Itle opportunities and challenges when vietnam joins 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

FACULTY OF INTERNATIONAL ECONOMICS

-      

-ACADEMIC WRITING

COURSE: INTERNATIONAL ECONOMIC RELATIONS

TITLE OPPORTUNITIES AND CHALLENGES WHEN VIETNAM JOINS TPP TUTOR : Ph.D Lam Thanh Ha

Miss Nguyen Ngoc Ha

STUDENT: Group 8- QHKTQT(2) KTQT48C1

Tran Thi Thanh Thao

Le Thuy Duong Than Hoang Duong Nguyen Thanh Trang Tran Phu Vinh

KTQT48C1-0310 KTQT48C1-0161 KTQT48C1-0163 KTQT48C1-0332 KTQT48C1-0354

Ha Noi -2022

I INTRODUCTION 1

II CONTENTS 2

CHAPTER 1: What is TPP ? 2

1.1 About TPP 2

1.2 Process of negotiation of VN 5

1.3 Why Viet Nam? 5

CHAPTER 2: OPPORTUNITIES 6

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

CHAPTER 3: CHALLENGES 11

3.1 Vietnam has to change its legal system to be appropriate with the TPP’s standards 11

3.2 The TPP affects Vietnamese businesses and economics in a negative way 12

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

4.3 Support bussinesses 18

4.4 Enhance productivity 19

III CONCLUSION 19

REFERENCES 1

LIST GRAPHS AND IMAGINES 6

Đánh giá thành viên nhóm 7

I INTRODUCTION

About ten years ago, Vietnam officially joined the Trans-PacificPartnership (TPP) While in the WTO, Vietnam has to accept existingcommitments and has no right to demand , it is completely different in TPP,since Vietnam joined it from the beginning, had equal rights as other membercountries, and the negotiation process ended only when all members reached anagreement Joining the TPP, Vietnam has gained many benefits andopportunities in promoting exports, attracting investment, expanding thefinancial services sector, and facilitating access to the global market However,besides these benefits, Vietnam also has to dealmany huge challenges Ourarticle will focus on researching, analyzing, and providing a comprehensiveview on the opportunities for Vietnam, the challenges it is facing as a member ofTPP, as well as our proposals and measures to those challenges, in the periodfrom 2012-2016 So, we will not mention the cancellation of the TPP as well asthe appearance of the CPTPP around those times

Our speech, “Opportunities and challenges when Vietnam joins TPP”consists of 4 chapters:

II CONTENTS

CHAPTER 1: What is TPP ? 1.1 About TPP

1.1.1 The definition of TPP

TPP, short for Trans-Pacific Strategic Economic Partnership Agreement(Trans-Pacific Economic Partnership Agreement), is an association, free tradeagreement between 12 countries with the goal of integration economy in theAsia-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 andSouth Korea have expressed interest in TPP

TPP's main goal is to eliminate taxes and prohibit imports of goods andservices between members In addition, TPP will have many laws and rulescommon among countries, such as: intellectual property, food quality, or laborsafety… 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 thestrengthening text, the TPP is also expected to boost the economic growth of the12-member group

1.1.2 The evolution of TPP

The impetus for what became the TPP was a 2005 trade agreementbetween a small group of Pacific Rim countries comprising Brunei, Chile, NewZealand, and Singapore In September 2008, USTR (United States TradeRepresentative) announced the decision of the United States to participate in the

expanded P4 negotiations and officially participated in some discussions onopening the financial services market with the P4 countries

In November of the same year, Australia, Peru and Vietnam alsoexpressed interest and participated in TPP negotiations, bringing the totalnumber of participating members to 8 countries (except for Vietnam, whichannounced its participation on November 13, 2010) Entered the negotiationswith 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 weredelayed until the end of 2009 due to waiting for the United States to completethe presidential election and the new administration of President Obama toconsult 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 negotiationsand many more separate meetings, the participating countries came to anagreement in October 2015 and signed the pact in early 2016

1.1.3 Areas in the TTP Agreement

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

Government spending, Invest Labor Law, Dispute resolution,Origin and origin

of goods, Quarantine of food, Telecommunication, Textile, Compensation forcommercial damage, Entrepreneurs will have easier entry to member countries

1.1.4 Contents of main commitments of the TPP Agreement

- Commitments in goods:

Tariff and non-tariff barriers are reduced and removed substantially acrossall trade in services and goods under the TPP Import tariffs are reduced by100% for goods traded among member states, with more than 90% beingeliminated immediately when the agreement takes effect

- Commitments in service and investment:

All 12 member states give consent to a liberalized trade in this area TheTPP also includes obligations on removal of performance requirements andreasonable requirements on senior manage-ment and board of directors

Notably, the TPP Chapter on Investment for the first time makes it very clearand transparent with regards to the MFN principle, that countries operating inmultistate regime must give foreign investors the best investment conditions ofall states, regardless of the state where the investment takes place Investors arealso allowed to petition against the Government from the investment registrationstage

- Commitment in Government procurement:

The TPP makes a list of government entities and agencies whoseprocurement of particular goods and services at a particular amount must besubject to public tender This chapter includes NT and MFN principles, removestender conditions favoring local tenders such as using local goods or localsuppliers, conditions on technology transfer or two-way trade and investment

- Commitment to State-owned enterprises:

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

1.1.5 Why TPP important?

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

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 withChina in this area Many also believe that other members of APEC will also jointhe 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 theworld's population

1.2 Process of negotiation of VN

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-ledFree Trade Area of the Asia-Pacific Vietnam has been actively invited to joinTPP 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 formalannouncement In early 2009, Vietnam decided to join the agreement as anassociate member

Viet Nam joined TPP in 2009 as a special observer On 13-14 November

2010, Viet Nam officially announced their participation in the negotiationprocess on the occasion of the APEC Summit in Yokohama, Japan

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

1.3 Why Viet Nam?

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

- First, Vietnam has proved to be a dynamic country; serious inimplementing international commitments; has a stable politicalenvironment and is playing an increasingly important role in the region; is

an important partner now and in the future that can help increase theimpact of the TPP

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

- Third, and also very important, the fact that Vietnam - a low-leveldeveloping country - can successfully participate in the TPP will beconvincing evidence that the TPP Agreement really cares aboutdeveloping countries development through a variety of measures to assist

a developing country in implementing the high standards of thisAgreement

CHAPTER 2: OPPORTUNITIES

The Institute for Economic and Policy Research (VEPR) previouslypublished a report on the impact of TPP on Vietnam's economy According tomany international experts, Vietnam will be the country that will benefit themost from joining the TPP Participating in TPP, Vietnam has manyopportunities, which are:

2.1 Opportunities in economic development

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

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

Research by the Peterson Institute for International Economics also showsthat, after the TPP is signed, Vietnam will be the country with the most robustincrease in income and exports among the 12 TPP countries, with growth rates

of 13, respectively 6%, and 31.7% Meanwhile, countries not participating inTPP will suffer trade diversion In addition, Vietnam will also try to gain deeperaccess to the world's two largest economies, which are the United States andJapan

As mentioned by these above statistics, the tariff benefits for trade ingoods thanks to TPP Agreement would help Vietnam have advantages ineconomic growth

2.2 A strong boost for export

In trade relations with TPP countries, Vietnam is in a rather large tradesurplus position, with a trade surplus of 7/11 of TPP markets Vietnam's keyexport products like textiles, garments, footwear, and seafood are expected togain breakthroughs in export value to the US, Japan, and Canada The mostimportant thing is that the import tax on many types of goods will be reduced to0%, which will be a strong boost for exports, positively impacting people'sincome, improving the competitiveness of exported goods, and increasing exportturnover

In 2014, Vietnam's exports to TPP member countries reached $58.41billion, accounting for a relatively high proportion of Vietnam's total exportturnover According to calculations by economic experts, exports will increase

by $68 billion by 2025 if the domestic manufacturing industry can meet thetechnical barriers The nation's exports will increase by $68 billion in 2025 For the textile and garment industry, import tax into the US will bereduced by 50% in the first year of TPP's effect (equivalent to 1 billion USD)

and continued reduced in the following years, leading to the export turnover willincrease 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 importedmaterials.”, there is some flexibility in this rule: Vietnam can import materialsfrom third countries to produce textiles and garments for export to the US butstill 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 about25% compared to the 15% growth rate before joining TPP; the export ofagricultural products, aquatic products, and processed products is likely toincrease

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

2.3 Promoting the investment

International investment flows into Vietnam will increase sharply,facilitating the banking system to enhance liquidity and also help access globalcapital at lower costs Up to 2015, direct investment of TPP countries intoVietnam has reached more than 100 billion USD in registered capital of validprojects, accounting for nearly 40% of Vietnam's total FDI Capital flows frommany highly developed TPP member countries can have significant benefits interms of technology and management skills, or higher value-added servicesectors The increase in investment will help promote the formation of fixedcapital and create opportunities for Vietnam to exploit its potential advantages inagriculture and the labor force

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

corporation enterprises such as Samsung, LG, Microsoft, Intel, MitsubishiHeavy Industries…

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

To conclude, joining the TPP would help Vietnam integrate more deeplyinto the world financial market, thereby promoting the investment of othercountries in Vietnam

2.4 Opening up the opportunities in production

Vietnam will have the chance to take part in supply chains that areestablished after the TPP comes into effect TPP countries represent nearly 40percent 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 businessopportunities when the new supply chains are launched

The TPP agreement will significantly reduce import taxes applied toVietnam's exports to member countries' markets, thereby increasing competitionwith similar goods from other countries in the region In addition, TPP alsostipulates that Vietnamese goods must use domestically produced materials orimported from TPP members This promotes the development of supportingindustries as well as the production scale’s expansion of Vietnamese companies.Participating in the TPP is also an opportunity for Vietnam to join thesupply chains of many large corporations in the world, especially the supplychain 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 restructurethe import-export market in a more balanced way, not relying too much on theChinese and East Asian markets About the matter that the United States andother countries give us the flexibility to access the TPP standard of having a

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 tomodernize its production, improve product quality, and participate more deeply

in the global production chain

2.5 Creating favorable conditions to restructure institutional environment

First, participating in the TPP will be an opportunity for us to continue toperfect the legal and economic institutions, including the socialist-orientedmarket economy – one of the three strategic breakthroughs that our Party hasidentified Second, it also supports us in the process of renewing our growthmodel, restructuring our economy, and administrative reform And at the sametime, giving us the opportunity to improve the business environment, approachadvanced international standards, and improve the competitiveness of products,enterprises, and the economy

With deeper and broader commitments in the WTO, TPP createsconditions for the Vietnamese economy to reallocate resources in a moreefficient way Moreover, TPP actively supports the restructuring process towardsindustrialization—modernization and innovation of the growth model, shiftingfrom broad-based growth on the basis of promoting available comparativeadvantages into increasing economic growth in depth, based on exploitingdynamic competitive advantages to improve productivity, quality, and efficiency

of exports

As a consequence, TPP creates favorable conditions for Vietnam torestructure its economy, renew its growth model, and accelerate the legal andinstitutional environment

2.6 Promoting the public procurement market

Participating in TPP creates favorable conditions for Vietnam to improvethe enforcement of intellectual property rights, make the public procurementmarket transparent, and do government bidding The TPP agreement can be agood incentive to address the current lack of transparency in public procurementcontracts and a good way to reduce corruption in public investment In the longrun, the TPP will promote an increasingly complete legal infrastructure, andimprove Vietnam's public administration, creating a foundation for moresustainable economic development in the future

Last but not least, the last great opportunity is the public procurementmarket

Participation in the TPP Agreement is considered an important step forVietnam in the process of international economic integration; and is seen as agreat opportunity for Vietnam to accelerate economic growth, reforminstitutions, and improve the competitiveness of the economy as well as thebusiness community Besides, TPP also brings increasing benefits to Vietnameseconsumers with the opportunity to access cheap and quality goods and servicesfrom 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, animportant regional structure will help Vietnam better grasp and take advantage

of opportunities due to the process of restructuring the international and regionalsituation, as well as the trend of economic integration, regional economicbenefits, implementing the international integration strategy, and enhancingVietnam's position in the international arena

CHAPTER 3: CHALLENGES

Besides numerous advantages, joining TPP also inflicts some drawbacks

3.1 Vietnam has to change its legal system to be appropriate with the TPP’s standards

Taking part in TPP means Vietnam has to modify its legal frameworks andother regulations to be suitable with international criteria The commitment andimplementation of deep and broad commitments within the framework of TPPwill 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, Vietnamhas to adjust many laws and regulations as well as quality indicators on trade,investment, procurement, intellectual property… Meanwhile, the legal system ofVietnam is less developed than the other partners in TPP Vietnam's law is weakfrom the stage of drafting to promulgation and enforcement Currently Vietnamremains the state to use many bylaws to implement a law The criteria forassessing the quality of products, the level of development of sectors and theeconomy in general was a big difference compared with international practicesboth in terms of quality and the method of calculation For example, the targetfor poverty reduction is calculated according to the own standards of Vietnam

In the context of Vietnam today, bringing the law system and the qualityindicators, economic and social indicators to a level equal to those of otherparties in TPP is extremely difficult

In the labor terms, “workers will be allowed to form unions, without approvalfrom the government, and with their own independently elected representatives

“ or “the government will not allow employer interference with labor unions” 1This gives workers a right to affiliate with each other across the country to formlarger unions, such as the individual textile unions joining together to form a

larger textile worker union Moverover, the agreement requires Vietnam toimplement this change within five years of the TPP’s effective date, whichdemands Vietnam to change itself in quite a short amount of time Meanwhile,labor forces in Vietnam have to face a predicament between maintaining itscurrent labor rights legislation, particularly freedom of association, which failsthe compliance to the TPP and may result in the loss of economic and diplomaticbenefits; and the desire to maximize advantages from the TPP by making itselfcomply with labor provisions

3.2 The TPP affects Vietnamese businesses and economics in a negative way.

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

difficulty and even bankruptcy, resulting in mass unemployment Whileproducers in several industries worry that the TPP’s environmental provisionscould raise costs which, in turn, undermine their competitiveness Besides, interms of manufacturing goods, the TPP's rules of origin require that productsexported from one TPP member to another be of "originating” goods, withoutusing third-country materials outside the new TPP member enjoy thepreferential tax rate of 0% To be more specific, “the Rules of Origin chaptercreates a fundamental commitment that only “originating goods”—that is, goodsgenuinely 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 TPPoriginating” 2 This is a difficulty for Vietnamese manufacturing enterprises,especially the apparel and footwear export industry Currently, due to limitedself-production and raw material supply capacity, Vietnam's apparel andfootwear export industry is completely dependent on imported materials, mainly