TPP could cripple agriculture and food industry

VOV.VN - Following three decades of market reform and trade liberalization, Vietnam has emerged as one of Asia’s most dynamic economies, said speakers at a recent business forum in Hanoi discussing the impact of the Trans Pacific Partnership (TPP) on the domestic agriculture and food industry.

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The TPP in a nutshell involves 12 countries –  the US, Japan, Malaysia, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile, Peru and Vietnam. The pact aims to deepen economic ties between these nations, slashing tariffs and fostering trade to boost growth.
   

The agreement has the potential to create a new single market something on the order of the EU.

Under its export-led growth strategy, Vietnam has become a leading exporter of coffee, rice, cashew nuts, and pepper – and a significant exporter of a variety of other commodities to the global market.

Despite a recent slowdown in growth, the Southeast Asian nation represents significant market potential for the agri-food industry of the other 11 TPP member states and they should benefit significantly from its passage, said Duong Nhu Hung, vice rector at the University of Economics and Law.

Most notably, Vietnam represents a very large 90 million strong consumer market for foreign pork and poultry products from other TPP member nations, said Vice Rector Hung.

With increased urbanization and rising household incomes, Vietnamese consumers have been increasingly choosing to purchase foreign packaged and processed food over domestically produced products for convenience, food safety concerns and a desire for variety.

As well, Vietnamese farmers are heavily dependent upon feed from foreign sources and have been steadily increasing their foreign purchases over recent years.

Accordingly, the prospects for trade gains for Vietnam in the agriculture and food industry is lopsided and benefit foreign imports into Vietnam more so than exports out of Vietnam, said the Vice Rector.

He said this results in large part, because Vietnam currently has preferential trade agreements (PTAs) with many of the negotiating TPP countries.

These PTAs already provide low or duty-free rates on imports of Vietnamese produced goods and the TPP affords no added benefit of any consequence as it relates to benefits from reduced import tariffs.

Even among trade partners with which it currently lacks a PTA, most of the nation’s top exported commodities—such as coffee, rubber, cashews, and pepper—are not protected by the TPP, leaving little room for growth.

However, the TPP could provide new opportunities where those PTA agreements did not liberalize market access, he said.

Smaller export segments such as cassava starch, pepper, processed foods, and honey could gain from further liberalization of tariffs, and Vietnamese rice might possibly gain a share of the Japanese market.

However, Vietnam small businesses are still confused about how to compete in the global market said Ly Kim Chi, president of the Ho Chi Minh City Food and Foodstuff Association, and it’s questionable whether they will be able to seize opportunities the TPP does afford them.

The import growth of Vietnam of products from other TPP member nations will likely be concentrated in the consumer-oriented sector, said Ms Chi.

Even though commodities used as inputs for agriculture (soy, cotton, wheat) make up the largest share of the nation’s agricultural imports, these commodities already enter with very low tariffs, thereby lessening the impact of the TPP.

Imports of consumer-oriented foods into Vietnam on the other hand, said Ms Chi, face significantly higher rates (15-40% ad valorem duties) and thus represent larger growth potential for the foreign food industries of the other TPP members.

US agricultural exporters, in particular, are well poised to expand their market share in meats, dairy products, and fruit in Vietnam should the now stalled TPP be ratified, which could cripple the domestic agriculture and food industry.

VOV

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