Vietnam all set to ratify US-led mammoth trade deal, but so what?

By    August 31, 2016 | 05:03 pm GMT+7
Vietnam all set to ratify US-led mammoth trade deal, but so what?
A worker in a factory in Vietnam. Photo by Reuters/Kham

Unless Obama pushes the trade deal through, the country's efforts may have been in vain.

The Trans-Pacific Partnership (TPP), one of the world’s biggest free trade agreements, is scheduled to be put in front of Vietnamese lawmakers for ratification in October, Prime Minister Nguyen Xuan Phuc said at a meeting with representatives of American businesses last week.

The Vietnamese government has shown a strong support for the trade deal, and its ratification in the next few months will come as no surprise.

However, all the efforts of Prime Minister Nguyen Xuan Phuc’s administration to get the trade pact through on paper might be in vain if the U.S., the largest economy in the TPP, does not formally come on board.

Vietnam seems to have reasons to be worried since both U.S. presidential candidates, Hilary Clinton and Donald Trump, are taking a harsher tone on the TPP, and even turning their backs on the deal, whose 12 members comprise nearly 40 percent of global GDP.

“The TPP ratification is getting tougher as more obstacles are coming from the U.S.,” Deputy Minister of Industry and Trade Tran Quoc Khanh said last Friday over worries that if President Barack Obama fails to get the trade pact signed, the fate of the TPP will be in the hands of either Trump or Clinton.

Signing does not mean ratifying, Khanh added, because for the pact to take effect, at least six countries that account for 85 percent of the combined gross domestic production of the TPP members must approve the signed agreement.

Although the TPP was signed by 12 member nations in February this year, the trade deal still requires a two-year ratification period before it becomes a reality in January 2018.

The 12 nations are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

Free trade yet to work for Vietnam

Vietnamese companies have gained little benefits from existing free trade agreements, said Deputy Minister Khanh, mainly because they have failed to take advantage of tax incentives.

Meanwhile, foreign invested companies in Vietnam have turned out to be better prepared than their local counterparts.

For instance, domestic companies have little information about supporting industries which are mainly controlled by foreign companies. About 80 percent of parts suppliers in Vietnam, including electronics and other metal parts, are foreign-invested companies.

Evidently, Vietnam's supporting industries are weak, putting the country’s manufacturing sector at risk of missing out on the benefits of free trade agreements like the TPP.

The TPP, for example, will scrap tariffs in many areas. In the garment industry, the trade deal, with a mechanism called “rules of origin”, will only benefit companies either importing materials from within the TPP community or sourcing them at home.

Related news:

>Vietnam to approve TPP this year, but all efforts may be in vain

>Vietnam to ratify TPP trade deal by August 9

>Vietnam to shake up supporting industries to seize TPP opportunities

>TPP offers promising new world for Vietnam's textiles sector

 
 
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