(Tiểu luận FTU) tiểu luận kinh tế quốc tế INTERNATIONAL TRADE BARRIER AND CASE STUDY IN CHINA

FOREIGN TRADE UNIVERSITY SCHOOL OF INTERNATIONAL BUSINESS &ECONOMICS =====000===== ASSIGNMENT ON INTERNATIONAL TRADE BARRIER AND CASE STUDY IN CHINA Lecturer: Dr Nguyen Binh Duong Class: KTEE308.2 Group Kiều Hạnh Chi- 1816150063 Nguyễn Trần Mai Linh-1811150092 Vũ Thảo Linh- 1811150097 Phan Thúy Cải- 1817150060 Hoàng Phương Thảo- 1811150123 Vũ Quỳnh Anh- 1813340008 Ha Noi, 11/2019 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Table of contents Page I INTRODUCTION 1 Objective of the study .1 Limitation of the study .1 Methodology of the study II FINDINGS OF THE STUDY Theory of International trade barrier 1.1 Definition 1.2 Characteristics: 1.3 Why trade barriers used? 1.4 Types of Trade Barriers Case Study in China 2.1 Introduction .8 2.2 The concept of New Trade barriers in China 2.3 The impact of Trade Barriers on China export’s Trade Lessons for Vietnamese government .13 3.1 Abstract 13 3.2 Overview .14 3.3 Tariff and non-tariff barriers in Vietnam 14 3.4 Policy implications learned from China 16 III Conclusion 18 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT This report give a concrete and detailed view about international trade barriers According to the term of international economic, we have researched the definition, characteristics of Trade barriers and why it is used And more specifically, we have discussed about the Trade barriers in China to clearly understand how trade barriers have affected the economy   Trade is an integral part of the total developmental effort and national growth of all economies It particularly plays a central role in the development plan where foreign exchange scarcity constitutes a critical bottleneck International trade is a factor and a product of the economic development of nations and also well known as “engine of growth” International trade increases the number of goods that domestic consumers can choose from, decreases the cost of those goods through increased competition, and allows domestic industries to ship their products abroad In this paper, we will particularly discuss about international trade barriers and its case study of Trade barriers in China We all know that international trade benefits all countries even the one that is less efficient than the others However, economists generally agree that trade barriers are detrimental and decrease overall economic efficiency; this can be explained by the theory of comparative advantage Most trade barriers work on the same principle: the imposition of some sort of cost (money, time, bureaucracy, quota) on trade that raises the price or availability of the traded products If two or more nations repeatedly use trade barriers against each other, then a trade war results Barriers take the form of tariffs (which impose a financial burden on imports) and non-tariff barriers to trade (which uses other overt and covert means to restrict imports and occasionally exports) LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com I INTRODUCTION Objective of the study This paper has been prepared from the corner of some objectives as follows:  To give a concrete idea about International Trade Barriers and how it impacts on the trade  To know the various terms of barriers and protectionism  To know the impact of barriers in the countries  To have a more specific view about the current trade war between US and China Limitation of the study Although the study has reached its aims, there were some unavoidable limitations and shortcomings First of all, I am an amateur researcher who is not even expert on the field of study; therefore, it was a tough task to assess the objectives perfectly within short time-limit Secondly, all the data I used in this study is mostly self-reported that is limited by the fact that it rarely can be independently verified Methodology of the study This study is generally a non-empirical analysis The main sources of this study include secondary sources like textbooks, reports, relevant national and international legislations, case studies, some important daily newspapers, online documents and some publications LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com II FINDINGS OF THE STUDY  Theory of International trade barrier 1.1 Definition Definition: Trade barriers are government-induced restrictions on international trade, which generally decrease overall economic efficiency 1.2 Characteristics: Trade barriers cause a limited choice of products and, therefore, would force customers to pay higher prices and accept inferior quality Trade barriers generally favor rich countries because these countries tend to set international trade policies and standards. Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, which can be explained by the theory of comparative advantage 1.3  Why trade barriers used? Protect infant Industries:  trade barriers and restrictions tend to protect young and undeveloped industries that are not large enough to completive with more mature foreign markets and products With governments help these industries have not been grown enough are given a chance to create recognition , a brand name and develop grove in a healthy economical environment.  With Trade barriers young industries will be protected from foreign competition while they are developing  Domestic Employment: Another major reason of trade barriers is protection of domestic employment By putting the trade barriers in front  of the imported products governments are promoting domestic produced product or services While demand on domestic products increases the domestic production and domestic employment increases along  Unfair Trade: In some cases foreign products may be sold in the domestic economy at a price actually below of its actual cost as a result of foreign governments subsidize their producers With This practice of dumping foreign products may take over the domestic market and give less change to domestic products compete That will allow increase of foreign products in the domestic market LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com  National Security : trade barriers also needed for protection of industries and companies those produce important products to the defense and security of the nations The aim is to prevent the country from depending on these vital products or services to another nation Trade barriers prevent foreign producers from unfairly gaining a competitive advantage in the domestic economy and help to level the playing field If it will be used fairly by the governments they could be great tools for international trade and control the trade deficit of a country  Retaliation: Countries may also set tariffs as a retaliation technique if they think that a trading partner has not played by the rules For example, if France believes that the United States has allowed its wine producers to call its domestically produced sparkling wines "Champagne" (a name specific to the Champagne region of France) for too long, it may levy a tariff on imported meat from the United States If the U.S agrees to crack down on the improper labeling, France is likely to stop its retaliation Retaliation can also be employed if a trading partner goes against the government's foreign policy object 1.4 Types of Trade Barriers 1.4.1  Tariffs and Tariff Rate Quotas Tariffs, which are taxes on imports of commodities into a country or region, are among the oldest forms of government intervention in economic activity They are implemented for two clear economic purposes First, they provide revenue for the government Second, they improve economic returns to firms and suppliers of resources to domestic industry that face competition from foreign imports Tariffs are widely used to protect domestic producers’ incomes from foreign competition This protection comes at an economic cost to domestic consumers who pay higher prices for import competing goods and to the economy as a whole through the inefficient allocation of resources to the import competing domestic industry Therefore, since 1948, when average tariffs on manufactured goods exceeded 30 percent in most developed economies, those economies have sought to reduce tariffs on manufactured goods through several rounds of negotiations under the General Agreement on Tariffs Trade (GATT) A tariff-rate quota (TRQ) combines the idea of a tariff with that of a quota The typical TRQ will set a low tariff for imports of a fixed quantity and a higher tariff for any imports that exceed that initial quantity In a legal sense and at the WTO, LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com countries are allowed to combine the use of two tariffs in the form of a TRQ, even when they have agreed not to use strict import quotas In the United States, important TRQ schedules are set for beef, sugar, peanuts, and many dairy products In each case, the initial tariff rate is quite low, but the over-quota tariff is prohibitive or close to prohibitive for most normal trade Explicit import quotas used to be quite common in agricultural trade They allowed governments to strictly limit the amount of imports of a commodity and thus to plan on a particular import quantity in setting domestic commodity programs Another common nontariff barrier (NTB) was the so-called “voluntary export restraint” (VER) under which exporting countries would agree to limit shipments of a commodity to the importing country, although often only under threat of some even more restrictive or onerous activity In some cases, exporters were willing to comply with a VER because they were able to capture economic benefits through higher prices for their exports in the exporting country’s market There are several types of tariffs:  Import tariff: It is the custom duty imposed by the importing country i.e the tax imposed on goods imported It is levied to raise revenue and protect domestic industries  Export tariff: It is the duty imposed on goods by the exporting country on its exports Generally, certain mineral and agricultural products are taxed  Transit duties: It is levied on commodities that originate in one country, cross another and are consigned to another Transit duties are levied by the country through which the goods pass It results in increased cost of products and reduction in amount of commodities traded  Other tariff barriers: Specific duty: It is based on (specific attribute) physical characteristics of goods It is a fixed or specific amount of money that is levied as tax keeping in view the weight (quantity)/ measurement (volume) of the commodity Ad valorem duty: These are duties that are imposed according to the value of commodities traded between countries It is generally a fixed percentage of the invoice value of the goods traded LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Compound duty: It is a combination of specific duty and ad valorem duty on a single product It is partly based on quantity  and partly on the value of goods 1.4.2 Non-tariff barriers Non-tariff barriers to trade includes:  Administrative and bureaucratic delays at the border Among the methods of non-tariff regulation should be mentioned administrative and bureaucratic delays at the border, which increase uncertainty and the cost of maintaining inventory For example, even though Turkey is in a (partial) customs union with the EU, transport of Turkish goods to the European Union is subject to extensive administrative overheads that Turkey estimates cost it three billion euros a year  Embargoes Embargoes are outright prohibition of trade in certain commodities As well as quotas, embargoes may be imposed on imports or exports of particular goods in respect of certain goods supplied to or from specific countries, or in respect of all goods shipped to certain countries Although an embargo may be imposed for phytosanitary reasons, more often the reasons are political (see economic sanctions and international sanctions) Embargoes are generally considered legal barriers to trade, not to be confused with blockades, which are often considered to be acts of war  Foreign exchange restrictions and foreign exchange controls Foreign exchange restrictions and foreign exchange controls occupy an important place among the non-tariff regulatory instruments of foreign economic activity Foreign exchange restrictions constitute the management of transactions between national and foreign operators, either by limiting the supply of foreign currency (to restrict imports) or by state manipulation of exchange rates (to boost exports and limit imports)  Import deposits Another example of foreign trade regulations is import deposits Import deposits is a form of deposit, which the importer must pay the central bank for a definite period of time (noninterest bearing deposit) in an amount equal to all or part of the cost of imported goods  Administrative regulation of capital movements LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com At the national level, administrative regulation of capital movements between states is carried out mainly within a framework of bilateral agreements, which include a clear definition of the legal regime, the procedure for the admission of investments and investors It is determined by mode (fair and equitable, national, 'most favored nation'), order of nationalization and compensation, transfer profits and capital repatriation and dispute resolution  Licenses The most common instruments of direct regulation of imports (and sometimes export) are licenses and quotas Almost all industrialized countries apply these non-tariff methods The license system requires that a state (through specially authorized office) issues permits for foreign trade transactions of import and export commodities included in the lists of licensed merchandises Product licensing can take many forms and procedures The main types of licenses are general license that permits unrestricted importation or exportation of goods included in the lists for a certain period of time; and one-time license for a certain product importer (exporter) to import (or export) One-time license indicates a quantity of goods, its cost, its country of origin (or destination), and in some cases also customs point through which import (or export) of goods should be carried out The use of licensing systems as an instrument for foreign trade regulation is based on a number of international level standards agreements In particular, these agreements include some provisions of the General Agreement on Tariffs and Trade (GATT) / World Trade Organization (WTO) such as the Agreement on Import Licensing Procedures  Localization requirement An importing country may require the prospective exporter to include a degree of local participation in the product or service Options include a designated importer, a joint-venture company with majority local control, requirement for complete local manufacture which may imply transfer of intellectual property The WTO has not reached a conclusion on the legitimacy of these measures.[7]  Standards Standards take a special place among non-tariff barriers Countries usually impose standards on classification, labelling and testing of products to ensure that domestic products meet domestic standards, but also to restrict sales of products of foreign manufacture unless they 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com meet or exceed these same standards These standards are sometimes entered to protect the safety and health of local populations and the natural environment  Quotas Licensing of foreign trade is closely related to quantitative restrictions – quotas – on imports and exports of certain goods A quota is a limitation in value or in physical terms, imposed on import and export of certain goods for a certain period of time This category includes global quotas with respect to specific countries, seasonal quotas, and so-called "voluntary export restraints" Quantitative controls on foreign trade transactions are carried out through one-time license Quantitative restrictions on imports and exports are direct administrative forms of government regulation of foreign trade Licenses and quotas limit the independence of enterprises with a regard to entering foreign markets, narrowing the range of countries in which firms can conduct trade for certain commodities They regulate the range and number of goods permitted for import and export However, the system of licensing and quota imports and exports, establishing firm control over foreign trade in certain goods, in many cases turns out to be more flexible and effective than economic instruments of foreign trade regulation This can be explained by the fact that licensing and quota systems are an important instrument of trade regulation of the vast majority of the world This type of trade barrier normally leads to increased costs and limited selection of goods for consumers and higher import prices for companies Import quotas can be unilateral, levied by the country without negotiations with exporting country; or bilateral or multilateral, when they are imposed after negotiations and agreements An export quota is a limit on the amount of goods that can be exported from a country There are different reasons for imposing export quotas from a country These reasons include guaranteeing of the supply of the products that are in shortage in the domestic market, manipulation of the prices on the international level, and the control of goods strategically important for the country In some cases, the importing countries request exporting countries to impose voluntary export restraints 11 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Case Study in China 2.1 Introduction First, with the establishment of the WTO organization and the completion of eight rounds  of negotiations, trade liberalization has increasingly become a worldwide trend As a  result, the level of tariffs has been significantly reduced, and the role of tariff barriers has also dropped Some countries  or regions are looking for ways to protect their own trade interests or prevent other countries from entering their domestic markets and  seek alternative trade barriers New types of trade barriers rose quickly, various new types of trade barriers, such as technical trade barriers,  green trade barriers, etc., due to their own characteristics of flexibility, concealment, etc., make them more easily used by some countries  as tools for trade barriers In this environment, new trade barriers have gradually developed After China’s accession to the WTO, China’s participation in international  trade has become more and more numerous, and it has become a world trade power While participating in international trade China's export trade will inevitably face the threat of new trade barriers 2.2 The concept of New Trade barriers in China New trade  barriers are relative to  traditional trade barriers Traditional trade  barriers are the general term for traditional  tariff barriers and traditional non-tariff barriers.  Including tariffs, quotas, anti-dumping, anti-subsidy, permits,  etc The new trade barriers are centered on technical trade barriers,  including social barriers and green barriers Traditional trade barriers mainly  restrict the free flow of goods in the international market on the commercial interests such as  the price and quantity of commodities Compared with traditional trade barriers, new trade barriers  consider more non-commercial interests than commodity prices and quantities Factors such as social and  environmental benefits In these aspects, the restrictions on the free flow of goods in the international community This is  the most fundamental feature of new-type trade barriers relative to traditional trade barriers In addition, the new trade barriers also have the following characteristics: First of all, both sides Unlike the traditional trade  barriers, which are simply aimed at restricting trade, new trade barriers have the name of protecting human health and safety On the one hand, 12 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com they have the benefit of the human society, and on the other, they are liable  to cause problems in some countries due to trade restrictions Using it as a hidden trade barrier is not conducive to the free development of international trade The main types of new  trade barriers include technical barriers to trade, green trade barriers and blue trade barriers:  Green trade barriers are barriers set in the name of protecting  human health, resources, and the environment Green trade barriers are introduced in order to attract public and corporate awareness as well as to reduce environmental pollution.  These barriers are also considered as non-tariff ones and there is no international organization or a common policy framework, which is powerful enough to enforce these barriers.  Moreover, the difficulty in monitoring environmental problems also creates many challenges in applying green trade barriers Despite the growing debates and controversies, the trend for imposing green regulations as a non-tariff barrier is upward.   Blue  barriers,  also known  as social trade barriers, which is  the working time, rights, and treatment  of workers On the one hand, it will make some foreign trade companies difficult to manage, on the other hand, it will help  solve labor problems under the globalization and promote social progress Therefore, enterprises should enhance the value creativity and value-added products of their companies and stimulate their operational vigor 2.3 The impact of Trade Barriers on China export’s Trade As new types of trade barriers have increasingly become the main method of  trade barriers in international trade, China's export trade is also unavoidably affected This kind of influence is two-sided On the one hand, it has  a positive effect On the other hand, it has a negative effect In the following, this article will introduce in detail the positive and negative aspects of the impact of new trade barriers on China's export trade 2.3.1 Positive Effects  of New Type of Trade Barriers on China's Export Trade First of all,  because TBT - (The WTO Agreement on Technical Barriers to Trade) sets barriers through high standards and  high requirements, for export companies in China, in order to deal with TBT of developed countries, they have  to improve technology, improve 13 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com packaging, etc to improve the technical level of products In addition, in order  to be invincible in the international competition, our export enterprises need to improve production efficiency  and product quality, which will help improve the international competitiveness of our export products As for those industries  that cannot make technological improvements, we will also be involved in international trade Therefore, objectively speaking,  technical trade barriers are conducive to optimizing China's export industrial structure Second, since TBT is mainly set up by developed countries or regions such as  the United States, Japan, and the European Union with their technological  advantages, while TBT suffers, China’s export enterprises are also inevitably going  to understand the technological level and technical standards of developed countries.  The government also inevitably needs to understand the technical regulations, rules and regulations  concerning trade of developed countries and international organizations This is of great significance  for Chinese enterprises and governments to increase their awareness of international technical regulations and improve China’s own technical laws and regulations.   As mentioned earlier, green trade barriers are barriers set in the name of protecting  human health, resources, and the environment Therefore, objectively, green trade barriers  have a positive effect on improving China's health, resources, and the environment There are several reasons why green trade barriers have a catalytic effect First of all, like technical barriers to trade, green trade barriers are also conducive to optimizing the structure of China's export  enterprises Enterprises that cannot adapt to high environmental standards will lose competitiveness and will eventually be eliminated by the market They can improve production processes and focus on products for humans Companies with health and environmental impacts can survive the competition Second, green trade barriers can increase the environmental awareness of our government and export companies Finally, green trade barriers are not exclusive to a country Any country can implement green trade  barriers in a proper name When China suffers from green trade barriers, our country’s corporate governments and enterprises are also aware of improving our environmental standards The importance of resource standards 14 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Blue  barriers,  also known as  social trade barriers,  also have a positive impact  on China's export trade objectively The  main content of social trade barriers is the SA8000 standard, which is the working time, rights, and  treatment of workers Guarantees and so on have set minimum requirements First of all, China's implementation of the SA8000 standard is conducive  to improving the working conditions and labor relations of workers We know that although there are clear regulations on the rights and interests of workers in the "Labor Law" of  China, some enterprises infringe on the rights and interests of workers The implementation of the SA8000 standard obliges companies to  respect the legitimate rights and interests of workers, and at the same time, it also enables workers to feel the  people-centered concept and increase their enthusiasm for work Second, blue trade barriers are conducive to improving China’s labor laws and regulations.   While  subjecting to  blue trade barriers,  some specific provisions in  the SA8000 also provide a basis and reference for the improvement of China’s labor laws The Chinese government will also see the gap between China’s laws and regulations  and international regulations and enhance the awareness of the improvement of the country’s labor laws Finally, social trade barriers are also conducive to the healthy development of enterprises An enterprise that does not respect the legitimate rights and interests of  workers not only does not have a good business image, but also cannot achieve long-term healthy development Even if it is fortunate to have short-term development, it must be deformed because it cannot obtain employee loyalty and a good corporate image Therefore, objectively,  the existence of blue trade barriers to a certain extent is conducive to the long-term healthy development of China's export enterprises 2.3.2 The New Trade Barriers Have a Negative Impact on China's Export Trade Technical  barriers to trade will obviously reduce the export volume of exporting countries  and reduce their share of the world market When technical requirements increase, products with lower technological levels are  forced to exit the market because they cannot meet the technical requirements, so that the number of exports of exporting countries  will decrease If the eliminated companies want to 15 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com maintain their share of the world market,  they must improve  their technologies and  increase their investment.  Ultimately, they will increase costs, increase prices,  and reduce international competitiveness The final result is not only to reduce the export volume of exporting countries and to reduce market share, but also to increase the burden on domestic consumers and the competitiveness  of products in the domestic market Therefore, the implementation of TBT is not conducive to the development of China's export enterprises  As  a kind  of technical  trade barrier,  green trade barriers  have other influences besides  the adverse effects of technical  trade barriers China implements green trade barriers.  It is obviously unfair to use high standards applicable to developed countries to require developing countries, because in the early stages of industrialization, developed countries were also the accumulation of  capital in return for resource waste and environmental pollution Nowadays, developed countries have conditions for environmental governance and scientific utilization of resources, and they have conditions for implementing high-standard environmental requirements As the largest developing country, China cannot properly develop and utilize resources when it suffers from green trade barriers, and  it is difficult for  primary products that  have advantages to gain  advantages High-tech and technological  products are few and are hindered by the technical trade barriers of developed countries Therefore,  the green trade barriers will cause unfair pressure on the production and livelihood of Chinese enterprises, and  ultimately hinder China's export trade and economic development  China  is a country  with abundant labor  resources The demographic dividend is a major advantage of economic development, and the products exported by China are mostly laborintensive products The blue standard with the SA8000 standard as the core is bound to hinder the development of China's advantages.  Excessive demands on the laborer's environment will, on the one hand, result in the exclusion of China's labor-intensive export products On the other hand, companies must seek SA8000 certification in order to obtain foreign orders This requires a significant amount  of certification costs for companies In particular, small and medium-sized enterprises lack sufficient financial resources, lose a lot of orders when they fail to obtain certification, and increase expenditures in order to increase employees' 16 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com welfare through certification This will increase  the export costs of enterprises, and the increase in costs will inevitably affect the Chinese enterprises Both technical trade barriers, green trade barriers, and blue trade barriers, as a type of new trade barrier, have a profound impact on China's export trade This kind of influence has both positive and negative aspects On the one hand,  it is conducive to promoting China’s technological upgrading and improving the social environment and the natural environment On the other hand, as a new type of flexible trade barrier, it will inevitably hinder China’s export trade For our country, both the government and the enterprise must pay attention to the impact of new trade barriers Not only for the  three mentioned in the article, but also other types of new trade barriers such as non-market economic status barriers, electronic waste disposal barriers, etc should also be given equal attention We must take advantage of positive influences, seize opportunities, and actively guide the positive role of new-type trade barriers We must actively respond to negative impacts and handle them with caution This part of the improvement should be open-minded to learn from advanced countries Malicious obstacles  to trade should be good at using rules to argue against arguments, protect our legitimate trade rights and interests, safeguard our country's market position, and promote the long-term healthy development of China's economy Only by facing up to the impact of new-type trade barriers on China's export enterprises, seizing the opportunity to improve the quality of economic development, and adopting a positive attitude to meet the challenges, can China's export trade stand in the world market Lessons for Vietnamese government 3.1 Abstract  Although the issues of trade barriers have been discussed extensively in the existing economic literature, little evidence has been documented regarding the structures, characteristics, and trends of the trade barriers, including non-tariff barriers, in Vietnam and China from a comparative perspective This study analyzes how Vietnam and China balance their needs to protect domestic industries and compliance with regional and multilateral commitments This study’s findings are summarized as follows: First, both Vietnam and China have similar tariff structures based on products and their origins, although the tariff schedule of China is more 17 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com complex than that of Vietnam Second, Vietnam’s tariffs are more dispersed across the items than those of China, due to the higher maximum tariff rate and percentage of tariff lines, ranging from 0-5 percent Third, in terms of tariff escalation, the magnitude in Vietnam is higher than in China Fourth, the non-tariff structure of China is more complex than that in Vietnam Finally, when putting all the pieces of the complex web of trade distortions together, it appears both countries give more protection to the agricultural sector than non-agricultural sectors, but the intensity of protection in Vietnam is higher than in China 3.2 Overview China became a member of the WTO in 2002, whereas Vietnam joined the WTO in 2007 Although both countries are members of the ASEAN Free Trade Area, China is a founding member and a high GDP country, while Vietnam is a low-income country Therefore, it is interesting to see how Vietnam and China balance their needs to protect domestic industries, on the one hand, and their compliance with regional and multilateral commitments, on the other hand This study is a comparative and comprehensive analysis of the tariffs and non- tariff barriers (NTBs) in Vietnam and China Although the issues of trade barriers have been discussed at length in the existing economic literature, little evidence has been documented regarding the structures, characteristics, and trends of the trade barriers of these two countries from a comparative perspective Admitting that the process of tariff reductions in these two countries is not complete, its achievements to date could be regarded as successful Along with the successful reduction of tariffs, NTBs have emerged as the main obstacles to international trade and investment Studies have shown that NTBs impose a much greater welfare loss or termsof trade deterioration effect than tariffs This study is guided by the following research questions: • How can we evaluate the trade barriers in these two countries from a comparative perspective? • What policy implications can we derive from our findings? 18 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3.3 Tariff and non-tariff barriers in Vietnam - Regional liberalization: Since July 1995, Vietnam has become a full member of the Association of Southeast Asian Nations (ASEAN) Subsequently, it became a member of the ASEAN Free Trade Area (AFTA), whose key target is to reduce tariff rates to 0-5 percent and remove all other nontariff barriers on virtually all commodities traded between ASEAN countries by the target date The tariff reduction and elimination targets are taken through the Common Effective Preferential Tariff (CEPT) scheme, under which a tariff between 0-5 percent was A Comparative Study of the Trade Barriers in Vietnam and China 241 to be achieved in 2003 for the six original member countries, in 2006 for Vietnam, in 2008 for Lao PDR and Myanmar, and in 2010 for Cambodia In addition, the elimination of NTBs is necessary, as its second pillar, in order to make AFTA an effective free trade area - Bilateral trade liberalization: The United States and Vietnam began trade negotiations immediately after the normalization of their relationship, and the first round of negotiations between the two countries was held in Ha Noi in September 1996 Since Vietnam is a developing country and is in the process of economic transition, the phase-in period is up to six years Reciprocally, Vietnam’s exports to the U.S have been granted MFN status, resulting in an estimated drop in the average tariff levied on Vietnamese imports into the US from some 40 percent to three to four percent In the area of NTBs, Vietnam agreed to eliminate all NTBs, including import and export restrictions2 , quotas3 , licensing requirements4 , and controls for all product and service categories over a period of three to seven years, depending on the product - Multilateral trade liberalization: Vietnam applied for accession to the World Trade Organization (WTO) in January 1995 The “Initial Offer for Goods and for Services” prepared by Vietnam was submitted to the members of the Working Party in December 2001 It included the binding of 96 percent of tariff lines 19 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com with an average of 27.8 percent, of which agricultural products receive a protection level of 32 percent on average, and non-agricultural products 27.1 percent The initial services offered included nine service sectors and 78 sub-sectors (Nguyen, 2002) Subsequently, the offers were revised to 25.8 percent of the average tariff rate during the sixth Working Party in April 2003, and 21 percent of the average tariff rate during the seventh Working Party in December 2003 The offers were accompanied by wide access to the services market, an increase to 10 sectors and 88 sub-sectors.5 A Comparative Study of the Trade Barriers in Vietnam and China 242 In the area of non-tariff barriers, Vietnam provided the Working Party with information on non-tariff measures, and action plans to implement a number of WTO agreements So far, Vietnam has taken different measures to implement nondiscrimination principles The remaining discrimination issues between domestic and foreign goods and domestic and foreign enterprises will be eliminated upon or shortly after accession Vietnam has also committed to removing the obligatory export proportion requirement applied on FDI enterprises upon accession, the ban on cigarette imports, the import quota, agricultural subsidies upon accession, domestic content policy, as well as ensuring transparency in import licensing and technical specifications on imported goods, and protecting intellectual property rights However, Vietnam has retained the rights to apply quotas to sugar, poultry egg, tobacco leaf and salt 3.4 Policy implications learned from China  First, not only efficiency losses associated with tariff structures depend on the average applied tariff rates, but also on the dispersion in these rates across products The higher the dispersion in tariff rates, particularly within groups of similar and highly substitutable products, the greater the likelihood that consumers’ and producers’ decisions are distorted by the tariff structure For Vietnam, areas such as beverages, spirits, tobacco and cigarettes, used clothes, vehicles and vehicle parts are the broad categories of products most protected by tariffs For China, duties on many high value fresh and processed food products are especially high Thus, producers of meats, certain fresh and dried fruits, juices, and other packaged items may still find it difficult to penetrate the China market The magnitude of the dispersion 20 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com indicator suggests the continued existence of potentially high degrees of distortion in luxury goods in Vietnam and the agricultural area caused by tariff schedules Second, the tariff structures in Vietnam and China are ‘cascading’ in nature This means tariffs are generally higher for finished goods than for intermediate goods The important policy implication is that the nominal tariff rates not provide an accurate picture of the resource allocation effects of the overall tariff system Under a cascading tariff structure, the resource allocation effects of the overall tariff structure on a given product sector depend not only on the tariff rate applicable to that sector, but also on tariffs on all other sectors which provide intermediate and capital goods to the sector, both directly or indirectly Such tariff escalation means that the level of effective protection is likely to increase as goods undergo processing, constituting a potential obstacle to processing primary A Comparative Study of the Trade Barriers in Vietnam and China 260 commodities or intermediate goods in exporting countries Therefore, tariff escalation in these two countries potentially impedes the industrialization of developing countries exporting to Vietnam and China This reflects the attempt to foster growth in domestic manufacturing through a regime of import substitution industrialization Again, the goal is to promote the domestic output of final goods by escalating tariffs on inputs  Third, despite significant progress in trade liberalization, Vietnam’s and China’s trade regimes have continued to operate within a comprehensive framework of trade barriers with efforts to promote exports as well as to protect import-substituting products This kind of trade regime has encountered some problems associated with the efficiency of resource allocation For example, given the current tariff structure, the level of manufacturing effective rates of protection in Vietnam has been high A natural question is the effectiveness of the instruments used to redress or counteract anti-export bias While various measures to counterbalance the anti-export bias of the protectionist regime seem to have some effect, they are unlikely to achieve the desired neutrality in the incentive structure There is even a considerable bias against exports in several sub-sectors where Vietnam and China have ample scope to achieve export markets (e.g., garments, plastic products, leather goods, and other manufacturing) 21 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Fourth, because of the inter-sectoral linkages in the economy, the indirect effects of tariffs and NTBs should spread across all sectors in Vietnam and China As a result, industries protected by tariff structures and NTBs have imposed large costs on the whole economy Domestic and foreign investment in Vietnam and China has been directed towards sectors with relatively high levels of protection In addition, tariffs in Vietnam and China had been used in ways that are not consistent with WTO principles Tariff peaks were applied to motor vehicles and a wide range of mechanical, electric and electronic products Therefore, the misallocation of production factors, together with higher prices for inputs and relative prices of consumer goods not in favor of agricultural products, has also imposed a substantial cost on farmers   III CONCLUSION From what has been discussed above, it can be concluded that international trade can benefit all countries even the one that is less efficient than the others However the governments usually use Trade barriers (Tariff and Non – Tariff barriers) as ways of protecting the domestic economies, thus making international trade less attractive We can see this clearly through the case of China They apply new types of trade barriers such as technical trade barriers,  green trade barriers, etc The application of those new barriers has risen quickly This trend, on one hand, has positive effects as they are set in the name of protecting  human health, resources, and the environment, therefore attract public and corporate awareness as well as to reduce environmental pollution On the other hand, those barriers will obviously reduce the export volume of exporting countries  and reduce their share of the world market Vietnam can learn from the lesson of China to balance between environment sustainability and economic efficiency  22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com REFERENCES: Butterly, T (2003) Trade Facilitation in a Global Trade Environment Trade facilitation: the challenges for growth and development UNECE Geneva, United Nations Staples, B R (1998). Trade Facilitation, http://www.cid.harvard.edu/cidtrade/issues/tradefacpaper.html.  UN/CEFACT (2005) "About Us." Retrieved August, 2005, from http://www.unece.org/cefact/about.htm World Bank (2006) "Trade and Transport Facilitation and Logistics." Retrieved October, 2006, from http://www.worldbank.org/transport/ports/tr_facil.htm#theory.  WTO (2006c) "Trade Facilitation." Retrieved October, 2006, http://www.wto.org/English/tratop_e/tradfa_e/tradfa_e.htm Grainger, Andrew (2007), Trade Facilitation: A Review, Trade Facilitation Consulting Ltd LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ... domestic industries to ship their products abroad In this paper, we will particularly discuss about international trade barriers and its case study of Trade barriers in China We all know that international. .. numerous, and it has become a world trade power While participating in international trade China' s export trade will inevitably face the threat of new trade barriers 2.2 The concept of New Trade barriers... green trade barriers and blue trade barriers:  Green trade barriers are barriers set in the name of protecting  human health, resources, and the environment Green trade barriers are introduced in