The Trans-Pacific Partnership: Opportunities and Challenges

Nathan Lane, U.S. Consulate General Ho Chi Minh CityVietnam Oregon Initiative Launch, April 22, 2015

Agenda

1. What is TPP?

2. What does TPP mean for Vietnam?

3. Opportunities

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What is the TPP?

Slide 3

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12 Countries

40% of the World Economy

TPP – A Comprehensive High Standard Trade and Investment Agreement

TPP Basics

• A “21st Century” Trade and Investment Agreement – Aims to eliminate all tariff and non-tariff barriers to trade and investment

• 12 Partner Countries - United States, Vietnam, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Canada, Japan, Mexico

• Massive in scope – 29 chapters, from Market Access to IPR to environmental standards

• Model for future trade pacts among APEC members

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Ambitious

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Source: scores of provisions from FTA database.

Dynamic scenarios

20252020

FTAAP21 APECEconomies

TPP12Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, United States, Vietnam, Canada, Japan, Mexico

TPP+ New countries join

2012 2015

TPP Scenario

What does TPP mean for Vietnam?

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AmCham/HCMC

What explains Vietnam’s gains?

• More exports of manufactured goods • More access to imported goods• Increased FDI• Stronger linkage to production chains,

overall productivity gains• Support momentum of reforms, growth

Export gains by country(gains from trade effects)

  GDP ($bill) Value change  ($bill) % GDP

  2025 TPP FTAAP TPP FTAAPAustralia 328 9 33 2.8 9.9Brunei 9 0 0 1.8 4.7Canada 613 7 17 1.1 2.8Chile 157 5 8 3.0 5.3Japan 1,239 61 180 4.9 14.6Korea 627 48 123 7.7 19.6Malaysia 328 16 29 5.0 8.8Mexico 519 16 58 3.1 11.1

New Zealand 57 3 5 5.7 8.5

Peru 92 10 13 11.0 14.2

Singapore 232 2 -10 0.6 -4.2

United States 2,845 56 292 2.0 10.3

Vietnam 264 68 113 25.8 43.0

TPP economies 7,310 301 862 4.1 11.8

Others 20,264 -78 962 -0.4 4.7

World 27,574 223 1,824 0.8 6.6

Market Access Opportunities for Vietnam

• Increase market access opportunities:• Promote Vietnam’s exports, especially to the

U.S. market for products • Improved market access and tariff reductions

in other TPP countries – e.g. U.S. tariff rates are already low for electronics, appliances, and a multitude of other low-end manufactured products, but rates in many of the other TPP countries (or potential TPP countries) are high

 

• Seafood – U.S. tariffs range up to 35% for canned seafood

• Other ag products (fruits, nuts, etc.) – U.S. tariffs can be as high as 30%-130% (e.g. for some peanuts)

• Flowers – U.S. tariffs up to 10%

• Footwear – U.S. tariffs average 17% (and can go as high as 48% for some sneakers)

• Accessories (hats, gloves, hair clips, etc.) – U.S. tariffs average 23.5%

• Auto parts – U.S. tariffs average 25%

• Wool cloth – U.S. tariffs average 25%

• Brooms and other straw materials – U.S. tariffs average 32%

• Ship parts – U.S. tariffs go as high as 50%

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Tariff Reductions Create New Opportunities

Investment• International “vote of confidence”

– TPP Differentiates Vietnam from other developing countries looking for investment;

– International investors like TPP, and the seal-of-approval it connotes

– Improved bond ratings and renewed investment flows; will pump up the overall economy and markets

• Higher demand for supportive industries

• Access to the larger TPP market should increase incentives for investors to move electronics and appliance factories to TPP countries;

– Vietnam and Malaysia are the logical destinations

Slide 14

FDI Gains by country(Vietnam FDI grows)

  GDP ($bill) Stock increase ($bill) % GDP

  2025 TPP FTAAP TPP FTAAPAustralia 1,536 10 19 0.7 1.3Brunei 28 1 0 2.8 1.2Canada 1,255 0 1 0.0 0.0Chile 444 4 3 0.8 0.7Japan 476 156 250 32.8 52.6Korea 406 17 58 4.2 14.3Malaysia 386 4 3 1.0 0.9Mexico 1,046 3 2 0.3 0.2

New Zealand 182 2 4 1.1 2.1

Peru 189 12 10 6.4 5.3

Singapore 1,678 0 0 0.0 0.0

United States 7,726 40 57 0.5 0.7

Vietnam 395 28 42 7.1 10.6

TPP economies 15,746 276 451 2.9 2.9

Others 40,335 0 895 0.0 2.2

World 56,082 276 1,345 0.5 2.4

• Improved Business Climate –

– Directly address complaints from U.S. and local businesses in Vietnam (IPR protection, increased international financial service providers, more level playing field for private firms, etc.)

– New investment creates new jobs, new skills, and opportunities for new supportive industries

Slide 16

Reform Attracts New Foreign Investment

Improved International Status

• Raise Vietnam's international status, and promote relationships with key partners• International stability and a secure

international environment brings economic security and stability

Overall

• All TPP members benefit

• Emerging economies like Vietnam benefit most

THANK YOUQuestions?

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