group assignment module international trade

15 Preferential ultilization rate from Vietnam’s trade agreements 2005 — 2022.... Based on five factors: economic growth, export-oriented economy, trade policies, trade relations and for

GROUP ASSIGNMENT MODULE: INTERNATIONAL TRADE

Group members: 1 VAN CONG KHANH LAN, ID: 2121013124

2 DANG MINH THU, ID: 2121012811

3 NGUYEN HOANG THIEN TRUC, ID: 2121013440

Class code: 2331910006802

Lecturer: Dr NONG THI NHU MAI

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CONTENTS

PPO UCTION 0 tytẩtairi.ii.aầdầđậdỪỪỪỪỌủừủửẢ1 5

Il Analyzing Vietnam’s eCOnOMy .cccccccceceeeeeeceeeeeeeeeceeeeeeeeccceeeeeeseeeeeesessncceeeeeseaes 5

1 soi co nhe e ,,,EAẰä54Ả 5

Important items Vietnam’s 2023 export to China .::ccccceeeeeeeeeeeeeeeeeeeeeeeeeees 15 Vietnam's largest trading partners in 2023 (as of November) 15 Preferential ultilization rate from Vietnam’s trade agreements (2005 — 2022) 17 lnvestment structure of the country in 2021 by sector - - 18

| Introduction

In the context 20 years, specifically from 2002 to 2022, which is the period after the world entered new era and had significant developments in technology, Vietnam has made a lot of progress Vietnam has only joined ASEAN for 7 years and participated in ASEAN free trade for 6 years To have success and developments like today is the result

of analyzing many factors, applying many factors, theoretical trade models to research on economics, trade policy and FDI up to now There are many economic theories from the past to present, but not all theories can be applied to all economies, depending on many other factors of that country such as policy or development path Based on five factors: economic growth, export-oriented economy, trade policies, trade relations and foreign direct investment, we will bring a few theories from classic to modern to make recommendations to improve the competitive capability and position of Vietnam in the world market

Il Analyzing Vietnam’s economy

1 Economic growth

Trade effects of production growth, if a country experiences growth, its PPF will shift outward, the producers now have a chance to select a production point on the new PPF and the consumers can also have a chance to select a consumptions pint on the new CPF

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Figure 1: Trade effects of production

Figure 2: Trade effects of consumption

We can see that in 2002 — 2018 period, the GDP fluctuations up and down are quite erratic As from 2002 and 2004, it increased, but in 2006, it decreased slightly, then 2007 increased a bit, and 2008 plummeted to 5.7% and fell to 5.4% in 2009 Most notably,

2020 was the lowest in 20 years period with only 2.9% due to the Covid-19 pandemic, but fortunately it only fell down a little to 2.6% in 2021, after that it increased sharply again after the lockdown ended and “normalized” again with 8% in 2022, the highest in

20 years period (World Bank Open Data, n.d.)

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⁄ `

Figure 3: GDP of Vietnam from 2002 to 2020

In 2002, the country achieved export turnover of 16.5 billion USD (Xuat Khau Nam 2002

Đạt Trên 16,5 Tỷ Đô La | Đại Sử Quán Việt Nam Tại Hoa Ky, n.d.) Otherwise, Vietnam’s total export turnover reached 371.30 billion USD, the country’s total import turnover reached 358.9 billion USD (Chi Tiét Tin, n.d.-a)

Promoting rapid growth to improve income is the basis for improving people’s living standards (Chi Tiét Tin, n.d.-b) There are research papers say that exports have a positive

impact on economic growth (Đánh giá tác động của xuất khâu đến tăng trưởng kinh té,

2021), not only that, export can create jobs, help Vietnam solve labor problem and increase other indicators of economic growth (poor rates )

Due to statistics above, for 20 years, Vietnam’s import-export ratio has changed continuously and tended to increase, positively affecting economic growth Besides,

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although GDP fluctuates, it has also followed an increasing trend for 2 decades, increasing by a small but very positive amount GDP and import-export ratio are evidence that this theory is not suitable for the Vietnamese economy

2 Export — oriented economy

Between 2012 and 2021, within a decade, Vietnam’s total goods imports and exports amounted to $5.146 trillion USD In 2018, Vietnam achieved remarkable rankings, with 26"" in exports This means that Vietnam consistently ranks among the top 30 countries and territories in the world in terms of the total value of goods imports and exports In terms of export composition, Vietnam is divided into three key groups: agriculture and fisheries, fuel and minerals, and processing industries and other commodities Vietnam’s export composition, according to the WTO, is primarily driven by the industrial goods group at over 10%, and the fuel and minerals group at slightly above 1% Various items are highly ranked in international export markets: black pepper is a leading commodity globally, and Europe, benefiting from EVFTA, is a significant market for Vietnam; the second — largest producer of leather footwear worldwide is working to enhance domestic localization; coffee also raked second with Brazil in the lead and meat more than 60% of the global coffee consumption requirements for the 2022 — 2023 season; the wood industry’s efforts put it at the forefront worldwide, with wooen pellet exports ranking 2nd; aquaculture ranked 3rd; this sector reached a historic moment in 2022 when it attained an export turnover of 11 billion USD, a first for this sector; despite dropping to the 3rd position in 2022, Vietnam’s textile and garment industry maintained an 11%

growth rate, achieving a record export value of 44.5 billion USD; electronic goods are presently positioned at the 12th spot on the global position

Vietnam is gradually shifting its focus towards exporting industrial products ratheer than agriculture ones However, the ccountry’s keuy industries, such as balck pepper, ricce, and coffee, continue to thrive Vietnam’s strong agriculture sector is supported by its extensive agriculture land, covering 74.89% of its natural area, and a suitable tropical

Kim ngạch xuất khẫu của Việt Nam giai đoạn 2013-2022 Nguồn: TCTK

Figure 4: Vietnam’s export turnover from 2013 to 2022

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mosoon climate for farming By applying Adam Smith’s theory of absolute advantage —

nations should focus on trading goods where they have a clear cost superiority, it becomes evident that Vietnam possesses a significant advantage in developing its agriculture sector and exporting a substantial quantity of agriculture products, solidifying its position as a leading global exporter in this field The labor forcce participation rate in Vietnam stands at 74.4%, significantly higher than the global average of 60.5% and the Sountheast Asia and Pacific regions average of 67.2% Research suggests that despite the impact of the pandemic and structural changes in the economy analysis suggests that, regardless of the pandemic’s effects and economic restructuring, Vietnam’s labor supply

will remain stable in both the short and medium terms That is the reason why Vietnam are changing from agriculture to industrial activities such as textile and garments, wood and so forth In Vietnam, labor expenditures in these fields are more budget — friendly compared to other nations that also possess affordable and moderately skilled labor, consistent with David Ricardo’s theory of comparative advantage — countries should trade in products where they have a relative production advantage To sum up, Vietnam has effectively ultilized its strengths to expand its global reach, emerging as a crucial supply link and exporter worldwide

3 Trade policies

In tariffs, there are two main types of taxes: specific tariff and valorem tariff Based on the theoretical model, Vietnam is a small country, according to the model, tariff have some impacts on Vietnam

Vietnam uses tariffs, quotas (for certain industries) and trade barriers as tools to control imported goods, while generating state budget revenue and encouraging consumers to use domestic products goods However, when Vietnam is a member of the WTO and other trade organizations, protecting domestic production through tariffs is no longer appropriate

Wellfare Effect of a Tariff: Small Country Case

National welfare falls

The higher the tariff is set, the larger will be the loss in national welfare

The tariff causes a redistribution of income Producers and the recipients of government spending gain, while consumers lose

General Equilibrium Analysis of Tariff in a Small Country

0 Domestic price of the importable commodity will rise by the full amount of

tariff for the individual consumers and producers in that small tariff- imposing country The international price of the commodity will, however, commodity for individual producers and consumers and the importing upon welfare

Figure 5: Tariff effect on small country

In the past: Vietnam started integrated into the world economy, notably the negotiation and accession (VWTO-2007), has amended tax regulations to facilitate the implementation

of bilateral and multilateral commitments and in line with international practices Until now, replacing the Tax, Export-Import Law to ensure import and export tax regulations are more in line with the country's deepening integration process Some of the major changes over the past 20 years are as follows:

Vietnam commits to bind the entire current import tariff including 10,600 tariff lines The final committed tax rate has an average reduction of 23% compared to MFN of the Tariff

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(from 17.4% to 13.4%), Implementation time after 5-7 years Some items with high tariff rates of 20-30% have reduced tariffs immediately after joining the WTO the average MFN tax rate for the agricultural sector is currently 23.5%, while the cut is 10% In the field of agriculture, Vietnam will be applied tariff quota mechanism for 4 items For these

4 items, the tax rate in the quota is equivalent to the current MFN tax rate (egg 40%, raw sugar 25%, refined sugar 50-60%, tobacco: 30%, salt 30%), which is much lower than the tax rate outside the quota For the industrial sector, the average MFN tariff rate of industrial goods is currently 16.6%, while the cut will be 23.9%

Vietnam has now participated in a number of new-generation FTAs, among which the prominent ones are (CPTPP), (EVFTA), which has affected the tariff regime, (CPTPP); Commit to eliminate import duties for 65-95% of tariff lines and completely eliminate 97- 100% of tariff lines, the remaining items will have a tariff elimination roadmap within 5-

10 years 65.8% of tariff lines have a tax rate of 0%, 86.5% of tariff lines have a tax rate

of 0% in the 4th year; 97.8% of tariff lines have a tax rate of 0% in the 11th year EVFTA, Vietnam and the EU commit to eliminate import duties on 99% of tariff lines within 7 years for the EU and 10 years for Vietnam

While tariffs (both MFN and applicable taxes) have tended to decline rapidly over the past 20 years, non-tariff measures, on the contrary, have increased dramatically Tariffs are gradually reduced due to the impact of liberalization commitments on goods in the WTO and trade agreements between countries Vietnam has increased NTMs as safeguard measures to control exports and protect domestic industries: anti-dumping duties, anti-

subsidy duties, safeguard duties To date, Vietnam has investigated 9 items and applied anti-dumping duties on 8 items The items are mainly sourced from Asian countries, especially from China Most of the items subject to anti-dumping duties are metal group items Vietnam is applying safeguard duties on 4 items

Current policies of Vietnam to build non-tariff barriers: Protection of environment and human health, Regulation on National Standards, Quality Management System ISO

14000, Law on Standards and Technical Regulations dated 29/6/2006; Law on Environmental Protection 2020; Decree No 127/2007/ND-CP-Law on Standards and Technical Regulations

Reducing import ta x rates produces results consistent with the Viet Nam Government's orientation on growth, industry structure, trade surplus, and increased household welfare However, in the short term, budget revenue decreased Reducing import taxes causes the structure of Vietnam's economic sector to shift towards increasing the proportion of industrial sectors, especially capital-intensive industries that have more opportunities to develop than labor-intensive industries

Vietnam signed trade agreements that also have reduced tax leading to reduce in prices Despite positive impacts such as market expansion and opportunities for enterprises to participate in the global production chain, FTAs affect budget revenue Therefore, taking advantage of non-tariff barriers is essential, not only to support the state budget, but also

to protect domestic consumer goods However, NTMs can both facilitate trade and hinder

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trade With the increasing integration of international trade, the harmonization and mutual recognition of NTMs has become common with the expectation of promoting trade

4 Trade relations

Since 1986, Vietnam has carried out the renovation and promoted international economic integration with the motto "diversification and multilateralization of foreign relations”

Up to now, Vietnam has established diplomatic relations with nearly 200 countries Since

2013, Vietnam has upgraded relations and created a comprehensive network of strategic partnerships with 33 countries

Vietnam officially became a member of the WTO-2007 In 2020, Vietnam ratified and implemented (EVFTA) and (EVIPA); participation in RCEP, and more than 500 bilateral and multilateral agreements in many fields Vietnam has signed 16 agreements (FTAs) Participating in FTAs gives the opportunity to restructure exports and imports more healthily, avoiding excessive dependence on one market Vietnam has actively participated in negotiations and signing (FTAs), important agreements such as ATIGAT, EVFTA2, CPTPP3, RCEP4 These FTAs are called new-generation free trade agreements because of their extensive and comprehensive commitments on free trade in goods and services, the deepest level of commitment (tax cuts almost to 0%) and strict enforcement mechanisms Although diverse in content with complex regulations, the common point in the above-mentioned new-generation FTAs is the commitment to apply self-certification

of origin