Vietnam must sign on to the Trans-Pacific Partnership, the United States-backed comprehensive trade plan. The agreement would allow Vietnam’s economy to become fully integrated with the rest of the industrialized world, and with that would come the prospect of further democratization at home.
By TUONG LAI | APRIL 6, 2015
HO CHI MINH CITY — Vietnam must sign on to the Trans-Pacific Partnership, the United States-backed comprehensive trade plan. The agreement would allow Vietnam’s economy to become fully integrated with the rest of the industrialized world, and with that would come the prospect of further democratization at home.
Equally important, the T.P.P., which involves 12 Pacific countries but not China, would realign geopolitical relations in the region and help stave off China’s expansionism in the South China Sea — an important contribution to the United States’s strategic rebalancing toward Asia.
Vietnam has nearly 3,500 kilometers of coastline fronting the South China Sea, a body of water vital to international trade. Almost one-third of the world’s crude oil and over half of its liquefied natural gas passed through here in 2013. This route is also the shortest way from the western Pacific to the Indian Ocean, and a favored passage for many navies, including that of the United States.
But Vietnam cannot play its significant geopolitical role until it fully develops economically and further liberalizes politically. And adopting the T.P.P.’s requirements — free trade unions, reduced state participation in the economy, greater transparency — will help Vietnam along that route.
Following many years of economic isolationism, Vietnam made impressive progress after 1986, when it began to open up to the outside world. It recorded one of the world’s highest G.D.P. growth rates during 1990-2010. It joined the World Trade Organization in 2007, and has since signed many important trade agreements. It was the world’s second-largest exporter of rice and coffee in 2013. Last year, Vietnam was Asean’s top exporter to the United States in dollar terms, ahead of Malaysia and Thailand.
But this was just a first phase of development, and it relied heavily on primary exports and labor-intensive and low-value-added industries. Vietnam now risks being stuck at the middle-income level. G.D.P. growth rates have slowed down significantly in recent years. Vietnam now ranks last among T.P.P. candidates in terms of economic development, with a G.D.P. per capita of about $1,910, compared with about $6,660 for Peru, the next lowest.
The T.P.P. provides a road map for the second phase of Vietnam’s economic and social development. As Prime Minister Nguyen Tan Dung said in February, citing this and other trade deals: “These agreements require us to be more open. So our market must become more dynamic and efficient.”
The T.P.P. would mean, for example, a substantial reduction in import tariffs that apply to Vietnamese apparel entering other T.P.P. countries, which will increase the competitiveness of those products against similar goods from China, India, Indonesia and Thailand. But the T.P.P.’s Rules of Origin also require that the materials used in the finished exports be produced locally. This will force Vietnam to develop supporting industries and expand its manufacturing base — as well as help it become less dependent on China, which currently supplies much of the materials used in Vietnam’s textile and apparel industry.
The T.P.P. also demands that its members embrace free labor unions, intellectual property rights and transparency in rules, regulations and practices. Perhaps most significant for Vietnam is the expectation that the governments of T.P.P. countries will not grant preferential treatment to state-owned enterprises or otherwise allow them to cause trade distortions. This will mean substantially reducing the role of such companies in Vietnam.
State-owned enterprises dominate major sectors of the economy — like commercial banking, energy production and transportation — and are very highly leveraged and often corrupt. Limiting their influence will likely trigger head-on confrontations with some high-ranking party members with ideological and financial interests in them. But the government now seems intent on doing so, partly because of these companies’ inefficiencies.
Which means that there are now few domestic obstacles in the way of Vietnam’s joining the T.P.P. The government has agreed to allow the formation of independent labor unions at the factory level. It has been making efforts recently to comply with international human rights norms it has been known to flout, releasing several prominent activists and refraining from arresting dissidents. It is also enforcing intellectual property rights, with the police periodically raiding stores that violate copyright laws.
The only major hurdle is obstructionism from China. Beijing is trying to counter Washington’s strategic rebalancing toward Asia — the Obama administration’s so-called pivot policy — by promoting its own free-trade zone, touting an Asia-Pacific Dream, starting a regional investment bank and pouring billions of dollars into massive infrastructure projects. It is also exerting tremendous pressure on Vietnam’s leaders not to join the T.P.P., much as it did before Vietnam signed the W.T.O. agreement and the bilateral trade deal with the United States. When reports became more credible recently that the general secretary of the Communist Party of Vietnam would travel to the United States in June, Beijing suddenly invited him for high-level meetings in China this week.
For various economic, political and strategic reasons, Vietnam can hardly afford not to join the T.P.P. But doing so will also require difficult structural adjustments, and countervailing pressure from China is intensifying. Vietnam needs, and deserves, all the support it can get from the United States. It will take no less that a concerted effort to fend off China’s increasing ambitions in the region.
Tuong Lai, also known as Nguyen Phuoc Tuong, is a sociologist and former adviser to two Vietnamese prime ministers. This article was translated by Nguyen Trung Truc from the Vietnamese.
