Vietnam likely to be the biggest winner of TPP trade deal

Vietnam is a significant player in President Barack Obama’s pivot to Asia as both the U.S. and Vietnam would like to see the Southeast Asian nation less reliant on China, which is not a party to the trade accord. Vietnam’s economy that relies on exports, is likely to be the biggest winner of the Trans-Pacific Partnership. In a decade, the country’s gross domestic product will be boosted 11 percent, or $36 billion, as a result of the world’s largest trade pact.

Exports may soar 28 percent in the period as companies move factories to the Southeast Asian country. Reduced import duties in the U.S. and Japan will benefit the Vietnam’s apparel manufacturers, whose low labor costs have enabled them to grab business from China. Vietnam may have a 50 percent increase in apparel exports in 10 years, according to the Eurasia Group.

The ending of tariffs for Vietnamese products is likely to trigger more investment from foreign companies. Companies such as Texhong Textile Group Ltd., Shenzhou International Group Holdings Ltd. and Pacific Textiles Holdings Ltd. are relocating operations to Vietnam to take advantage of the trade agreement.

The signing of the agreement is expected to give a short-term boost to the broader market. Vietnam’s benchmark stock index has risen 3 percent this week, with foreign investors snapping up logistics, industrial parks and garments. Foreign investors have bought $41.8 million of Vietnamese stocks this week, poised to be net buyers after selling Vietnamese stocks earlier in the month. More FDI is expected into these sectors.

As the trade pact is pressuring Vietnam to reform state-owned companies and make institutional changes. Vietnam’s Prime Minister Nguyen Tan Dung has called for a restructuring of the country’s agriculture sector to help it compete with multinationals.

The agreement still needs to be passed by the governments of the 12 nations. The failure of TPP would leave Vietnam more economically isolated and dependent on China. The failure of TPP would also undercut those in Vietnam advocating closer ties to the U.S. and dent America’s influence in the region.

But Vietnam although has successfully negotiated trade deals with the European Union and South Korea earlier this year, is aggressively seeking economic partners to balance its relationship with China.