The TPP would actually benefit whom?: The local Vietnamese companies or rather the global capitals which invest in Vietnam ?

tpp

Outcomes of many studies suggest that Vietnam would become one of the largest beneficiaries of the Trans-Pacific Partnership (TPP) by substantially expanding its apparel exports to the United States. However, the news report below raises another interesting question to consider: who actually would benefit from the TPP: The local Vietnamese companies or rather the global capitals which invest in Vietnam because of the agreement? This question is important because the answer reflects many debates nowadays about the impact of globalization; particularly, the impact is suggested to be unequally felt by different stakeholders.

From thanhniennews

The US-led TPP trade pact that will include Vietnam among its signatories is expected to be wrapped up this year, but Vietnamese firms are unsure if they will benefit.

Many are anxious since foreign investors with deep pockets are planning to set up operations in the country to take advantage of the lowering of import taxes by many large economies that will sign up for the trade deal.

For instance, import tariffs in the US, the biggest customer for Vietnam’s leading export, textiles, will be cut from 17-32 percent now to zero.

Many textile and garment companies in the region have already begun to move to Vietnam.

Texhong Corporation of Hong Kong, which set up a dyeing factory in the southern province of Dong Nai in 2006, recently opened another one in the northern province of Quang Ninh with an investment of US$300 million.

One of Hong Kong’s leading textile companies, TAL Apparel, has plans to set up a second textile-dyeing -apparel factory worth hundreds of millions of dollars. It has eight factories worldwide, including one in Vietnam’s northern province of Thai Binh since 2004.

Unisoll Vina, owned by South Korean Hansoll Textile Ltd, has also got a license to build a $50-million factory to make fur and leather clothing and accessories.

According to the Ho Chi Minh City Association of Garment, Textile, Embroidery and Knitting, Japanese companies Toray International and Mitsui, Austria’s Lenzing, and China’s Sunrise are also exploring investment opportunities in the country.

Vietnamese companies are meanwhile trying to enlarge their limited feedstock production capacity to comply with TPP’s regulations on origins – for instance apparel has to be made using yarn and other materials produced in member countries.

The Vietnam National Textile and Garment Group (Vinatex) has opened three yarn factories this year in Hanoi and the central provinces of Ha Tinh and Thua Thien-Hue with an annual capacity of 1,270 tons.

It started work on 11 others in the first half of the year.

Figures from the Vietnam Textile and Apparel Association (Vitas) showed that 70 percent of more than 3,700 textile factories in the country make apparel; only 6 percent produce yarn and 17 percent make cloth while 4 percent dye.

Local producers depend largely on fabric imported from China.

Insiders said a yarn factory costs tens of millions of dollars, a sum most Vietnamese businesses cannot afford.

Pham Xuan Hong, deputy chairman of Vitas, said unless the government helps by making cheap loans available for yarn projects, the industry would not benefit from the TPP at all.

The government also needs to zone certain areas for dyeing plants since they are shunned everywhere due to pollution concerns, Hong said.

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Author: Sheng Lu

Professor @ University of Delaware

11 thoughts on “The TPP would actually benefit whom?: The local Vietnamese companies or rather the global capitals which invest in Vietnam ?”

  1. I believe that simply saying that Vietnam will be one of greatest winners of the TPP agreement is just too easy. When really looking into this concept, it becomes evident that the Vietnamese economy will be stimulated, however, not solely by the rise of domestic companies. Many of the factories in Vietnam who produce yarns and dyes are owned by companies from other Asian countries. Many of these countries are inquiring building factories in Vietnam in the near future, in order to potentially take advantage of the lowering of import taxes between countries, such as Vietnam and the US, as a result of the TPP agreement. This would be a great thing for the countries who are not involved in the agreement, but who own factories on properties who are involved.

    Maybe it is smart to put in place the yarn-forward rules of origin, so that both countries benefiting will be those that are actually part of the TPP agreement, including the domestically-owned companies with factories in the region. Since local Vietnamese producers depend largely on fabrics imported from China, there will probably be a delay in these companies sourcing materials from the US and other countries involved in the TPP agreement, but eventually both parties involved in the negotiation will greatly benefit from it. I personally feel that this negotiation will deplete the possibility of the “winners” being those countries who are not even involved in the agreement.

    1. good thinking! No matter how, the TPP will be a game changer. Keep an eye on the issue, because it matters for the survival of the US textile industry in particular.

  2. The Vietnamese are nervous that many large companies will be on board with the US-led TPP trade pact and capitalize on the duty-free import tariffs into the United States. As the second-largest exporter of textiles into the U.S., Vietnam is right to worry. In order to be rewarded duty-free import tariffs, Vietnam must import yarns and textiles from one of the CATFA or NAFTA member countries, which means increased expenses of materials. If Vietnam were to become a member of CAFTA or NAFTA they would able to import yarn from any of the regions duty-free, but they would also be supporting the economies of other member countries. Another option for Vietnam is to manufacture their own yarn for apparel exports, however, yarn factories costs tens of millions of dollars, which is more than most Vietnamese businesses can afford. Vietnam is currently importing yarn from China for cheap, but they are also paying 17-32 percent on textiles due to import tariffs in the United States, should they agree to the TPP those taxes would be entirely eliminated. However, considering that Vietnam is still developing a developing country, loses would be greater than gains and the industry would not benefit from the TPP at all.

  3. Seeing how the TPP plays out will be pretty interesting. What will happen to Vietnam? Will it become increasingly polluted and will it work having so much production there? What happens when its economy grows like Chinas’? How will apparel prices change? Where will Vietnam get their yarns when they have been relying so heavily on China? U.S. textile and yarn prices are not cheap and a myriad of new sourcing relationships would have to be made for Vietnam. Will workers be increasingly abused, or will such an increase of sourcing from the country bring economic prosperity and increased workers benefits? TPP brings a variety of questions and considerations on how it will play out, not just for the U.S. and Vietnam, but for China as well. What will happen with the U.S. and China’s relationship, which relies so heavily on each other, as the U.S. increasingly imports from Vietnam instead? How the TPP works out and effects global markets will be interesting to see.

  4. It is interesting to think about what will happen with TPP. How would this effect Vietnam? Vietnam should worry because the U.S is a lot larger than them. Vietnam should consider importing yarn and textiles from CAFTA/NAFTA even though it means increased expense so that there are duty free expenses. In order for Vietnam to support other economies they would have to join the CAFTA or NAFTA this would allow them to import yarn from any region duty free.

  5. The TPP is trying to showcase new opportunities to get cheaper products regardless of where it is from. Vietnam is a huge importing country, but not from the U.S. Although they are not as large as the U.S. Vietnam’s textile industry is growing more rapidly everyday. If anything I think the U.S. should worry about Vietnam because they are going to be the country who loses their imports to Vietnam. I think that the U.S. is the biggest winner of TPP and not Vietnam because the U.S. is going to want to seek out the countries that have the cheapest labor for fiber and yarn production.

  6. I think the question here is “Who in Vietnam may benefit?” The article predicts that the local textile industry is likely to suffer due to the competitive foreign investors making a profit also, but I believe that, ultimately, Vietnam as a whole will benefit from TPP. The massive amount of building projects predicted will create a lot of employment opportunities – from the necessary contractors and their crews to the eventual staff of the facilities being established. These are roles that can be filled by Vietnamese citizens. I believe foreign investment can help the Vietnamese govenment and, in theory, if these funds are used properly and with social awareness, will trickle down to the public and help meet their needs, too.

  7. I liked the last comment and it put this article into a better perspective for me. I agree that we should wonder who in Vietnam will benefit but I also think this is a classic example of what we learned from the T-shirt book. By letting Vietnam be a part of the TPP agreement they now have the “in” that will eventually be what industrializes their country. By having so many industries moving into Vietnam to take advantage of their lower costs for importing to the US, their economy. I disagree with those who have said, Will Vietnam benefit, because of course they will. This is the push that their country needs to get on the same direction that the countries who already have benefited from being a part of the textile and apparel industry already have.

  8. After reading this post and learning about the rise of vietnam in class I believe that they are not going to be one of the greatest winners of the TPP. Their economy may get better but they still need to rely on other countries for some of the products that they use. I also think that if they start to rise too much then America and European companies will feel threatened and pull their product production out of Vietnam. The Vietnam should look into importing yarn and textiles from NAFTA/CAFTA even if it means increased spending. This was they would be paying duty free instead of being taxed on every little thing.

  9. The TPP is a game changer and thus simply saying that it will affect one country is not how the game works. The TPP also works for those companies who may have dyeing and yarn factories in the Vietnam. They too will gain from the TPP because of the cheaper taxes being imposed. And thus winners won’t only be those countries who are not involved. What Vietnam could do is take part in CAFT or NAFTA but this would mean that they are helping to support businesses of other countries however this would help them in importing supplies duty free.

  10. I think its obvious that the TPP will change a lot of things for a lot of countries involved- and yes, Vietnam should have concern and move forward with caution. In the long run and overall Vietnam will benefit! They may not be as large as the U.S but they are progressing rapidly. With the textile industry on their side these days, they are rapidly stimulating their economy and cresting thousands of jobs for their citizens. They will benefit from the cheaper taxes TPP will bring. The only thing I think Vietnam needs to be cautioned about is the fact that their rapid growth may intimidate other countries that they need help from and therefore these countries will no longer want to use Vietnam for their services and will go elsewhere.

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