Vietnam - The TPP, AEC and Star Trek: Scotti: Beam Vietnam Up

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VIETNAM – THE AEC, TPP AND STAR TREK:
SCOTTI: BEAM VIETNAM UP
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AGENDA:
• ASEAN ECONOMIC COMMUNITY (“AEC”) –WHAT IS
IT?
• WHAT DOES AEC HAVE TO OFFER TO INVESTORS?
• TRANS-PACIFIC PARTNERSHIP (“TPP”) – ITS
BENEFITS FOR VIETNAM
• CONCLUSION
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ASEAN ECONOMIC COMMUNITY
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Introduction
Regionalism and the multilateral trading system
• RTA’S /FTA’S Are vastly in number, scope and coverage and their
number is still growing.
• It is estimated that more than half of world trade is now conducted
under preferential trade agreements.
• Among the best known are the European Union, the European
Free Trade Association (EFTA), the North American Free Trade
Agreement (NAFTA), the Southern Common Market
(MERCOSUR), the Association of Southeast Asian Nations
(ASEAN), and the Common Market of Eastern and Southern
Africa (COMESA).
• From its inception, the GATT — and now the WTO — has
allowed member countries to conclude customs unions and free-
trade areas, as an exception to the fundamental principle of non-
discrimination set in the most-favored-nation clause of Article I.
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AEC establishment
• One of the 3 pillars of ASEAN Community, together
with ASEAN Security Community and ASEAN Socio-
Cultural Community
• Originated from ASEAN Vision 2020 adopted in 1997
on the 30th anniversary of the Association of Southeast
Asian Nations
• The realization of the end goal of economic integration
as espoused in the Vision 2020, which is based on a
convergence of interests of ASEAN member countries
to deepen and broaden economic integration through
existing and new initiatives with clear timelines.
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AEC establishment
• AEC members: Brunei Darussalam, Cambodia,
Indonesia, Lao PDR, Malaysia, Myanmar,
Philippines, Singapore, Thailand, and Viet Nam
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AEC Market Snapshot – Asia’s main
investment hub
• GDP: US$2311.3 billion (2012)
• GDP per capita: US$3748.4 (2012)
• Population: 620 million, 60% under the age of 35
• AEC % of world GDP: ~3.3%
• AEC % of world population: 9%
• AEC’s merchandise exports: US$1.2 trillion - ~54% of total
ASEAN GDP and 7% of global exports
• If ASEAN were one economy, it would be the 7th largest in
the world – 4th largest by 2050 if growth trends continue
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Key characteristics of AEC
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Progress of AEC formation – Single market and
production base
• 2010: duties applicable for 99.2% of tariff lines for ASEAN 6 Member States
were eliminated; for other countries (Lao PDR, Cambodia, Myanmar and
Vietnam): duty rates of 0-5% on 97.52% of tariff lines.
• Removing NTBs to intra-ASEAN trade: ASEAN Single Window Gateway,
mutual recognition arrangements, ASEAN Harmonized Tariff Nomenclatures
• ASEAN Framework Agreement on Services: ease restrictions in at least 80 sub-
sectors; gradually allow 70% foreign (ASEAN) equity participation for all
service sectors
• ASEAN Comprehensive Investment Agreement: investor state dispute
settlement mechanism based on non-discrimination principles; investment
protection
• 9/2012: ASEAN Exchanges launched ASEAN Trading Link
• ASEAN Agreement on the Movement of Natural Persons
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Progress of AEC formation – Competitive
Economic Region
• Great attempts by ASEAN Member States to
introduce competition laws and policies
• On-going developed physical infrastructure:
– ASEAN Highway Network
– ASEAN Power Grid
– Trans-ASEAN Gas Pipelines
– ASEAN Open Skies Policy: liberalization of air services
– Reduced telecommunication rates within ASEAN
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Progress of AEC formation – Equitable
Economic Development
• Enhancement of competitiveness and expansion of
SMEs under the Strategic Action Plan for ASEAN
SME Development (2010-2015)
• 2011: ASEAN Framework for Equitable Economic
Development – different level of economic
development of each Member State is of utmost
consideration
• AEC benefits are evenly shared among Member
States
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Progress of AEC formation – Integration
into global economy
• A number of ASEAN+1 FTAs
• On-going negotiations for Regional Comprehensive
Economic Partnership (RCEP) – the world’s largest
trade bloc in terms of population
• Several key ASEAN Member States are currently
negotiating the Trans-Pacific Partnership, a U.S-lead
regional FTA
• ASEAN Member States are individually negotiating
FTAs with the European Union
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ASEAN Framework Agreement on Services
• Expanding WTO commitments on services
• Free flow of services in AEC: substantially no restriction on
ASEAN service providers in providing services and in establishing
companies across national borders within the region
• Modes 1 (cross-border supply) and 2 (consumption abroad): none
except for bona fide regulatory reasons
• Mode 3 (commercial presence): gradually allow 70% foreign
(ASEAN) equity participation for all service sectors
• Removal of Other Mode 3 MA Limitations by 2015
• Set Parameters of Liberalisation for Mode 3 NT, Mode 4 (presence
of natural person), and Horizontal Limitations
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Services sectors of priority integration
• Air travel
• e-ASEAN
• Healthcare
• Tourism
• Logistics services
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Mutual recognition arrangement
• To facilitate the free flow of professional services
• Professional service providers registered/certified in their home
countries to be equally recognized in other signatory countries
• Up to now, 8 mutual recognition arrangements on:
– Engineering services
– Nursing services
– Architectural services
– Surveying qualifications
– Accountancy services
– Medical practitioners
– Dental practitioners
– Tourism professionals
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ASEAN Dispute Settlement Mechanism
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ASEAN Legal Unit
Advisory Stage
Method 1
Method 2
ASEAN
Consultation to
Solve Trade and
Investment
Issues (ACT)
* Operational issues should
be mostly received at this
stage
Consultative
Stage
Method 3
ASEAN
Compliance
Board (ACB)
* Countries which feel
that they have been
injured by actions of
another country can
choose to engage the
ACB at this stage, or skip
to the enhanced ASEAN
DSM directly.
Adjudication
Stage
Method 4
Enhanced
ASEAN DSM
* The enhanced ASEAN
DSM resembles the
WTO DSM, whose
decisions will be binding
and solely based on legal
considerations.

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Investment protection and Dispute Settlement
Mechanism
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Investment
Protection
Compensation
in case of
strife
Free transfer
of funds
Fair and
equitable
treatment
Full
protection
and security
No unlawful
expropriation

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Investor-state Dispute Settlement Mechanism
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Alternate Dispute Resolutions
Meditation
Conciliation
Consultation/ Negotiation
Domestic Courts
Arbitration
ICSID
UNCITRAL
Others

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AEC perspectives – What does AEC have to
offer?
• Shared market, shared benefits - From TEN to ONE
• Simplified rules, greater access - Trading on a bigger stage
• ASEAN: Home for your investment – Partners in Business
• Making capital work for you – Expanding access to finance
• ASEAN professionals in the move – Best people and Best
practices
(Source: www.asean.org)
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6 out of 10 ASEAN countries have improved their
rankings
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TRANS-PACIFIC PARTNERSHIP
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How is the TPP Different?
• The TPP is the most ambitious FTA: an annual gross domestic
product of nearly $28 trillion that represents roughly 40 percent of global
GDP and one-third of world trade
• The TPP is being touted as a “high-standard agreement” meaning “a
landmark, 21st-century trade agreement, setting a new standard for
global trade and incorporating next-generation issues”
• The TPP negotiations are taking place across twenty-nine chapters and
as part of a single undertaking.
• So-called "key elements" including the notion of comprehensive
market access, a fully regional agreement, cross-cutting issues
(regulatory coherence, competiveness and business facilitation, small and
medium sized enterprises, and development), new trade challenges
(particularly rules on state owned enterprises); as well as, finally, the
notion of a living agreement.23

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How is the TPP Different?
TPP with 30 chapters covering:
• Competition,
• Cooperation and capacity building, cross-border services,
• Customs,
• E-commerce, Environment,
• Financial services, Government procurement,
• Intellectual property, investment, labour, Legal issues,
• Market access for goods, Rules of origin,
• Sanitary and phytosanitary standards (SPS), Technical barriers to trade
(TBT),
• Telecommunications, Temporary entry,
• Textiles and apparel, and
• Trade remedies.24

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How is the TPP Different?
• In terms of international treaty commitments in areas that have thus far
eluded multilateral trade rules, the TPP seems to harbor the prospect of
a new textual template that will set the tone in both the Transatlantic
Trade and Investment Partnership currently getting started between the
EU and the US, as well as - further down the road - future trade and
investment agreements.
• These “new” areas include the following:
– Regulatory coherence,
– State-owned enterprises,
– Government procurement,
– Competition,
– Investment,
– E-commerce,
– Environment and
– Labour.
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How is the TPP different?
• In areas that have long been part or were recently brought within
the purview of multilateral trade rules, the TPP seems to promise
more far-reaching commitments with regard to contracting parties‘
policy space and regulatory autonomy, particularly in policy areas
such as:
– Export taxes and restrictions,
– Subsidies,
– Sanitary and phytosanitary measures,
– Technical barriers to trade,
– Trade in services,
– Intellectual property rights.
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Government procurement agreement
• 3 out of 11 TPP negotiating countries are parties to the WTO
Government Procurement Agreement (Singapore, Japan and the United
States)
• Allows all firm operating in any signatory country to be provided equal
access as domestic firms to the domestic procurement contracts (National
Treatment principle).
• The United States is the biggest trading partner of Vietnam
 Vietnam enterprises operating in the United States have significant access
and equal treatment as the U.S. firms in the government procurement
process.
• TPP is a stepping stone for Vietnam to become party to the WTO GPA
 increase competition, enhance the efficiency and transparency of the
government procurement system  VN to attract more foreign
investment and avoid corruption.27

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Investor-state dispute settlement (ISDS)
• Through binding arbitration, including for violations of the investment
and financial services chapters.
• ISDS provisions are expected to include protections commonly found in
investment agreements such as non-discrimination; fair and equitable
treatment; full protection and security; the prohibition of expropriation
that is not for public purpose, without due process, or without
compensation; the free transfer of funds related to investments; and the
freedom to appoint senior management positions regardless of
nationality.
• Expected new protections in the TPP:
– Transparency in arbitral proceedings, disclosure of filings and arbitral awards, and
participation of interested non-disputing parties to make amicus curiae submissions
to a tribunal
– Safeguards to ensure government’s ability to regulate in the public interest (public
health, safety and the environment)28

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HOW WILL TPP BENEFIT VIETNAM?
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How will TPP benefit Vietnam?
• Vietnam will enjoy strong economic and trade expansion. Vietnam’s
GDP would add an additional increase of 13.6% to the baseline
scenario.
• Vietnam is expected to gain significantly from the TPP’s considerable
plans for tariff and duty reduction
• Vietnam’s export will enjoy the agreement’s great benefits when the
US and Japan are one of the biggest partners of Vietnam, especially
the garment and textiles sector
• Export to the US would increase by 13-20% a year until 2017,
fetching total export of US$25-30 billions
• The foreign businesses are planning to enter Vietnam in preparation
for a post-TPP business climate.
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How will TPP benefit Vietnam?
• FDI inflows grow
• Improving agricultural yield: maximising yields on
existing lands and utilizing unusable / idle land by
new deployed technology
• Reducing power and waters needs that are retarding
growth and GDP plans
• More sophisticated joining of separate business
sections to integrate into new profit streams
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TPP and AEC intersection
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Thailand
Malaysia
Brunei
CanadaAustralia
Cambodia
Indonesia Myanmar
Peru
Philippines
Japan
Laos
Mexico New Zealand
Singapore
The United States
Vietnam
Chile

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What shall we/Duane Morris do to prepare for TPP
• Prepare to establish an ISDS Practice group
• Have a Corporate Tribunal team
• Start building it now!
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Questions & Answers

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omassmann@duanemorris.com
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