How should Vietnam behave after the US abandons TPP?

Anti-globalization and protectionist attitudes are increasing in some countries, but Vietnam still has an open economy. This means big challenges for Vietnam in upcoming days.


US President Donald Trump on January 23 officially pulled out of the 12-nation Trans-Pacific Partnership

US President Donald Trump on January 23 officially pulled out of the 12-nation Trans-Pacific Partnership (TPP), a move that The New York Times said “put an end to the era of multinational trade agreements that defined global economics for decades”.

Vo Dai Luoc, a respected economist, believes that Vietnam’s exports to the US will bear big influences by the move.

A report from GDC showed that the US in 2016 was Vietnam’s biggest export market which consumed $38.5 billion worth of Vietnam’s products, accounting for 21.78 percent of Vietnam’s total export turnover.

“If TPP had had a better ending, some business fields in Vietnam's economy would have enjoyed tax incentives when exporting products to the US, such as textiles & garments and wooden furniture. Of course, if the US prioritizes to buy American goods and hire American workers, Vietnam’s exports will suffer,” Luoc said.

Luoc also anticipates big impact on foreign direct investment (FDI) in Vietnam, since foreign investors cannot expect benefits from TPP.

However, he thinks Vietnam can pin hopes on other things. “We have wrapped up the negotiations for 11 free trade agreements,” he said. “And we can hope that the US new administration, when abandoning TPP, may think of a bilateral trade agreement with Vietnam.”

How should Vietnam behave? An analyst said Vietnam ‘should do something with the exchange rate policy’, i.e. it needs to plan a roadmap to devalue the local currency which is now overvalued.

“If the tariff barrier doesn’t exist, countries have to use the exchange rate as a barrier,” he said.

The analyst also urged the government to apply necessary measures to protect domestic production with technical barriers, commenting that Vietnam is still weak at taking full advantage of the barrier.

Luoc said Vietnam has no other choice than finding new ways for development and preventing adverse effects.

“It needs to improve its inner strength, exploit the domestic market while expanding to other markets. It would be better not to be too reliant on certain markets,” he said.

He went on to say that it is still too early to predict the Vietnam-US trade turnover, believing that better predictions about the issues will come after Trump’s first 100 days in office.

However, he doesn’t think the US will impose any kind of tax on Vietnam’s goods to restrict imports from Vietnam, because the turnover of tens of billions of dollars is small for the large US economy.

My An / vietnamnet