The Cable

Vietnam Could Be the Biggest Loser if Obama Can’t Deliver TPP

Vietnam stands to lose the most in a world without Obama's Asian trade deal.


President Barack Obama wanted to travel to Vietnam having already secured the Trans Pacific Partnership, the massive trade deal covering 40 percent of the global economy that over a decade would add $36 billion, or 11 percent, to Hanoi’s gross domestic product. But it doesn’t look like Obama will be able to deliver the deal before he leaves office.

Obama began his visit Monday, becoming the third U.S. leader to visit the Socialist Republic since the end of the Vietnam War. He immediately called an end to the arms embargo against Vietnam. But TPP benefits to Vietnam and its leader, President Tran Dai Quang, remain elusive.

On top of the 11 percent GDP bump, exports would soar as high as 28 percent in the next 10 years with the TPP as companies move factories to the Southeast Asian country, according to a report by the Eurasia Group. This is because labor there is cheap; according to the International Monetary Fund, Vietnam has by far the lowest GDP per capita among potential TPP member states.

This would make it a popular destination for foreign companies’ manufacturing operations. The Eurasia Group found that Vietnam’s apparel and footwear sector could grow by 50 percent by 2025. Companies like Texhong Textile Group Ltd., Shenzhou International Group Holdings Ltd., and Pacific Textiles Holdings Ltd. already have plans to relocate operations there.

It would also serve a second purpose: Vietnam’s gains in footwear and apparel would bleed jobs from China.

“The Asia-Pacific economies are very dynamic,” said Lee Branstetter, non-resident senior fellow at the Peterson Institute for International Economics. Without TPP, Asian nations like Vietnam “will move forward as we’re standing still,” he said.

Hanoi has recently made trade pacts with the European Union and South Korea. It’s also negotiating China’s Regional Comprehensive Economic Partnership, an agreement meant to rival TPP.

At a press conference Monday, Obama said he was “confident” the trade deal would get done. “The reason I’m confident is because it is the right thing to do. It’s good for the country, it’s good for America, it’s good for the region, it’s good for the world,” the president said.

His confidence might be misplaced. Due to lack of support in the House and the Senate for the bill, and a growing anti-trade sentiment among both Republicans and Democrats, the chances for Obama to get the deal are dwindling.  Moreover, both Republican presidential front-runner Donald Trump and Democrat candidate Hillary Clinton oppose the pact.

So Obama’s last opportunity to push TPP through could be the lame duck Congress after the presidential election — and experts say the odds are slim.

“Don’t plan on ratification this year,” Eric Shimp, policy adviser at international law firm Alston & Bird, told CNBC. “There’s talk the White House may move ratification through a lame duck session in November, after elections, but there’s really no political willpower to do that in Congress.”

Photo credit: JIM WATSON/Getty Images

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