Obama and TPP

However, the crux of the problem is whether the US President is able to make it possible on the other side of the equation. That is whether he can persuade the US Congress to pass the TPP in the remaining time of his presidency. Otherwise, if he fails to do so, what would become of the TPP under the new US president?

On the Vietnamese side, the road map is quite clear. According to the Government’s resolution made in April, Vietnamese lawmakers would enact the TPP at the first sitting of the new National Assembly. The Government has even assigned the relevant agencies to the task of revising laws and regulations to be conform to the TPP course.

As the most positive step so far, the US Congress last July gave the President the fast-track authority, or Trade Promotion Authority (TPA), which led to the conclusion of negotiations over the TPP in February this year. In other words, US lawmakers will give the trade pact an up or down vote, without any amendment.

However, so far nobody could tell when the US Congress would discuss the ratification of the TPP. As 2016 is an election year, the ratification of the TPP, if any, remains a big question. As a tradition, the US administration often relies on Republicans for the passage of a trade pact because Democrats normally oppose free trade agreements of that nature.

Even former Secretary of State Hillary Clinton, who used to play a crucial role in TPP negotiations, now a US presidential hopeful, has just declared her opposition to ratification of the TPP prior to the election.

When asked by the American press, “If elected President, would you oppose holding a vote on the TPP during the ‘lame duck’ session before you take office?” she replied, “I have said I oppose the TPP agreement — and that means before and after the election.” 

Meanwhile the Republican presidential candidate, billionaire Donald Trump, made it clear a long time ago that the TPP should start all over again. The fact that leading US presidential candidates have turned their back on the TPP also means that US lawmakers would not ignore it if they want to win support from voters who want to reinstate protectionism.

Consequently, what Obama could do, if any, is how to manage to bring about the discussion and ratification of the TPP during the “lame duck” session, meaning when new Congress has been elected but has not taken office, ratification by incumbent lawmakers may not much influence the prestige of every of them. Whether Obama could make this possible remains unanswered, at least as far as his Democrats are concerned.

In fact, the TPP can go effective without the ratification of all the 12 members. Within the next two years, if at least six countries accounting for 85% of the trade pact’s gross domestic product (GDP) could ratify it, then the agreement would take effect after 60 days (after the two-year term ends).

However, the US alone makes up 62% of the TPP’s total GDP while Japan accounts for 17%. The trade pact will never materialize if one of these two countries does not endorse it. Furthermore, in the case of Vietnam, benefits to be earned from the TPP comes mostly from trade with the US.

Everybody expects 98% of the value of Vietnam’s agricultural and fishery exports and 75% of industrial exports stateside are exempted from import tariffs as soon as the TPP becomes valid. Likewise, up to 95% of tax lines effective on textile and garments are exempted or slashed with the TPP validity.

To this end, from the TPP preparations emerges a vital issue. To be eligible for TPP favorable tax rates, Vietnam’s textile and garment exports have to meet the “yarn forward” rule of origin. That’s why Vietnam has welcomed foreign-invested projects in weaving and dying industries. Despite frowns of concern over the environmental effect, the “yarn forward” phrase may have gained enough weight to partly impact the endorsements of these projects.

Suppose the US Congress says no to the TPP, is the approval of these projects without sufficient consideration of their environment effects a wise thing to do?

From the above argument, we could come to the conclusion that whatever Obama would say or whatever the American political scene could become, the environmental factor will be the decisive one, not the urge from somebody or industry.