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CPTPP comes into force in Vietnam today
The Saigon Times Daily
Monday,  Jan 14, 2019,19:31 (GMT+7)

CPTPP comes into force in Vietnam today

The Saigon Times Daily

A worker trims a piece of cloth at a factory of Viettien Garment Corporation. The CPTPP is expected to boost many industries in Vietnam, especially the textile and garment sector – PHOTO: THANH HOA

HCMC – The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which takes effect in Vietnam today, January 14, after the country notified its partners 60 days in advance, is expected to open up ample opportunities for the country to boost its exports, but challenges will abound as well, reported the Vietnam News Agency.

The CPTPP officially came into force on December 30, 2018 in six other countries after the due process. The 11-member trade deal was signed by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam in Santiago in March 2018.

The trade pact creates a free-trade market with a population of some 500 million people and a combined gross domestic product (GDP) of more than US$13.5 trillion that accounts for 13% of the global GDP.

The CPTPP includes investment and service regulations for many areas, gradually abolishing 98% of tariffs on agricultural and industrial products, easing investment regulations and enhancing the protection of intellectual property.

Economist Le Dang Doanh, a member of the United Nations Committee for Development Policy, said the signing of the CPTPP is a new step ahead by Vietnam in the process of international economic integration. The participation enables the country to multilateralize economic and trade relations and avoid risks, due to the establishment of ties with several major markets.

He explained that other CPTPP partners will abolish some 78%-95% of tariff lines on Vietnamese ordinary goods in the next five to ten years. By the end of the tax reduction schedule, they will remove up to 98%-100% of tariff lines.

Meanwhile, Vietnam will immediately eliminate 65.8% of tariff lines for partners, and by the 11th year, the country will slash up to 97.8% of these lines for its partners.

The CPTPP enables Vietnam to set up free trade relations with many more distant partners and is a driving force for Vietnamese businesses to penetrate new markets, according to Doanh.

In addition, the restructuring of exported products among CPTPP members is complementary and less competitive with each other. Therefore, the trade pact is expected to open doors for key Vietnamese exports, such as textiles, garments, footwear, wooden furniture and seafood, to penetrate the new markets of Canada, Mexico and Peru.

Tran Quoc Khanh, Deputy Minister of Industry and Trade, told the news agency that the CPTPP will create many opportunities for local wood firms to boost their exports, including plywood, timber slabs, picture frames, door frames and especially indoor furniture. Their import tariffs, ranging from 6% to 9.5%, have now been abolished.

Export tariffs on Vietnamese textile and garment products to markets that do not have common free trade agreements (FTAs) are over 10% on average. As the CPTPP takes effect, those products meeting the general technical criteria will enjoy a zero tax rate. As a result, the prices of Vietnamese products will become more competitive, stated Pham Xuan Hong, president of the HCMC Textile, Garment and Embroidery Association.

The tariff reduction is also a major factor that will push domestic and foreign investors to develop raw material and supporting industries in Vietnam. Their investments will help set up links in textile and garment chains in a more effective manner, bolstering the sustainable development of the sector.

Furthermore, thanks to its CPTPP membership, Vietnamese textile and garment producers will learn more about new markets in South America and boost their exports there.

Challenges ahead

However, Tran Thi Thanh Huyen, an official at the Department of International Cooperation under the Finance Ministry, stated that the criteria for obtaining tax incentives listed in FTAs are not that simple, especially with a new, comprehensive FTA like the CPTPP. Vietnamese commodities must meet stringent standards and face multiple technical barriers.

Hong of the HCMC Textile, Garment and Embroidery Association commented that technical criteria are not a major problem for Vietnamese textile and garment firms. However, the regulation on yarn origins, which requires fabric spinning, weaving and dyeing processes to be carried out in the CPTPP market, is a tough challenge.

Vietnamese firms currently import over 60% of raw materials from beyond the CPTPP zone, he noted, adding that seeking new material sources is not simple for the local textile and garment industry.

He pointed out that the CPTPP could be seen as a factor that attracts foreign investment to the raw materials manufacturing industry. However, the industry will carry risks of environmental pollution if outdated technologies are used.

Economist Doanh explained that local firms should present action programs and plans to improve their production capacity to make use of tariff incentives from current and future FTAs.

Experts also recommended that firms improve their governance capacity and change their production methods to improve the added value of their products. In addition, they should upgrade their technologies to increase productivity and meet environmental standards.

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