TPP Revived as CPTPP: What it means for Vietnam
The original Trans-Pacific Partnership (TPP) signed in February 2016, included the US along with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. By January 2017, the new US administration pulled out of the pact, forcing the remaining members to continue with the agreement, known then as TPP-11. In November 2017, all the existing parties to the agreement met at the APEC summit in Da Nang and reaffirmed their commitment to the agreement, now called as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
TPP to CPTPP: what has changed
The total GDP of TPP members stands at US$ 28.7 trillion, largely due to the US, while the CPTPP’s GDP stands at US$ 10.1 trillion. In terms of GDP, CPTPP will account for 13.5 percent of the global GDP, down from 40 percent had the US stayed in TPP. The market size has also reduced considerably from 822 million to 499 million under CPTPP.
In terms of the agreement text, most of the commitments related to goods, services, procurement, and investment remain unchanged. Only 20 provisions of the TPP have been suspended in the CPTPP. Most of these provisions were in place at the urging of the United States, and are mostly from the Intellectual Property chapter of the agreement such as protection for copyright, patent extensions, protection of data, and offenses regarding the protection of encrypted program-carrying satellite and cable signals.
Apart from the suspended provisions, there are four provisions that are still to be finalized by Brunei, Canada, Malaysia, and Vietnam, which includes:
- a cultural exception for Canada;
- exceptions regarding trade sanctions for Vietnam;
- exceptions for state-owned enterprises in Malaysia; and
- exceptions regarding coal production in Brunei.
In addition, CPTPP would still have the ISDS legal system, which would allow foreign investors and corporations to legally challenge countries for its violation of investment-related commitments.
In comparison to the TPP, Vietnam will have reduced benefits under the CPTPP. According to Vietnam’s National Center for Socio-Economic Information and Forecasting, CPTPP will lead to an increase of 1.32 percent in Vietnam’s GDP, much less than 6.7 percent as predicted under the TPP.
The gains from tariff elimination will reduce from 6.79 percent to 1.1 percent as a share of its GDP. Exports are forecasted to grow by 4 percent under CPTPP, while under TPP, Vietnamese exports were predicted to grow by 15 percent. Imports will also reduce from 10.5 percent to 3.8 percent in comparison to TPP.
Gains for Vietnam
Even without the US, CPTPP will still contribute to the Vietnam’s economy and trade, and most importantly, will lead to numerous policy reforms. Vietnam will have access to newer markets and can expand their exports to countries such as Canada, Mexico, and Peru with whom it does not have a trade agreement. Exports are forecasted to grow by 4 percent.
Labor-intensive industries such as garments and footwear will benefit the most from increased exports. There will also be an increase in imports, but the effect will be minimal, as Vietnam already has trade agreements with most of the members of the CPTPP.
In addition, CPTPP will lead to numerous institutional reforms such as labor reforms leading to an easier and faster integration into the global supply chains. It will also push Vietnam in improving regulations, introducing administrative reforms, and investing further in innovation to remain competitive.
Without the US, CPTPP also helps its members in reducing their dependency on major economies such as US and China for a successful trade agreement.
Entry into force
Once six members out of the 11 ratify the CPTPP, it will come into force among those ratifying nations. After the ratification requirements are met, it would take another 60 days for it to enter into force. Most of the tariff reductions on goods will be in effect when the agreement comes into force, as well all provisions for services and investment. The members are pushing for a mid to late 2018 deadline for entry into force.
Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, India, Indonesia, Russia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at firstname.lastname@example.org or visit us at www.dezshira.com
Dezan Shira & Associates Brochure
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.
An Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.
Managing Contracts and Severance in Vietnam
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.
- Previous Article Vietnam’s Key Regions and Economic Zones – New Issue of Vietnam Briefing Magazine
- Next Article Vietnam – EAEU Full Free Trade Agreement