vietnam - the tpp, aec 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 7

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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 11

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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 13

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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) 19

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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.

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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.

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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)

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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. 30

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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

Canada Australia

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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DUANE MORRIS VIETNAM LLC

Thank you very much!

HANOI OFFICE HO CHI MINH CITY OFFICE Pacific Place, Unit V1307/08, 13th Floor, Suite 1503/04, Saigon Tower 83B Ly Thuong Kiet, Hoan Kiem District 29 Le Duan Street, District 1 Hanoi, Vietnam Ho Chi Minh City, Vietnam Tel.: +84 4 39462200 Tel.: +84 8 3824 0240 Fax: +84 4 3946 1311 Fax: +84 8 3824 0241

Contact email:

[email protected]

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vietnam - the tpp, aec and star trek: scotti: beam vietnam up

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