Vietnam’s entry this week into the 11-nation Trans-Pacific Partnership trade deal, to be followed by a trade agreement with the EU, will give Hanoi largely tariff-free access to markets totalling an estimated 45 per cent of global GDP,
Vietnam’s Ministry of Planning and Investment estimated the partnership would boost Vietnam’s GDP by US$1.7 billion, up 1.3 per cent, and exports by more than US$4 billion by 2035 or 4 per cent.
The one-party state is looking to boost the vibrant tech sector through increased foreign investment.
Donald Trump pulled the US out of the Obama era imitative in 2017.
Vietnam’s National Assembly ratified the Comprehensive and Progressive Trans-Pacific Partnership, cutting tariffs to Canada, Japan and other significant trading partners.
The Ministry of Industry and Trade in Hanoi said there would be zero tariffs for coffee, tea, pepper and cashew nuts. Meanwhile, rice, clothing, seafood and wood products would see significant cuts.
The trade deal, designed to challenge Chinese dominance, covers 13.5 per cent of the world economy or around US$10 trillion.
Six other nations have already ratified the deal of which Vietnam, with a population of 95 million, is the largest.
Vietnam Chamber of Commerce and Industry chairman Vu Tien Loc said: “Vietnamese businesses will have more opportunities to lure investment and import hi-tech facilities. In addition, commitments in the CPTPP will also boost the reform of economic mechanisms towards more transparency and competitiveness, creating a better eco-system for enterprises’ development.”
Vietnam is also waiting for the EU, representing 21.8 per cent of global GDP, to ratify a free trade agreement that was negotiated in 2015. The EU said it expected to ratify the deal this year although the process might be disrupted by the European parliamentary elections in May and demands from rights groups for Vietnam to ease online surveillance.
“Vietnam will enjoy a comparatively lower duty rate in some export markets where it competes,” said Frederick Burke of law firm Baker McKenzie in Ho Chi Minh City. “It’s hard to say what would be bigger than the WTO, that was really a big bang. But [last year] we’ve had already as much foreign direct investment as we did the year of the WTO accession.”
Vietnam is seen as one of the principal beneficiaries from the partnership because of its large export sector, meaning most other members of the pact will be net importers of Vietnamese goods.
Vietnam is well-placed to take advantage of lower tariffs. Picture credit: Wikimedia