TPP forecast to give Vietnam a boost over Cambodia

Trade representatives attend at a press conference for the Trans-Pacific Partnership, a pan-Pacific trade agreement involving 12 nations, in Sydney in 2014. AFP

TPP forecast to give Vietnam a boost over Cambodia

Phnom Penh Post | 30 March 2016

The anticipated ratification of the Trans-Pacific Partnership (TPP) agreement is expected to have a negative impact on Cambodia’s economic growth as Vietnam takes priority as a top trading partner within the 12-member bloc that accounts for 40 per cent of the world’s economy, an academic said yesterday during a lecture organised by the Canadian Chamber of Commerce in Cambodia.

Citing World Bank statistics, Susan Green, a professor of law at the Royal University of Law and Economics, said preferential tariff reductions or eliminations to the US market under the TPP could boost Vietnam’s GDP by 10 per cent by 2030. She said manufacturers were already looking to leverage the trade framework, sinking investment into Vietnam, a member of the TPP, that might otherwise have gone to non-member Cambodia.

“Fabric manufactures in China are reported to be moving to Vietnam now and building major manufacturing facilities so that components can be provided to Vietnam companies,” she said. “This is very significant and it is predicted to bring a lot of job growth.”

“If Cambodia enters the TPP it would either have to produce its own fabric to comply with the rules of origin clause, or import from other TPP countries,” she said, citing the yarn-forward clause that requires raw material to originate within the trading bloc.

Green argued, however, that the economic consequences of the TPP might be smaller than originally envisioned. She highlighted a recent study from US-based Tufts University which projected that Vietnam’s GDP would only rise by 2.18 per cent by 2025 as a result of the TPP – about a fifth of the prevailing projected growth. Non-TPP countries, however, would see a net loss of 5.24 per cent of GDP by 2025, significantly higher than World Bank models predict.

The TPP, one of the world’s biggest multinational trade deals, was signed by 12 member nations in February following five years of negotiations. The signatories include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

Cambodia has expressed interest in joining the multinational trade agreement. However, Canadian Ambassador to Cambodia Philip Calvert said there were still lengthy hurdles that the Kingdom would need to overcome in terms of trade compliance before it could be considered for acceptance. He also questioned the value of a late entry.

“The problem with joining the TPP after it has been ratified is that the framework will have already been in place and [the original member countries] will have already have benefitted,” Calvert said.

In the meantime, he said, it is more important for Cambodia to take advantage of its current trade agreements rather than to seek inclusion in the TPP.