Lawyer in Vietnam Oliver Massmann Trans Pacific Partnership Agreement - Ratification and Key Impact for Vietnam

1. Lawyer in Vietnam Oliver Massmann Trans Pacific Partnership Agreement -
Ratification and Key Impact for Vietnam
If the TPP is ratified and goes into effect, what do you see as the key areas of impact on
Vietnam and its economic future?
Answer: Vietnam would be the largest beneficiary of this trade pact. Statistics show that by
participating in the TPP, Vietnam’s GDP would add an additional increase of 13.6% to the
baseline scenario. According to the World Bank and other institutions, Vietnam’s GDP in
2020 will increase by USD 23.5 billion and USD33.5 billion in 2035. Export value will also
increase by USD 68 billion in 2025. Vietnam’s real income by 2025 is also forecast to
increase by 10.5%, leaving Malaysia’s as the second highest income rising country out of the
TPP members far behind at 5.6%.
TTP will help Vietnam balance relationships with key markets, approach larger markets
including the U.S, Japan, Canada, boost import-export, reduce import deficit, and attract
foreign investment. In addition, TTP will also help Vietnam’s economy allocate its resources
more effectively, enabling active supports to the processes of restructuring, innovation and
improving regulations, and improve administrative reforms.
What industries do you see within Vietnam would benefit the most, and where do you see
major risks to established industries if the TPP is ratified?
Answer: The TPP will have significant positive impact on Vietnam’s exports in textile,
footwear, agriculture, forestry and fisheries sectors. This is due to major reduction in import
duties for goods from Vietnam, especially in Japan and the United States. Supply chain
established after the effectiveness of the TPP will also bring Vietnam a lot of new
opportunities. Recently, many big corporations have chosen Vietnam as a part of their
production chain of high tech products. The TPP will help to develop this trend.
The livestock industry will suffer from fierce competition as a result of the TPP. In Vietnam,
the livestock industry is still small, not modernized, mainly household scale with
participation of small and medium enterprises. Products have certain difficulties in meeting
high quality and sanitary standards.
Textile industry is also a sector which bears negative impact from the TPP. The yarn-forward
rule of origin makes Vietnam’s textile products difficult to be entitled with preferential
import duties, as the domestic weaving industry has not well developed. Vietnam still has to
import cloth and fabrics from non-TPP countries (for example, China). The textile industry
sees this as an opportunity to re-structure the whole industry and improve the supply chain.
In your view, if the US does not ratify the TPP, do you see the RCEP as a replacement for
Vietnam? And if so, what do you see as the major impacts (positive or negative) on
Vietnam, as a result of implementing the RCEP without having a TPP?

2. Answer: I take a positive view that the TPP will sooner or later be ratified. However, in the
unlikely worst scenario that the TPP will not be materialized, Vietnam will lose a great
opportunity to integrate its economy deeper in the Asia- Pacific Region. RCEP has a lower
level of trade liberalization and smaller commercial scale. RCEP does also not take a single-
package approach, or in other words, it is not a comprehensive trade agreement which covers
new issues of the era such as labour and environment standards, competition, SOEs,
government procurement, IP rights, etc.) as the TPP. Thus, RCEP’s positive impacts on
transforming Vietnam’s economy will not be as large as the TPP’s. Without the TPP,
Vietnam will face strong competition from China – which is not a party to the TPP and this is
Vietnam’s advantage over China. RCEP will put Vietnam in a disadvantaged situation in its
relationship with China as a result of more liberalized and preferential bilateral trade from
RCEP. Vietnam will no longer benefit from RCEP due to the similarities in the export
structure between Vietnam and China.
If the TPP is ratified and goes into effect, do you see any effect with Vietnam – China
trade? Especially given that there is already a trade agreement in place as part of the
ACFTA.
Answer: Vietnam’s participation in the TPP will not harm Vietnam – China trade. I note that
Vietnam has great trade deficits with China. However, while China is the biggest trading
partner of Vietnam in terms of two-way trade, the United States is still Vietnam’s largest
market. By being part of the TPP, Vietnam can take advantage of this opportunity to access to
other TPP members’ market, improve its competitive capacity, thus reducing its reliance on
China. Vietnam – China trade relations will then be improved towards better balance,
stability and for mutual benefits.
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Please contact the author Oliver Massmann under omassmann@duanemorris.com if you have
questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam
LLC.