CPTPP offers more opportunities for Vietnamese goods into American markets

CPTPP bright spot in Americas

At a seminar themed "CPTPP - Opportunities for Vietnam’s exports to American markets", held by the Ministry of Industry and Trade (MOIT) in Hanoi on April 27, MOIT Deputy Minister Do Thang Hai said that the agreement, officially approved on December 30, 2018 and effectual in Vietnam from January 14, 2019, is considered an important turning point, creating a new impetus to promote cooperation in trade and investment between Vietnam and its partner countries in general and the Americas in particular.

Among the 11 member countries participating in the CPTPP, there are four in the Americas, including Canada, Mexico, Chile and Peru, of which Canada, Mexico and Peru are the three that reached free trade agreements (FTA) with Vietnam in recent times. They also have commitments to cut very high tariff rates for Vietnamese goods as soon as the CPTPP comes into effect, with Chile at 95%, Canada 94.9%, Peru 81% and Mexico 77%.

Some two years since CPTPP being put into effect, Vietnam’s exports to the two countries that have ratified the CPTPP – Canada and Mexico – have grown strongly, reaching US$4.4 billion (up 45%) and US$3.17 billion (up 41%). The remaining countries also witnessed very fast growth, with Chile up 30% and Peru 21% compared to 2018, although they have as of yet not ratified the agreement.

According to Deputy Minister Hai, in 2020, amid the world going through a special year of fluctuations and recessions, as well as the negative effects of COVID-19, Vietnam's exports to the Americas still achieved encouraging results, becoming a bright spot in its trade exchanges with the world. Specifically, total trade turnover between Vietnam and the Americas reached nearly US$111.5 billion, up 16% compared to 2019; of which exports reached US$89.7 billion, up 21.7% ,accounting for 31.7% of the total. Notably, despite COVID-19, Vietnam's exports to CPTPP countries in the Americas still grew 10.23% reaching US$8.84 billion. In particular, export growth to Canada and Mexico continued to take the lead in the CPTPP market block, up 12%, much higher than the overall increase in exports.

Following the growth momentum of 2020, in the first three months of 2021, Vietnam's exports to its CPTPP partners in the Americas also increased positively. Specifically, exports to Canada increased 15%, reaching US$1.13 billion; Mexico up 17%, reaching US$931 million; Chile up 12% to reach US$321 million; and Peru increased by 35%, reaching US$134 million.

These figures confirm the CPTPP has become a driving force to open up the door for Vietnamese goods to new markets in the Americas, still a very new market with high potential, emphasised the MOIT deputy minister.

Deputy Minister of Industry and Trade Do Thang Hai speaking at the workshop.

Taking opportunities for Vietnamese products to conquer Americas

Besides the CPTPP, the opportunity to penetrate into the American markets for Vietnam's goods is still active thanks to the available trade blocs and FTAs within the region. According to Do Thi Thu Huong, Vietnam Trade Counselor in Canada, in addition to exploiting the CPTPP markets, Vietnamese businesses can seek opportunities in taking advantage of local economic linkages and the available infrastructure of the CPTPP member countries, through which Vietnamese products can penetrate and expand to other markets in the Americas.

The region has various economic linkages through the FTAs with close ties, such as the United States-Mexico-Canada Agreement (USMCA) with nearly 500 million people and GDP at US$21 trillion, the Southern Common Market (MERCOSUR) including Brazil, Argentina, Uruguay and Paraguay with 265 million people and a GDP of US$2.4 trillion, the Pacific Alliance (AP) formed by Chile, Colombia, Mexico and Peru with 230 million people and GDP at US$2.1 trillion, and Andean Community (CAN) comprising Bolivia, Colombia, Ecuador, and Peru with 111 million people and GDP worth US$700 billion.

If good use is made of these economic linkages and trade incentives, Vietnamese enterprises can find favourable opportunities to diversify their products and export markets in the region, especially in the trend of global supply chains shifting and priorities being given to recovery and maintaining economic development both during and after the pandemic.

In addition to its favourable conditions, the Vietnamese business community and its partners in the CPTPP and the Americas still face a range of challenges in business cooperation, such as remote and unpredictable geographical distances, without direct passenger and freight routes, language barriers, and the lack of up-to-date information on market access. In addition, Vietnamese businesses are also facing some difficulties in meeting rules of origin, product quality and market standards.

According to Nguyen Cam Trang, Deputy Director of the MOIT’s Agency of Foreign Trade, meeting origin standards is one of the prerequisites for Vietnamese goods to enjoy tariff preferences from CPTPP as well as the FTAs. However, to achieve this requirement, there are still some difficulties, especially for products of Vietnam such as textiles and garments. In addition, quality requirements are also an issue, especially for agricultural products, which are also one of Vietnam’s strengths. In addition, the limited number of businesses grasping fully the commitments needed for preferential tariffs in the CPTPP is also an issue hindering them from taking advantage and boosting exports.

Therefore, to make effective use of the CPTPP, according to Trang, more powerful and new solutions are needed. On the side of state management agencies, it is to improve the efficiency of enforcement, while continuing to review legal documents and especially improving the business environment as it is a premise to facilitating production, business operation and exports.

In addition, communications should continue to be focused on providing information related to commitments, tariff incentives and rules of origin in a more specialised direction, going deep into each market, each specific product, with specialised training offered having a more strengthened impact on specific target groups. Information on import markets related to taste, capacity and especially management policies should also be provided to businesses for their production orientation.

On the business side, they also need to improve their activity in capturing the above information. In addition, when accessing a new market, businesses also need to renew their business thinking, improve their product competitiveness and prepare in a more methodical manner in terms of both human and capital resources.

According to Pham Cao Cuong, Deputy Director of the Vietnam Institute of American Studies under the Vietnam Academy of Social Sciences, most Vietnamese businesses today are small and medium-sized ones, so the approach to new markets for them is very important. They need to proactively grasp information about supply chain movement around the world to be autonomous in accessing these and ensuring their exports. Meanwhile, State management agencies also need to have more policies and campaigns in place to help foreign markets know more about Vietnamese businesses and their products through diversified access channels, thereby contributing to raising trade exchange turnover.

Along with the efforts from the Vietnamese Government against COVID-19 and rejuvenating the economy, the MOIT affirmed it would continue to support localities and the business community in market information and connection with foreign businesses, partners and importers to seek opportunities for key Vietnamese products, thereby helping them build market access and business strategies more methodically, as well as taking advantages of existing incentives within CPTPP and assisting them in solving problems arising in market penetration and business development.