The predicament faced by Vietnam's chicken raisers provides an idea of the level of competition that will accompany the introduction of the TPP.
It’s generally agreed that Vietnam stands to benefit more than most from the TPP, with exports of goods such as clothing, footwear, and seafood expected to increase considerably.
Recent articles from local media, however, illustrated the challenges the country’s poultry industry will have to address in a tougher competitive environment post-TPP.
In an unprecedented move, companies and households raising chickens in Vietnam are planning to instigate an anti-dumping lawsuit against the US.
The Southeast Livestock Association is completing procedures to officially sue US companies it claims are dumping chicken in Vietnam. The cheap price of US chicken has made Vietnamese producers stand up and take notice of the fierce competition that accompanies global trade.
“Vietnam has been forced to accept that although products like garments and certain agricultural products will be the big winners in international markets, many other agricultural products will lose market share because their foreign competitors hold advantages in low-cost production,” said Mr. Murray Hiebert, Researcher at the Center for Strategic and International Studies (CSIS) in Washington.
Mr. Au Thanh Long, Vice President of the Southeast Livestock Association, said it must launch the lawsuit because the local industry has faced an extended period of difficulty in competing with imported chicken from the US.
Mr. Long’s calculations show that in the last 16 months its members incurred VND2.7 trillion ($121.5 million) in losses despite providing about 2.4 million chickens to the market every week.
US chicken traders, meanwhile, said the accusations of dumping in Vietnam are unfounded. They argue that the Southeast Livestock Association is comparing the most expensive type of chicken in the US with frozen chicken thighs, which are exported in batches.
President of the US Poultry and Egg Export Council, Mr. James Sumner, said that US chicken sells at a cheap price thanks to large-scale production and cheap animal feed, which accounts for 70 per cent of production costs. He also emphasized that breeding costs for US chickens are the lowest in the world.
Winners & losers
Chicken is among a few industries that will do poorly from the TPP, but many will do well and the country as a whole will be better off. Mr. Alan Phan, Chief Economist at VinaCapital, predicts that the TPP will add more than 30 per cent to Vietnam’s GDP over the next decade.
Although they appreciate that many sectors will grow under the TPP, a number of experts contacted by Bloomberg remain concerned that some sectors will find it difficult to compete with their foreign rivals.
People used to believe that Vietnam would never lose its competitive advantage in the agricultural sector due to its low labor costs, but the tale of imported US chicken is evidence that the agricultural sector, especially livestock, needs to change and change quickly.
According to Mr. Tony Foster from Freshfields Bruckhaus Deringer LLP in Vietnam, the number of industries struggling will grow as more and more bilateral and multilateral trade agreements come into effect.