Six out of the 11 signatories to the CPTPP, including Mexico, Japan, Canada, New Zealand, Singapore and Australia have ratified the trade pact so far.
At the sixth session of the ongoing 14th National Assembly, Party General Secretary and President Nguyen Phu Trong submitted a proposal to the NA for its ratification of the CPTPP other related documents.
Heavy dependence on import sources
According to experts, the CPTPP will create one of the world’s largest free trade bloc with a combined market of nearly 500 million people which will account for 13.5% of global GDP.
Tran Toan Thang, Head of the World Economic Department, National Center for Socio-Economic Information and Forecast under the Ministry of Planning and Investment said the trade deal will greatly benefit Vietnam, however the benefits will be on a much lower scale than the Trans-Pacific Partnership Agreement (TPP).
Specifically, due to the impact of tariff reductions, the CPTPP can help Vietnam’s annual GDP increase by additional 1.32%, equivalent to US$1.7 billion (the figure would stand at 6.7% in the TPP). The impact will be higher if tariff reductions and service liberalization are carried out simultaneously under the service opening scenario at 2.01%.
Engaging in the trade deal, Vietnam’s export turnover is expected to hit roughly about 4% or US$4.09 billion. Total import revenue will grow by another 3.8% to 4.6% or (US$4.93 billion).
Due to the higher export growth rate, the risks of a trade deficit can be better managed over time. Vietnam can diversify its export markets as the rise in exports primarily come from CPTPP member countries.
For imports, an increase in imports by CPTPP member nations in the bloc is not significant, but largely from non-CPTPP members. Therefore, Vietnam will continue relying on import sources of some nations like China and the Republic of Korea, Mr Thang analyzed.
Luong Hoang Thai, director general of the Multilateral Trade Department under the Ministry of Industry and Trade (MoIT), said CPTPP commitments to the elimination of import tariffs under the roadmap and service and investment liberalization are the same as those regulated in the previous TPP.
As a result, Vietnamese businesses will enjoy a substantial tariff reduction from between 90%- 95% under the commitments of the trade pact.
Mr Thai, however, said that similar to other trade pacts, with commitments to reduce tariffs within the CPTPP, some of Vietnam’s economic sectors will face stiffer competition from imported goods coming from other CPTPP member countries. The sectors related to pharmaceuticals, sugarcane animal feed production sectors need to redouble efforts to stand firm for further development.
Joint efforts by government and businesses needed
Head of the Macroeconomic Policy Department under the Central Institute for Economic Management (CIEM) Nguyen Anh Duong said that the CPTPP will help Vietnam to boost domestic institutional reform, operate a market economy in a comprehensive manner and create a transparent and open investment and business environment.
"Institutional reform will bring a lot of benefits to Vietnam so this is seen as a mandatory requirement when Vietnam agrees to join the common playing ground. Therefore, the country needs to keep up the quality and momentum of reform after its entry to the trade pact. Conversely, if there is no effective management of the Government and relevant agencies at the grassroots levels, challenges will be more than opportunities provided by the CPTPP, thus putting high pressure of institutional reform on the government,” Duong noted.
In addition to the efforts by the Government, Duong said the Vietnamese business community should regard the country’s engagement in the CPTPP as an opportunity to improve their competitiveness, the quality of goods and services, and production capability of the national economy in order to keep abreast with the world's development trend, thereby effectively getting involved in global supply chains. Enterprises themselves must look for full information about what is consistent with their business investment strategies.
“Thee CPTPP is considered to be a trade deal of high standard and a long term game. However, Vietnamese enterprises are able to participate in this combined market, depending on their strategies, visions, and accumulated experience in production, relationships, brand building and partnerships. "Duong added.