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TPP may give Vietnam tax benefits

Under the Trans Pacific Partnership, Vietnamese companies won’t have to pay tax when exporting products to the US. Vietnamese textile and garment products now have an import tariff of 17 per cent on an average when entering the US market. However, there is a feeling that it is not Vietnamese enterprises, but US importers which will get benefits, because US importers have to pay the tax.

The question being raised is whether US importers would pay more for the products of Vietnamese exporters and if so whether they would share benefits to be brought by TPP with Vietnamese enterprises. The opinion is that US importers will take full advantage of TPP to optimise their profits. However, in an indirect way, there will be benefits to Vietnamese enterprises, because US importers would get higher profits thanks to TPP, and therefore, would place bigger orders with Vietnamese enterprises.

Once demand increases, and Vietnamese supply is limited, US importers will have to offer higher prices to scramble for contracts with Vietnamese enterprises. Meanwhile, it has been estimated that 70 per cent of Vietnam’s textile and garment export turnover is from foreign invested enterprises. Vietnam exported $23 billion worth of textile and garment products in 2015, while only $7 billion went to Vietnamese enterprises’ pockets.