By Dr. Seshadri Ramkumar

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership – popularly known as TPP-11 – is now in effect in seven of the 11 participating countries.

The treaty, which was signed by 11 countries on March 8, 2018 in Santiago, Chile, had to be subsequently ratified by the countries’ respective national assemblies. The treaty became effective in Australia, Japan, Mexico, New Zealand, Canada and Singapore on December 30, 2018. Vietnam was added on January 14.

Vietnam’s entry creates an interesting dynamic in the cotton trade. Vietnam’s textile sector is burgeoning and needs good supplies of cotton.

In the last three seasons, Vietnam is the number one importer of United States cotton, including about 2.98 million bales (480 lbs. each) during the 2017/18 season. That number has more than doubled since 2013/14, when the United States exported about one million bales to Vietnam.

Vietnam is followed by China in terms of U.S. exports, while other major importing countries are Turkey, Indonesia and Pakistan. Bangladesh is also marching closely with Mexico in terms of U.S. cotton imports.

As part of the TPP-11 treaty, free trade between Australia and Vietnam will boost agricultural exports from Australia to Vietnam. This agreement eliminates 98% of tariffs in the TPP-11 region, whose collective GDP is about $13.5 trillion.

According to the Australian Department of Foreign Affairs and Trade, all tariffs on cotton exports will be eliminated under the treaty, providing an additional advantage for Australia’s exports of cotton to Vietnam. Japan has also given more market access to Australian cotton via Vietnam. Tariffs on clothing made from Australian cotton in Vietnam have been eliminated in Japan, giving more market entry for Australian cotton.

In 2017, 15% of Australia’s total cotton exports were to TPP-11 countries. Market access and common rules are expected to enhance the export chances of agricultural products from Australia.

Grady Martin, Director of Sales for Plains Cotton Cooperative Association stated, “Vietnam is a very important market for U.S. cotton. As yarn and garment operations are shifting to Vietnam, the country has growing importance.”

Regarding the impact of the new TPP-11 treaty on exports to Vietnam, Martin replied that it may have an impact, but Vietnam needs cotton. In the long run, what the impact will be is hard to judge right now, he added.

The biggest question to answer is this: Since 80% of U.S. cotton is exported, will the non-participation of United States in the TPP-11 impact agricultural exports – and particularly cotton?