THÔNG TIN TÀI LIỆU
VIETNAM ACADEMY OF SOCIAL SCIENCE GRADUATE ACADEMY OF SOCIAL SCIENCE NGUYEN TUAN TU TRADE RELATION IN INTERMEDIATE GOODS BETWEEN JAPAN – CHINA IN THE FIRST TWO DECADES OF XXI AND A NUMBER OF POLICY RECOMMENDATIONS FOR VIETNAM Major: International economy Code: 9.31.01.06 SUMMARY OF DOCTORAL THESIS IN ECONOMICS HANOI – 2019 The thesis is completed at: GRADUATE ACADEMY OF SOCIAL SCIENCE Supervisors: 1: Dr Nguyen Binh Giang 2: Assos Prof Dr Nguyen Xuan Trung Referre 1: Prof Dr Do Duc Binh Referre 2: Assos Prof Dr Do Huong Lan Referre 3: Assos Prof Dr Chu Duc Dung The thesis will be examined by an examination board of the Academy at at……… … …………, The thesis can be found at: - National library - Library of graduate academy of social sciences INTRODUCTION The necessity of subject Intermediate goods trade has always accounted for a significant proportion in developing countries and is very important in trade connection and vertical production in East Asia Over the years, Vietnam has always been seeking answers to the question: Where is Vietnam now in the global value chain and how can it engage deeply in the long-term value chain, which implies the increase of the share of intermediate goods export According to assessments of domestic and international experts, trade in intermediate goods between Vietnam and Japan; Vietnam and China is creating many disadvantages for Vietnam Up to now, Vietnam has been mainly involved in short-term value chains, focusing on mining, raw and preliminary processing industries, but has not firmly participated in long-term value chains (deepprocessing products, components, manufacturing products, RD, satellite) Meanwhile, China, after several decades of economic reform, has emerged as the most important trading partner of Japan and some ASEAN countries, joining significantly the East Asian production network The bilateral trade relationship between Japan and China is both complementary and competitive, in which intermediate goods play a very important role Vietnam has still struggled to build export strategies for intermediate goods to join the global value chain, so that Vietnamese enterprises are still far behind many other countries’ enterprises in the region Moreover, in trade relations with Japan and China, intermediate goods of Vietnam remain in a very low position, sometimes only as a one-way import, leading to large trade deficits and unfavorable to the economy The bilateral trade in intermediate goods between Japan and China is not only a typical example of trade in intermediate goods but also a typical example of trade between a developed country and a developing country In addition, China has the same level of development as Vietnam and Japan and China are important trading partners of Vietnam Therefore, studying the trade relation of intermediate goods between Japan and China will give practical implications, experiences and useful lessons for Vietnam to promote trade in intermediate goods of Vietnam with other countries and improve bilateral trade relations between Vietnam and Japan; Vietnam and China in the direction of increasing benefits for Vietnam By participating more actively in the trade of intermediate goods in East Asia and in the world, Vietnam has the opportunity to participate more deeply in the global supply chain For this reason, the topic: “Trade relation in intermediate goods between Japan and China in the first two decades of XXI and a number of policy recommendations for Vietnam” is necessary in both theory and practice, supporting us to understand the nature of trade relation of intermediate goods between Japan and China, factors affecting this relation, its impacts and some lessons for Vietnam in promoting its trade relations with Japan, China and other countries in East Asia Research goals and tasks of the thesis: 2.1 Research goals: This thesis examines the trade relation in intermediate goods between Japan and China from 2001 to 2017 By assessing factors that affect this relation, the thesis will present experience lessons and policy implications for Vietnam in boosting trade relations of intermediate goods with countries in the world in general and with Japan and China in particular 2.2.Research tasks of the thesis: The thesis will address three following basis tasks: - Clarifying the implications related to the trade in intermediate goods between Japan and China Based on that, analyse and evaluate the current state of trade relations between Japan and China since 2001 - Studying factors that affect the trade relation in intermediate goods between Japan and China in order to provide successes, shortcomings and causes in this relation in recent years - Presenting experience lessons from trade in intermediate goods between Japan and China and seeking solutions to boosting trade relations of intermediate goods with countries in the world in general and with Japan and China in particular Research objects and scopes: - Research objects: Trade relation in intermediate goods between Japan and China - Research scopes: Japan-China bilateral trade policies, the status and characteristics of trade relation in intermediate goods between Japan and China, the factors affecting trade in intermediate goods between Japan and China, lessons and policy implications for Vietnam + Scope of space: The thesis studies trade relation in intermediate goods between Japan and China in East Asia + Scope of time: From 2001 to 2017 Methodology: - Research approach: The thesis uses an interdisciplinary approach based on trade theories, bilateral cooperation to evaluate and analyse Japan-China trade relation and factors such as: history, international relations, politics, and culture to explain the nature of the relationship - Methodology: + Methodology of systematic analysis + Methodology of comprehensive analysis + Methodology of comparison + Methodology of case-study New contributions of the thesis on scientific theory and meaning To systematise a number of theoretical issues on trade relation in intermediate goods and examine the factors affecting bilateral trade in intermediate goods to clarify related issues This is an important content in modern international trade relations but has not been studied comprehensively and systematically in previous domestic and foreign studies New contributions of the thesis on practice and practical implications - The thesis concentrates on the context of East Asian where intermediate commodity trade has taken place vigorously since the last decades of the twentieth century, as a basis for studying the trade relations of intermediate goods between Japan and China - Analysing the status of intermediate goods relation between Japan and China These are two important intermediary trade partners of Vietnam JapanChina intermediate goods relation shows the interdependence of East Asian trade links on the supply and value chain - Analysing the status of the trade relations in intermediate goods between Vietnam and Japan, Vietnam and China, giving general assessments, drawing practical lessons from the experiences of China and Japan to provide policy recommendations for Vietnam in boosting trade relations in intermediate goods between Vietnam and Japan, Vietnam and China - The thesis is meaningful in practice as studying the status of trade relation in intermediate goods between Japan and China clarifies the interdependence of the two countries in regional manufacturing network in East Asia, showing the different roles and positions of these countries in regional connection manufacturing network in East Asia Understanding the nature, causes and assessments on factors influencing this relation in the first two decades of XXI will help Vietnam define its position and tasks in the regional system of intermediate goods trade, from which it would be possible to upgrade domestic manufacturing industries to avoid dependence and promote its trade relation in intermediate goods with China and Japan Structure of the thesis Apart from the introduction, conclusion and reference, the thesis has chapters: Chapter 1: Literature review Chương 2: Theoretical and practical basis on trade relation in intermediate goods Chương 3: Status and factors affecting the trade relation in intermediate goods between Japan and China Chương 4: Trade relations in intermediate goods between Vietnam and China, Vietnam and Japan: A number of lessons and policy recommendations for Vietnam CHAPTER LITERATURE REVIEW The objective of this chapter is to review the literature on issues related to the thesis in order to evaluate the results of the researches, from which the author will study the gaps of previous studies on the subject 1.1 Domestic researches Regarding theoretical issues related to the thesis, in Vietnam, trade in intermediate goods is studied under few terms: semi-finished goods, vertical trade, intra-industry trade There is no complete concept of "intermediate goods trade" In several research studies, the concept, nature, characteristics and structure of the international production network are mentioned quite specificly However, intermediate goods trade has not been put into a complete concept, it has only been implied in some analysis as objecst and scope of research of these studies are relatively different from the research topic of this thesis Regarding Japan and China 's foreign policy and economic cooperation with the region in the last two decades, research studies have shown that Japan and China have had changes in foreign policy and economic cooperation, which focus on Asian countries by forming multilateral and bilateral cooperation mechanisms, signing FTAs and having diplomatic political views that compete against each other as two big countries in Asia Regarding Japanese-Chinese intermediate goods relation, it is clear that the research studies on this issue are quite limited Along with the trend of forming FTAs in East Asia, the flow of intra-industry trades is increasing and mainly intermediate and semi-finished goods, in which trade relation between Japan and China are interdependent and China is gradually replacing Japan to become the largest trading partner of countries in East Asia However, intermediate goods relation is mentioned quite sporadically, unsystematicly and not following a separate topic Therefore, it is difficult to assess the role of intermediate goods in bilateral trade relation between Japan and China as well as the nature of this relation It is necessary to have inherited and specialised studies Regarding the study of lessons for Vietnam from the trade relation in intermediate goods between Japan and China, domestic researches only focus on bilateral trade relations between Japan and Vietnam or China and Vietnam For the trade relations between Vietnam and China, a number of researches have evaluated generally the development process of Vietnam-China relations towards the impact of a rising China and analysing the situation of issues such as political belief in Vietnam-China relations; Vietnam's trade deficit from China; Chinese investment in Vietnam; Chinese cultural soft power; national defense and security in Vietnam-China relations; the South China Sea issue in the relationship between the two countries in order to provide policies for Vietnam-China relation in the context of a China continuing to rise during the next decade of XXI In addition, other studies have described the current status of trade in Vietnam, which is higly dependent on China, to provide several recommendations to limit import of Vietnam from China Regarding Vietnam - Japan trade relations, some authors have analysed the current situation of Vietnam - Japan trade relations since the two countries established diplomatic relations According to those authors, friendly relations and multifaceted cooperation between Japan and Vietnam in many fields, especially the commercial economy, have developed rapidly and achieved many positive results The relations between the two countries have currently been in a new period with good prospects However, this positive situation is still not commensurate with the needs and development potentials of the two countries, so it is necessary to propose feasible solutions to promote trade relations between the two countries These studies have provided sufficient information on the situation and the cause of Vietnam's commercial status with China and Japan However, the connection between Japan-China trade relations in intermediate goods and its influence as well as lessons for Vietnam have not been mentioned by these works, so it still needs to be researched 1.2 Oversea researches In terms of trade relations in intermediate goods, the thesis has studied a number of works on the relationship between intermediate goods trade and international production segmentation Regarding these studies, if the production process can be divided into differnet stages, each stage can be implementd in a country with comparative advantages in producing products of that period Therefore, the more different resources countries have, the greater the share of intra-industry trade is Intermediate goods are exchanged based on the principle of comparative advantages Other studies have analysed the concepts and characteristics of intermediate goods trade, the methodology of approaching and evaluating trade in intermediate goods and services, the forms of trade in intermediate goods and its impacts on labour productivity Regarding directly Japan-China trade relation in intermediate goods, there are only few studies focusing on this issue Some studies have mentioned the influence of Japan in trade relation in intermediate goods with China via an approach of flying geese model, supply chain and the role of Japanese transnational cooperation in developing intermediate goods trade in East Asia For Chinese intermediate goods, some studies have presented the influence of China’s policies in its intermediate goods over the past three decades Institutional change is the main factor behind the success of China in the production system of East Asia Regarding the study of lessons for Vietnam from Japan-China trade relation in intermediate goods, oversea studies mostly concentrate on bilateral trade between Japan and Vietnam or China and Vietnam Regarding trade relations between Japan and Vietnam, some authors have studied trade relations between the two countries in the first decade of XXI According to those authors, in the context of globalisation, the expansion of cooperation in general and economic cooperation in particular is an essential need of each country However, each country based on its strengths has specific cooperation views for each of its partner Vietnam is on the process of modernisation and industrialisation which require a lot of capital and technology While Japan has capital and technology, it is facing an aging population and a lack of productive labor Participating in international cooperation, the needs of the two countries will be resolved Determining comparative advantages and characteristics of the two countries is essential to understand the need of promoting their economic and trade cooperation Regarding trade relations between China - Vietnam, as well as domestic studies, foreign articles on trade relations between China - Vietnam also focus on analysing the commercial status between the two countries in import and export and trade in goods The works all claim that China is now one of Vietnam's most important trading partners With the steady growth of trade between the two countries in the last 10 years, it has proved favorable factors in the trade relations between the two countries such as the complementarity of economic structure and conveniently geographical position for goods transfer, diversification in the form of trade exchange so that it effectively promoted and brought practical benefits to the two countries However, it is undeniable that Vietnam's trade is heavily dependent on China and is worried that trade deficit from China is on the rise 1.3 The values of domestic and foreign studies, researach gaps and new contributions of the thesis 1.3.1 The values of domestic and foreign studies In theory, the above studies have partly clarified the concept of intermediate trade relations between two nations in various terms such as: semi-finished goods, component goods, vertical trade, intra-industry trade The basic theories related to intermediate goods trade have clarified the problems regarding production segments, production networks, and the reason why a country participates in production networks, vertically and horizontally international labour assignment, comparative advantages in intermediate goods trade relations, the role of FDI in intermediate goods trade In practical terms, previous studies have clarified the East Asian economic context, where China - Japan intermediate goods relations take place In this context, the authors have explained the geese model, the economic dependence among East Asian countries, and the role of China-Japan bilateral trade relations in the East Asian context The status of bilateral trade relations between China and Japan then has been mentioned by many authors according to different aspects: policies and history of bilateral trade relations, the situation of import and export between the two countries from 2000 to 2017 1.3.2 Research gaps and new thesis’s contributions First, previous studies have not clarified the content of evaluation criteria, characteristics and factors affecting intermediate goods trade relations among countries These issues are only mentioned in a small and scattered manner Therefore, the task and new points of the thesis are to clarify the analytical framework and criteria for evaluating intermediate goods trade among countries Second, the status of trade relations in intermediate goods between China and Japan has only been mentioned mainly in trade relations in general goods between these two countries or in the commercial relations of the intra-regional production network of East Asia Therefore, the research gap here is: there is no clarification on the situation, characteristics and the nature of the intermediate goods trade relations between Japan and China, as well as the policy intentions of the two countries in exchanging intermediate goods and the factors affecting Japan-China intermediate goods trade, the impact of intermediate goods trade on Japan and China, on East Asia, and ASEAN Third, most of previous studies have not provided experience lessons and policy proposals for developing countries (including Vietnam) in intermediate goods relations with other countries; or some research projects offer some very simple lessons by giving only recommendations in bilateral relations (Japan Vietnam and China - Vietnam), but not focus deeply on recommendations in multidimensional relations (Vietnam in the relationship of intermediate goods trade with Japan and China) Fourth, technically, most of the above researches have only analysed the trade relations in intermediate goods between China - Japan until 2010-2012 In a currently and rapidly changing world and the increasingly complicated geopolitical situation of North East Asia, regional connection of East Asia has been changing as the CPTPP goes into effect, the dynamics of the trade relations in intermediate goods of Japan - China, Japan - China - America, or Japan - China - ASEAN will likely have to change to suit the actual situation CHAPTER THEORETICAL AND PRACTICAL BASIS IN TRADE RELATIONS IN INTERMEDIATE GOODS 2.1 Theoretical issues of trade relations in intermediate goods 2.1.1 A number of basis concepts: - Intermediate goods: are the goods used at a certain time in the production process of other goods and not for final consumption - Intermediate goods trade (or parts and components trade): is closely related to vertical division of labor (assigning the internal production segments among countries) and international production networks, international supply chains 2.1.2 Theoretical basis of trade relations in intermediate goods Since trade in intermediate goods is part of trade in general, the thesis presents some theories related to international trade: 2.1.2.1 Theory of comparative advantage The basis of the theory of comparative advantage is the differences between countries, which are not only in natural and technical conditions but also in terms of production conditions That means any country in principle can find these differences and specialise in producing certain products whether having natural and technical advantages In fact, the absolute advantage of each country is not much, moreover, most countries conduct trade with not only the goods with absolute advantage but also exchange goods based on relative advantage Therefore, every country can benefit from participating in international division of labor on the ground of exploiting relative advantages and foreign trade allows to expand a country's consumption capacity In addition, some countries have comparative advantages in exporting some of their products as the production of those goods has used the factors of production that are favored for them than other countries It is the preference of natural advantages of these production factors (including capital, labor, natural resources, land, climate ) and countries’s technology are equivalent, leading to some countries having lower opportunity cost in producing certain products 2.1.2.2 National competitive theory The comparative advantage theory based on production factors cannot fully explain commercial activities and does not give the answer why for different countries there are similarities in economic scale, technology, resources, labor, , but economic activities of one country is better than the other The assumptions, which are based on production factors to underlie comparative advantage, are considered more persuasive in the 18th and 19th centuries when industries were still fragmented, production mainly used workers and did not give prominence to skills, and trade reflected many differences in conditions of natural resource development and capital However, in many present industries, comparative advantages based on production factors cannot fully explain commercial activities This is particularly true in industries and industrial segments that involve complex technology and require skilled workers Those industries are the most important sectors for national productivity Therefore, national competitive theory argues that success of a counrtry depends primarily on two basic charecteristics: (i) advantages of production costs (comparative advantages) and (ii) advantages of individual product manufacturing (competitive advantage) M Porter has built “national diamond“ model to analyse a nation’s competetive capacity in international market Regarding this model, competetive advantages of a nation depends on four major factors: - Production factor conditions include: basic factors and progressive factors Basic factors include natural resources, climate, geographic location, labor (unskilled and semi-skilled), loans Progressive factors include technology level, modern telecommunications infrastructure, highly qualified human resources - Demand conditions geese" model, which is based on international division of labor in the region This model initially describes a developed country's industrialisation model, but it then extends the scope of application to the industrialisation and development model of production and cooperation networks in the region In this model, Japan is considered a leading goose, with more advanced technology, followed by NIEs and ASEAN4 countries, having a gradual decline in technology levels With such a sequence, the industrial structure of countries is increasingly improved thanks to the strategy of pursuing technology through attracting intra-regional FDI and international trade, forming a separate production network in East Asia 2.2.2 East Asia intra-regional production network and the role of intermediate goods trade East Asia intra-regional production network was formed quickly thanks to the role of international trade and investment Since the mid-1980s, due to different economic levels and scales, East Asian countries have implemented a deep internal economic cooperation strategy In the period from 1985 to 2000, East Asian countries witnessed an export-oriented industrialisation strategy, which benefits from the trend of globalization, deep economic liberalisation and economic cooperation with countries around the world Since 2000, East Asian countries have strengthened economic cooperation inside and outside the region, and by November 2010 East Asia has signed 43 FTAs with countries around the world, accounting for 20.9 % of total FTAs signed by WTO member countries In the matrix connection of manufacturing industry, we can see the important role of China, Malaysia and Thailand as major regional suppliers of component and intermediate goods and China gradually becomes a factory of East Asia The internal production network of East Asia has the following basic characteristics: - First, the East Asian production network is decentralised and trade in intermediate goods plays an increasingly important role - Second, Japan and China play an important role in East Asia production network and trade in intermediate goods - Third, the East Asian production network always suffers from the external shocks 11 CHAPTER STATUS AND FACTORS AFFECTING THE TRADE RELATIONS IN INTERMEDIATE GOODS BETWEEN JAPAN AND CHINA 3.1 Overview of the current status of bilateral trade relations between Japan and China since 2001 3.1.1 Overview of China-Japan trade relations since 2001 Japan and China are the two major economies in the world, with huge bilateral goods relations and considered one of the largest trading partners in the world The economic and trade relations between Japan and China has a history of ups and downs This relationship was normalized in 1972 and only really warmed since 2001 after the visit to China of Japanese Prime Minister Junichiro Koizumi Japan has always suffered from a trade deficit with China since 2000s It is worth noting that China has always been one of the three largest trading partners of Japan, and China's position in the Japanese trade balance has been continuously improved Japanese exported goods to China are mainly textiles, computer components and machinery, in which electronic devices account for the largest proportion During the last 16 years since 2001, China has always been Japan's largest importer The main imported products of China from Japan are electronic machinery, especially mobile phones Although both countries have published bilateral trade deficit figures, on the Chinese side, the dependence on trade exchanges with Japan has tended to decrease since 2001, while for Japan this dependency is on the rise 3.1.2 Policies of Japan and China in developing bilateral trade relations Regarding politics and diplomacy, after normalising diplomatic relations, relations between Japan and China developed rapidly, especially in the economic field, but at that time, the United States did not establish diplomatic relations with China, so Japan-China relations were still limited and only from the last years of the 1970s when the US and China formally signed agreements to establish diplomatic relations, Japan-China relations then developed more comprehensively With Japanese view that "China's stability and development has a great significance for the stability and development of the Asia-Pacific region" and "China's huge market is very necessary for Japan's economy, which is based on foreign trade and Chinese view that "Japanese capital and technology needed for economic development", they are the main reasons for the strong development of bilateral relations In terms of economic policy, the two countries quickly became important partners of each other, Japan became the largest trading partner of China and China also rose to become Japan's second largest trading partner after the US Trade is the most important area of economic relations between the two countries Both countries have established mechanisms to expand trade as well as to resolve trade-related disputes in a friendly way Both sides try to maintain good relations 12 and explore new areas of cooperation Economic ties contribute to tightening relations to a level that both are dependent on In terms of trade policy, due to the ups and downs political-economic relation between China and Japan during the past few decades, the bilateral trade relationship between the two countries has only been a normal bilateral trade This trade relationship is based on bilateral economic cooperation agreements signed by two parties in the economic field (as mentioned above) for the purpose of sharing resources and comparative advantages in some commercial areas of mutual interest These agreements are often based on the principles of trade cooperation specified in the WTO and for a certain period of time, only focusing on some specific trade cooperation contents as well as on short and medium term benefits for both parties 3.2 Japan – China trade relations in intermediate goods 3.2.1 Status of Japan – China trade relations in intermediate goods - Regarding import and export turnover of intermediate goods between the two countries On the Japanese side, in bilateral trade relations with China, Japan's intermediate goods export has increased continuously The value of Japanese intermediate goods export to China and some ASEAN countries has always increased faster than the value of final consumer goods export, suggesting that Asia continues to be in the indispensable supply chain of Japan and China is one of the important factors of supply chain of Japan On the Chinese side, in trade relations with Japan in intermediate goods, China seems to continue to stand behind some other Japanese trading partners: the US, South Korea, EU and ASEAN Exports of China's primary goods to Japan increased continuously It is easy to see that, before 2000, China always ranked after the US, EU, Korea, and ASEAN in Japan's intermediate goods export turnover, but after 2000, China's position has improved quickly and China has now become Japan's largest export partner for intermediate goods, surpassing all traditional partners of Japan such as the US or EU However, since the global economic crisis in 2008, as the Chinese economy has continued to expand production scale and improve domestic supply capacity, Japanese export of intermediate goods to China has tended to decline, including preliminarily processed and components goods - Regarding intra-industry trade structure in intermediate goods between the two countries: The index of intra-industry trade between China and Japan in the top 7-8 main import and export groups all tends to increase and is at a balanced level Japan is a major supplier of intermediate goods to manufacturing enterprises in East Asia As intra-industry trade between Japan and China increased, Japan's input intermediate goods exports to China also increased steadily China's dependence on Japanese intermediate goods from the 1990s to the present has been very high, 13 and China is still a major importer of intermediate goods from Japan In intraindustry intermediate goods trade, China surpassed Japan to become the largest intermediate goods exporter in East Asia, also becoming the world leader in intermediate goods exports, followed by the United States, Germany, Japan, South Korea, France, Malaysia, Italy, Mexico and the UK In East Asia, Japan, China and South Korea become important triangles in intermediate trade relations - Regarding the quality of import and export of intermediate goods: Japan imports most of the intermediate goods, which are lower technology items, from China In the value of imports of Japan from China, intermediate goods with the largest import value account for 50%, including 1) Electronic equipment and components (imported value of goods from China reach 46.7 billion USD); 2) Garment accessory products, knitted or crocheted (8.5 billion USD), 3) Garment accessories, unknitted or uncrocheted (8.2 billion USD); 4) Plastics ($ billion); 5) Furniture, lighting, signage, construction equipment (4.7 billion USD); 6) Optical, imaging, technical, medical equipment components (4.7 billion USD), 7) Iron and steel (3.6 billion USD) Compared to 2010, import turnover of key intermediate goods from China has increased in some items such as electronic equipment and components; all kinds of plastics; but it tends to reduce import turnover for other key intermediate goods Imports of Chinese intermediate goods from Japan are mainly high-tech goods or raw materials for production In 2017, key intermediate items imported from Japan include: 1) Electrical and electronic equipment and components (imported value from Japan reached 42.2 billion USD); 2) Optical, imaging, technical and medical components (15.9 billion USD); 3) Plastics and plastic products (9.7 billion USD); 4) Organic chemicals (7.0 billion USD); 5) Iron and steel (6.0 billion USD); 6) Other chemical products (3.3 billion USD); 7) Copper and products from copper (3.1 billion USD); 8) Iron and steel parts (2.4 billion USD) In the import value of Chinese goods from Japan in 2017, these intermediate items reached 89.6 billion USD, accounting for 54% (of the total Chinese imports from Japan in the year) 2017 is 165.8 billion USD) Compared to 2010, China's major intermediate goods imports from Japan tend to increase in most commodities, except for electric and electronic equipments - Regarding the role of trade in intermediate goods in the economy: Intermediate goods trade always accounts for a large proportion of the total import and export turnover of China and Japan and this proportion tends to increase China has always suffered a deficit in the trade balance of intermediate goods with Japan and this deficit has been expanding in recent years Most of China's imports from Japan are intermediate goods, while imports of final capital goods and final consumer goods account for a relatively small percentage For Japan, most Japanese goods imported from China are final consumer goods (with the highest import turnover and the highest increase in all 14 types of goods) as final consumer goods of China have competitive advantages in price on Japanese market, while there have not been many kinds of Japanese intermediate goods imported from Chinese market, especially semi-finished products that tend to reduce imports from Chinese market in recent years - Regarding the openes of intermediate goods trade: In Japan-China intermediate goods relations, it is clear that the two countries' trade promotion policies have a positive influence on intermediate goods trade The Chinese government allows the import of input products (raw materials, semi-finished goods, components and parts) that are exempt from tax Moreover, the export of goods as input products for FDI projects (components, equipment, machinery) is also exempt from customs tax These incentives have helped Japanese businesses have favorable conditions to implement vertical trade and investment links, supporting trade in intermediate goods between Japan and China has experienced strong growth in recent years As for Japan, the government supports free trade policíe, encouraging Japanese companies to invest in China The flow of investment and commercial activities between China and Japan is a confirmation to the strong development of these two countries in Northeast Asia - Regarding the openness of foreign investment facilitating trade in intermediate goods: Japan-China intermediate goods trade is growing strongly thanks to Japanese enterprises FDI continuously expanding their production to China Japanese FDI inflows to China reached 6.57 billion USD in 2005, continuously increasing and reaching 12.6 billion USD in 2011, 13.4 billion USD in 2012, 9.1 billion USD in 2013, 10.3 billion USD in 2014 and 8.8 billion USD in 2015, in which Japanese FDI into Chinese manufacturing industries accounted for the highest proportion (77.5% in 2005 and 60.5% in 2015) Along with Japan's FDI inflows to China, Japan's intermediate goods export to Japanese FDI enterprises in China reached 20.3 billion USD and imports of intermediate goods by Japan enterprises in China reached 11.3 billion USD 3.2.2 Characteristics of Japan - China trade relations in intermediate goods Firstly, China-Japan trade relations in intermediate goods are in the supply chain and the value chain of the East Asia production network, in which bilateral trade in intermediate goods has a growing deficit, leaning toward China Secondly, China-Japan trade relations in intermediate goods are implemented through backward and forward links Third, vertical links in intermediate goods trade between Japan and China are also giving China many challenges 3.2.3 Factors affecting Japan - China trade relations in intermediate goods 3.2.3.1 Factors belong to China and Japan 15 - Market scale: For Japan, China is a huge potential market China-Japan relations were normalized in 1972, facilitating the signing of the Japan-China trade agreement and many other cooperation agreements in the 1970s China's high economic growth over the past few decades has encouraged Japanese businesses to export to China because demand for goods in China is always very high, from low-quality to luxury goods of Japan and other countries over the world In recent years, China is a very strong market for Japanese goods, especially electronics, machinery, chemical products and transport equipment Moreover, as a developed country, Japan is lacking a lot of natural resources, materials and energy to serve its economic development, while China is a country with great potential in those fields In addition, China is also a potential market for Japan in textile products (17.7%), agriculture and fisheries (5.4%), electronics (16.8%), machinery (15.1%) and toys (8.1%) Since China joined the WTO, the Chinese market has always been open to foreign goods because there are not many obstacles in tariff barriers under WTO commitments, especially in the automotive industry, making Japanese exports of goods very strong in China during this period For China, Japan has great potential in trade relations and plays an important role in China's economy First of all, the economy has a total GDP of USD 4,900 billion in 2013 (WB), showing that Japan is still the second largest economy in Asia, after China As a developed economy, the Japanese market has great consumption capability - Technology level: The figures on bilateral trade deficit in intermediate goods between China and Japan show that China still relies relatively on Japanese goods, especially semiconductor, electronics, machinery and equipment In addition, Japan's manufacturing industry in China can help Chinese businesses raise their brands to the global level China exports to Japan mainly electronic products, machinery, textiles, toys, food and seafood, handicrafts but these are mostly labor intensive products and low value added, so Chinese goods on the Japanese market face fierce competition from ASEAN goods Having to meet the quality and technology standards of Japanese enterprises has forced Chinese businesses to be stronger and developed their markets faster - Differences in national resource factors: The scarcity of natural resources or production factors such as high land use costs has caused Japan to face systematic disadvantages in goods production Therefore, Japan has enhanced its search for natural resources and production facilities in countries with many favorable conditions regarding this issue, notably China In contrast to Japan, China is a large country (ranked fourth in the world in terms of area size) and has a rich natural resource, strong in the mining industry Especially, the country has the largest reserve of rare earth in the world (accounting for half of the world's rare earth) According to many experts, rare 16 earth plays an important role in intermediate goods manufacturing industries In the structure of imports from China, oil and coal accounted for 24.8% of Japan's imports of goods from China in 1990, down to 1.1% in 2011 Other sources of raw materials such as cement, ceramic, steel and minerals account for 8.3% of total Japanese imports from China - The distance between the two countries: China and Japan's geostrategic positions in East Asia make these two countries increasingly closer to each other for economic benefits, although there are still many barriers between the two countries regarding political institution and historical disputes Nowhere is clearer than the Sino-Japanese relationship, although there are still many disputes left behind by the legacy of World War II, bilateral trade relations and investments between the two countries have still thrived China and Japan have become each other's leading trade and investment partners, dominating the East Asian economic development trend Having a close geographic distance and staying in the most dynamic and developing region of East Asia have a positive impact on the bilateral trade between Japan and China, bringing China and Japan to join deeper the global production network in the region - Economic development level: Current countries with developed economies (such as Japan) mainly focus on developing modern technologies and transferring to developing countries with lower costs to implement production and import finished goods In addition, countries with prosperous and developed economies tend to have more economic relations with countries having similar economic level with them Meanwhile, countries with less-developed economies (such as China) often have trade relations with richer countries This is explained by competitive advantages, which here are price and cost Countries with developed economies producing high-tech and international-standard products will business in the similar market to maintain competitive advantages - Open door policy and international integration of China and Japan: Japan – China trade relations in intermediate goods benefit first from China's tariff structure In 2001, China officially became a member of the WTO, the tariff rate decreased significantly, especially for intermediate goods The tariff rate applied to intermediate goods is always lower than that of consumer goods and goods that affect the Chinese-Japanese trade structure, in which intermediate goods play an important role in intra regional trade The two countries' trade promotion policies also positively affect intermediate goods trade In China, imports of input products (raw materials, semi-finished goods, components and parts) are all exempted from tax Moreover, the export of goods as input products for FDI projects (components and parts, equipment, machinery) is also exempt from customs tax However, Japan and China have not signed a bilateral free trade agreement Japan-China trade relations in intermediate goods have been benefited from ASEAN +1 such as FTAs between ASEAN and Japan, ASEAN and Korea, 17 ASEAN and China in which ASEAN is considered a bridge of free trade flows in East Asia Japan-China economic and trade relations have been improved mainly through mutual visits of the two national leaders, and through bilateral economic cooperation support via mechanisms of WTO, through regional bilateral and multilateral dialogue forums such as ASEAN Regional Forum, Japan - China security dialogue forum, APEC, bilateral cultural and technical cooperation - Historical and geographical disagreement: Stemming from historical issues and sensitive statements from the leaders of two sides related to Yasukuni temple, bilateral trade relations between the two countries have unusual "cold" times In addition, disputes around the Diaoyu/Senkaku island between China and Japan have seriously affected bilateral trade relations and trade in intermediate goods between the two countries 3.2.3.2 Regional and international factors: The global economic crisis has hit significantly on the world's economies, including Japan and China, affecting bilateral trade growth in recent years Moreover, the complicated geopolitical situation in Northeast Asia such as North Korea issue, South China Sea issue, the maritime dispute between Japan - China, South Korea - China has made the establishment of China - Japan FTA face a lot of difficulties, affecting Japan-China bilateral relations The emergence of NIEs and ASEAN has also significantly affected the intermediate goods trade between Japan and China If in the past, China imported intermediate goods primarily from Japan and NIES, but many current integration outcomes from both sides have benefited from the strong economic development of ASEAN and the process of implementing the ASEAN-China Free Trade Agreement In the other hand, this relationship is also affected by ASEAN market, which gradually replaces Japan and NIEs to become China's main regional importer 3.2.3.3 Overall assessment of the importance of factors affecting Japan – China trade relations in intermediate goods According to Porter, advantages are only maintained when the source of advantages is expanded and upgraded Some decisive factors create more sustainable advantages than other factors Conditions creating dynamic advantages (technological innovation, pioneer advantage, level of pressure) will be more important than those creating static advantages (production cost factor or market in a big country) Therefore, competitive advantages lie primarily in the difference of products, not in the minimisation of costs Advantages of cheap labor cost, raw and rare materials, and market size only create sustainable and stable development, not create a foundation for the economy to develop to a certain level New modern technology is the factor that is able to get rid of natural resources from international competitive trajectories and replace them with products having more competitiveness and success In addition, some experts believe that, without technological advancement, a country can still improve its 18 standard of living thanks to the accumulation of capital or aid, but it cannot maintain stable economic growth because technological progress is a key factor, playing a decisive role in all areas and development stages However the level of technology's impact on each country's competitiveness depends on the wealth of each country Therefore, rich countries often promote technology to maintain and improve competitiveness In developing countries, competitive advantages of technology depends primarily on the ability to receive technology through FDI and technology transfer of broad channels, rather than creativity at least in the short and medium term In Japan-China trade relations in intermediate goods, it is clear that the two countries' trade promotion policies have a positive influence on intermediate goods trade The Chinese government allows the import of input products (raw materials, semi-finished goods, components and parts) that are exempt from tax Moreover, the export of goods as input products for FDI projects (components, equipment, machinery) is also exempt from customs tax These incentives have helped Japanese businesses have favorable conditions to implement vertical trade and investment links, helping trade in intermediate goods in Japan - China grow significantly in the recent years As for Japan, the government supports a free trade policy, encouraging Japanese companies to invest in China The flow of investment and commercial activities between China and Japan is a testament to the strong development of these two countries in Northeast Asia Nonetherless, China-Japan economic and trade cooperation was heavily influenced by the international financial crisis of 2008 The effects of the disputed Diaoyu-Senkaku Island, historic disagreements and complex geopolitical situation in Northeast Asia have caused trade cooperation between the two countries to face unprecedented bad circumstance Relations between the two countries have changed from a "cold and hot economic" model to a "cold political and cold economy" model CHAPTER TRADE RELATIONS IN INTERMEDIATE GOODS BETWEEN VIETNAM AND CHINA, VIETNAM AND JAPAN: A NUMBER OF LESSONS AND POLICY RECOMMENDATIONS FOR VIETNAM 4.1 Overview of trade relations in intermediate goods between Vietnam China, Vietnam - Japan 4.1.1 Overview of trade relations in intermediate goods between Vietnam – China Vietnam - China trade relations in intermediate goods have developed strongly since 2000 Within 12 years, Vietnam's export of intermediate goods to the Chinese market increased by 3.7 times and it has accounted for a larger proportion of the total export turnover of Vietnam intermediate goods 19 Vietnam's exports to China are mostly low value-added goods In 2015, the top 10 major export products of Vietnam to China are computers, electronic products and components, various kinds of fiber, vegetables, cassava and cassava products, camera and filming components, wood and wood products, rice, crude oil, rubber, shoes Most products are intermediate products Intermediate goods imported from China have increased at a faster rate Vietnam's leading intermediate goods imported from the Chinese market are textile accessories, phone accessories, oil and petrochemicals, products from iron and steel, machinery and equipment, common metal, plastic products In general, cregarding broad economic categories (BEC), it can be seen that imported goods from China are mostly industrial supporting goods and materials of intermediate goods for production Vietnam began to have trade deficit with China in 2001 and since then this trade deficit has increased at a dizzying pace In the CAFTA partnership, China seems to be benefiting from low-cost intermediate products from Vietnam and reexporting intermediate products of higher and good value to Vietnamese enterprises The dependence of Vietnamese economy and manufacturing industry on Chinese intermediate products has been growing, hurting Vietnamese economy when there are fluctuations in commodity prices from China or when Chinese economy is in a difficult situation in economic development 4.1.2 Overview of trade relations in intermediate goods between Vietnam and Japan The trade relations in interrmediate goods between Vietnam and Japan have a different nuace compared to China First of all, Vietnam is not in a trade deficit of intermediate goods with Japan and this trade relationship is relatively balanced Second, intermediate goods have only accounted for a relatively moderate proportion of the total import and export turnover of Vietnam in the past years Third, Vietnam's intermediate goods imported from the Japanese market accounted for about 67% of Vietnam's total import turnover in 2000 and stopped at 69-70% in 2010-2012 Japan is Vietnam's second largest importer after China and Vietnam's second largest export market after the US Unlike China, the intermediate goods structure of Japan and Vietnam is complementary, not competitive Japan is a big importer of seafood, consumer industrial products, processed foods and imported low-cost materials and accessories from Vietnam, while Vietnm is the country having the absolute competitive advantage of these products In contrast, most of Vietnam imported products from Japan are machinery, equipment, and intermediate products for production, helping Vietnam to participate well in the supply chain of goods in ASEAN region with Japan Importig intermediate goods from Japan helps Vietnam diversify its export structure (with intermediate goods content from Japan) in the direction of manufacturing exports in order to reduce raw material exports and increase more added value products 20 4.1.3 A number of evaluations First, the status of intermediate goods exchange between Vietnam and Japan and Vietnam with China shows that the speed of trade in intermediate goods between Vietnam and China is much higher than that of intermediate goods trade between Vietnam and Japan Second, Vietnam's trade deficit of intermediate goods from the Chinese market is placing many problems in Vietnam's economic structure Many manufacturing sectors in Vietnam are highly dependent on China for raw materials, intermediate goods and output markets (product consumption) Third, the balanced status of Vietnam trade relation in intermdiate goods with Japan shows that Japan is having a positive influence on Vietnam's economic restructuring 4.2 A number of lessons for Vietnam from Japan – China trade relation in intermediate goods 4.2.1 Lessons should be consulted and learnt First, intermediate goods trade plays an important role in economic development, so it is necessary to assess the economy's demand for this kind of goods to avoid too much dependence on imported intermediate goods, which can damage domestic economic development Second, selecting the right partner in the exchange of intermediate goods is an important solution to help countries more conveniently participate in the supply chain and improve the competitiveness of export products Third, to protect the domestic economy, protecting trade in intermediate goods at a reasonable level is necessary 4.2.2 Lessons to avoid: Do not rely too much on a market that provides and imports intermediate goods as an important measure to control risk 4.3 A number policy implications for Vietnam First, it is necessary to quickly improve the quality of intermediate goods in international trade exchange to avoid negative impacts on economic growth Second, it is necessary to adjust the market structure and product structure in the exchange of intermediate goods, to avoid reliance on a single market and importing intermediate products with low quality Thirdly, focusing on the development of supporting industries to effectively participate in international production networks and reducing the dependence on imports of intermediate goods as well as increasing product value of intermediate goods for export Fourthly, improving the competitiveness of domestic enterprises in order to create more favorable conditions for enterprises to participate in trade in intermediate goods Fifth, choose the right solutions in promoting intermediate goods trade with China and Japan - For China, it is essential to limit the import of intermediate goods with low 21 quality or having quality similar to Vietnam, and also quickly improve the production capacity of domestic enterprises to create export products with higher added value to the Chinese market to balance the trade balance of intermediate goods between Vietnam and China In order to that, we first need to review all groups of imported goods: limiti low quality intermediate goods; strengthen the management of imports of intermediate goods that can be produced domestically; Tightening control activities at the border to minimize the smuggling of goods from China; Develop and enforce mandatory standards and technical regulations for products, especially food and machinery, thereby having a legal basis to control and prevent poor quality products imported into Vietnam - For Japan: Vietnam needs to seek solutions to promote further intermediate goods trade with Japan in the future to reduce the dependence on imports of intermediate goods from China, and also increase rapidl proportion of Japanese intermediate goods in Vietnam's trade balance, contributing more positively to economic restructuring and creating higher added value for the final product To that, Vietnam needs to focus on attracting FDI from Japanese manufacturing enterprises, improve the investment attraction environment towards Japanese investors; select priority industries in attracting Japanese investment, prioritising Japanese technology; build a system of product catalogs that are encouraged in the exchange of intermediate goods trade with Japan; monitor quality of imported and exported intermediate goods to Japan market Along with that, it is necessary to actively carry out trade promotion to better exploit the potential of the Japanese market and take full advantage of the opportunities brougt by the Agreements, especially the Vietnam - Japan Economic Partnership Agreement (VJEPA) 4.4 Necessary and sufficient conditions to apply experiences lessons and policy recommendations to Vietnam 4.4.1 Necessary conditions Improving national competitiveness is a condition to ensure stable export growth, shift production structure to economic sectors with higher technology and added value This condition is influenced and governed by many different policies such as: - Macroeconomic policies to create conditions for enterprises to feel confident in long-term investment in technology development in production Macroeconomic policies need to be stable for a long time, including inflation, exchange rates and interest rates policies - National science and technology policies must create conditions for enterprises to easily approach the research environment, effective technology application and use, including policies to increase R&D investment and increase financial support for enterprises in access to and application of new technologies - Trade policies that create conditions for enterprises to access new technologies having trade defense forms to prevent the import of low and outdated technologies 22 - Developing human resources, both in terms of work skills and management skill to create capabiltiy of absorbing and applying modern technology - Technology transfer should be selected and oriented, prioritising the import and transfer of high and medium technologies, resolutely refusing to grant import and transferring permits for low and pollution technologies Technology import policies must have long-term orientation, focusing on priorities industries to shorten technology gap with other countries 4.4.2 Sufficient conditions Restructuring the economy and transforming the model of economic growth from width to depth under the influence and impact of following issues: - This is necessary to have a comprehensive and long-term plan for restructuring and transforming economic growth model This plan is not a few years, but a development phase; focusing properly on phases: investment restructuring (mainly public investment), restructuring state-owned enterprises, restructuring the financial-banking system - The government should objectively recognise the defects of the growth model and the old economic structure in order to eliminate defects and begin innovations - The motivation for economic growth has to be determined clearly in the coming period to have a plan to focus synchronously and effectively on resources and policies - Need sufficient resources to transform the model of economic growth and economic restructuring, of which the most important issues are financial and human resources CONCLUSION In East Asia, Japan and China are two major economies having an important influence on international relations in the region Since the two countries conducted normalisation of diplomatic relations in 1972, the China-Japan bilateral trade relation has developed strongly Currently, China is Japan's largest trading partner and Japan is China's second largest trading partner after the US Along with the initiatives that are being proposed on about the Asian Economic Community (AEC), Japan - China - Korea Free Trade Area (JKCFTA), Regional Comprehensive Economic Partnership Agreement (RCEP) ) etc., cooperation in East Asia is increasingly expanding, which has particularly important roles of Japan and China However, so far Japan and China have not signed a bilateral trade agreement (FTA) between the two countries in the context that East Asia has becommed the "pasta bowl" by bilateral trade agreements There are many reasons to explain this problem, but the unsigned bilateral FTA has shown that Japan and China have not fully utilised their potential for commercial cooperation in the past China's rise in the past few decades has been both an opportunity and a challenge as well as a threat to Japan's previous economic leadership in Asia Moreover, the complex 23 fluctuations of the East Asian situation, including the Korean issue, conlicted islands (in South China Sea, Diaoyu Islands/ Senkaku islands), historical issues between Japan and China, make Japan - China trade relations in the first two decades of the 21st century still face many limitations, affecting significantly the trade cooperation in Asia region, including Vietnam For Vietnam, Japan and China are two major trading partners, which have an important influence on Vietnam's economic, trade and investment activities over the past years Vietnam is now facing siginificant opportunities and challenges in Asia when the regional geopolitical context is changing in a complicated way, including the great influence of big countries like Japan and China, but also under impacts by other important factors such as the US and Russia that are carrying out the policy towards the East If in the last two decades of the twentieth century, the economic development in East Asia took place in the wave model, with the geese squad led by Japan, the strong rise of China in the 21st century is making this model change and some Southeast Asian countries having their economies close to China’s economy (including Vietnam) are becoming China's potential trade and investment markets with low and medium technology products In recent years, along with the increase in bilateral trade between Vietnam and China, Vietnam has always been a big importer from China and this country has always been Vietnam's first major trading partner, while Japan moved to the second largest trading partner but the growth rate of bilateral trade between Vietnam and Japan in recent years has always been lower than the growth rate of bilateral trade between Vietnam and China If this trend continues, it does not exclude the possibility that Vietnam is becoming increasingly dependent on the Chinese market and continues to exist in an economy of "lower level" than China and other countries in the region In Vietnam, intermediate goods trade plays an important role, especially with major trading partners such as China and Japan Trade in intermediate goods with Japan and China has many benefits for Vietnamese industries, but so far Vietnam does not seem to have developed enough supporting industries to effectively participate in the intermediate goods supply chain, leading to Vietnam's dependence on this group of goods is growing significantly, especially in spearhead industries such as automobiles, electronics, and textiles The dependence on intermediate materials and goods from external markets, especially the Japanese market and China is putting Vietnam in a bad situation: Not be able to buyi intermediate goods to serve the domestic production, which means that production is not linked to raw materials and Vietnam is cut off from the supply chain Studying the status of Japanese-Chinese intermediate goods relations gives Vietnam many valuable lessons In the age of 4.0 technologies, Vietnam needs to have effective solutions to modernise the economic structure, including the import of intermediate goods from the world, particularly from Japan and China, which is Vietnam's top two important trading partners by 2030 24 PHD CANDIDATE’S RESEARCH ARTICLES PUBLISHED IN JOURNALS Nguyen Tuan Tu (2012), “Present public debt in Vietnam: Status and Solution”, Journal of Science VNU, Economics and Business 28 (2012), pp.200-208 Nguyen Tuan Tu (2015), “Japan - China trade relations: potential and limitations ”, Journal of Africa and Middle East Studies No (113), pp 20-27 Nguyen Tuan Tu (2017), “Situation of Vietnam's intermediate goods trade with Japan and China ”, Journal of Africa and Middle East Studies No.7 (143), pp 29-35 Nguyen Tuan Tu (2018), “Factors affecting trade in intermediate goods Japan - China ”, Journal of Africa and Middle East Studies No.2 (150), pp 29-35 25 ... intermediate goods between Vietnam and Japan; Vietnam and China is creating many disadvantages for Vietnam Up to now, Vietnam has been mainly involved in short-term value chains, focusing on mining,... BETWEEN VIETNAM AND CHINA, VIETNAM AND JAPAN: A NUMBER OF LESSONS AND POLICY RECOMMENDATIONS FOR VIETNAM 4.1 Overview of trade relations in intermediate goods between Vietnam China, Vietnam - Japan... in intermediate goods between Vietnam – China Vietnam - China trade relations in intermediate goods have developed strongly since 2000 Within 12 years, Vietnam''s export of intermediate goods
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