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Impacts of free trade agreements on Viet Nam’s economy (Part 2)

11/8/16
Kết quả hình ảnh cho Impacts of free trade agreements on Viet Nam’s economy
Difficulties and challenges
TPP is a real opportunity for Viet Nam because it has never had a good position as today. The overall impact of TPP on Viet Nam's economy is very positive, but by no means true to all sectors and all businesses. Lessons learnt 7 years after its accession into the WTO show that opportunities sometimes become challenges if there are no appropriate macroeconomic policies and necessary reforms.
TPP may cause some social consequences. Sectors which are heavily protected and less competitive enterprises will have to reduce production or even shrink or go bankrupt. Sectors with advantage may also encounter a few hurdles when Viet Nam joins TPP. This is also the biggest challenge, particularly for the agricultural sector where production is still fragmented with low productivity, and poor quality. Viet Nam’s agricultural brand can not compete with those of countries in the region and around the world.
Unlike other FTAs, in TPP negotiations, the United States put on the negotiating table higher demands, such as removing all barriers to trade, liberalize to the maximum investment activities and services (for special economic zone), protection of intellectual property rights, environmental protection and sensitive issues for Viet Nam, such as equality for domestic and foreign enterprises, State-owned enterprises (SOE), right to association, and government procurement. These issues have been included by the United States in its FTAs with TPP negotiating countries, like Peru, Chile, Singapore, Australia, New Zealand, or with Canada and Mexico in the of North American Free Trade Agreement (NAFTA).
In fact, to participate in TPP, Viet Nam will have to reform many laws to meet acceptable standards. TPP will not help remove anti-dumping/anti-subsidy measures and other protection measures that the US impose upon Viet Nam’s exports. TPP establishes a clear legal basis, not accepting preferential and special treatment to any enterprise. For SOEs, TPP requires transparency and equal treatment. Without clear and unified direction, as well as integrated plans right now, the pressure in the implementation of commitments are likely to be a barrier to new opportunities.
Lessons learnt from the accession into the WTO and other trade agreements have been reiterated by experts as a warning, because not a few industries have suffered damage due to poor preparation for integration. It is possible that Viet Nam’s exports in general and seafood export in particular benefit in terms of tariff. However, if enterprises fail to meet requirements which do not belong to tariff, especially the protective barriers that many countries impose, they ran the potential risk of being eliminated from the “game”.
In the implementation of FTAs, conflicts of interest always happen because opportunities of this sector may be challenges to other sectors and vice versa. This often happens in the economy, whether Viet Nam has participated in FTA or not. Nevertheless, the benefits derived from the FTAs are great for Viet Nam, though opportunities and challenges of each business are different, depending on the scale, industry, export markets and competitors. Viet Nam will now have to face increasing risks of trade protection, anti-subsidy, self-defense, and anti-dumping lawsuits in markets that Viet Nam is about to sign the FTA with. The technical barriers in trade and the quarantine requirements from the markets will also rise.

With an average registered capital of about 6 billion dong/ enterprise (less than US$ 300,000/enterprise), the majority of Viet Nam’s businesses are small and super small businesses which can not reach out to the region, and so far, they are less interested in integration. In recent time, each year from 50,000-60,000 of them stop businesses due to many reasons, and the underlying cause is a majority of the businesses can not stand the pressure of integration. This is the price we have to pay when we “open” our market. Viet Nam has to be well prepared for the new generation of FTA which will have high standards surpassing resilience of the vulnerable groups (farmers, agricultural enterprises, small and medium enterprises) and sensitive social groups (workers, and patients, among others).
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