as the appearance of the CPTPP around those times.

Our speech, “Opportunities and challenges when Vietnam joins TPP”

We hope that this writing will give a closer look at what is TPP and the values that it brings to Viet Nam as well as other members before being cancelled.

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<b> II. CONTENTS</b>

<b>CHAPTER 1: What is TPP ?1.1 About TPP</b>

<i>1.1.1. The definition of TPP</i>

TPP, short for Trans-Pacific Strategic Economic Partnership Agreement (Trans-Pacific Economic Partnership Agreement), is an association, free trade agreement between 12 countries with the goal of integration. economy in the Asia-Pacific region. The 12 members of the TPP include: Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Canada, Peru, Singapore, Vietnam, the US and Japan. In addition to Colombia, the Philippines, Thailand, Taiwan and South Korea have expressed interest in TPP.

TPP's main goal is to eliminate taxes and prohibit imports of goods and services between members. In addition, TPP will have many laws and rules common among countries, such as: intellectual property, food quality, or labor safety… Tighter economic ties between countries, through measures to reduce (even completely eliminate in some cases) tariff barriers between countries, helping to increase the exchange of goods and services. Along with the strengthening text, the TPP is also expected to boost the economic growth of the 12-member group.

<i>1.1.2. The evolution of TPP</i>

The impetus for what became the TPP was a 2005 trade agreement between a small group of Pacific Rim countries comprising Brunei, Chile, New Zealand, and Singapore. In September 2008, USTR (United States Trade Representative) announced the decision of the United States to participate in the

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expanded P4 negotiations and officially participated in some discussions on opening the financial services market with the P4 countries.

In November of the same year, Australia, Peru and Vietnam also expressed interest and participated in TPP negotiations, bringing the total number of participating members to 8 countries (except for Vietnam, which announced its participation on November 13, 2010). Entered the negotiations with full membership, other countries decided to join officially at the outset). Also from this time, the P4 expansion negotiation was renamed the Trans-Pacific Partnership (TPP) negotiation. However, the new TPP negotiations were delayed until the end of 2009 due to waiting for the United States to complete the presidential election and the new administration of President Obama to consult and review its participation in the TPP negotiations. In December 2009, USTR just announced President Obama's decision on the United States' continued participation in the TPP. After nineteen official rounds of negotiations and many more separate meetings, the participating countries came to an agreement in October 2015 and signed the pact in early 2016.

<i>1.1.3. Areas in the TTP . Agreement</i>

TPP agreement can impact on some categories: Ecommerce, Cross-border services, Taxes, Environment, Financial services, Intellectual Property,

Government spending, Invest Labor Law, Dispute resolution,Origin and origin of goods, Quarantine of food, Telecommunication, Textile, Compensation for commercial damage, Entrepreneurs will have easier entry to member countries

<i>1.1.4. Contents of main commitments of the TPP Agreement</i>

- Commitments in goods:

Tariff and non-tariff barriers are reduced and removed substantially across all trade in services and goods under the TPP. Import tariffs are reduced by 100% for goods traded among member states, with more than 90% being eliminated immediately when the agreement takes effect.

- Commitments in service and investment:

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All 12 member states give consent to a liberalized trade in this area. The TPP also includes obligations on removal of performance requirements and reasonable requirements on senior manage-ment and board of directors Notably, the TPP Chapter on Investment for the first time makes it very clear and transparent with regards to the MFN principle, that countries operating in multistate regime must give foreign investors the best investment conditions of all states, regardless of the state where the investment takes place. Investors are also allowed to petition against the Government from the investment registration stage.

- Commitment in Government procurement:

The TPP makes a list of government entities and agencies whose procurement of particular goods and services at a particular amount must be subject to public tender. This chapter includes NT and MFN principles, removes tender conditions favoring local tenders such as using local goods or local suppliers, conditions on technology transfer or two-way trade and investment - Commitment to State-owned enterprises:

The main obligations under the Agreement include: State-owned enterprises (State-owned enterprises) must operate under the market mechanism; State-owned enterprises must not engage in anti-competitive behavior when they have a monopoly position, affecting trade and investment; Transparency of some information such as the State's ownership rate, audited and permitted financial statements; and the State does not provide excessive subsidies, greatly affecting the interests of other countries.

<i>1.1.5. Why TPP important?</i>

The 12 participating countries are all members of the Asia Pacific Economic Cooperation (APEC) with a total population of 650 million people, an average per capita income of US$31,481 (in 2011), total GDP to more than 20 trillion USD. When effective, TPP creates a potential common market for businesses.

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In addition, it is impossible not to notice that this is a US-led initiative. The US is the largest economy in the world and has always considered the Asia-Pacific region as the key to future growth.

Some also argue that the US is trying to use TPP as a tool to compete with China in this area. Many also believe that other members of APEC will also join the TPP in the next few years, making the TPP even more important.

The 21 APEC countries account for 44% of global trade and 40% of the world's population

<b>1.2 Process of negotiation of VN</b>

Following the formation of P4, Singapore joined and declared its intention to broaden TPP and use it as a vehicle to realize the concept of an APEC-led Free Trade Area of the Asia-Pacific. Vietnam has been actively invited to join TPP by this lion island since 2006, but due to political and economic factors, Vietnam has not accepted this invitation.

The US announced its intention to join TPP in September 2008. Vietnam is also invited to join TPP by the United States before making a formal announcement. In early 2009, Vietnam decided to join the agreement as an associate member.

Viet Nam joined TPP in 2009 as a special observer. On 13-14 November 2010, Viet Nam officially announced their participation in the negotiation process on the occasion of the APEC Summit in Yokohama, Japan.

Alongside the negotiation, TPP welcomed several new countries, namely Malaysia, Mexico, and Japan, bringing the total number of members to 12.

<b>1.3. Why Viet Nam?</b>

Despite being a low-level developed economy, Vietnam was chosen as one of the countries participating in the negotiations and was highly appreciated by other countries. for a number of reasons:

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- First, Vietnam has proved to be a dynamic country; serious in implementing international commitments; has a stable political environment and is playing an increasingly important role in the region; is an important partner now and in the future that can help increase the impact of the TPP.

- Second, Vietnam has a significant population, a dynamic economy, and promises to become a market with great purchasing power and a destination for businesses from all over the world, especially in the Asia-Pacific region.

- Third, and also very important, the fact that Vietnam - a low-level developing country - can successfully participate in the TPP will be convincing evidence that the TPP Agreement really cares about developing countries. development through a variety of measures to assist a developing country in implementing the high standards of this Agreement.

<b>CHAPTER 2: OPPORTUNITIES</b>

The Institute for Economic and Policy Research (VEPR) previously published a report on the impact of TPP on Vietnam's economy. According to many international experts, Vietnam will be the country that will benefit the most from joining the TPP. Participating in TPP, Vietnam has many opportunities, which are:

<b>2.1. Opportunities in economic development</b>

According to the Ministry of Industry and Trade, in economic development, Vietnam is assessed to gain great and “core” opportunities when

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participating in the TPP. In the economic term, the TPP will expand Vietnam's GDP by USD 23.5 billion in 2020 and USD 33.5 billion in 2025.

Research by the Peterson Institute for International Economics also shows that, after the TPP is signed, Vietnam will be the country with the most robust increase in income and exports among the 12 TPP countries, with growth rates of 13, respectively 6%, and 31.7%. Meanwhile, countries not participating in TPP will suffer trade diversion. In addition, Vietnam will also try to gain deeper access to the world's two largest economies, which are the United States and Japan.

As mentioned by these above statistics, the tariff benefits for trade in goods thanks to TPP Agreement would help Vietnam have advantages in economic growth.

<b>2.2. A strong boost for export</b>

In trade relations with TPP countries, Vietnam is in a rather large trade surplus position, with a trade surplus of 7/11 of TPP markets. Vietnam's key export products like textiles, garments, footwear, and seafood are expected to gain breakthroughs in export value to the US, Japan, and Canada. The most important thing is that the import tax on many types of goods will be reduced to 0%, which will be a strong boost for exports, positively impacting people's income, improving the competitiveness of exported goods, and increasing export turnover.

In 2014, Vietnam's exports to TPP member countries reached $58.41 billion, accounting for a relatively high proportion of Vietnam's total export turnover. According to calculations by economic experts, exports will increase by $68 billion by 2025 if the domestic manufacturing industry can meet the technical barriers. The nation's exports will increase by $68 billion in 2025.

For the textile and garment industry, import tax into the US will be reduced by 50% in the first year of TPP's effect (equivalent to 1 billion USD)

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and continued reduced in the following years, leading to the export turnover will increase by about 30% per year. Regarding the rule of “Produce all from the first to the last stage and using only domestic materials, not using imported materials.”, there is some flexibility in this rule: Vietnam can import materials from third countries to produce textiles and garments for export to the US but still enjoy preferential treatment under TPP.

For the leather and footwear industry, it is expected to reduce about 60% of the import tax to the US, the estimated export is expected to increase by about 25% compared to the 15% growth rate before joining TPP; the export of agricultural products, aquatic products, and processed products is likely to increase.

In short, TPP Agreement would help Vietnam expand its export markets, promote export growth, also change the structure of import and export markets towards a more balanced direction.

<b>2.3. Promoting the investment</b>

International investment flows into Vietnam will increase sharply, facilitating the banking system to enhance liquidity and also help access global capital at lower costs. Up to 2015, direct investment of TPP countries into Vietnam has reached more than 100 billion USD in registered capital of valid projects, accounting for nearly 40% of Vietnam's total FDI. Capital flows from many highly developed TPP member countries can have significant benefits in terms of technology and management skills, or higher value-added service sectors. The increase in investment will help promote the formation of fixed capital and create opportunities for Vietnam to exploit its potential advantages in agriculture and the labor force.

The process of trade liberalization and deepening international economic integration of Vietnam is helping Vietnam become one of the attractive investment destinations; also attracting many large investment projects from

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corporation enterprises such as Samsung, LG, Microsoft, Intel, Mitsubishi Heavy Industries…

Vietnam is a country that has many strengths in agriculture due to favorable natural conditions. The TPP will help Vietnam promote the FDI of the countries in the bloc, creating opportunities for Vietnam to exploit its advantages and potential in agriculture, also fisheries.

To conclude, joining the TPP would help Vietnam integrate more deeply into the world financial market, thereby promoting the investment of other countries in Vietnam.

<b>2.4. Opening up the opportunities in production</b>

Vietnam will have the chance to take part in supply chains that are established after the TPP comes into effect. TPP countries represent nearly 40 percent of global GDP, 30 percent of global trade and include large markets such as the US and Japan. So definitely, there will be many production and business opportunities when the new supply chains are launched.

The TPP agreement will significantly reduce import taxes applied to Vietnam's exports to member countries' markets, thereby increasing competition with similar goods from other countries in the region. In addition, TPP also stipulates that Vietnamese goods must use domestically produced materials or imported from TPP members. This promotes the development of supporting industries as well as the production scale’s expansion of Vietnamese companies.

Participating in the TPP is also an opportunity for Vietnam to join the supply chains of many large corporations in the world, especially the supply chain of high-tech and electronic goods (because TPP countries account for 40% of GDP and 30 percent of GDP in global trade). It also helps Vietnam restructure the import-export market in a more balanced way, not relying too much on the Chinese and East Asian markets. About the matter that the United States and other countries give us the flexibility to access the TPP standard of having a

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transition period, the maximum route for the most difficult obligations is up to 20 years.

In conclusion, joining the TPP opens up Vietnam’s opportunities to modernize its production, improve product quality, and participate more deeply in the global production chain.

<b>2.5. Creating favorable conditions to restructure institutional environment</b>

First, participating in the TPP will be an opportunity for us to continue to perfect the legal and economic institutions, including the socialist-oriented market economy – one of the three strategic breakthroughs that our Party has identified. Second, it also supports us in the process of renewing our growth model, restructuring our economy, and administrative reform. And at the same time, giving us the opportunity to improve the business environment, approach advanced international standards, and improve the competitiveness of products, enterprises, and the economy.

With deeper and broader commitments in the WTO, TPP creates conditions for the Vietnamese economy to reallocate resources in a more efficient way. Moreover, TPP actively supports the restructuring process towards industrialization—modernization and innovation of the growth model, shifting from broad-based growth on the basis of promoting available comparative advantages into increasing economic growth in depth, based on exploiting dynamic competitive advantages to improve productivity, quality, and efficiency of exports.

As a consequence, TPP creates favorable conditions for Vietnam to restructure its economy, renew its growth model, and accelerate the legal and institutional environment.

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<b>2.6. Promoting the public procurement market</b>

Participating in TPP creates favorable conditions for Vietnam to improve the enforcement of intellectual property rights, make the public procurement market transparent, and do government bidding. The TPP agreement can be a good incentive to address the current lack of transparency in public procurement contracts and a good way to reduce corruption in public investment. In the long run, the TPP will promote an increasingly complete legal infrastructure, and improve Vietnam's public administration, creating a foundation for more sustainable economic development in the future.

Last but not least, the last great opportunity is the public procurement market.

Participation in the TPP Agreement is considered an important step for Vietnam in the process of international economic integration; and is seen as a great opportunity for Vietnam to accelerate economic growth, reform institutions, and improve the competitiveness of the economy as well as the business community. Besides, TPP also brings increasing benefits to Vietnamese consumers with the opportunity to access cheap and quality goods and services from member countries with more diverse and richer choices.

Emerging regional integration plays a key role in various forms, especially in the Asia-Pacific region. Participating in the TPP Agreement, an important regional structure will help Vietnam better grasp and take advantage of opportunities due to the process of restructuring the international and regional situation, as well as the trend of economic integration, regional economic benefits, implementing the international integration strategy, and enhancing Vietnam's position in the international arena.

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<b>CHAPTER 3: CHALLENGES</b>

Besides numerous advantages, joining TPP also inflicts some drawbacks.

<b>3.1. Vietnam has to change its legal system to be appropriate with the TPP’sstandards </b>

Taking part in TPP means Vietnam has to modify its legal frameworks and other regulations to be suitable with international criteria. The commitment and implementation of deep and broad commitments within the framework of TPP will require Vietnam to quickly strengthen its legal system, indicators on quality of products, environment, society, etc. according to international practices. Furthermore, to implement the commitments in the TPP Agreement, Vietnam has to adjust many laws and regulations as well as quality indicators on trade, investment, procurement, intellectual property… Meanwhile, the legal system of Vietnam is less developed than the other partners in TPP. Vietnam's law is weak from the stage of drafting to promulgation and enforcement. Currently Vietnam remains the state to use many bylaws to implement a law. The criteria for assessing the quality of products, the level of development of sectors and the economy in general was a big difference compared with international practices both in terms of quality and the method of calculation. For example, the target for poverty reduction is calculated according to the own standards of Vietnam. In the context of Vietnam today, bringing the law system and the quality indicators, economic and social indicators to a level equal to those of other parties in TPP is extremely difficult.

In the labor terms, “workers will be allowed to form unions, without approval from the government, and with their own independently elected representatives “ or “the government will not allow employer interference with labor unions” <small>1</small> This gives workers a right to affiliate with each other across the country to form larger unions, such as the individual textile unions joining together to form a

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larger textile worker union. Moverover, the agreement requires Vietnam to implement this change within five years of the TPP’s effective date, which demands Vietnam to change itself in quite a short amount of time. Meanwhile, labor forces in Vietnam have to face a predicament between maintaining its current labor rights legislation, particularly freedom of association, which fails the compliance to the TPP and may result in the loss of economic and diplomatic benefits; and the desire to maximize advantages from the TPP by making itself comply with labor provisions.

<b>3.2. The TPP affects Vietnamese businesses and economics in a negativeway.</b>

From an economic perspective, Vietnam’s TPP membership will place domestic enterprises under greater pressure. State-owned enterprises (SOEs) could face significant adjustments. TPP may push SOEs and those with outdated technologies and those that still rely on Government subsidies to easily face

difficulty and even bankruptcy, resulting in mass unemployment. While producers in several industries worry that the TPP’s environmental provisions could raise costs which, in turn, undermine their competitiveness. Besides, in terms of manufacturing goods, the TPP's rules of origin require that products exported from one TPP member to another be of "originating” goods, without using third-country materials outside the new TPP member. enjoy the preferential tax rate of 0%. To be more specific, “the Rules of Origin chapter creates a fundamental commitment that only “originating goods”—that is, goods genuinely produced in TPP countries—will receive the lower tariffs of the TPP. A good cannot be produced in countries outside the TPP and be considered TPP originating”<small> 2 </small> This is a difficulty for Vietnamese manufacturing enterprises, especially the apparel and footwear export industry. Currently, due to limited self-production and raw material supply capacity, Vietnam's apparel and footwear export industry is completely dependent on imported materials, mainly

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