With preferential tariffs provided under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam has the opportunity to increase exports of garments, footwear, timber products, and beverages to other member countries.

Delegates discuss opportunities and challenges arising from CPTPP for
Vietnam’s garment and textile, footwear, timber products and beverage
sectors at a conference held in HCM City on December 5. — VNS Photo 

But Vietnamese enterprises’ ability to take advantage depends on their preparation, Nguyen Thi Thu Trang, director of the Vietnam Chamber of Commerce and Industry’s WTO and Integration Centre, said.

Speaking at a conference titled 'Opportunities and Challenges from CPTPP for Vietnam’s Garment and Textile, Footwear, Timber Products and Beverage Sectors' held in HCM City on December 5, she said, “Our exports of footwear, garment and textile, timber products, and beverages to CPTPP member countries account for 12.5 per cent, 16.04 per cent, 20 per cent and 23.46 per cent of their total exports.

“We export a lot to CPTPP member countries, but our market share remains modest, for instance at 2-2.9 per cent of their footwear imports and 0-6 per cent of garment and textile imports. Therefore, there is still much more room for Vietnamese firms to boost exports.

“Canada, Mexico and Peru are countries that Vietnam does not have free trade agreement with, thus CPTPP offers great opportunities for Vietnamese firms to access these markets through preferential tariffs.”

But to capitalise on the opportunities, the products must meet the CPTPP’s rules of origin and conform with sanitary and phytosanitary (SPS) requirements and technical barriers to trade (TBT), she said.

“If we do not meet their requirements, we cannot utilise the preferential tariffs that CPTPP member countries offer to us.”

Japan, Malaysia, Singapore, Australia, New Zealand and Chile are countries that Vietnam has bilateral or multilateral FTAs with.

The CPTPP creates another preferential tariff scheme for businesses, who, depending on which FTA offers more advantages, should choose that to export under, she said.  

Khuu Thi Thanh Thuy, general secretary of the HCM City Textile and Garment - Embroidery Association, said Vietnamese garment and textile firms have faced difficulty in meeting the CPTPP’s rules of origin since their raw material imports from countries outside the CPTPP remain high.

Local and foreign firms are now investing in the underdeveloped textile, dyeing and fabric segments to increase the local content rate, she said.

Nguyen Chanh Phuong, deputy chairman of the Handicrafts and Wood Industry Association of HCM City, said: “Meeting the rules of origin is not a difficult task for the wood products sector.”

But the sector has not benefited much in terms of tariff duties from the CPTPP because import tariffs on Vietnamese furniture were already very low and even zero in many markets, he said.

“Most companies in the timber industry make their products in the form of OEM (according to customers’ orders). Firms mainly wait for buyers to come. With the current good market situation, for example, a strong increase in exports to the US, firms may not find new opportunities.” 

He said local firms should do market research to appropriately target exports, adding that businesses, especially large ones, need to have market research divisions to discover new opportunities brought by FTAs and changes from competitors.

Vo Tan Thanh, director of the Vietnam Chamber of Commerce and Industry’s HCM City branch, said, “Tariff commitments in the CPTPP come with relatively detailed and complex rules of origin, which not all businesses know how to comply with.

“Therefore, understanding CPTPP commitments, the conditions required to take advantage of the opportunities, their impacts on market prospects and development trends in these sectors are important for Vietnamese enterprises to take advantage of the exciting opportunities arising from the CPTPP.”

Domestic market

While offering benefits in terms of creating export opportunities and improving incomes for millions of workers, the agreement also creates competitive pressure in the domestic market since Vietnam has also to lower tariffs on imports from other member countries.

Theoretically, CPTPP would bring intense competition in the domestic market, Trang told the media on the sidelines of the conference.

“But our competitiveness in these sectors is relatively strong. In addition, at least seven partners in the CPTPP have FTAs with us and we have already opened the market wide to them. Therefore, there has been competition in these sectors after the CPTPP took effect, but it is not a big shock.

“We are very successful in exporting these products and account for rather large market shares in many foreign markets.

“But firms did not pay much attention to the domestic market. So I hope businesses pay attention to the domestic market since many foreign companies consider our market a delicious piece of cake.”

Competing at home would be easier for local firms and so they should tweak their strategy to focus more on the domestic market, she added.