Now the TPP’s as good as dead, the Chinese-led Regional Comprehensive Economic Partnership is a possible Plan B for Vietnam. RCEP doesn’t have the US as a member and has previously been seen as a counter to the TPP. Vietnam, however, had signed up to both, as had many TPP members.
Some of the older guard in Vietnam’s communist party used to be known for a certain scepticism regarding the US. Could you really trust them, and would they be there when needed? China, on the other hand, is always there, geographically and otherwise. Much of that has changed in recent times and the talk over pro-US and pro-China factions in the Politburo has thankfully quietened as Vietnam and America have drawn closer, from the comprehensive partnership deal signed in 2013 to General Secretary of the Communist Party of Vietnam Nguyen Phu Trong’s visit in to Washington in 2015 and Obama’s May visit this year.
That’s all well and good. But the TPP, an important area of cooperation, is now gone:. Vietnam was one of its most enthusiastic proponents and the Central Committee worked hard on it. Ratification of the TPP was discussed before the national congress in January this year. Estimates of how much it could have added to the economy vary, ranging from US$33 billion to US$65 billion (by 2025). Bloomberg wrote in late July, the TPP is set to boost Vietnam’s gross domestic product by 8 percent by 2030, making it among the biggest gainers of the trade accord, according to the World Bank’.
While some journalists raised concerns over environmental risks and about Monsanto (the company that produced Agent Orange) returning to Vietnam, the reaction has been mainly positive. Most Vietnamese businesses are pro-TPP.
Now it’s likely all over. Vietnam pulled out not long before Donald Trump promised to pull the US out in his first day in office. Trump has been a worry for Vietnam strategically and economically. He’s said little on Vietnam, and much of what he has said has been part of a longer list of the ‘they’ who are taking US jobs or who export more to the US than they import. Also, of course, a scaled back American presence in the region is going to change the balance, especially in the South China Sea.
The TPP would have lessened the trade imbalance with China. I covered this a few months ago, observing that two-way trade was estimated to be US$100 billion by the end of this year and that Vietnam is China’s biggest ASEAN trade partner:
‘The trade deficit’s been an economic and political worry for Vietnam for some years. The issue can become politicised at times, such as ‘Buy Vietnamese’ campaigns after sovereignty disputes flare or worries that economic dependence on China will undermine state sovereignty… Vietnam’s trade deficit with China is offset by a strong surplus with the US, and the EU. It’s also a reason Vietnam’s been so keen for the Trans-Pacific Partnership.’
The TPP’s proponents said it would force Vietnam to increase transparency, reform its economy, fix faulty state-owned enterprises (it’s been trying to do that in various ways for years) and implement international IP laws. Labour reforms were also on the cards. It’s unlikely the same thing would happen with the less proscriptive RCEP, but that’s now the Plan B (though obviously both would’ve been better).
In fact, in much the same way as the country has been developing its diverse network of strategic partners, it’s also signing up to varied trade pacts and groups, including the TPP and RCEP along with the ASEAN Economic Community (AEC), the Eurasian Economic Union ,the Transatlantic Trade and Investment Partnership and an FTA with the EU. Vietnam had 58 FTAs at the end of last year. It sees AEC as important, given there are some 600 million people and a combined economy of USD2.6 trillion, as well as the valuable benefit of promoting ASEAN unity and cooperation.
Pham Hong Hai, CEO of HSBC Vietnam, told the Vietnam Economic Times ‘Vietnam stands to gain from increased sourcing of production from such RCEP member countries as Japan, South Korea and China’. (Republished by the Vietnam Express.)
RCEP takes in ASEAN, India, China, South Korea, Japan, and Oceania nations like Australia and New Zealand. Vietnam already trades with all of those. The downside to the demise of the TPP for Vietnam is the loss of some new markets and improved access to the US market.
Two problems are less quantifiable: RCEP doesn’t have the transparency or IP protection framework of the TPP. Those features could’ve been useful in Vietnam’s quest for economic reform (which the PM Nguyen Xuan Phuc affirms will continue regardless of the TPP). And there may also be a trust issue: should Vietnam continue to look to the US? It most likely will but this is a certain grist-to-the-mill for those entertaining US-scepticism. However the Vietnamese public, especially younger people, is enthusiastic about America in a way China can’t match. Of course, with Trump in the White House, keeping its new friend at arm’s length and diversifying its trade and ties might be the best idea.