The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) was officially concluded and signed in Santiago, Chile on March 8, 2018. The signing ceremony was held in the presence of trade ministers from Australia, Brunei, Canada, Malaysia, Mexico, Japan, New Zealand, Peru, Singapore, and Vietnam.

Basic content

CPTPP, also called TPP – 11, was launched and negotiated a year ago after the US withdrew from the Trans-Pacific Partnership (TPP) agreement. Basically, CPTPP maintains TPP’s framework but temporarily suspends executing 22 articles and clauses. The notable difference of CPTPP is the change in the role of leader, whereby Japan actively promoted the agreement without the US. Before signing, Mr. Toshimitsu Motegi, Japan’s Minister of Economy said the new agreement would be the “engine to overcome protectionism”, and that Japan predicted these new changes would draw the US’s attention, and encourage the US to consider re-participating.

The formal signing of CPTPP will promote economic growth through (i) opening up the market; (ii) approaching the elimination of tariff barriers; (iii) facilitating free movement of goods and services; (iv) increasing access to the business and investment environment; while at the same time (v) committing not to trade human rights, cultural and environmental rights for business purposes. These will lead to (vi) the creation of more jobs; (vii) poverty reduction, and (viii) improvement in the quality of people’s living conditions in member states.

Articles and clauses which were suspended mainly belong to the following groups: Investment[1]; Intellectual Property[2]; Transparent and equitable procedures for pharmaceutical goods and medical equipment[3].

The CPTPP is expected to create one of the largest free-trade areas in the world, with a market of around 499 million people and GDP of USD 10.1 trillion, accounts for 13.5% of the world’s GDP.

TPP or CPTPP – Will Vietnamese truly benefit?

Throughout the negotiation of CPTPP, Vietnam has shown its role after having successfully organized the APEC Economic Leaders’ Forum (at APEC 2017 in Da Nang) as well as at the meetings to complete the signing. These efforts and contributions demonstrate Vietnam’s position in promoting free trade, economic and trade integration in Asia, the Americas, and Oceania. On the contrary, many opinions continue to debate the economic value that CPTPP would actually bring to Vietnam.

On the bright side, the CPTPP inherits the “ambition” of TPP and the characteristics of a new generation FTA. The scope and areas covered by the CPTPP are wider, not limited to only the elimination of tariff and non-tariff barriers (such as the first generation FTAs); services (like the second generation FTAs); but also increase in the level of service sector openness, especially financial services; regulations on investment liberalization, labor and environmental issues, non-commercial issues.

In the context of protectionism tending make it way back in some countries, the CPTPP maintains a favorable environment for countries to pursue integrated economies such as Vietnam. The Vietnamese people will have more opportunities to access quality products and advanced services. Agricultural commodities, which are among Vietnam’s strengths, will be made available to a large market of nearly 450 million people.

However, opposite viewpoints are that Vietnam will face a lot of pressure before it can benefit from the CPTPP. Limited competitiveness of small and medium enterprises (SMEs); low transparency and equality in administrative procedures; the unhealthy investment environment; quality, technical and hygiene standards of goods are some of the issues Vietnam is forced to improve upon joining the CPTPP membership. The temporary suspension of articles relating to dispute resolution between foreign investors and the host country has made a number of investors hesitant to approach the Vietnamese market.

Compared to a non-US trade agreement, a number of other bilateral and multilateral agreements actually provide comparable opportunities for Vietnam. For example, the Regional Comprehensive Economic Partnership (RCEP) between ASEAN with six other partners: China, Japan, Korea, Australia, New Zealand, and India (also known as ASEAN + 6). RCEP provides an opportunity to access 24% of GDP and 46% of the population (3,5 billion). Seven members of the CPTPP are also members of the RCEP, including Vietnam.

The CPTPP aims to set the standards of the “developed countries” that other countries who wish to join the agreement must meet, so it contains strict provisions related to labor standards, human rights, and the environment. The RCEP does not have such provisions, which means that Vietnam will suffer less pressure.

In addition, a bilateral trade agreement has been in place between the United States and Vietnam since 2001. The US has been Vietnam’s largest export market, while the trade surplus of Vietnam with the US has been continuously increasing, which reached US$2.7 billion in 2017.[4]

It is estimated that the CPTPP will be officially executed by the end of 2018 or the first half of 2019. After the signing ceremony, member states will domestically ratify and implement the CPTPP into their legislation. The Government of Vietnam is very hopeful about this Agreement’s feasibility.

[1] Article 9 and Annex 9-L of the CPTPP

[2] Rights related to patents Article 18 of the CPTPP

[3] Annex 26 – Article 3 of the CPTPP

[4] Vietnam’s trade surplus hits US$2.7 billion in 2017

< http://english.vietnamnet.vn/fms/business/193066/vietnam-s-trade-surplus-hits-us-2-7-billion-in-2017.html>


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