The Trans Pacific Partnership, a U.S.-led trade pact encompassing 40% of the world economy, isn’t “confirmed dead,” to borrow language from an equity research firm in Hanoi. But unless it passes the U.S. Congress before Donald Trump takes office in January, the tariff-cutting agreement is just taking up space in some ICU before undertakers arrive. Vietnam knows the trade deal is unlikely to take shape despite signatures by 12 member nations in February. Trump doesn’t like it and his Republican Party controls Congress.
So Vietnamese leaders have started looking instead toward a series of two-way free-trade deals to sustain their fast-growing $193.6 billion economy that depends heavily on exports.
“The sad news for Vietnam is that trade liberalization is unlikely to be high on the agenda, whatever the new [U.S.] president’s cabinet and policy implementation will be,” French investment bank Natixis said in a statement Thursday. “And thus, Vietnam will have to mourn the death of the highly-anticipated Trans Pacific Partnership.”
The deal known usually as TPP would have raised the Vietnamese GDP by 11%, estimates Louie Nguyen, editor and founder of the news website VietnamAdvisors. Multinationals would move more factories into Vietnam if the pact took effect, he adds. And increasingly wealthy and adventurous consumers in Vietnam may also hold onto more of their money as 89% of the public supports TPP and its “collapse of TPP could take the wind out of the sail of Vietnamese consumers,” Nguyen says. A lot of the spending power comes from creation of jobs that follow expansion of factories, which export stuff from coffee to smartphones.
Yet officials in Hanoi probably won’t hang out too long at the funeral.
Even when polls tipped Trump to lose the U.S. election, Vietnam was hedging bets about the TPP in case the U.S. Congress missed its February 2018 deadline to ratify the deal under whatever president. The TPP effectively requires U.S. ratification to reach 85% of the trade bloc’s combined GDP, a rule for final implementation. A steering committee headed by the Vietnamese deputy prime minister decided in August instead of pushing for ratification in late 2016 to keep monitoring what other countries do with the deal. Vietnam’s next chance to ratify it would be early next year.
The Southeast Asian country has meanwhile signed and implemented a raft of two-way free trade agreements that could offset losses to exports from lack of a TPP. Among the confirmed trading partners are Australia, Chile, China, India, Japan, New Zealand, South Korea and the European Union. Vietnam’s trade negotiators are likely to keep channeling their efforts into bilateral deals rather than the Pacific Rim bloc. And those ties “are enough for an economy with nominal GDP of roughly $200 billion to capture growth opportunities in the years to come,” Hanoi-based equity market research firm SSI Research said in a note Thursday.
Tags: Asia, Australia, Chile, China, creation of jobs, Donald Trump, European Union, India, Japan, New Zealand, Pacific Rim, Philippines, Republican Party, South Korea, tariffs, TPP, trade, Trans Pacific Partnership, Trump, U.S., U.S. Congress, Vietnam, Vietnamese Workers