The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) signed by Vietnam and 10 other countries on Thursday will yield robust economic gains for Vietnam, a new World Bank report says.
According to analysts, multilateral trade agreements such as the CPTPP are expected to boost Vietnam’s investment and export driven growth model.
The CPTPP will reduce tariffs in countries that together amount to more than 13 percent of the global economy - a total of $10 trillion in gross domestic product. With the United States, it would have represented 40 percent.
Even without the United States, the deal will span a market of nearly 500 million people, making it one of the world's largest trade agreements, according to Chilean and Canadian trade statistics.
The CPTPP will increase Vietnam’s GDP by 1.1 percent by 2030, according to the report. “Assuming a modest boost to productivity, the estimated increase of GDP would amount to 3.5 percent from the CPTPP,” said Ousmane Dione, World Bank country director for Vietnam.
Lower tariffs under the trade deal are expected to help boost Vietnam’s exports by 4 percent, said Tran Toan Thang from the National Center for Socio-economic Information and Forecasting.
Under the CPTPP, exports to signatory countries will increase from the current $54 billion to $80 billion by 2030, reaching 25 percent of total exports, according to the World Bank.
Textiles, footwear and beverages are expected to enjoy the biggest boost thanks to the lower tariffs.
For Vietnam's seafood industry, the biggest impact of the CPTPP may well be improving quality, according to Nikkei Asian Review. The country's fish - particularly its panga - have been the subject of attacks in Europe and the U.S. over food safety and farming conditions.
In February, Vietnam struck back, filing a case against the U.S. for what it called punitive tariffs on its fish, including new rules requiring panga to be inspected by both the U.S. Department of Agriculture and the U.S. Food and Drug Administration.
But the CPTPP could improve the reputation of Vietnam's fish. Japan has high tariffs on seafood, meaning it made little sense for companies to invest the money in techniques that would ensure their catch was up to its high standards. "If those tariffs drop to zero, suddenly there are incentives to figure out how to clear the challenging standards to sell in Japan," Nikkei quoted Deborah Elms, executive director of the Asian Trade Center in Singapore, as saying. "The upsides of being in Japan are huge for Vietnam."
Duong Ngoc Minh, owner of the country's leading panga exporter Hung Vuong, says his company will still benefit from the CPTPP. He sold $20 million worth of seafood to Japan, Canada and Australia last year, but hopes to eventually increase that by 30 percent after the final agreement is signed among the so-called TPP 11 countries at a ceremony in Santiago, Chile, on March 8, according to Nikkei.
In addition to boosting exports, the trade deal will create opportunities for domestic private firms to integrate into global value chains and promote the development of the small and medium-sized enterprise (SOE) sector.
“The new agreement will bring direct benefits to Vietnam, from trade liberalization and improved market access. Most importantly, it will help stimulate and accelerate domestic reforms in many areas.” said Sebastian Eckardt, the World Bank Lead Economist for Vietnam. “Delivering commitments under the CPTPP will contribute in promoting transparency and supporting the creation of modern institutions in Vietnam.”
The CPTPP is expected to stimulate reforms in areas such as competition, services (including financial services, telecommunications, and temporary entry of service providers), customs, e-commerce, environment, government procurement, intellectual property, investment, labor standards, legal issues, market access for goods, rules of origin, non-tariff measures and trade remedies, the World Bank said.
According to new data from HSBC, 63 percent of businesses in Vietnam believe the CPTPP will have a positive impact.
The 11 CPTPP state members represent a market of 500 million people, greater than that of the European Union's single market.
The pact will come into force 60 days after it is fully ratified by six of the 11 members.
The 11 CPTPP countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.