Implementing the RCEP will make China gain many export advantages over Vietnamese products, meanwhile, Vietnam faces trade deficit pressure from countries in the RCEP ...

Import-export movement of Vietnam with RCEP markets, 2009 - 2019. Source: Ciem.

Covering countries with populations up to 2.2 billion, equivalent to 30% of the global population, the RCEP Agreement creates a large and potential market for exports. This is an area with a strongly developed economy, high standard of living, so consumption demand is also very large, creating more opportunities for Vietnamese businesses to increase exports and expand markets, especially commodities that Vietnam has advantages such as rice, coffee, pepper, cashew, seafood ...
 

"However, the RCEP also creates a number of challenges that Vietnam will face in the coming time", according to the assessment in the report "Effective implementation of the Regional Comprehensive Economic Partnership is associated with improved autonomy of the economy: Requirement of completing trade and investment institutions in Vietnam "of the Central Institute for Economic Management.

                                             EXTREMELY PRESSURE

The domestic manufacturing industry will face the biggest challenge when goods from other countries can be brought into Vietnam with lower tax rates. If firms from partners in RCEP do not adjust prices before import tax, their goods will still be more price competitive when entering Vietnam and could put pressure on trade deficit. 

In another scenario, if enterprises in RCEP countries use the cost savings from import taxes to increase investment in technology, product quality, the pre-tax price may not change, but the amount of imports larger aperture. Then, the implications for Vietnam's trade deficit will be even greater. The fact that the trade deficit in the period before 2020 with RCEP countries has more or less reflected this concern.

The share of Vietnam's exports to RCEP countries increased from 44.0% in 2010 to 44.1% in 2018, then decreased to 41.8% in 2019. However, the share of imports from the RCEP bloc in the total import export is even higher: reaching 70.7% in 2019 compared to 67.4% in 2010. 

In the period 2009 - 2019, Vietnam tends to increase its trade deficit with the RCEP market. Vietnam has a large trade deficit with Korea, China and the ASEAN group. The statistics show that the trade deficit with China has continuously increased, especially in the period 2010-2015, and gradually decreased from 2016. The trade deficit with South Korea has increased especially rapidly since 2015. Specifically Therefore, the trade deficit increased on average at 22.3% / year in the period 2010-2014, and expanded to 31.4% / year in the period 2015-2017 after the Vietnam Free Trade Agreement - Korea (VKFTA) was signed in 2015.

The increase in trade deficit can put pressure on the balance of payments and the foreign exchange market, affecting the macroeconomic situation and the monetary policy space in Vietnam - which has always been a concern in decades. recently.

Import and export situation of Vietnam 2010 - 2019 and 10 months of 2020 - Source: Ciem.

LOSS PROFIT COMPETITION WITH CHINA

A major corporate challenge is that RCEP can create the risk of trade diversion, more specifically, increasing competition with China. 

Currently, Vietnam has a comparative competitive advantage over China thanks to the Vietnam-Japan Agreement (VJEPA), Vietnam - Korea (VKFTA), and the ASEAN + 1 Agreements. With RCEP, China has more tax incentives when exporting to these markets and will increase competition with Vietnam and ASEAN countries. For example, currently under the Agreement, Vietnam's textiles and garments are exported to Japan with a preferential tax rate of about 10%, while the tax rate on Chinese textiles is 15-20%. 

Another example, Japan imposes a tax rate of less than 5% on Vietnamese leather and footwear products, and 30% on imports from China. With RCEP, China can enjoy tax incentives and thus lose the competitive advantage of Vietnamese enterprises.

Compared to members in the bloc, Vietnamese enterprises are weak in capital size, equipment capacity, technology, management skills and labor. Therefore, Vietnamese enterprises, especially textile and garment enterprises, will be at a much more disadvantageous position in dominating the markets of other countries compared to China, because Chinese enterprises produce mass production and deliver goods. series, cheaper price, better design.

Besides, there are also concerns about the possibility of the domestic agricultural and fishery sector being negatively affected by the RCEP. In fact, China, Australia and New Zealand export many agricultural products while ASEAN countries are competitive in the seafood sector. Vietnam also faces the challenge of redirecting trade between Japan and South Korea as these countries open their markets to China. If the trade diversion effect is greater than the trade boosting effect, overall it will bring negative results for Vietnam.

Vietnam has a competitive advantage over a number of agricultural and aquatic products and industry, but mainly raw products or low processing content, low quality. Meanwhile, the export structure of these two sectors of Vietnam is similar to that of other countries in ASEAN and China, and the degree of export similarity with South Korea and India is also increasing. This creates increased competition pressure between Vietnam and other countries in the bloc.