USPresident Donald Trump's decision to withdraw the US from the TPP agreementcould prove to be useful for China as it will get access to the entire Asianmarket. However, Vietnam stands to lose a chunk of its market, considering thatit exports 20 per cent of its products to the US, a Fibre2Fashion report.
The Trans Pacific Partnership(TPP), a trade agreement between twelve Pacific Rim countries, was signed onFebruary 4, 2016, in Auckland, New Zealand. These 12 countries are the US,Malaysia, Japan, Vietnam, Brunei, Singapore, New Zealand, Australia, Canada,Chile, Mexico and Peru. It is awaiting approval to come into force, but due tothe US withdrawal from the agreement on January 23, 2017, it cannot beratified. If the agreement is not approved by all the countries before February4, 2018, it will be implemented after approval by at least six states, whichtogether have a gross domestic product (GDP) of 85 per cent of the GDP of allcountries.
The Obama administration hadclaimed that the agreement intended to promote economic growth, retain jobs,enhance living standards, reduce poverty, ensure good governance, enhancelabour and protect the environment of the member countries. The TPPnegotiations began in 2005, and was signed by Brunei, Chile, New Zealand andSingapore. In 2008, Australia, Canada, Japan, Malaysia, Mexico, Peru, the USand Vietnam joined the group.
TPP'sfuture after US withdrawal
The TPP's future isuncertain after the US withdrawal, but some countries have shown interest torework the agreement without US participation. New Zealand has planned analternative deal without the US. Australia's trade minister, Steven Ciobo saidthat he has spoken to other leaders of TPP member countries to discuss ways tolock the benefits from the TPP without US participation in the partnership.However, Prime Minister of Japan, Shinzo Abe has said that the TPP without theUS would be worthless.
US President Donald Trump and his
trade team have made it clear that their principal goal is to stick it to
China. Withdrawing from the TPP will have exactly the opposite effect. It will
be a gift to China, and no one is happier about the development than the
government of China. Chinese President Xi Jinping has said that China would be
happy to take over the leadership role in global trade that the US has now
surrendered. This will be good for China, but not for the other countries. US
withdrawal from the TPP could free Mexico from dependence on the US for trade.
After US withdrawal from the TPP,
China will have an opportunity to fill up the void. China plans to create an
Asian free trade pact. It would allow the country to do business across the
same national borders, which Obama hoped that the US would do, that will help
China to strengthen its position as an economic power in the region. The
Chinese wanted entire Asia for themselves, and Trump just gave it to them.
China also has its own Asia-Pacific trade deal, the Regional Comprehensive
Economic Partnership (RCEP) that excludes the US. This traditional trade
agreement involves cutting tariffs instead of opening economies and setting
environmental and labour standards like TPP would have.
It is expected that the US and
China could soon be in a trade war, with both sides prohibiting the other's
products. This would adversely affect the economies of both, and have ripple
effects that could considerably impact countries in Europe and Asia.
With US withdrawal from the TPP,
emerging market Vietnam on the face of it seems to be standing at the losing
end. Vietnam has said that it would stick to the deal even without the leading
party of the agreement, and will continue to attract foreign direct investment
(FDI). The US is the top export destination for Vietnam, accounting 20 per cent
of all exports. On the other hand, imports from the US are 5 per cent of all
Vietnamese imports. Several US-based companies have been shifting their
production from China to Vietnam in search of less bureaucracy and lower
production costs. But Vietnam would fail to benefit from the US market for its
textile and footwear industry.
Recently, Vietnam signed a number
of trade agreements with various countries that could attract foreign
investments in the future. There is a possibility that instead of the TPP, the
US might negotiate and accomplish alternative trade agreements with Vietnam. It
cannot be denied that the country can attract foreign investment capital
through the TPP, and it has also reframed regulations and legal policies to
adopt the TPP. The new framework would create more opportunities in the process
of international economic integration of the country, and encourage investors
from foreign countries to set up business in Vietnam.
The TPP not being approved by the
US will not have negative impacts on Vietnam. It has its own value in growing
mid-income earners, competitive labour and stable government for attracting
FDI. Vietnam is considered to be among the big winners and expected to boost
its growth by 12 per cent in the coming years as firms move factories to the
Some facts to look at after the US withdrawal:
Without the US declaring its leadership in Asia, China is
slated to expand its influence;
This could put US businesses at a competitive disadvantage;
The US withdrawal could alter its relations with trading
Withdrawal of TPP could be a sign of what's to come for
the North America Free Trade Agreement (NAFTA).
Moreover, even if the TPP dies, major benefits of this agreement can be saved through various other means like bilateral FTAs. Multiple bilateral deals may not be as impressive as the TPP agreement led by the US, but they could be an option for nations like Malaysia, Japan and Vietnam, which do not have bilateral agreements with the US as opposed to other existing TPP members.