VIETNAM'S FTA AND IMPLICATION OF PARTICIPATING IN THE TPP Nguyen Huy Hoang, PhD Institute for Southeast Asian Studies Vietnam Academy of Social Sciences Taipei, October 31 st, 2013
AGENDA VIETNAM INTEGRATION PROCESS VIETNAM S FTA TPP AND PARTICIPATION OF VIETNAM TPP PARTICIPATION IMPLICATION FOR VIETNAM CONCLUSING REMARKS
I. Milestones achievements of Vietnam s Global and International Integration 1986: Started Doi Moi (Renovation)Policy (open policy) 1994: Filled application to join GATT and re-affirmed determination for WTO negotiations 1995: Became official member of ASEAN 1996: Participated in CEPT within AFTA framework; Became founding member of ASEM 1998: Became official member of APEC 2002: With ASEAN launched FTA negotiations with China (ACFTA) 2003: With ASEAN started FTA negotiations with India and Japan 2004: With ASEAN started FTA negotiations with Korea, and Australia and NZ 2006: Became official member of WTO 2007: With ASEAN launched FTA negotiation with EU; bilateral FTA negotiation with Japan 2008: Launched bilateral FTA negotiation with Chile; negotiation for TPP
I. Milestones and achievements of Vietnam s Global and International Integration (Continued) 2012: With ASEAN launched RCEP negotiation (ASEAN+6 Framework); Started bilateral FTA negotiation with EU, Korea and EFTA* (Swiss, Norway, Liechtenstein, Iceland) 2013: Started FTA negotiation with Customs Union (consists of Russia, Belarus and Kazakhstan) Besides, Vietnam has established good relationship with most of the world s countries, especially world powers and P5 countries (5 permanent members of UN Security Council) Improve from strategic partnership to comprehensive strategic partnership with China, became comprehensive strategic partnership with Russia, establishing strategic partnership with Japan, India, Korea, Spain, United Kingdom, and United States, On multilateral cooperation: close links with ADB, WB, IMF and many other regional and international organizations.
I. Continued (Achievements by trade liberalisation and opening market) In the period 2001-2010, growth in exports of goods on average 17.42%, 2.42% higher than the target set out in the export development strategy 2001-2010. Alone in the period 2007-2010, the period after joining the WTO, exports grew by 14 % per year, imports increased by 11 % per year. By 2011, according to the General Statistics Office, the export turnover reached U.S. $ 96.3 billion, the highest level ever, up 33.3 % from the record achieved in 2010. At the same time, the trade deficit in 2011 was the lowest in the last 5 years.
I. Continued (Achievements by trade liberalisation and opening market) The structure of exports of Vietnam in the period 2001-2010: there has been a positive shift towards increasing the proportion of processed food and reduced crude exports. Concretely, the proportion of the agricultural, forestry and fishery decreased from 29.37 % in 2001 to 23.3% in 2010; proportion of light industry goods and handicrafts has increased from 35.72% in 2001 to 48.9% in 2010, proportion of mineral resources and fuel products declined from 34.92 % in 2001 to 27.8% in 2010. Foreign markets are expanded and diversified. The number of export markets has increased over 1.4 times after 10 years (2001-2010), from 160 to over 230 markets. The market structure of import and export has been shifted towards reduced dependence on Asian markets.
II. Vietnam s FTA process With rapid increase of FTA for Free Trade Area, Vietnam has actively launched FTA establishment process. Results are: Signed: ASEAN FTA: Signed in 1996. most of commitments have been implemented. ASEAN-Australia/New Zealand FTA: Signed in 2009; Effective from 2010 ASEAN-India FTA: Signed in 2009; Effective from 2010 ASEAN-Korea FTA: Effective from 2007 ASEAN-Japan FTA: Signed in 2008 within AJCEPA ASEAN-China FTA: Signed in 2004; Effective from 2010 Vietnam-Japan FTA: Signed in and effective from 2008 Vietnam-Chile FTA: Signed in Nov. 2011; Effective from 2013
II. Vietnam s FTA process (continued ) Under negotiations RCEP (ASEAN+6*) in 2012 ASEAN-EU FTA in 2007 (still under negotiation) TPP : Under negotiation since 2008 Vietnam-EU FTA: Negotiation since 2012 Vietnam-Korea FTA: Negotiation since 2012 Vietnam-EFTA (Swiserland, Norway, Liechtenstein, Iceland) FTA since 2012 Vietnam-Customs Union (Russia, Belarus and Kazakhstan) FTA since 2013 Under examination Vietnam-Canada FTA
FTA Commitments Vietnam pledges to open market and to tax reductions, focus on investment environment, intellectual property, sustainable development accordingly to FTA Regarding the liberalization level: Basically, it is higher than commitments to WTO accession. Of these, approximately 90% of tariff lines (accounting tariff lines of import tax) with the time frame of cutting down to 0% within 10 years, of which some tariff lines are flexible in the range of extended period from 2 to 6 years. Of which, the degree of liberalization in AFTA/CEPT/ATIGTA commitments is highest (99% of 8-digit tariff lines), the lowest is in the AIFTA/AITIG commitments (80% of 6-digit tariff lines) and the commitment AJCEP (88,6% of 10-digit tariff lines). On tax cuts roadmap: With AFTA, ACFTA and AKFTA tax cuts will be implemented according to the schedule prescribed for the annual reduction step (AFTA: 1996 to 2006 - from 2015 to 2018, AKFTA: 2007-2016 to 2018 ). Road map for reduction of the remaining FTA (AJCEP, AIFTA, AANZFTA, VJEPA) will be gradually reduced each year to reach the final tariff commitments. (AJCEP: 2008-2018-2024 VJEPA: 2009-2019 - 2015 AANZFTA: 2010 2018-2020, and AIFTA: 2010 2018-2021).
FTA Commitments (continued) Tariff Commitments of Vietnam in Vietnam-Chile FTA: - Vietnam committed to eliminate tariffs on 87.8% of tariff lines in the current import tariff (accounting for 91.22% of imports from Chile to Vietnam in 2007) in 15 years. In 12.2% of the remaining tariff lines, 4.08% of the tariff lines under the exclusion list (no reduction and elimination), 3.37% of tariff lines remain the same tax base and 4.75% of tariff lines are partially tax reduction.
III. TPP and participation of Vietnam 2005 called Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4*): A free trade agreement aiming at further liberalizing the economies of Asia and pacific region. 2010: Changed to TPP: is now a free trade agreement under negotiation by Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam Accession process: Taiwan has announced its interest in September 2013. Country Membership Status Date Country Membership Status Date Brunei Original Signatory June 2005 Peru Negotiating Nov. 2008 Chile Original Signatory June 2005 Vietnam Negotiating Nov. 2008 New Zealand Original Signatory June 2005 Malaysia Negotiating Oct. 2010 Singapore Original Signatory June 2005 Mexico Negotiating Oct. 2012 US Negotiating Feb. 2008 Canada Negotiating Oct. 2012 Australia Negotiating Nov. 2008 Japan Negotiating Mar. 2013
III. TPP and participation of Vietnam (continued) TPP is referred as a Century Agreement as its big size and significant influence once it is implemented. TPP is an open mechanism, in which interested countries can negotiate to join. For a member likes Vietnam, this is important time and Vietnam needs to create best frameworks of TPP participation in order to facilitate other countries participation latterly. TPP covers broader geographical territories compared to TBA, FTA and WTO in trade in goods, trade in service, investment and intellectual property. It also covers non-traded issues as government procurement, environment, labour, trade union, support to SMEs. Joining TPP is not like WTO where negotiation is one-way, interested country has to follow WTO commitments which can not negotiate. In TPP, Vietnam has rights to negotiate and be able to participate in the construction of agreements rather than agree to agreements and terms (equal rights among participating members).
IV. TPP Participation Implications for Vietnam Opportunities by joining TPP: By commitments, Vietnam has chance to conduct institutional reforms, improving business environment to facilitate socio-economic development, Trade and investment relations, education, science and technology cooperation between Vietnam and TPP members can be improved quickly to expand, both broader and in-depth, creating more resources for Vietnam development in the new period. Among TPP members, there are important countries, with can be highly supplementary for Vietnam economies like the US, Australia, New Zealand, Singapore, etc. They are also the Vietnam potential investment partners. TPP could help boost investment from these countries to Vietnam, especially in some areas Vietnam wants to develop as high-tech industries, improving domestic industry, services, agriculture, and enabling Vietnam to better participate in the value chain in the region and globally. Vietnam has opportunity to improve competitiveness capabilities of enterprises, businesses both private sectors and state own sectors.
IV. TPP Participation Implications (Continued) By joining TPP, Vietnam has opportunities to reform labour law to international and regional standards, On the equal basis, during TPP negotiation Vietnam could protect its interests, especially core interests as other members do. To protect its core interests, Vietnam needs to clearly identify its concrete objectives during negotiations. For example, the changes to Rules of Origin (ROO) in textile products, change or loosen the Yarn Forward provision could improve significantly Vietnam chance to access the US market. Another example, there need to be a concrete regulation to promote Vietnam quickly becoming market economy in anti-dumping cases, For example, Vietnam's economy continues under the dominance of the state-owned enterprises in a greater level than any other TPP countries. Ensure that these enterprises have not been discriminated against as a key objective of Vietnam
IV. TPP Participation Implications (Continued) Challenges: By joining either FTA in general or TPP in particular, Vietnam has to open its market for goods and services from its partners. Thus, Vietnam would also face this challenge by joining TPP. ROO would hamper Vietnam textile industry Vietnam s regulation system is generally less developed than most TPP members, so it is difficult for the country to make its system to match other members in the TPP. Vietnam s local industries, especially SMEs face stiff competition due to lower import duties after realization of TPP. Vietnam's economy is protected more from foreign investment and engage more with the government than any other TPP countries. Thus, Vietnam will face demands from other TPP countries for more open and liberation for foreign investment in areas such as telecommunications and financial services. To satisfy these requirements will be a challenge for business and public policy.
Advantages by joining TPP Vietnam can improve its trade relations with China and other emerging and large economies like India. Improve competitiveness in all sectors Vietnam integrates deeply globally and regionally If Vietnam is successful in negotiating over ROO to ensure the regulations of the developing countries, the goods such as textiles, leather shoes of Vietnam will have a lot of advantages in TPP markets
Analysis of the potential disadvantages for Vietnam by joining TPP By joining TPP, Vietnam would lose in the domestic market: Vietnam would face disadvantages in the domestic market in the following forms: Disadvantage from tariff reduction for goods and services from TPP partner countries Disadvantage from open services market Disadvantage from implementing high requirements on environment, labor, competitiveness as well as procedure binding when promulgating regulations relating to technical barriers and sanitary, etc. Disadvantage from implementing high requirements on protection of intellectual properties Disadvantage from opening market for public goods procurement. Vietnam would lose in its TPP partner countries: High requirements/standards on environment and labors Binding procedures on issuing and enforcing regulations on TBT*, SPS**, and trade defense
V. Conclusing Remarks Participating FTA or TPP (a kind of FTA), Vietnam s economy is in the process of deeply integrated into regional and global markets The country is facing great challenges ahead. To success, Vietnam still has a lot of works to do. Government should consult multidimensional information from different channels. From there, it needs to analyse, evaluate and consider the opinions and suggestions of the stakeholders, especially the direct beneficiaries or those are badly impacted by the agreement to clearly see all the benefits and damages not only for the economy but for each economic sector and other stakeholders to make most effective and harmony measures.
To enterprises and business: Related to TPP, currently we just raise some basic issues as the agreement is under negotiation. The specific commitments during negotiation and finalization of the TPP is not discussed in Vietnam at this point of time. But we aware that this is a century-level agreement, its range is very wide, very deep that would affect the entire economies those joining TPP. So all related sectors (most economic sectors in Vietnam are related to TPP) especially enterprises should study and examine carefully this agreement. In cases of need, the Government's negotiation body have to publicize the negotiation information (if possible) for stakeholders to know in order to allow them to discuss and suggest recommendations.
Thank you!