CPTPP impact on Vietnam: The World Bank report
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade deal of 11 Pacific Rim countries is going to be signed in March in Chile. The CPTPP will reduce tariffs among the 11 involved countries that together amount to more than 13% of the global economy (the deal will span a market of nearly 500 million people, making it one of the world's largest trade agreements), and boost trade and GDP growth. With its certain future, the World Bank has created a study analyzing its impact on Vietnam.
According to the report, the multilateral trade deal will further boost Vietnam’s investment and export driven growth model, but also will impact the domestic reforms. According to 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.”
CPTTPP impact in numbers
- Output: Under conservative assumptions, by 2030, the trade deal will further increase Vietnam’s GDP by 1.1%. In case the productivity also increases, the growth could climb to 3.5%.
- Exports and imports: Exports are projected to grow by 4.2%, and imports by 5.3%. Export growth is expected to be strongest in food, beverages, tobacco, clothing & leather, chemical, leather & plastic products, transport equipment and machinery & other equipment. Imports are expected to grow in all sectors.
- Tariffs: Average trade weighted tariffs faced by Vietnamese exporters to CPTPP markets will fall from 1.7% to 0.2%.
- Sectoral impact: The largest growth in output is estimated to be in food, beverages & tobacco, clothing & leather and textiles.
- Distributional impact: All income groups are expected to benefit from the new agreement. However, higher-skilled workers in the top 60% of the income distribution may reap more. In addition, CPTPP is projected to reduce poverty by 0.6 million people at poverty line $5.50 a day relative to baseline conditions in 2030.
The report concludes that the anticipated increase in FDI is expected to lead to a further expansion of services sectors, while also boosting productivity growth. It will create opportunities for domestic private companies to integrate into global value chains, and promote the development of the SME sector.
Vietnam is already one of the leaders when it comes to number of signed trade deals in ASEAN (with only Singapore and Malaysia in front). With CPTPP, Vietnam will continue developing its strong connection with other economies through signed bilateral and multilateral trade deals.