The "piece of cake" of the CPTPP market is very large

The CPTPP includes 11 member countries Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. CPTPP countries account for 13.5% of global GDP with total trade turnover of more than US$10,000 billion. Photo: ST

Getting what?

Since it became effective on January 14, 2019, after two years of implementation, Vietnamese enterprises have gained many benefits from the CPTPP.

According to Phan Thi Thanh Xuan, Vice Chairman of the Vietnam Leather, Footwear and Handbag Association (Lefaso), the CPTPP has opened up new market opportunities, attracting investment, as well as developing supporting industries for the Vietnamese footwear industry. Lefaso's data shows the proportion of leather and footwear exports to CPTPP countries increased by 13%. Canada and Mexico are two new markets that this industry can access after the CPTPP comes into effect. In particular, thanks to the CPTPP, Vietnamese firms have exported directly to two markets thanks to the tariff incentives provided by the CPTPP, instead of having to export to a third country as previously.

Similarly, the Vietnam Association of Seafood Exporters and Producers (Vasep) said in January 2021, shrimp exports to the US, the EU and China all decreased over the same period, except for some CPTPP member countries tend to increase. As pangasius exports to the US and some CPTPP markets like Mexico, Australia and Canada increased while China fell sharply, the EU decreased slightly in the first two months of the year.

According to a report "Vietnam after two years of implementing the CPTPP from an enterprise perspective" coordinated by Aus4Reform Program - Australian Embassy in Vietnam, Vietnam Chamber of Commerce and Industry (VCCI), the CPTPP is in the top three free trade agreements (FTA) with the most positive ratings by firms. In particular, the report said businesses look at the CPTPP not only from direct concrete impacts but also as a symbol showing that the Vietnamese Government is trying to integrate into the international economy in depth, with high standards and accepting the pressure to reform itself.

However, regarding the specific impacts of the CPTPP, only one out of four enterprises has experienced the "sweet fruit" from this agreement. The most common interest group for these firms is tariffs, especially in new markets like Canada and Mexico. The positive impacts on institutions (reflected in measures to reform administrative procedures, adjust policies and laws since the CPTPP was officially implemented) is also emphasised by enterprises, even it is after the tariff benefits. Next, they are expected benefits in the future (in cooperation plans, joint ventures with foreign partners to take advantage of the CPTPP, or the expected market expansion with support from this agreement of enterprises). A few businesses even feel the benefits of the normative commitments considered to be of high standard in the CPTPP such as the protection of intellectual property rights.

Regarding the effects of the CPTPP and FTAs in this post-Covid-19 period, businesses were surprisingly optimistic. Some 60% of enterprises think that CPTPP and FTAs ​​will be very useful for them in the "new normal" period. The VCCI's report commented that in difficult situations, every opportunity such as the CPTPP or FTAs ​​is more expected by businesses.

Increasing initiative

Despite such results, comparing the general ground, Nguyen Cam Trang, Deputy Director of the Import and Export Department (Ministry of Industry and Trade) said the benefits businesses receive are still modest. Export growth to CPTPP markets (7.2%) was lower than the 8.4% growth in exports to the world in the same period. The rate of taking advantage of tax incentives for all markets in the CPTPP is only 1.67%, a very low level compared to the 2019 average (37.2%) and compared to the first utilisation rate of many other FTAs.

In addition, the VCCI's report also pointed out that three-quarters of businesses have never benefited directly from the CPTPP and the main reason is that they do not have any business activities related to the market in the CPTPP region in the past two years. A few firms mentioned other reasons like slow issuance guidelines, complicated preferential procedures, difficult licensing procedures and the ability of the importing country to meet quality standards is limited.

In this regard, economists expressed regret when firms have heard a lot, but most of them only know briefly about the CPTPP, so they have not taken advantage of the advantages behind the border line the CPTPP brings to increase production capacity and internal resources. Therefore, many firms said that they do not have an order in this sector because they do not fully understand the CPTPP.

The VCCI report also said that in CPTPP partner countries, the market share of Vietnam's exported goods is still low, only from 1% to more than 3%. Meanwhile, the "piece of cake" in the 10 member countries of this agreement is still very large with an import scale of US $2,500 billion. According to Nguyen Cam Trang, the space to continue growing is still wide. In which, the biggest benefit is the opportunity to continue to improve institutions and the business environment. The next step is to put pressure on increasing the competitiveness of enterprises, forcing firms to raise standards of export goods and form value chains.

Phan Huu Minh, Vice President and General Secretary of Thai Nguyen Business Association, said the CPTPP is "two-sided", on the one hand, creates favorable conditions for firms to integrate and develop production and export capabilities. On the contrary, the CPTPP also provides strict standards, forcing businesses to prepare to follow the general regulations and pay attention to the origin. Therefore, we have to look back at what has been done and not yet done, what is the objective and subjective cause to find the most appropriate direction. With drastic and more substantial support from the authorities, businesses must also seek market information and regulations on origin and tariff preferences. Businesses will work out strategies, prepare to organise production, improve capacity so as not to lose or lose competitiveness.

To prepare for the distant future where the CPTPP and FTAs ​​can be an effective aid, on the business side, experts said that enterprises need to be more proactive in exploring opportunities, commitment to CPTPP and take action to realise benefits from the agreement. In addition, businesses must improve their competitiveness, the Government must continue to review relevant legal regulations, improve the business environment favourable for businesses; strengthen communication, market information, business orientation in production and business plans.