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How CPTPP will affect Vietnam

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The recent buzz in the Vietnamese textile and garment industry is CPTPP which the country recently signed with 10 other countries. In the presentation, we throw light on the future perspectives of this trade agreement for Vietnam. – PowerPoint PPT presentation

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Title: How CPTPP will affect Vietnam


1
How CPTPP will affect Vietnam?
2
Content
CPTPP benefits for Vietnams economy
5
What is CPTPP?
1
Reduced economic benefits in CPTPP than in TPP
6
How CPTPP originated?
2
CPTPP Benefits and Forecast about Vietnam's
textile and garment industry
7
USA and CPTPP
3
  • Challenges faced by Vietnams garment sector
    under CPTPP

8
Difference between TPP and CPTPP
4
3
What is CPTPP?

CPTPP stands for Comprehensive and Progressive
Agreement for Trans-Pacific Partnership also
known as TPP11.
It is a multilateral free trade agreement
signed on March 8, 2018 in Santiago, Chile but
not yet ratified by its member nations
The member countries are Australia, Brunei,
Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore and Vietnam.
4
How CPTPP originated?
CPTPP originated from the Trans-Pacific
Strategic Economic Partnership Agreement (TPSEP)
(also called as P4) signed in 2005 by Singapore,
Chile, New Zealand and Brunei.
Since September 2008, the United States,
Australia, Peru, Vietnam, Malaysia, Canada,
Mexico and Japan have jointly negotiated with
the aim of setting up the Trans-Pacific
Partnership Agreement (TPP). 
The negotiations of TPP were finalised in 2015
under the agreement from 12 member states. It
was then signed on 4 February 2016.
5
How CPTPP originated?
The TPP never entered into force as with the
coming of Donald Trump in power, he announced US
withdrawal from the agreement in January 2017
citing fear that jobs shall move out of USA to
low wage countries if this deal goes through.
Following this, remaining 11 countries
postponed the implementation of 20 TPP
provisions, unanimously promoting this process
with the establishment of CPTPP.
6
USA and CPTPP
  • USA had pulled out of TPP citing its terms to be
    discriminatory. The remaining 11 countries
    reframed the terms and signed the renewed pact in
    form of CPTPP.
  • At present, the USA is exhibiting inclination to
    join this pact again in the backdrop of its other
    such similar deals with Canada Mexico (NAFTA)
    and South Korea.
  •  
  • Joining of USA in CPTPP has received mixed
    response from existing members of CPTPP, with
    almost everyone desiring a complete relook at the
    existing terms and conditions, in case US steps
    in.
  • Vietnam is welcoming USAs entry in CPTPP, as it
    believes that US will have a transformative
    effect on the Vietnamese business, environment,
    and the countrys strategic goal to
    industrialise, modernise, and globalise.

7
Difference between TPP and CPTPP
Point of difference TPP CPTPP
Name Trans-Pacific Partnership Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Member nations 12 11 (excludes US)
Total GDP covered 38.2 (US 28.5 trillion) 13.5 (US 10.1 trillion)
Total world trade turnover 26.5 15.2
Apparel Import Size US 133 billion (in 2017) US 53 billion (in 2017)
Population 800 million 500 million
Reference taken from https//www.csis.org/analysi
s/tpp-cptpp Reference taken from
http//www.vir.com.vn/key-differences-between-cptp
p-and-tpp-56904.html
8
CPTPP benefits for Vietnams economy
  • It is expected that CPTPP can increase GDP by
    1.1 by 2030.
  • With CPTPP, Vietnam is expected to gain export
    benefits by 4.2.
  • The tariff reduction in large markets like Japan,
    Canada and Australia will help Vietnam to
    increase its export of goods and it will attract
    foreign investments in the fields where Vietnam
    needs development.
  • CPTPP will help Vietnam reform domestic
    institutions, create a transparent and open
    investment and business environment.

9
Reduced economic benefits in CPTPP than in TPP
  • According to Vietnams National Centre for
    Socio-Economic Information and Forecasting, CPTPP
    will lead to an increase of 1.32 in Vietnams
    GDP, much less than 6.7 as predicted under the
    TPP.
  • The gains from tariff elimination will reduce
    from 6.79 to 1.1 as a share of its GDP.
  • Exports are forecasted to grow by 4.2 under
    CPTPP, while under TPP, Vietnamese exports were
    predicted to grow by 15.
  • Imports will also reduce from 10.5 to 3.8 in
    comparison to TPP.

10
CPTPP Benefits and Forecast for Vietnamese
textile and clothing industry
  • Despite US being one of the large export market
    for Vietnamese textile and garment sector, CPTPP
    opens new opportunities for the country to tap in
    huge potential markets such as Australia, Canada
    and Japan. These three markets have large textile
    use of around US 42 billion a year. The export
    market share of Vietnam's textile industry in
    these markets is still US 4.2 billion. Thus,
    CPTPP brings in a platform for Vietnam to expand
    its export turnover in these 3 markets.
  • Apparel market size in Japan, Australia and
    Canada is approximately US 133 billion which
    gives huge opportunity to Vietnam.
  • Japan is the second largest export market for
    Vietnamese textile and garment industry with US
    3 billion worth of export. However, Japan's
    imports from Vietnam are just 11 as compared to
    that of 65 from China.

11
Benefits and Forecast for Vietnamese textile
and clothing industry
  • Similarly, Vietnam is expecting double digit
    export growth from Australia after CPTPP.
    Currently, its growth of textiles and garment
    exports to Australia is below 10. However, with
    CPTPP, Australia will cut duties to 5 per cent in
    first 3 years of CPTPP and subsequently, it will
    be zero.
  • According to FPT Securities Company, Vietnam's
    textiles and garments exports to CPTPP countries
    account for 15 of Vietnam's total export
    turnover which can go up to 35 in next 2 years.
    This will be the second largest market for
    Vietnam's garment and textiles after US, at 47.

12
Challenges faced by the Vietnams garment sector
under CPTPP
  • Once the CPTPP comes into effect, the
    labor-intensive textile industry will need to
    bring changes in the quality of labour. This will
    become an important factor in establishing the
    brand and quality of Vietnams textile and
    garment industry in demanding markets like Japan
    and Australia. Further, a stable policy regime
    towards labour issues, insurance, and wages is
    required for garment businesses to remain
    competitive.
  • In CPTPP, garment businesses get preferential
    tariffs on raw materials originated from member
    states or imported from CPTPP countries. However,
    most of the materials for Vietnams garment and
    textile sector are imported from China.
    Therefore, Vietnams Government will have to
    devise ways to prevent the import of raw
    materials from non-CPTPP countries if it wants
    local firms to benefit from the agreement.

13
Benefits and Forecast for Vietnamese textile and
clothing industry
  • Non-financial barriers in terms of improved
    technology and environmental protection are at
    the core of CPTPP. Vietnamese businesses will
    have to overcome such challenges in order to
    remain sustainable and reap benefits of CPTPP in
    long run.
  • Vietnam is facing serious competition from China
    for entering the Australian market as the
    latters textiles and garment market share in
    Australia amounts to 60 per cent. 
  • Australia orders products in small quantities and
    large Vietnamese enterprises are not interested
    in small orders. Further, small firms do not have
    a social responsibility certificate to qualify
    for exports to Australia. 

14
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