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Can Vietnam reform without the TPP?

How successful can Vietnam’s reform plans be without the impetus of the TPP pushing them forward?




The withdrawal of the United States from the Trans-Pacific Partnership (TPP) under President Donald Trump almost immediately after his inauguration has raised a number of national policy and reform issues for its other members, especially Vietnam.

Conceived first as a signature instrument of former president Barack Obama’s ‘pivot’ to Asia, the TPP — whose then 12 member countries comprise nearly 40 per cent of global GDP — was mandated to benefit all members. But to most analysts it was a strategic political instrument for the rebalance policy of the United States, not just a trade agreement.

In Vietnam, 89 per cent of the population supported the TPP according to a Pew survey. There were some initial concerns about restrictive clauses regarding, for example, pharmaceutical products under the TPP.

But it seemed that the TPP would help Vietnam further expand its exports and its manufacturing industry, in which it has definite comparative advantages, to the US and to other markets.

Due to Vietnam’s policy of openness since Doi Moi in 1987, cheap labour and relative economic and political stability, the TPP would have been a big boost to export and manufacturing sectors that are already receiving record foreign investment. A World Bank report  claimed that the TPP would have benefited Vietnam the most out of its members and to the tune of 10 per cent of national GDP in 2030.

For Vietnam, the TPP would have led to more economic cooperation with other TPP members for mutual prosperity and regional stability, mandated subsequent domestic reforms on labour laws and prompted the reduction of government subsidies to state-owned enterprises to create a level-playing field for business.

Apart from these trade and reform considerations, the TPP could have meant a closer alliance with the United States — a rival combatant in the recent and seemingly almost forgotten war.

Strengthening the US–Vietnam bilateral relationship would have been the TPP’s big political contribution. The relationship gained momentum over the past two pre-Trump years, coinciding with recent fissures between Hanoi and neighbour Beijing over troubles in the disputed South China Sea.

Without a TPP, Vietnam will have to depend on the long-standing relationship with the United States — now headed by Trump — to continue its successful growth, trade, investment and reform policies.

The reactions of other TPP members to US withdrawal have varied.

Malaysia suggested that it would focus efforts on wrapping up a rival multi-national trade pact, the Regional Comprehensive Economic Partnership, of which the United States is not a member. Japan is trying to stick with the TPP and push ratification, even without the United States. Singapore said it will pursue other trade agreements. The remaining 11 TPP members appear to agree with Japan’s position and are seeking to revive the TPP with a clause that would allow the United States to re-join the agreement when it is ready to do so.

Vietnam has committed to continue its policy of openness to trade and investment as the motivation for domestic reforms to promote growth and other national programs with or without the TPP.

But how successful can Vietnam’s reform plans be without the impetus of the TPP pushing them forward?

Vietnam’s foreign economic policy without the TPP still has a very good chance of continued success as long as its major exports — from the textiles, seafood and footwear sectors  — and other emerging related sectors continue to have comparative advantages in the global market. Policy reform related to corporate and investment law and education and training for example must be enacted to ensure this.

Existing trade agreements also help. As long as they are effectively implemented and follow WTO economic integration guidelines, Vietnam should still be able to sustain appropriate reforms conducive to high growth, more trade and investment, meaningful poverty and inequality reduction, and peaceful external cooperation for mutual prosperity and stability in the region.

The TPP would have helped Vietnam achieve its big reform agenda and garner huge economic gains. But Vietnam still has the capacity and will to achieve these objectives and successfully manage its economy without the TPP.

Tran Van Hoa is Director of the Vietnam and East Asia Summit Research Program and a Professor at Victoria University and the University of Wollongong.
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