Tuesday,  Sep 25, 2018,07:49 (GMT+7) 0 0
WB: Vietnam to benefit from sweeping trade deal
Thuy Dung
Monday,  Mar 12, 2018,23:17 (GMT+7)

WB: Vietnam to benefit from sweeping trade deal

Thuy Dung

Representatives of 11 countries at the signing ceremony of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in Santiago, Chile last week - PHOTO: REUTERS

HANOI – Vietnam and 10 other countries including Japan and Canada signed a landmark Asia-Pacific trade pact without the United States last week in what the World Bank said would greatly benefit the Vietnamese economy.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will bring huge economic benefits to Vietnam, according to a World Bank (WB) report released last Friday after 11 Pacific Rim countries signed the agreement in Santiago, Chile.

The report on economic and distribution impacts of the CPTPP showed that the pact will further boost Vietnam’s investment and export-driven growth model. Even under conservative assumptions, the CPTPP would increase Vietnam’s gross domestic product (GDP) by 1.1% by 2030. Assuming a modest boost to productivity, the estimated increase of GDP would amount to 3.5%, said Ousmane Dione, the WB country director for Vietnam.

All workers are expected to benefit from the agreement, especially higher-skilled ones in the top 60% of the income distribution. Moreover, the increase in foreign investments will lead to a further expansion of the service sector and boost productivity growth, said the report.

It is also expected to create opportunities for domestic private firms to integrate into global value chains, promoting the development of small and medium enterprises.

Sebastian Eckardt, the WB chief economist in Vietnam, said the new trade agreement would bring direct benefits to Vietnam from trade liberalization and improved market access. Most importantly, it would help stimulate and accelerate domestic reforms in many areas such as competition, services, customs, e-commerce, environment, government procurement, intellectual property, investment, labor standards and legal issues.

He added that delivering commitments under the CPTPP will promote transparency and support the creation of modern institutions in Vietnam.

The CPTPP was earlier known as Trans-Pacific Partnership (TPP) from which President Donald Trump withdrew the United States shortly after he was sworn in early last year.

Chilean Minister of Foreign Affairs Heraldo Munoz called the deal a powerful signal against protectionism and trade wars. It is aimed at cutting tariffs among the member countries and removing non-tariff barriers.

The new deal consists of mechanisms to deal with disputes between governments and enterprises which allow firms to file lawsuits against governments if law amendments affect their profits.

The CPTPP comprises Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The Asian member countries are seen reaping more benefits from the deal.

The Peterson Institute for International Economics estimated the CPTPP would increase Malaysia’s, Singapore’s, Brunei’s and Vietnam’s GDP by 2% by 2030 while the rate will be some 1% for New Zealand, Japan, Canada, Mexico, Chile and Australia.

Australian Prime Minister Malcolm Turnbull said 20 provisions initiated by the U.S. had been suspended in the freshly signed deal. Therefore, it would be hard for the U.S. to re-enter the agreement.

The trade pact is set to take effect in early 2019 after it is ratified by at least six member countries.

Vietnamese Minister of Industry and Trade Tran Tuan Anh said on the ministry’s website that Vietnam commits to open up its market, lift tariff barriers, facilitate trade, and streamline State management of market development.

Through the agreement, he noted, the competitiveness of the Vietnamese economy and businesses will be boosted. 

The pact would facilitate capital flow into Vietnam thanks to reforms in all sectors. Sectors like garment/textile, footwear, food processing, beverage, confectionery, tobacco, wine and beer will benefit most from the deal.

However, the country will have to fulfill its integration commitments, and implement reforms towards sustainable development and higher added value, Anh said.

Before the signing of the CPTPP, some other economies such as Thailand, Indonesia, the Philippines, South Korea, Taiwan and the UK. had expressed interest in joining the trade bloc. Despite the U.S. withdrawal, the CPTPP now accounts for 14% of global GDP and one-sixth of global trade, and involves 500 million consumers, even larger than the European Union’s population.

The agreement retains the high standards, economic significance and integrity of the TPP while ensuring the commercial and other interests of all the signatories. Up to 95-98% of taxes will be exempted as soon as the CPTPP takes effect, instead of five to seven years as stipulated in bilateral trade agreements.

Vo Tri Thanh, former deputy director of the Central Institute for Economic Management (CIEM), said the CPTPP would force Vietnam to make drastic legal reforms to create a more competitive business environment and prop up its competitiveness.

The 11 members reached a broad agreement last November and agreed on the revised content of the agreement on January 23, 2018. On February 21, the full text of the CPTPP was announced.

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