How CPTPP will affect Vietnam

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

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Difference between TPP and CPTPP
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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.
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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.
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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.
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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.

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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
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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.

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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.

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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.

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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.

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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.

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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. 

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