13 January 2022
Author: Nguyen Anh Duong, Central Institute for Economic Management
Following years of effort, in 2015 Vietnam concluded negotiations for the Trans-Pacific Partnership (TPP) trade deal. After the US withdrawal from the trade pact, Vietnam worked with the remaining members to revive it under the name of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Indeed, Vietnam was the seventh member to ratify the CPTPP.
Vietnam’s enthusiasm for the CPTPP stems largely from hopes it will induce further domestic reforms by aligning external pressure over domestic vested interests, an approach the country has relied on since 1986. The long process from negotiation to ratification has allowed Vietnam to build domestic institutional capacity in a number of regulatory areas, including around data flows, state-owned enterprises (SOEs) and intellectual property (IP).
Vietnam’s regulations on cross-border data flows have seen little change since the CPTPP’s entry into force in 2019, despite calls from the business community. The other signatories gave Vietnam five years to amend to the strict data localisation requirements from its 2018 Cybersecurity Law which are inconsistent with the CPTPP’s e-commerce chapter. Though Vietnam is yet to announce any upcoming legal changes, in practice the country may be less restrictive than it appears — in 2019 it ranked 7th globally in cross-border data flows.
SOE reform has also seen insufficient progress since 2019. Vietnam planned to equitise 127 SOEs from 2017–2020 but fell short by 54. Those that were equitised did see an improvement in operational efficiency, yet no material progress was reported for the SOE sector overall.
Changes to Vietnam’s IP protection regime have proceeded more rapidly. In 2019 the country amended its IP law to meet CPTPP commitments as per an agreed roadmap set out in the trade pact. Vietnam has now fulfilled commitments related to patent applications, geographical indication, enforcement and customs measures.
While the CPTPP only requires the establishment of an electronic trademark system, Vietnam went even further by making the system available for all kinds of IP rights. Vietnam has also drafted further legal amendments for National Assembly approval in 2022 aimed at addressing any remaining IP issues related to commitments made under the CPTPP.
Within Vietnam, there has been debate as to how swiftly reforms related to the CPTPP should have proceeded. Some experts on economic integration have called for an earlier and more radical phase in meeting Vietnam’s CPTPP commitments as part of a unilateral reform approach. But the pay-offs from such an approach were diminished by the US TPP withdrawal under former US President Donald Trump and the Biden administration’s apparent lack of enthusiasm for resurrecting the trade pact.
China’s application for CPTPP membership in September 2021 stirred up new discussion on whether Vietnam should take the CPTPP more seriously and could be another incentive for Vietnam to accelerate reform. Some experts have suggested China could meet the CPTPP standards if it can negotiate similar exemptions to those given to Vietnam under the pact. Still, had Vietnam been bolder in its SOE reforms to date, it might not have been named as an example of relaxed entry into the CPTPP.
Likewise, in terms of data flows, targeting the exemptions that Vietnam enjoyed under CPTPP would be a possibility for China. China’s application to join the Digital Economy Partnership Agreement between Singapore, Chile and New Zealand is another factor for consideration. If Vietnam was able to swiftly improve domestic regulations to facilitate cross-border data flows — at least in line with the CPTPP commitments —Vietnam could help preserve high standards of the CPTPP and eventually realise its aim of contributing to writing global trade rules.
Implementing the remaining IP commitments under the CPTPP is another complex task for Vietnamese regulators.
Making IP regulatory changes just in line with CPTPP commitments gives Vietnam some space in how to implement rules domestically and perhaps shape new rules in future trade negotiations. But as the IP commitments are phased in with a roadmap, a series of amendments to Vietnam’s IP law over time may only increase the changeability — instead of the adaptability — of its regulations. Vietnam may need a more concrete approach to IP policy given that in 2019 the country ranked only 19th among APEC member economies in the adaptability of its legal framework to digital business models.
For Vietnam, the CPTPP has so far failed to live up to expectations in inducing difficult reforms around SOEs, IP and data flows. Instead of getting side-tracked by the economic and geopolitical minutiae relating to their implementation, Vietnam should remember that these reforms are in the long-term national interest and should not hesitate to move on them.
Nguyen Anh Duong is Director of the Department for General Economic Issues and Integration Studies at the Central Institute for Economic Management, Hanoi, Vietnam.