The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will yield robust economic gains for Vietnam, says a new World Bank (WB) report following the recent signing of the agreement by Vietnam and 10 other countries.
The 11 Asia-Pacific countries of Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam signed the CPTPP on March 8 in Santiago, Chile.
Multilateral trade agreements such as the CPTPP are expected to further boost Vietnam’s investment and export driven growth model, according to the WB report, “Economic and Distributional Impacts of Comprehensive and Progressive Agreement for Trans-Pacific Partnership: The Case of Vietnam.”
“Even under conservative assumptions, the report estimates that CPTPP would increase Vietnam’s GDP by 1.1 percent by 2030. Assuming a modest boost to productivity, the estimated increase of GDP would amount to 3.5 percent from CPTPP,” according to Ousmane Dione, World Bank country director for Vietnam.
Under CPTPP, Vietnamese exports are projected to grow by 4.2%, and imports by 5.3%; with larger increases of 6.9% and 7.6%, respectively, assuming productivity gains.
In the case of tariffs, the average trade weighted tariffs faced by Vietnamese exporters to CPTPP markets will fall from 1.7% to 0.2%.
Non-tariff measures faced by Vietnam in CPTPP markets are expected to decline, on average, 3.6 percentage points in ad-valorem tariff-equivalent terms.
On sectoral impacts of CPTPP, the largest growth in output is estimated to be in food, beverages, and tobacco; clothing and leather; and textiles; along with more modest growth in several manufacturing sub-sectors, as well as services.
Export growth is expected to be strongest in food, beverages and tobacco; clothing and leather; chemical, leather and plastic products; transport equipment; and machinery and other equipment. Imports are expected to grow in all sectors.
All income groups are expected to benefit from this new agreement, although higher-skilled workers in the top 60% of the income distribution may reap more, said WB.
In addition, the anticipated increase in FDI is expected to lead to a further expansion of services sectors and boost productivity growth. It will create opportunities for domestic private firms to integrate into global value chains and promote the development of the SME sector.
“The new agreement will bring direct benefits to Vietnam, from trade liberalization and improved market access. Most importantly, it will help stimulate and accelerate domestic reforms in many areas,” said Sebastian Eckardt, the World Bank lead economist for Vietnam.
“Delivering commitments under the CPTPP will contribute in promoting transparency and supporting the creation of modern institutions in Vietnam,” he added.
The CPTPP is expected to stimulate reforms in areas such as competition, services (including financial services, telecommunications, and temporary entry of service providers), customs, e-commerce, environment, government procurement, intellectual property, investment, labor standards, legal issues, market access for goods, rules of origin, non-tariff measures, and trade remedies.
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