State by State – Vietnam and Pennsylvania Trade
With a GDP of around US $663 million as of Q3 of 2015, the state of Pennsylvania is ranked as the United States’ sixth largest state economy. If Pennsylvania were an independent country, it would be included in the top 20 largest economies in the world. Pennsylvania is home to fifty Fortune 500 companies, showing what an important player the state is within the United States and the world.
International trade is particularly important in the state, with export and import industries supporting over 1.6 million Pennsylvanian jobs. The top 5 Merchandise Exports in 2014 were food manufactures, minerals & ores, chemicals, computer & electronic products and machinery (except electrical). Once a manufacturing powerhouse, helping pave the way for the industrial development of the US, the state today has transitioned towards a high-tech manufacturing and service focused economy.
Import and Export
Pennsylvania’s foreign trade landscape impresses through sheer numbers and volume. In 2014, US $40.4 billion of Total Goods Exports originated from ports in Pennsylvania. To put this into perspective, total goods exports from the United States reached US $2.35 trillion, so Pennsylvania is no small player in the field. The 2012-2014 average of total goods exports from Pennsylvania bound for TPP countries reached $18.8 billion Pennsylvania exported US $18.8 billion annually, increasing by 10% from 2012-2014.
Out of its total goods exports, US $75.5 million was destined for Vietnam. Exports were up 18.1 percent in value from 2013 and have risen from US $19.2 million in 2005, further illustrating Pennsylvania’s impressive growth journey and potential to penetrate this market further, once the TPP comes into effect and trade barriers are removed.
In comparison to its exports, Pennsylvania imported US $691 million from Vietnam, ranking it in 24th place in imports to Pennsylvania. Imports increased by 14.8 percent since 2013 and Dairy products seem to have had the largest increase in 2014. Furthermore, Pennsylvania imported 32 percent of its man-made fiber sweaters and 27.5 percent of women’s fiber suits from Vietnam in 2013.
TPP and its Effects
With the TPP coming into effect, Vietnam is a trade partner with enormous potential for growth over the coming decade. The United States and Vietnam didn’t have a previous FTA agreement, thus the removal of existing trade barriers will lead to a higher volume of trade flow. The most important aspect of the TPP is the removal of tariffs on certain goods. The five percent rate on thickening agents exports from Pennsylvania to Vietnam will likely lead to an increase of trade in this commodity. Mineral & ore exports could benefit from TPP provisions addressing technical regulations and standards, which restrict trade. Vietnam’s top 10 imports all revolve around food manufacturers and other food related items.Since one of Pennsylvania’s top exports to Vietnam is food manufactures the value and significance of this commodity stands to increase and benefit from the TPP. Food manufacturers such as Hershey, who already exports to Vietnam, may see some significant increase in its exports.
Likewise, Vietnam stands to gain from the TPP as well. For example, Vietnam is one of the leading exporters of seafood to the U.S. which currently imports around 91 percent of its consumed seafood. The TPP agreement, which has been supported by Vietnamese seafood businesses, may lead to an even larger share of imported seafood from Vietnam to the U.S. and other nations. In an analysis of likely effects of the TPP, VASEP, the Vietnamese Association of Seafood Exporters and Producers, said seafood exporters would benefit since part of the TPP agreement is to eliminate or reduce import taxes by 90 percent. Shrimp exports to the US may rise even more dramatically, since the two countries didn’t have a trade agreement before.
Investment Opportunities and New Market Access
Because Pennsylvania is closely tied to export and world trade, the opportunity to access new markets in a commercially meaningful way presents a good opportunity for investment. Furthermore, the TPP will further enable service sectors to expand its business. For example, many banks and online service providers will benefit from a decrease in customs duties and ease of other licensing issues. While many ASEAN nations, including some without previous FTA agreements, are part of Pennsylvania’s top 25 export destinations, Vietnam is not included yet. This only gives reason to think that once an FTA agreement with Vietnam is in place, this statistic may yet rapidly change.
Further Support from Dezan Shira & Associates
Dezan Shira & Associates can service Pennsylvania-based companies that are looking to further develop their operations in Vietnam. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at: email@example.com.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
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