State by State – Vietnam and Ohio Trade
Ohio is the 7th largest economy in the US and a big part of this has been thanks to the trade relationships Ohio-based companies have formed with other countries. The state has been keen to increase trade in its manufacturing, logistics and agricultural sectors. Ohio has also strategically taken advantage of FTAs negotiated by the US with partner countries to leverage these treaties into beneficial trade relationships. Ohio’s GDP totaled US $583.4 billion in 2014, an increase of over US $130 billion in the past decade. The state’s primary industries include finance, insurance, and real estate, which together account for nearly 20 percent of Ohio’s GDP – however they are as yet not directly involved with the Ohio-Vietnam trade relationship. Manufacturing of non-durable goods serve as the state’s second largest contributor to its GDP, accounting for 0.44 percent of its growth in 2014.
Import and Export
Both Vietnam and Ohio can benefit from the implementation of the TPP to increase trade flows between the two. Up until Q3 of this year, total U.S. trade in goods with Vietnam accounted for US $5.14 billion, of which Ohio’s share is relatively low. In 2014, Ohio’s exports to Vietnam reached US $105 million, significantly less than trade than with other ASEAN neighbors. The two currently run a small trade deficit. In a nationwide comparison, Ohio’s share of U.S. Exports to Vietnam was 1.8 percent in 2014. Yet, it represents an increase of 29.4 percent on the prior year’s trade numbers. In total, exports are up from US $25.9M in 2005.
Ohio imported $1.395 billion from Vietnam in 2014, which puts Vietnam in 7th place in terms of total goods imported to Ohio. This represents a 13.1 percent increase from 2013 to 2014. While Ohio’s exports to Vietnam may not figure significantly when compared to other ASEAN nations, Vietnam’s exports to Ohio make-up the largest share of imports to Ohio from ASEAN nations.
Additionally, Ohio imported most of their Knitted and Non-Knitted Apparel and Accessories from the country, placing Vietnam with Indonesia among the top five trading partners in this category.
In wake of the TPP coming into effect, Ohio’s top five Goods Exports present excellent investment opportunities in Vietnam. Chemicals, ranked number one of Ohio’s exports, will see the most significant decrease in tariffs, which range up to 35 percent in TPP markets. Beverage and tobacco products as well as food manufactures, ranked in second and third place respectively, are likely to benefit from the deal, since safety standards will increase and foreign companies are more likely to satisfy consumer’s change in demands. In fourth place, machinery items (excluding electrical products) were subject to tariffs ranging as high as 70 percent, but will benefit from TPP provisions that will address technical regulations and standards that previously restricted trade. Ranking fifth place in terms of goods exported are computer and electronic products.
The TPP and its Effects
Ohio stands to gain from the coming into effect of the TPP, and trade with Vietnam stands to increase especially, because the USA and Vietnam did not have previously benefit from an FTA agreement. In total, 552,600 jobs in Ohio are supported by trade with TPP members and 57 percent of Ohio’s total exports are bound for TPP nations. For example, a TPP agreement directly affecting families would eliminate the 32 percent tax on man-made fibers sweaters from Vietnam, turning lower tax rates into direct savings to consumers. For industries, such as glue and adhesive manufacturers, it would mean that firms would see a decrease in the 14 percent export rate in 2011.
Since some of Ohio’s largest employers are insurers and other financial firms, lifting overseas barriers to U.S. Financial services may greatly benefit the sector and its employees. While Japan has already agreed to open up further to U.S. insurers, Vietnamese financial institutions have remained far more closed. Currently, foreign ownership of Vietnamese banks is capped at 30 percent, and ownership of non-bank financial institutions at 49. Nevertheless, a trend of gradual opening in the economy is only set to increase under the TPP, one which Ohio based financial institutions may benefit from in the years to come.
Further Support from Dezan Shira & Associates
Dezan Shira & Associates can service Ohio-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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