Trade ministers from the 11 remaining countries in the Trans-Pacific Partnership, after the U.S. withdrew, agreed in Hanoi on Sunday to promote the so-called TPP 11 trade liberalization deal.

Vietnamese Trade and Industry Minister Tran Tuan Anh, who chaired the meeting, declared that the 11 countries will continue their efforts in the lead up to the Asia-Pacific Economic Cooperation forum which convenes in the Vietnamese city of Da Nang in November.

While Vietnam broadcasts to the world that it is all in for the TPP 11, its true interest lies elsewhere.

TPP without the U.S. has little meaning for the Vietnamese. The country's exports to the U.S. increased 14.9% in 2016 from the previous year to $38.4 billion, which accounts for 21.8% of its total exports. Vietnam saw the original TPP as a chance boost exports of clothing, shoes, leather goods and agricultural products to the U.S.

Playing the Japan card

Following U.S. President Donald Trump's decision to withdraw from the accord, the Vietnamese government had originally taken a "No U.S., No TPP" stance, according to a source close to the ruling communist party.

Why then is Vietnam now supporting TPP 11? It seems that Japan is the driving factor. New Zealand -- which has close ties with Japan -- has already ratified TPP 11, complying with Japan's intention. Vietnam was to do the same in November last year but delayed action because, as Prime Minister
Nguyen Xuan Phuc put it, the government was unable to submit a suitable ratification plan.

Japan is Vietnam's largest provider of official development assistance and its second largest source of foreign direct investment after South Korea.

In addition, Japan and Vietnam have been strengthening bilateral ties. For example, ships from Japan's Maritime Self-Defense Force made their first call at Vietnam's strategically important Cam Ranh Bay in April 2016, and Japanese Emperor Akihito and Empress Michiko paid their first visit to Vietnam in March 2017.

Although Vietnam does not expect much substantial benefit from TPP 11, it intends to leverage its support of the accord in future negotiations with the U.S. and China, creating the impression that it sides with Japan, a Vietnamese government official said.

The strategy will be tested in upcoming negotiations with the U.S.

Although the U.S. is Vietnam's largest export market, it has proven to be a tough trading partner. When Vietnam began to export tra, a farm-raised fish, to the U.S. in 2002, Washington declared that it could not be marketed as "catfish." Furthermore, Washington trebled the import tariff on tra to $1.2 per kilogram in 2014 and forced Vietnamese tra farmers in 2016 to comply with stringent U.S. sanitary standards.

Regulations on tra imports will be toughened this year as the U.S. Department of Agriculture replaces the Food and Drug Administration as the governing agency in September.

The U.S. measures, which appear protectionist to Vietnam, are thought to be aimed at protecting American fish farmers.
"Vietnam alone cannot protest [against] the U.S. from a position of strength, but may obtain favorable terms by hinting at its [close] relations with Japan," said a Japanese trade official in Vietnam.

Countering China

One other reason for Vietnam's push for TPP 11 probably lies with the Regional Comprehensive Economic Partnership.

This Asian free trade agreement could be equally attractive because it includes China and India. But Vietnam is wary of China wielding undue influence over other members if the huge RCEP was indeed implemented.

As of 2016, Vietnam depends on China for 28.7% of its imports, the largest of any country. Despite the close trade ties, the two are in dispute over sovereignty of the Paracel Islands and Spratly Islands in the South China Sea. Vietnam would be less comfortable if its reliance were ever to increase. 
Vietnam hopes to conclude negotiations for the TPP 11 on the sidelines of the upcoming APEC summit. While paying lip service to the accord, Vietnam will try to extract favorable terms in bilateral trade talks with the U.S.

Should the TPP 11 become a reality, the RCEP will be a dead issue, dealing a blow to China's plan to boost exports.

Past wars with France, China, the U.S. and Cambodia have impressed upon Vietnam the importance of diplomacy. The way the country has handled the TPP 11 talks have revealed its knack for skillful negotiation.

Source: Nikkei
 

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