General Cuong: Challenges and opportunities when Vietnam joins CPTPP

President Trump's mistakes

Originating from the Obama administration, the Trans-Pacific Partnership (TPP) is a free trade agreement negotiated since March 2010, including 12 member countries: the United States, Canada, Mexico, Peru, Chile, New Zealand, Australia, Japan, Singapore, Brunei, Malaysia and Vietnam. TPP was officially signed on February 4, 2016 and is expected to take effect from 2018.

However, after taking office as the 45th President of the United States in January 2017, President Donald Trump decided to withdraw from the TPP, which his predecessor had signed, making it impossible for the TPP to meet the conditions for taking effect as originally planned. The American public and allied countries believe that this was a wrong decision, time will tell.

President Donald Trump signed a document officially withdrawing the US from the Trans-Pacific Partnership Agreement, January 23, 2017. Photo: Reuters

The remaining 11 countries, with Japan playing the leading role, have held many meetings to organize the construction of a new forum without the US. At the APEC forum held in Vietnam in 2017, representatives of the 11 countries exchanged common perceptions on the new agreement. This is a turning point for the birth of a new agreement.

In November 2017, the remaining 11 member countries issued a Joint Statement agreeing to change the name of the TPP to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In March 2018, the countries signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Why is it called a comprehensive and progressive agreement?

Because this agreement goes beyond conventional trade agreements in that conventional agreements are signed to reduce transaction costs, the CPTPP ensures improved labor and environmental standards in Asia - Pacific, and aims to achieve many important goals regarding foreign trade, employment opportunities, and rapidly improve the lives of people in 11 countries.

CPTPP is the first large-scale economic association agreement in the Asia-Pacific region, with a population of 505 million people in 11 countries, a total GDP of 10,570,000 billion USD, accounting for 13.1% of the world's total economic volume, and trade between these 11 countries accounting for 15% of global trade turnover.

CPTPP member countries. Photo: Internet

The 11 members are countries in the Asia-Pacific region with economic vitality and abundant development potential, many of which are at a very high level such as Japan, Canada, Australia... Many countries are emerging, dynamic economies with quite high growth rates such as Vietnam, Mexico...

With its large economic scale and the rapid and dynamic development of its member countries, CPTPP has great appeal to countries in and outside the region. Currently, according to many sources, many countries such as South Korea, Taiwan (China), the UK, the Philippines, Colombia... also intend to join CPTPP.

CPTPP is a new version of the TPP Agreement without the US.

During the period 2001-2011, the US was bogged down in the Middle East terrorist war. Taking advantage of the US's quagmire, superpowers like Russia developed rapidly, playing an important role in world politics in terms of economy, politics and security. While the US was stuck and bogged down in the Middle East war, Russia recovered quickly after the Great Depression and collapse (1991-1999). China rose to achieve miraculous results, with its total GDP surpassing Japan, becoming the second largest economy in the world, challenging the role and position of the US in the Asia-Pacific region.

In response to the strong rise of China, the Obama administration has implemented a strategy of pivoting to Asia - Pacific. In the process of implementing this strategy, the Obama administration has also promoted countries to join the TPP. TPP is a diplomatic initiative of President Obama, through TPP, the Obama administration aims to achieve the goal of reducing tariff barriers of 12 countries, whose GDP accounts for 40% of the world.

Leaders of member countries and negotiating countries meet at a TPP summit in 2010. Photo: Internet

In that sense, TPP is a core part of the Obama administration’s pivot strategy to Asia-Pacific. Without TPP, the US cannot implement its pivot strategy to Asia-Pacific. Therefore, compared to TPP, CPTPP has some new points, in terms of scale, TPP’s GDP with the US accounts for 40% of global GDP, without the US, it only accounts for 13% of global GDP.

The biggest difference between TPP and CPTPP

Most importantly, the content of the provisions of these two agreements is different in many ways. CPTPP has many adjustments, in the direction of lowering the mandatory threshold compared to TPP, but still maintains comprehensive and progressive standards. Basically, CPTPP still retains 2/3 of the content of TPP.

The biggest change of CPTPP compared to TPP is the suspension and amendment of a maximum of 22 points, out of more than 1,000 points of the agreement. Among them are points and provisions related to intellectual property protection. Most of the provisions that have been suspended, not implemented, and have many amendments and supplements, are related to intellectual property protection provisions requested by the US during the TPP negotiation process.

The United States is the country with the most developed science in the world, nearly 60% of Nobel Prize winners are Americans, and every year the United States accounts for about 50% of the world's patents and inventions. Therefore, intellectual property protection is the focus of the entire US TPP negotiations. Chapter 18 of the Agreement on intellectual property rights is the longest chapter in the TPP agreement.

Head of the negotiating delegation of CPTPP member countries. Photo: Internet

In fact, the issue of intellectual property protection is the most thorny and tense issue in the TPP negotiation process between the US and the remaining 11 countries.

The essence of the problem is that the US prolongs the time of implementing intellectual property protection. For example, there are inventions in antibiotics, medicine, and pharmaceuticals, the US demands intellectual property protection for 8-10 years. That is, during this time, no country has access to American inventions. During that time, the US has invented other more modern things.

Therefore, the biggest difference between TPP and CPTPP is intellectual property protection.

In the new agreement, the issue of intellectual property rights has been reduced to a minimum to satisfy 11 countries. This is the newest and most important point that distinguishes the TPP and CPTPP. Therefore, all 11 countries participating in CPTPP feel comfortable.

Advantages and disadvantages when Vietnam joins CPTPP

First of all, we must determine Vietnam’s position in this agreement. Among the CPTPP members, Vietnam has the lowest level of economic development. There are highly developed countries such as Japan, Singapore, New Zealand, Australia, etc.

Second, Vietnam's market economy is in its infancy, we do not have much experience in organizing and managing a full economy.

The third weakness is that Vietnam's level of science and technology development is also low among the 11 countries. In the context of globalization and the 4.0 revolution, countries with low levels of science and technology usually have to endure many pressures and difficulties when integrating internationally.

CPTPP negotiating delegations in Da Nang, Vietnam in November 2017. Photo: Reuters

Advantages that Vietnam is capable of taking advantage of and exploiting

Firstly, expanding the market space, when the agreement comes into effect, Vietnamese goods can penetrate huge markets, such as Japan, New Zealand, Australia, Mexico, Canada... the possibility of expanding the export of goods is very large. Because once a member, the tariff barriers will be reduced, of course it is a mandatory standard condition, but this is a very important opportunity for us to expand the export market of goods.

The second opportunity is that Vietnam has very good conditions to attract FDI from the remaining 10 members. We hope that when the agreement comes into effect, large investors from Japan, New Zealand, Australia, Canada, Mexico... will invest in Vietnam. Vietnam's economy has the conditions to receive larger FDI. An economy that attracts more foreign investment will have the opportunity to improve economic development and raise people's living standards.

The CPTPP coming into effect is an opportunity for Vietnam to expand its export market. Photo: Internet

The third advantage is that through the new agreement's members being in countries with highly developed economies and complete legal systems, we will learn and exchange experiences to complete our country's legal system, as well as the management and operation of the market economy.

Fourth, we are a member closely associated with the remaining 10 countries of CPTPP, including economic centers such as Japan, Australia, Canada... thus the Vietnamese economy can expand its foreign relations, avoiding dependence on a few other powers, making it easy to be economically dominated.

These are favorable opportunities that Vietnam must know and create conditions to exploit these advantages.

Minister of Industry and Trade Tran Tuan Anh and Japanese Minister of Economic and Financial Policy Toshimitsu Motegi at a joint press conference on the Trans-Pacific Partnership (TPP) negotiations in Da Nang city, Vietnam. Photo: Internet

3 big challenges for Vietnam

Besides the above advantages, we also face great challenges, because we are at a low position in terms of development level, science and technology, and market economy, so we also face many risks and disadvantages besides the advantages. There are 3 great challenges:

Firstly, CPTPP requires governments to treat each other fairly, allowing businesses of member countries to participate in purchasing goods, performing services, and contracting construction projects of the government, and requires non-discrimination against foreign businesses, creating a level playing field for domestic and foreign businesses. This is a big challenge in the context of our businesses not being effective, if we are not careful we will lose market share, losing right at home. This can be considered the biggest challenge when we join CPTPP.

The second challenge is that the space for economic policy making will be narrowed. When joining the CPTPP, you cannot do whatever you want. Many policies will have to be adjusted according to the terms of the CPTPP. For example, investment policies, financial trade support for businesses, policies on developing economic spearheads, resource allocation issues... Not only Vietnam but also the member countries participating in this agreement.

The third challenge is the risk that goods from the remaining 10 countries will flood into Vietnam, especially high-tech and agricultural goods. Countries like Japan, Australia, Canada... will have extremely fierce competition in goods and services, even in areas where we have strengths such as agriculture. Most of our goods are priced higher than those of the countries participating in this agreement.

5 things to do

To overcome challenges and take advantage of opportunities when joining CPTPP, in my opinion, Vietnam needs to do 5 things when the National Assembly approves this agreement, which are:

- Continue to innovate, reform and reorganize the entire system of State-owned enterprises - the backbone of the economy. Resolutely endure the pain of cutting off ineffective enterprises, focusing on a few essential key enterprises. Force enterprises to operate effectively when entering the market, otherwise they will fail.

- Reorganize the banking system. In fact, recent major crimes, reflecting the collusion between businesses and banks, have damaged our banking system. If we do not improve and are not effective, we will fail in this game.

- Vietnam must amend many laws, such as: tax, customs, trade... to comply with the CPTPP Agreement. Because currently, our legal system has some points that are not compatible with this agreement.

- Pay attention to training the state staff in economic management and the business team. The market economy in the marketplace is the businessmen, they must be "talented generals" to be successful. In this business game, it is necessary to quickly train a team of good, talented and dedicated businessmen, for the benefit and development of the country and the nation.

- Joining this Agreement will expose our weaknesses. And there will be some cadres who fall and commit crimes, this is not unique to Vietnam. Therefore, the Party and the State must strengthen and assign greater responsibility to the competent agencies: the Party Central Inspection Committee, in supervising the Government on the process of participating in the agreement; the Central Economic Committee must have talented people, "divine eyes" to supervise and look at the Vietnamese economic apparatus in the process of integrating into the CPTPP; the State Audit continues to supplement and perfect the law, assign greater power to the audit, have talented people, bright minds in the audit to closely supervise.

Only then can we overcome challenges and take advantage of opportunities to develop the country rapidly and sustainably, as set out in Resolution 12 of the Party.