State by State - Vietnam and Connecticut Trade - Vietnam Briefing News
By: Dezan Shira & Associates, Andrew Salzman, Anais Robin
Vietnam is a significant player in the United States’ pivot to Asia. The economic and political relationship between the former enemies is now at its warmest ever, and the relationship is underpinned by a flourishing trade relationship, strengthened by the agreement over the Trans-Pacific Partnership (TPP) trade pact earlier this year.
One state which has seen its trade with Vietnam likewise grow is Connecticut, long a bastion for financial services and high end manufacturing. The state has now become a major player in trade with ASEAN, something only set to increase in the coming years.
Import and Export
Trade relationships are vital for Connecticut based companies, and exports out of the United States make up a relatively high percentage of its overall trade.
RELATED: Dezan Shira & Associates’ Corporate Establishment Services
According to the United States census bureau, the state’s total exports represented about US $15.9 million in 2014.
Nearly 2,000 Connecticut manufacturers and non-manufacturers are engaged in exporting, and their products and services are shipped to more than 200 countries around the world.
Roughly 87 percent of Connecticut’s exports are manufactured goods. Specifically, transportation equipment, machinery, and computer and electronic equipment account for 63% of Connecticut’s exports.
Connecticut’s exports to Vietnam have fluctuated wildly in recent years, though the overall trend is one of growth – something which will surely continue once a free trade agreement is formally ratified between the US and Vietnam. For instance, in 2014 were US $16.5 million, down 51.9 percent from 2013.
While Exports have risen from a lowly US $3.8 million in 2005, they are currently down from their peak of US $72.4 million in 2010. Transportation Equipment had the biggest share of the drop, reflecting the passing nature of large infrastructure investment projects.
The top five goods exports to Vietnam in 2014 were:
1) Machinery, except Electrical
2) Computer and Electronic Products
3) Electrical Equipment, Appliances, & Components
4) Agricultural Products
5) Primary Metal Manufacturing
Vietnam’s imports to Connecticut in 2014 were valued at US $147 million, a one percent year on year increase from 2013. The country ranked 25th in import totals overall to Connecticut.
There are two key tariffs to be reduced with TPP’s passage; firstly Connecticut’s parts for electrical circuits exported to Vietnam, which faced a tariff rate up to 12 percent in 2012, as well as Connecticut’s man-made fiber sweaters imports from Vietnam, which faced a 32 percent tariff rate in 2013.
RELATED: State by State – Vietnam and Colorado Trade
TPP and its Effects
After five years and 19 formal rounds of negotiation, the Trans-Pacific Partnership was finalized in October 2015 by the United States, Vietnam, and ten other countries. In the eyes of its boosters, the pact addresses new and emerging trade issues and 21st-century challenges, and sets the table for a pan-Pacific trade community, comprising roughly 30 percent of global output.
The Transpacific partnership will open new markets for Connecticut with five countries that are not current United States Free Trade Agreement partners that’s for say Brunei, Japan, Malaysia, New Zealand and arguably most notably, Vietnam.
According to the Ministry of Finance of Vietnam, tariff schedules by TPP members could be reduced between 80 and 95 percent, clearing the way for an inflow of Vietnamese produced goods. Thus many point to Vietnam, with its low cost base and steadily growing economy as the winner of the TPP. Vietnam-Connecticut trade relations are no exception, and the economic integration between the two partners will accelerate following the TPP ratification.
Further Support from Dezan Shira & Associates
Dezan Shira & Associates can service Connecticut-based companies that are looking to further develop their operations in Vietnam. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at: [email protected]
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email [email protected] or visit www.dezshira.com.
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