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Trans Pacific Partnership (TPP) What is it and how can developing nations such as Vietnam prepare for it?

In recent years, a topic that has attracted much discussion in international trade is the negotiations of the Trans Pacific Partnership (TPP), a trade alliance connecting North America’s U.S. and Canada, Latin America’s Peru and Chile, Asian Pacific countries such as Japan, Korea, Australia, and New Zealand, as well as ASEAN nations. Initial negotiations started in 2010 with just three members: Chile, New Zealand and Singapore. Since then, the TPP has expanded enormously in scale and scope, and now includes thirteen member states in active discussions with each other.


A more pragmatic, rules-based trade policy in which a jurisdiction rarely or never deviates from established norms, TPP is expected by many to solve many of the roadblocks that WTO members encountered during the Dohar Development Round throughout the last decade. Complex trade animosities such as those between the U.S. and Europe and the U.S. and China are no longer present, which allows for a more focused and deeper conversations between the various parties.

In this context, developing nations such as Vietnam faces three primary challenges stemming from strict requirements as demanded by developed nations such as the United States. Vietnam will have to open up key industries earlier and to more players than anticipated by current free trade agreements including those of WTO and ASEAN. The immediate impact of this move is a lower revenue from import tax for key industries such as agriculture. The other, more alarming issue is the loss of market share to foreign players in home territories, especially in the service sector where the competitiveness levels of the local companies are low. Finally, a major concern lies in the environmental, labor and intellectual property protection frameworks that Vietnam must build, some would argue prematurely, to satisfy the demands of strict partners such as the United States and Japan.

However, even in light of these seemingly damaging effects that accession to the TPP will bring, in my opinion they are insignificant when compared to the immense benefits associated therewith. First of all, the tariff effect should be minimal given the existing roadmap for tariff reduction with key trade partners already in the TPP. The loss of competitiveness is both a blessing and curse, where players with weak fundamentals will be weeded out and their resources are redistributed to other areas of the economy. The regulatory frameworks that the Vietnamese government must build as required by the other TPP members are the most difficult issue, since the government is facing a budget constraint as a result of prolonged economic slow-down. Furthermore, the standards expected by mature markets such as the U.S. and Japan cannot be built over night; their implementation requires gradation to maximize the adoption rate by the public and the minimize losses spurring from regulatory arbitrage. The key is to persuade the TPP partners to allow for a more lenient implementation roadmap as well as provide Vietnam with technical and financial support indispensable in bringing the systems to their fully functional stage.

Regardless of whatever the outcomes may be, I am a strong advocate of free trade and multilateral negotiations. The TPP does have its share of criticisms, including lack of transparency throughout the negotiation process as well as accusations of favoritism of big corporations in the U.S. Putting these claims aside, I believe that the TPP has the potential to be a binding force in world trade. As is the case with all negotiations, engaging in a long-term and holistic discussion, understanding what other parties want and being able to analyze these items in multiple dimensions, as well as aiming for a fair and equitable relationship through concessions are the key to a successful ending. Let’s hope that the member nations will be able to build a lasting legacy out of the TPP and help promote economic growth and prosperity not only in their own countries but also across the Pacific Ocean.


Image source: Flickr

Danny Pham
Co-Founder, Freelensia
Reserve language interpreters for meetings, exhibitions, and seminars
Anywhere, anytime, for any language

32 Lives in Ho Chi Minh City, Vietnam FIELD Interpretation - Strategy - Finance - Data BACKGROUND Co-Founder & Interpreter at Freelensia EDUCATION CFA Charterholder (2012-present) MBA at INSEAD LANGUAGES: English - native Japanese - JLPT level N1 French - CEFR level C1 Korean

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