VINACHEM

Vietnam’s admission to the Trans-Pacific Partnership (TPP) Agreement will not negatively affect Vietnam - China trade relations. If Vietnam can improve its competitiveness, the trade relations between Vietnam and China will be more balanced.

TPP is seen as a "historic" agreement for the significant changes that it will bring to the member economies. Negotiations took place between the 12 member countries across the Pacific, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam, promising to create a free trade area of a group holding 40% of the global economy.

In a press conference at his residence in late June, the US Ambassador to Vietnam Ted Osius said that Vietnam will benefit most from the TPP because its GDP can increase by 30%.

Deborah Elms, CEO of the Asia Trade Centre based in Singapore, has the same views with Ambassador Ted Osius, saying that many foreign investors will flock to Vietnam after the TPP takes effect.

A recent report by the Peterson Institute for International Economics, based in Washington DC, the United States has clarified the statement by Ted Osius and Deborah Elms. Thanks to tax exemption for footwear and apparel to the US, Vietnam's exports will be more favorable than now when the tax rate is between 17% to 32%. This is expected to boost Vietnam's exports to the US market – Vietnam’s largest export market.

Nigel Cory, Head of South East Asian Studies of the Center for Strategic and International Studies (CSIS), said he TPP will help exports of shoes and garments of Vietnam reach $165 billion before 2025; without TPP, this figure may stand at $113 billion.

TPP to promote Vietnam - US cooperation

In late December 2013, during a meeting with the US Trade Representative Michael BG Froman in Hanoi, Prime Minister Nguyen Tan Dung emphasized that the TPP is an important platform for promoting cooperation between the two countries.

2015 marks the 20th anniversary of normalization of Vietnam-US relations, and the end of TPP negotiations will be an important impetus to promote economic relations between the two sides.

The US is an important market and the largest export partner of Vietnam. The TPP will boost Vietnam's exports to this country. It will not only benefit the US and Vietnam in terms of bilateral economic cooperation, but also play an important role in Washington's efforts to balance soft strategy towards China, experts said.

US officials also see the TPP as a way to create a counterweight to the growing power of China in Asia. Promoting Vietnam – US trade has a very important role in helping both reduce economic dependence on China. Through it, the two sides may prevent Beijing from using economics as a lever to achieve political benefits in the future.

Vietnam’s TPP membership will not negatively affect the trade relations between Vietnam and China but help improve that relation towards more balance.

The countries with small economic scale like Vietnam are keen to develop a harmonious and balanced economic relations with big countries in the world and the region. Besides the US, Vietnam is also boosting economic ties with China, Japan, the EU, Russia ...

When it comes to the impact of the TPP to the trade deficit of Vietnam and China, Professor Carl Thayer, an Australian expert on Southeast Asia, said that when Vietnam joins the TPP, it will have the advantage of infiltrating the market of all other member states.

In other words, the advantage of Vietnam's participation in the TPP will be tariff reductions. If Vietnam uses raw materials originating from China to produce goods for the member states, it will suffer higher taxes if Vietnam uses raw materials from other TPP member countries.

Economic relations between Vietnam and China will be basically unaffected when Vietnam joins the TPP. Some Chinese entrepreneurs said that they would still benefit from investing in Vietnam. And Vietnam’s accession to the TPP will not affect China's participation in the Comprehensive Economic Partnership Agreement with ASEAN countries.

TPP and the expansion of China in the East Sea

The East Sea is on the major sea route connecting the Pacific - Indian Ocean, Europe - Asia, Middle East - Asia. It is considered the second busiest international shipping route in the world with more than 40% of the world trade transport.

Nikkei Asian Review on September 21 commented that the efforts of the US and Japan in strengthening regional economic and security cooperation in Asia through the TPP may be hampered by the military presence of China on the vital maritime trade route in the East Sea.

Amid this key maritime route is Vietnam’s Truong Sa Archipelago (internationally known as the Spratlys Islands), where China is filling, building and militarizing illegal artificial islands. Three military runways of 3,000 meters were built by Beijing to take control in the air and on the sea. This activity by China will undermine the stability of the key maritime route of Japan's economy in particular and the other TPP economies in general.

That lack of respect for international law and increasing military modernization of China has created a threat to the security of the countries surrounding the East Sea and the world in general.

Although the US stands neutral in territorial disputes over the East Sea, the US has to publicly oppose the hegemonic claims of Beijing in the East Sea because this is a major threat to freedom of international navigation and trade.

The implementation of the TPP in the future will be difficult to achieve results as expected if the East Sea disputes and the expansion of China in this area shows no signs of cooling. Vietnam is no exception to this negative impact.