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Can TPP be revived under APEC 2017 in Vietnam?

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Authors: Do Quynh Anh & Bui Hong Hanh*

The Trans – Pacific Partnership Agreement (TPP) is the largest and most ambitious trade agreement in history, which was considered dead when US President Donald Trump abruptly announced his withdrawal in February, 2017. But shortly thereafter, TPP quietly took by the 11 remaining parties to restructure efforts under the name TPP11.

After the United States withdrew from the TPP, there are three views concerning the future of this agreement. Firstly, the most pessimistic view is that TPP without the United States will no longer be a TPP, so other countries should give up the agreement. Secondly, after the United States decisively withdraw, TPP should invite other Asian countries such as China, South Korea and Indonesia to participate and start negotiations again. Thirdly, the TPP 11 that is being headed by Japan will not change the content and the rest will continue to promote the TPP sooner. The third view is agreed by remaining countries, but this conclusion of TPP 11 still face many obstacles.

It is said that with the determination of the remaining members, TPP11 still has the prospect of revival. On the sidelines of the 13th Ministerial Conference of the Asia-Pacific Economic Cooperation forum held in New Zealand in May, the remaining 11 nations, in an attempt to restart the agreement, agreed to find ways to continue implementing the TPP without US . If revitalized, the TPP will link 11 countries, including the world’s 4/20 leading economies, to a combined GDP of $ 9,800 billion, followed by 19 new free trade agreements. This is also the reason that some economists recently said that it is possible that the United States will have to rethink its attitude toward TPP.

In order to have a positive result from the other members, Japan and major economies in the TPP such as Australia, Canada and New Zealand have been working hard for nearly a year in the hope of accelerating the process. These members expressed their determination to work closely together to reach a compromise soon in line with the common interests of all countries.

Replacement of the United States leading position, Japan has pledged to play a leading role in setting a clear direction for the TPP11, as Tokyo believes that the agreement will not only bring economic benefits but also a geopolitical strategies. The victory in the House of Representatives elections in Japan on October 22 has strengthened the political role of Prime Minister Abe, who favors TPP, and shows the bright future of TPP11. From Australia side, Australia Trade Minister Steven Ciobo told reporters that the gains made by the TPP are worthy to continue the agreement. He expressed satisfaction with the views of Japanese Prime Minister Shinzo Abe and what they discussed showed that there are more positive factors than expected. New Zealand Prime Minister Bill English continued to promote TPP11. He emphasizes that the country has stepped to the stage joining hands with Japan to recover the TPP process.

Meanwhile, Canada, the second largest economy in the TPP11, said it would try to remove the terms of each concession to the United States in its initial agreement. The US withdrawal from the TPP is bringing more benefits to Canada as well as allowing it a better position to rewrite the treaty. The Westover Center recently announced a study entitled “The Art of Trade Negotiation: Quantifying the Benefits of the TPP Without the United States.” According to this report, Canada’s exports to the TPP11 countries by the year 2035 will increase by 4.7%, while Mexico will increase by 3.12%, higher than the base without the TPP. When TPP included the US, the increase was only 0.36% and 0.05%. In addition, Mexico and Canada also benefited from exports to foreign TPPs in the context of TPP11 adoption. The study also found that Canada’s largest harvest under the TPP was from agriculture, agricultural food because it was not competing with the United States in the TPP. The benefits of TPP11 will allow Canada and Mexico to broaden their lead in re-negotiating NAFTA. Peru and Chile are also beneficiaries of the US withdrawal from the TPP as these countries will have a larger market share in the non-US TPP. Similarly, Singapore will also have the advantage of not competing with the United States in the Asian market.

At present, in the hope of reviving the TPP Agreement, the original text of the TPP needs to be adapted to the new situation, not just a simple exemption from the US, but also a number of difficult issues. This new face gradually revealed. Some members have proposed modifying or freezing some of the terms of the agreement, such as issues related to state procurement or the protection of intellectual property rights. Viet Nam has proposed the possibility of regulating some provisions on worker rights and intellectual property regulations in the pharmaceutical field of the original treaty. Meanwhile, Canada and Mexico have issued the terms they want to suspend, including a number of provisions of the TPP that may be incorporated into the revised version of the North American Free Trade Agreement (NAFTA) between the United States and these two countries.

After many meetings, the common perception among member countries has progressed. A number of sessions have been conducted to find a way to modify the original TPP text to suit the new context. There have also been significant advances in discussions on the modification or suspension of certain terms, such as the intent to freeze a patent filing extension, if the application is subject to postponement. Unreasonable, investment rules, copyright protection …Although the United States has retreated, the TPP is better than any agreement currently on the agenda of countries, such opportunities are not much. So, basically countries are discussing the same agreement with the original version.

Officials from several countries said a possible agreement could be reached at APEC 2017 – the Asia-Pacific Economic Cooperation forum, which will take place in Danang, Vietnam in November. TPP members are present at this conference. The move comes after the end of the fourth round of talks between high-level officials in Tokyo in September, which has sparked renewed hopes for a large-scale cooperation in the TPP process. Observers note the importance that the parties have achieved.   Peruvian Trade Minister Edgar Vasquez announced to media after the meetings “All member states are willing to evaluate alternatives so that TPP can survive.”

At the meeting of APEC Finance Ministers in Hanoi on October 20, 2007, in addition to the contents related to APEC’s organization works in Da Nang next month, the information showed that with little change, Japanese officials and participating countries are optimistic that TPP will have a good result in Da Nang.

Commenting on the next APEC meeting next month, the Australian Ambassador said Australia’s main objective in the forum was to join the 10 member countries approve the TPP. After this round, the final decision on the new TPP, which many hope to become reality at the end of the year and if agreed, can be implemented from next year.

The TPP agreement will have some adjustments, but that contents is not much, not very important. Because of that, the general desire of TPP members still to hope America back. In order for the United States returned, TPP 11 can not cut off what it has installed in the Agreement so much, especially in such areas as labor, environment, intellectual property, public procurement, fighting terrorism, transparency and anti-corruption, conflict resolution, competition policy, and service sectors lead by United States. The revival of the TPP11, the Asia-Pacific region has determined Its own path, not completely passive look at the US leadership as before.

*Bui Hong Hanh, associate professor, Vietnam National University, Hanoi

Southeast Asia

CPTPP Serving Vietnam as Opportunities and Challenges

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CPTPP is originated from the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP) (it is also so call P4) signed in 2005 by Singapore, Chile, New Zealand and Brunei. Since September 2008, the United States, Australia, Peru, Vietnam, Malaysia, Canada, Mexico and Japan have jointly negotiated at the aim of setting up the Trans-Pacific Partnership Agreement (TPP). The TPP negotiation process ended in 2015 under the agreement of the 12 member states; however, Trump administration announced its withdrawal from the agreement in January 2017. After a number of adjustments, including postponing the implementation of the 20 TPP provisions with the expectation that the United States would return to the Agreement, the 11 remaining TPP members unanimously continued to promote this process by establishing Comprehensive and Progressive Agreement for Trans-Pacific Partnership -CPTPP). After completely reviewing the content and approved by the member parliaments, estimated by March 2018, CPTPP will officially become a large economic zone in Asia-Pacific with a population of over 460 million, contributing 14% of world GDP and 1/6 of global trade.

The agreement is expected to establish a new common framework for regional free trade arrangement for Asia-Pacific countries, to support trade, to attract foreign investment, and to promote institution reformation in those countries. CPTPP has the basic advantages as the members of the negotiation are the countries that have been strongly committed to the trade liberalization. Given the disclosed commitments, CPTPP is considered as a model treaty for the 21st century because of its overwhelming scale and influence in comparison with other trade agreements regionally and globally.

Given the competitiveness, the economic size and the inadequacies of the current institutional system, it is surprised that Vietnam has strongly participated in CPTPP. Compared with other members, it has the least competitive economy and the loosest legal system. Despite its 20-year-old experience in the process of international economic integration, Vietnam lacks the practices in a highly competitive and demanding integration environment since it is only familiar with first-generation FTAs, where the open commitments and reform pressures are readily accepted in a transitional and distinctive economy.

Meanwhile, CPTPP’s regulations set out in the negotiations are evaluated as far beyond the ability of the current economy of Vietnam. What is the motive of Vietnam to join CPTPP?

Given the economic size of the members and the terms of trade liberalization, joining CPTPP is obviously advantage to empower Vietnamese economy in the Southeast Asia in terms of economic growth, trade as well as FDI attraction. In the economic perspective, Vietnam is a country to achieve the most benefit from the CPTPP.

Firstly, the opportunities to increase the export of goods that are the advantages of Vietnam (i.e. textiles, footwear, electronic products and equipments) are relatively high by combining the tariff reduction and the experiences in these markets.

Secondly, the attraction of foreign investment into Vietnam is greatly promising. The access to large markets such as Japan and Canada together with the clearer commitments to improve the investment environment and protect intellectual property rights will become a significant attraction for international investors. Moreover, Vietnam, under the framework of CPTPP, is able to attract large inflows from the member countries through the membership of regional economic organizations such as AFTA and ACFTA.

Thirdly, the chances of faster economic growth are strongly wide. The expansion of the major export industries such as textiles, footwear, fishery, etc., will help stimulate the income growth from domestic production, thereby support the increase of the overall demand.

Fourthly, Vietnam will have an opportunity to form a more comprehensive economic structure. CPTPP will urge the domestic investors as well as the regional ones to invest in the supporting industries to create local material resources given the extremely high standards on the place of origin.

Fifthly, it is a chance to complete the institutions that govern the market economy. CPTPP sets out a clear legal framework for not accepting concessions to any business. Because of its high and foreseen requirements on policy transparency, compared to many other agreements, CPTPP could become one of the important premises for Vietnam to carry out institutional and market reforms thoroughly and comprehensively.

However, among the countries participating in CPTPP, Vietnam achieves the lowest level of development and faces big challenges.

Firstly, the production industry structure is not consistent with the provisions of CPTPP. The economy is not well-prepared and the supporting industry is weak. With regard to the requirements of origin, the sectors which are the advantages of Vietnam’s export sector are not able to exploit the concessions from the CPTPP because their inputs do not contain domestic factors.

The second challenge is from the stagnation of the enterprise system. The adaptability to the market economy of Vietnamese enterprises is weak. The lack of an effective investment strategy for the supporting production industry and “traditional outsourcing” works have made the overall benefit of the economy declined.

Thirdly, the limitation of state enterprises’ role in the national economy becomes a content of CPTPP. The external pressure is positive only if it meets the community benefits. If the selection of CPTPP is purely commercial-economic aspect, it will not cause the objection against the reformation within the SOE system.

The fourth challenge is from the increasing competition of goods from the members of CPTPP. At present, Vietnamese enterprises are well-protected by the high tariffs. The trend and demand for zero tariff reduction will be applied to CPTPP members in the coming time. In the analysis of the export structure of CPTPP countries, it can be seen that the manufacturing industries of Vietnam facing difficulty are automobile industry and agriculture, especially the husbandry which remains mall and fragmented, and unable to compete against the large, experienced and traditional competitors.

The fifth challenge from the requirements of intellectual property protection in CPTPP is much more critical. The continuing possibility of “appearing to court” by infringing intellectual property law is present in countries previously without adequate preparation of intellectual property law. Furthermore, the requirements for increasing the level of protection of intellectual property rights over inventions, copyrights, and trade marks can lead to the escalation of drug prices and create a health burden to the emerging economy like Vietnam. More than that, the measures to protect intellectual property related to biology also affect agriculture which accounts for more than 60% of the population of Vietnam. The prices of agricultural products such as veterinary drugs, fertilizer, etc. will thereby grow significantly, which increases costs and reduces the efficiency of agricultural production in general.

In regard of the need for economic reform and the promotion of economic growth, the process of further integration into the world economy is not allowed to slow down. The question is what Vietnam needs to do to facilitate the upcoming integration roadmap.

Firstly, administrative reform and severely corruption offence are the most important things. It is shown that the WTO supports free market economy so that it could operate and develop only in a healthy competitive environment. Since the joining in the WTO, Vietnamese economy has not really created a healthy competitive environment. Meanwhile, corruption has created more conditions for interest groups to ramp up and distort even the good national policies. If the administrative procedures remain cumbersome and troublesome, corruption will still restrain the required transparency in corporate management. In accordance, CPTPP is not an opportunity, but a challenge to the whole system.

Secondly, the reformation of the legal environment and policies to ensure a single “standard” prescribed by CPTPP is a difficult for Vietnam. But in the long run, this reform of the institutional environment towards the international “rules” is a necessary condition for growth in the context of globalization. In this perspective, although adjusting the policy system involving the regulation of CPTPP is a difficult and costly process, Vietnam’s commitments can be seen as an external “push” to provide additional momentum for domestic efforts towards a transparent institutional environment and economic growth.

Thirdly, it is needed to organize the perfect communication to all classes of people, especially the business and the production circles in the countryside. The participation in CPTPP without fast updating to the farmers might cause the loss of market, the high pressure of competition, and even the legal disadvantage in disputes and sues.

Fourthly, the reform of SOE and the development of SMEs is the key solution. Given the population and economic growth, the number of enterprises in Vietnam is relatively low. This is a major constraint in economic development, employment, creation of competitive markets and the mobilization of resources from society.

In the context of limited resources and high demands of work, the development of these types of enterprise is appropriate not only to the internal capacity but also the preferences of CPTPP. Hence, it is essential to reform SOEs in a substantial way and enable them to have a transparent business environment.

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Southeast Asia

Time to Divest from Myanmar? Not Quite

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In an op-ed that ran in the Guardian last week, Hannah Lownsbrough of the NGO SumOfUs put forward a highly provocative take on the Rohingya crisis gripping Myanmar. Running just a few days before Christmas, Lownsbrough asked whether Christmas shoppers buying gifts from brands like Bulgari wanted to “consider their role in propping up the genocide of Rohingya people.” As she tells it, outside companies that source materials from Myanmar (and, by extension, their customers) are bankrolling the violence against the one of the world’s most persecuted minorities.

The article puts forward an appealingly simple narrative of corporate complicity in Myanmar’s conflict. Unfortunately, that simplicity ignores far more important factors in the Rohingya’s ongoing suffering and advocates a course of action (divestment) whose efficacy is a matter of contentious debate. Why the fixation on what the Guardian op-ed refers to as “genocide gems” just one year after the Obama administration lifted remaining US sanctions on the industry?

One possible explanation: the people advocating divestment may not be exactly who, or what, they seem. In her op-ed, Lownbrough states her organization is campaigning alongside the International Campaign for the Rohingya (ICR) to “cut off this income stream to the Burmese military.” The ICR indeed seems laser focused on pressing multinational companies do “no business with genocide” but does not otherwise seem active in supporting relief efforts.

In a peculiar coincidence, the organization seems to be led by American lobbyist Joseph Grieboski and staffed entirely by his associates. Grieboski’s wife is named as ICR co-chair, while the campaign’s treasurer is an employee at Grieboski Global Strategies and the chief strategy officer at Grieboski’s firm Grieboski Jolly Caraway is listed as the group’s “secretary.” Joseph Grieboski is also founder of the obscure “Institute on Religion and Public Policy” and known for his connections to the controversial Church of Scientology (including alleged lobbying work on its behalf).

Does this mean there are ulterior motives behind the SumOfUs/ICR campaign against foreign companies who do business in Myanmar? The ICR’s website makes no mention of funding sources (other than pointing visitors to a donate button). However, one of Grieboski’s major clients is the 57-country Organization for Islamic Cooperation (OIC). The OIC, which technically represents the entire Islamic world but in practice is closely aligned with Saudi Arabia, has offered more rhetorical support for the Rohingya than concrete assistance.

If there were a deeper connection between the OIC and the ICR, it would be a bizarrely roundabout way of responding to the crisis. Fully 860,000 Rohingya men, women, and children have sought refuge in Cox’s Bazar in Bangladesh. The UN and other aid organizations need hundreds of millions of dollars to assist up to 1.2 million people impacted by the crisis.

Funding shortfalls mean those organizations do not have the resources on hand to handle the sheer scope of the exodus. The UN’s Office for the Coordination of Humanitarian Affairs (OCHA) has met only 35% of its $434 million US fundraising target. The $15 million in aid Saudi Arabia’s King Salman pledged for the Rohingya in September does not stake up to the generosity of previous monarchs: during a previous crisis 2012, King Abdullah donated $50 million. Before that, King Faisal allowed many Rohingya families to resettle in Saudi Arabia. Salman, for reasons that remain unclear, later moved to deport many of them.

There are reasons for Riyadh to dissimulate its criticism of Myanmar, many of them economic. Saudi oil uses a new, 771-kilometer pipeline that starts in Rakhine State and traverses Myanmar to reach customers in China’s Yunnan Province. Myanmar’s central location gives it a key role in Saudi regional economic aspirations. Curiously, the ICR has not called on companies like Saudi Aramco to abandon their interests in the country.

Saudi Arabia isn’t the only Muslim country with a problematic stance. Bangladesh has taken in the vast majority of the Rohingya to flee Rakhine State over the past few months, but is making their stay a precarious one. Bangladeshi prime minister Sheikh Hasina is moving ahead with a proposal to resettle 100,000 Rohingya refugees on a remote, flood-prone island liable to being completely submerged by the tides. Dhaka signed a deal with Myanmar to repatriate displaced Rohingya to Myanmar, even as Rohingya villages still burned.

The campaign to force corporate interests out of Myanmar raises a broader question: what, if anything, would divestment actually do for the Rohingya? Campaigners like SumOfUs point to apartheid-era South Africa to illustrate the power of ostracization. However, comparing South Africa in the 1980s to Myanmar today is problematic at best. This is not least because Suu Kyi, the one leader who could translate a global divestment campaign into effective grassroots action, is herself guilty of ignoring the crimes perpetrated against the Rohingya by her country’s military.

One of the most important factors driving the Rohingya crisis is the fear, hatred, and suspicion with which even pro-democracy members of Myanmar’s Buddhist majority view their Muslim neighbors. While Myanmar’s military is obviously implicated in the deadly attacks on Rohingya communities, vigilante groups and the Buddhist nationalist movement have actively stoked and committed anti-Muslim violence for years.

Having grown accustomed to decades of seclusion, it is difficult to imagine Myanmar’s generals or sectarian extremists bowing to pressure from abroad. Economic isolation may instead produce the same retrenchment Myanmar’s junta fostered for decades. Western officials recognize that blanket sanctions and economic disengagement are unlikely to help the Rohingya, but even the targeted measures now under consideration by American policymakers could undermine Myanmar’s economy and end up strengthening domestic support for the military’s anti-Rohingya campaign.

As Hannah Lownsbrough herself wrote in the Guardian, untangling the conflict between Myanmar’s government and its Rohingya will “not be straightforward.” Unfortunately, changing the government’s behavior is also far more complicated than her piece lets on. If the international community (and especially Muslim-majority countries) want to help the Rohingya, they should look directly to the refugee camps where the need is greatest.

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Southeast Asia

Bringing electricity to all corners of Southeast Asia

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Providing electricity access for all remains a critical topic in many parts of the developing world. The challenge is especially acute in Southeast Asia, one of the most dynamic regions of the global energy system, but whose rich and varied environment defies one-size-fits-all energy solutions.

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