By Truong-Minh Vu & Nguyen Nhat-Anh

After 10 days of intensive meetings in Hanoi, a high-level Vietnamese government delegation traveled to Washington on September 15-19 to discuss the country’s priorities in the Trans-Pacific Partnership (TPP) with U.S. officials. With negotiations between the 12 member countries reaching a critical stage, a major debate has broken out in the Vietnamese media. Elites and scholars are discussing the economic tradeoffs for Vietnam as well as the implications for Vietnam’s growth model.

The debate about the TPP revolves around the question of what economic benefits Vietnam would enjoy if Hanoi participates in the completion of the TPP. Peter Petri’s seminal study “The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment,” is being widely discussed in Vietnam. This study argues that Vietnam would be the largest beneficiary of the TPP. It is cited as the key reason Vietnam joined the negotiations, and has bolstered a growing number of pro-TPP voices among the public.

The TPP consists of partners that are complementary to the Vietnamese market, including the United States and Japan. These markets are expected to step up their demand for products that play to Vietnam’s strengths, including footwear, textiles, fisheries, and certain agricultural products. Right now, the fact that China, India, and Thailand remain outside the TPP provides Vietnam a sizable advantage.

But since early 2014, some doubts have began to emerge among Vietnamese policymakers. Some economists question the ability to quantify tradeoffs for the economy and determine domestic losers under the TPP. Other experts question the model itself, arguing for instance, that Chinese trade competition in the long term has proven very difficult for Vietnam to manage. This should mean that the TPP’s “China exclusion” effect will become valuable, particularly in the textile, garment, and footwear industries, in which Vietnam’s competitiveness is expected to reap relative advantage over China’s.

Still, Vietnam’s economic benefits are far from certain. The “yarn forward” rules of origin being pressed by the United States in the negotiations put some of these apparent benefits in question. Vietnam’s supply chain is heavily dependent on Chinese textiles and other inputs, which could disqualify Vietnamese garment makers from access to zero tariffs under the TPP, and finding alternative suppliers is unrealistic in the short term.

Additionally, the TPP is not a gift from developed to developing countries. Vietnam will have to offer its negotiation partners some concrete tradeoffs in areas of importance to them to obtain what it wants. This will require serious deliberation about the implications of the tradeoffs for Vietnam’s economy.

Under the TPP, it is expected that Vietnam’s economy will encounter some challenges, including increased competition. The TPP would offer Vietnam considerable advantages in the areas of aquaculture, coffee beans, pepper, and rice. But Vietnam’s livestock industry has been lagging far behind and is unlikely to survive competition without immediate reform.

For Vietnam, joining the TPP is the second step of doi moi, or renovation, launched by the Communist Party in 1986. Truong Dinh Tuyen, the former trade minister and widely referred to as “Mr. WTO” thanks to his key role in Vietnam’s accession to the World Trade Organization, emphasizes that renovation is an interconnected process between politics and the economy. He argues that joining the TPP will mean opening the door to more competent, transparent governance and pressure to overhaul domestic corporations to be more competitive. Crucially for Tuyen, TPP could provide new impetus for doi moi 2.0.

The TPP may provide Vietnam’s government with leverage to reform its state-owned enterprises (SOEs). Over the last five years, the inefficiency of Vietnamese SOEs has been fully exposed to the public. Even before Vietnam joined the TPP, restructuring the SOEs was seen as vital if the economy was to continue to develop.

Earlier this year, Prime Minister Nguyen Tan Dung stressed many times that the government would endeavor to complete its SOE “equitization” (read privatization) process within the next two years. The target is for 500 SOEs. A few leading examples would include Vinamotor, Vietnam Posts, Telecommunications Group (VNPT) and Vietnam Airlines.

The most prominent impediment lies within the mindset of the SOE owners. Most enterprises listed in the 2012-2015 equalization effort are still seeking to postpone the process. As reasons they cite the need to preserve state capital and the importance of maintaining economic stability, both of which are backed by the constitution. The Vietnamese government will have a hard time sacrificing the SOEs, considered its “children,” especially when the children are screaming for protection.

In Vietnam, the hopes brought by joining in the TPP go beyond the short-term benefits and lie in larger institutional change. Vietnam’ participation in the TPP will undoubtedly support the government’s ongoing efforts at legal and political reform. But that will take time.

Mr. Truong-Minh Vu is a lecturer at the University of Social Sciences and Humanities (USSH), Ho Chi Minh City, Vietnam. Mr. Nguyen Nhat-Anh is currently an associate research fellow of the research project “Vietnamese Discourses on the Trans-Pacific Partnership” at the Faculty of International Relations, USSH. The opinions expressed in this article are the authors’ own.