investment protection and dispute …2014/10/30 · exports: us$ 340 million in 1986 => 132.2...

Vietnam’s Preparation

for Participation

in TPP and RCEP

Dr Le Quoc Phuong

Deputy General Director

Vietnam Industry and Trade Information Center

(Ministry of Industry and Trade of Vietnam)

Contents

I. Overview of TPP and RCEP

1. TPP and RCEP: key characteristics

2. TPP and RCEP in context of FTAs Vietnam concluded/negotiating

II. Why does Vietnam need TPP and RCEP?

1. Vietnam’s export-oriented economy needs further export

expansion

2. Special importance of region covered by TPP and RCEP for

Vietnam

III. Vietnam’s preparation for participation in TPP and RCEP

1. Vast opportunities of TPP and RCEP for Vietnam

2. Challenges and measures to overcome


TPP and RCEP - key characteristics

TPP

(Trans-Pacific Partnership)

RCEP

(Regional Comprehensive Economic Partnership)

Target FTA of 12 Trans-Pacific economies FTA between ASEAN and 6 countries ASEAN

has FTA with: 6 (ASEAN+1)=ASEAN+6

Launched 2005 (initially by Chile, NZ, Singapore,

Brunei)

2012

Countries in

negotiations

(as of Oct

2014)

12 countries

ASEAN: Singapore, Brunei, Vietnam,

Malaysia

Japan

America: Chile, US, Peru, Canada,

Mexico

Oceania: Australia, NZ

16 countries

10 ASEAN countries: Brunei, Myamar, Cambodia, Indonesia, Laos, Malaysia,

Philippines, Singapore, Thailand, Vietnam

6 ASEAN partners: China, Japan, Korea, India, Australia, NZ

Expected

conclusion

End-2015 End-2015


TPP and RCEP - key characteristics (cont.)

TPP RCEP

Rounds of

negotiation (as

of Oct 2014)

Round 1: Australia, May 2010

…

Round 20: Canada, July 2014

Round 1: Brunei, May 2013

…

Round 5: Singapore, Apr 2014

Driving force US as driving force:

TPP include trade and non-trade issues

TPP regarded high-standard

agreement

ASEAN and China as driving force:

RCEP focus on trade issues

RCEP standards regarded modest

Scope of

negotiations

Both trade and non-trade

Trade-related:

Trade in goods: trade in services;

Investment; IPRs; Competition; Dispute

settlement mechanism; Government

procurement; SPS; TBT

Non-trade:

Environment; Labor standard; Trade

union; SOE reform; Support for SME

Mainly trade issues

Trade in goods, trade in services

Investment

IPRs

Competition

Dispute settlement mechanism

Economic and technical cooperation

I. Overview of TPP and RCEP TPP and RCEP in context of FTAs Vietnam concluded/negotiating

Vietnam signed 8 FTAs: 2 bilateral+6 regional

Title Signed Effective Note

Bilateral FTAs

1. Vietnam-Japan Economic

Partnership Agreement (EPA)

2008 07/01/2009

2. Vietnam-Chile FTA 2011 01/01/2014

Regional FTAs

1. ASEAN Free Trade Area

(AFTA)

1992 1993 FTA of 10 ASEAN members

Vietnam joined in 1996

2. ASEAN-China FTA

(ACFTA)

2009 01/01/2010

3. ASEAN-Japan EPA (AJEPA) 2008 2008-2009

4. ASEAN-Korea FTA

(AKFTA)

2006-

2009

2007-2009 Agreement on trade in goods: signed

2006, effectve 2007

Agreement on trade in services: signed

2007, effective 2007

Agreement on investment: signed 2009,

effective 2009

5. ASEAN-India FTA (AIFTA) 2009 01/01/2010

6. ASEAN-Australia-New

Zealand FTA (AANZFTA)

2009 2010-2012 Effective date varies for individual ASEAN

members

I. Overview of TPP and RCEP (2) TPP and RCEP in context of FTAs Vietnam concluded or negotiating (2)

Vietnam negotiating for 6 FTAs:

2 regional (TPP, RCEP)+4 bilateral (EU, EFTA, Korea, CU)

Title Negotiations

launched

Expected

conclusion

Note

1. TPP 2005 End-2015 FTA among 12 countries

2. RCEP 2012 End-2015 FTA among 16 countries

3. Vietnam-EU

FTA

2012 2014-2015 FTA between Vietnam and European

Union

4. Vietnam-EFTA

FTA

2012 2014-2015 FTA between Vietnam and countries

of European Free Trade Association

5. Vietnam-Korea

FTA

2012 2014-2015

6. Vietnam-

Customs Union

FTA

2014-2015 FTA between Vietnam and countries

of Customs Union (Russia, Belarus,

Kazakhstan)


6 ASEAN countries joined RCEP negotiations but not TPP:

Indonesia, Myanmar, Thailand, Cambodia, Laos, Philippines

4 ASEAN countries joined both:

Vietnam, Singapore, Malaysia, Brunei

Reasons why TPP & RCEP important for Vietnam:


expansion

2. Special importance of region covered by TPP and RCEP

for Vietnam


expansion

Since late 1980s Vietnam follows export-led growth strategy

This strategy utilized by Japan since 1960s, NICs (Korea, Taiwan,

Singapore, HK) since 1970s, China since early1980s

As result, Vietnam’s exports rise rapidly (Figure 1):

Exports: US$ 340 million in 1986 => 132.2 billion in 2013

Average export growth 1986-2013 = 24%

Openness (total trade/GDP): 53% in 1990 => 170% in 2013

=> Vietnam in top group in terms of openness

Vietnam sets export target of US$ 255-265 billion by 2020

To reach this, new FTAs including TPP and RCEP are pivotal

II. Why does Vietnam need both TPP and RCEP?


1. Vietnam’s export-oriented economy needs further export expansion (cont.)

Figure 1: Vietnam’s foreign trade rises rapidly (1983-2013)

-20

30

80

130

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Exports ($US billion)

Imports ($US billion)

Trade balance ($US billion)

a) Vietnam’s export-oriented economy needs further export expansion (cont.)

Table 4: Vietnam’s trade value and export/GDP ratio (1990-2013)

1990 2000 2010 2013

Trade value (US$ billion)

Exports 1.7 14.5 71.0 132.2

Imports 1.8 15.6 82.8 131.3

Trade/ GDP ratio (%)

Exports/GDP 26.2 46.5 69.2 85

Imports/GDP 27.4 50.2 89.0 85

Total trade/GDP 53.6 96.6 158.2 170


2. Special importance of region covered by TPP and RCEP

Importance to world

4 world largest economies (US, China, Japan, India) are among countries negotiating for TPP and/or RCEP

20 countries negotiating for TPP and/or RCEP all located in Asia-Pacific region, which accounts for 50% of world GDP and trade

Importance to Vietnam

This region accounts for 80% of Vietnam’s trade with world

Many TPP and RCEP members are Vietnam’s most important trade partners and/or largest FDI investors in Vietnam

US, Japan, China, Korea, Thailand, Malaysia: among top 10 of both Vietnam’s trade partners and FDI investors (Table 5)


Table 5: TPP and RCEP members as Vietnam’s top

trade partners and FDI investors

Country TPP RCEP Rank in Vietnam’s

export markets

Rank in Vietnam’s import

destinations

Rank in FDI in Vietnam (% total)

US X 1 7 7 (4.6%)

China X 3 1 9 (3.2%)

Japan X X 2 3 1 (15.0%)

Korea X 4 2 3 (12.7%)

Malaysia X X 5 8 8(4.4%)

Thailand X 9 6 10 (2.7%)

Singapore X X 11 5 2 (12.8%)

Indonesia X 12 10 26 (0.14%)

Australia X X 7 13 21 (0.6%)



1. Vast opportunities provided by TPP and RCEP

a. Further expansion of export markets

b. Opportunity for Vietnam’s major export industries

c. Easing import restriction measures imposed by importing

countries

d. Opportunity to increase FDI


a) Further expansion of export markets

Most TPP and RCEP members already Vietnam’s largest trade partners

Joining TPP and RCEP, Vietnam hopes to further expand these major markets

Conclusion of TPP and RCEP will lower tariff rates (0-5%) => greater

access for Vietnam’s goods to world largest markets (US, Japan, China)

However, benefits Vietnam would gain from TPP and RCEP come mainly

from exports of goods. Gains from exports of services insignificant because

Vietnam’s exports of services is quite small.



b) Opportunity for Vietnam’s major export industries

TPP and RCEP expected to give further impetus for garment, footwear, seafood, wood products

These groups now among Vietnam’s top exports (Table 6)

Garment #2 (13.5% exports): 50% to US, 10% to Japan

Footwear #4 (6.3% exports): 30% to US, 5% to Japan

Seafood #6 (5.1% exports): 17% to US, 12% to Japan

Wood products #9 (4.2% exports)

TPP and RCEP =>new opportunity to expand markets for these industries (especially US, China, Japan - world’s top importing countries):

Garment: US tariff now 17%=> 0%

Footwear: US tariff now 12%=> 0%

Seafood: tariff now 30%=> 0-6%

Wood products: tariff => 0%




b) Opportunity for Vietnam’s major export industries

Table: Vietnam’s top 10 export product groups in 2013

Rank Products Export value (US$ billion) % of total exports

1 Mobile phones and parts 21.5 16.3

2 Garment 17.9 13.5

3 Computers, electronics 10.7 8.1

4 Footwear 8.4 6,3

5 Crude oil 7.2 5.5

6 Seafood 6.7 5.1

7 Transport equipment and parts 4.9 3.7

8 Other machinery, equipment 6.0 4.6

9 Wood and wood products 5.5 4.2

10 Rice 3.0 2.3

Total exports in 2013 132.2 100,0



c) Easing import restriction measures imposed by TPP and RCEP

countries

Joining TPP and RCEP: Vietnam given rights to consult with partner

governments over their possible anti-dumping and anti-subsidy

measures

d) Attracting more FDI from TPP and RCEP members

TPP and RCEP members now top list of100 countries investing in

Vietnam: Japan #1, Singapore #2, Korea #3, US #7 (Tab. 4)

Joining TPP and RCEP gives opportunity for Vietnam to establish

more favorable investment environment

=> Attract more FDI from TPP and RCEP members


2. Big challenges of TPP and RCEP

a) Rising foreign competition

b) Many vital sectors will be affected

c) Rule of origin (RoO)

d) Possible rise of anti-dumping, anti-subsidy, TBT, SPS measures

e) High IPR requirements

f) ISDS mechanism

g) Reduction in tariff revenue

2. Big challenges a) Rising foreign competition:

TPP and RCEP requires Vietnam open up (at high pace) domestic market for foreign goods & services

Many domestic companies and sectors will be hurt:

SMEs

Agriculture

Retail

Banking

b) TPP rule of origin (RoO):

a product exported by one TPP country to another TPP country must have TPP origin in terms of its materials/parts, in order to get preferential treatment (Eg “yarn-forward” clause

for garment; parts for computers and other equipment)

Vietnam’s export industries based mainly on assembly: importing most of materials/parts, then assembling them to make final export product)

Vietnam imports many materials/parts from non-TPP countries => Little benefit because of RoO



2. Big challenges

c) Possible rise in anti-dumping, anti-subsidy, technical, SPS measures

Conclusion of TPP and RCEP

=> Increase in Vietnam’s exports to member countries

=> Possible rise in anti-dumping/anti-subsidy/technical and SPS

measures by importing countries

d) Tough IPR requirements

TPP longer copryright terms=life of author+70 yrs after author’s death.

For comparison: WTO TRIPS sets the term at 50 yrs.

Tougher IPR requirements will increase Vietnam’s cost of purchasing

licenses, copyrights, trademarks

2. Big challenges

e) Investor-state dispute settlement (ISDS): more rights to investors,

less power to host government

Foreign investors given rights to sue host country government at

international/regional/foreign arbitration institutions

Foreign investors can demand host country government to compensate for

their losses, allegedly caused by domestic law/regulation

f) Reduction in tariff revenue

Required tariff cut to 0% for wide range of goods imported from

member countries will reduce tariff revenue => reducing government

budget



Measures to overcome challenges

Get business sector involved in negotiations

Provide information on details of negotiations for business

sector

Help enterprises (especially SME) increase their competitiveness

Support vital sectors in preparation for participating in TPP

and RCEP

Build up supporting industries to meet “rule of origin” => gain

maximum benefits from TPP and RCEP

Adjust domestic legal system in line with TPP and RCEP

requirements

End of presentation

Thank you!

investment protection and dispute …2014/10/30 · exports: us$ 340 million in 1986 => 132.2...

Documents