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Made in Vietnam: Emerging logistics giant isn’t slowing down post-TPP

puzzle_480Electronics manufacturers in the central Vietnamese province of Quang Nam had been ramping up capacity since 2008, when the country joined 11 other nations in crafting the Trans-Pacific Partnership, or TPP. The free-trade agreement would be the largest ever conceived and promised to promote economic growth and launch Vietnam as a regional manufacturing and export powerhouse.

Already outpacing China in terms of manufacturing growth, Vietnamese firms were producing around the clock, according to HSBC and Markit Economics analysis. “Falling commodity prices in world markets continued to feed through to lower input costs,” said Andrew Harker, senior economist at Markit. Wages were – and still are – relatively low, with the average Vietnamese earning US$197 per month in 2013, compared with $391 for Thailand and $613 for China, based on International Labor Organization data. Free trade with America and other TPP signatories pointed to a “golden age” of Vietnamese manufacturing and logistics.

But then 2016 happened.

The storm clouds started gathering during the U.S. presidential primaries in early 2016, as both the Republican and Democratic parties started falling over themselves to condemn the incipient agreement that many had previously supported. “The Trans-Pacific Partnership is another disaster done and pushed by special interests who want to rape our country,” declared candidate Donald Trump last year at a rally in St. Clairsville, Ohio. “It’s a harsh word, but it’s true.” On Nov. 9, whatever chances the oft-maligned TPP had of becoming ratified by the U.S. were dead, as Trump scored a surprise victory over Hillary Clinton to become the nation’s 45th president.

With so much riding on trade with the U.S., and an economic development model predicated on free trade, Vietnam stands at a crossroads. How will the country maintain its growth without a deal with the largest economy in the world? While this remains a vexing question, some say the answer is relatively simple: Look elsewhere.

With an already existing free-trade agreement with the European Union that will begin to kick in next year, and with its proximity to the massive Chinese economy directly to the north, Vietnam has enough options – even without the TPP – to become a thriving manufacturing country, a logistics nerve center for Southeast Asia and a booming airfreight hub. The only remaining question is whether the emerging nation has the political will and economic commitment to bring its outdated infrastructure into the 21st Century.

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