State By State: Vietnam and Rhode Island Trade
Located along the Northeast corridor of the United States, Rhode Island is a mere 180 miles from New York City. The small coastal state is known for its knowledge economy based on its elite universities and hospitals. In 2013, Rhode Island’s GDP was US$53.2 billion. The largest contributor to the state’s GDP growth was professional and business services sector. Today, Rhode Island’s industry base is dominated by healthcare, education, financial services, defense and advanced manufacturing.
Trade between Rhode Island and Vietnam is currently small, but it doesn’t have to be that way. There are opportunities for businesses on both sides to work together more closely. In 2013, Rhode Island exported only $3M in goods and services to Vietnam. In return, in 2012, Vietnam imported almost $10M in scrap metal and waste paper from Rhode Island. It was the 8th largest importer of RI scrap metal/water paper.
Most Favored Nation Status and the Trans-Pacific Partnership
The USA and Vietnam do not as yet have a bilateral free trade agreement (FTA). However, Vietnam is granted Most Favored Nation (MFN) status by the USA under its World Trade Organization (WTO) obligations. As WTO rules allow regional trading blocs to set tariffs lower than WTO MFN preferential rates, the ongoing Trans-Pacific Partnership (TPP) negotiations should be the focus of any US business interested in Vietnam. The future looks bright for the TPP, a dozen-country regional trade bloc which would bring the markets of the USA and Vietnam closer together by removing tariff and non-tariff trade barriers for goods and services, and work towards securing intellectual property protection.
The below tariffs are important to Rhode Island and would all be reduced if the TPP is passed. Please note that these are 2013 rates.
Tariff on Rhode Island Exports
– Squid and cuttlefish export tariff is up to 17%
Tariff on Rhode Island Imports
– Man-made fiber overcoats tariff is 28%
– Cotton sweaters tariff rate is 16.5%
The ASEAN Economic Community and Vietnam
By the end of 2015, Vietnam is scheduled to enter into the ASEAN Economic Community (AEC), along with Cambodia, Laos and Myanmar. In practical terms, this will mean that tariffs in these four countries will fall into line with the other six ASEAN members Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand. This single market of over 630 million people represents a vast opportunity for Rhode Island businesses.
According to the East-West Centre, exports to ASEAN supported 1,096 jobs in Rhode Island in 2012. With the implementation of the AEC, and further integration down the line in the TPP, this figure looks set to increase.
Deeper than Economic Ties
In 2010, the US Census found only 1,326 Vietnamese nationals recorded as living in Rhode Island, less than 1% of the USA’s registered Vietnamese population of 1,548,449. The East-West Centre found in 2012 that the 16,954 ASEAN-Americans in Rhode Island make up 1.61% of Rhode Island’s population. Visitors from ASEAN contributed US$10 million to the local economy in that year, with a further US$7 million coming from the state’s 293 ASEAN students in 2012-13.
Considering this, it is little wonder that Providence, Rhode Island has a sister city relationship with Phnom Penh, Cambodia.
High-Level Political-Economic Partnership
Rhode Island Democrat Senator John Reed is, along with Arizona Senator John McCain, leading a Senate delegation to Singapore and Vietnam this May. He is expected to meet with government officials in Vietnam’s political capital Hanoi and commercial centre Ho Chi Minh City, focusing on regional economic and political issues. The two Senators will then travel on to Singapore for the annual Asia Security Summit. Other Senators to join the Vietnam leg of the trip include Dan Sullivan, R-Ark, and Joni Ernst, R-Iowa.
Further Support from Dezan Shira & Associates
Dezan Shira & Associates can service Rhode Island-based companies that are looking to further develop their operation 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 firstname.lastname@example.org.
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 email@example.com or visit www.dezshira.com.
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