CHAPTER 2: PROSPECTS FOR TRADE RELATIONS BETWEEN VIETNAM
2.3. Turn over trade between Vietnam and U.S
2.3.2. Bilateral turn-over in trade
(a) Role of U.S. in Vietnam’ economy
From commercial statistics between U.S. and TPP countries, position of Vietnam can be confirmed. Although Vietnam is currently is a small economy, import – export turnover with the United States continues increasing significantly in comparison with other TPP partners. Similarly, U.S is the strategic partner of Vietnam in this negotiation. One proof can be shown by trading statistics of Vietnam’s major partners in 2009 in Figure 2.8 (Vietnam General Statistics Office cited in Mark E. Manyin, 2010, p. 12)
Figure 2.8.Vietnam’s major trading partners, 2009
Source: Vietnam General Statistics Office
From the above pie chart, for export market, the highest rate belonged to the United States with 20 percent while the whole ASEAN countries and EU just accounted for 15 percent and 16 percent correspondingly. However, for import market, ASEAN countries and China stood the first and second rank with 20 percent and 16 percent of total import turnover of Vietnam. A special point can be realized that though U.S is a smallest import partner in comparison with other economies such as China, Japan,
ASEAN, Taiwan or EU, the country is the most important export partner of Vietnam.
This is contrary to the case of China which is the smallest exporter but the largest importer of Vietnam. It explains why negotiating a FTA, and in present negotiating TPP plays a strategic role in Vietnam’s economic development.
(b) Bilateral trading development
As mentioned above, trade relations between Vietnam and the United States have witnessed a lot of ups and downs, which can be justified clearly in their bilateral trade growth from the year 1994 to the year 2010 in Table 2.4 (Michael F. Martin, 2011, p.2) In contrast to some other nations (for example, China), official U.S. and Vietnamese trade data are comparatively close and reflect a similar pattern in the growth of bilateral trade. However, data from U.S are always a little bit higher than these from Vietnam and the difference tends to become gradually small. This reflects the fact that the two countries have more and more unified with each other in trading as well as exchanging information.
There is a special point that considerable growth has appeared according to millstones in Vietnam – U.S. relationships with the year such as 1994, 2000 and 2010. For the first few years following the end of the U.S. embargo, trade between the two nations grew slowly, principally because of Vietnam’s lack of NTR. During the period 1994 to 1999, bilateral trade turnover seemed to increase very slowly, especially the quantity exported from the United States to Vietnam. More detailed, in around 6 years, according to U.S. trade data, exports to Vietnam increased 118 million USD (from 173 million USD in 1994 to 291 million USD in 1999) while imports from Vietnam was ten-folds higher (from 50 million USD in 1994 to 609 million USD in 1999). There was a particular point is that since 1997 when exports to Vietnam were about twice as high as imports from Vietnam (616 million USD and 319 million USD correspondingly), the former began to exceed the latter in quantity.
Table 2.4.Growth in Bilateral Trade between Vietnam and the United States Unit: million USD
Year
U.S. Trade Data Vietnamese Data Exports to
Vietnam
Imports from Viet Nam
Exports to United States
Imports from United States
1994 173 50 N.A N.A
1995 253 199 170 130
1996 616 319 204 246
1997 278 388 287 252
1998 274 553 469 325
1999 291 609 504 323
2000 368 822 733 363
2001 461 1,053 1,065 411
2002 580 2,395 2,453 458
2003 1,324 4,555 3,939 1,143
2004 1,163 5,276 5,025 1,134
2005 1,192 6,630 5,924 863
2006 1,100 8,566 7,845 987
2007 1,903 10,633 10,105 1,701
2008 2,790 12,901 11,869 2,635
2009 3,108 12,290 11,356 3,009
2010 3,710 14,868 12,800 3,766
Source: U.S. data from International Trade Commission; Vietnamese data from General Statistics Office of Vietnam
However, situation tended to change dramatically after the granting of conditional NTR in December 2001 with trade flows between the United States and Vietnam growing quickly. Merchandise trade over doubled between 2002 and 2003 (from 2,395 million USD to 4,555 million USD in imports and from 580 million to 1,324 million in U.S. exports), regardless of which nation’s figures one uses. Bilateral trade jumped again in 2007, following the United States granting PNTR status to Vietnam. Total trade declined slightly in 2009 as U.S. imports from Vietnam slid 4.7 percent because
of the economic recession, but rebounded in 2010. During the last ten years since trade normalization was established, U.S. exports to Vietnam increased 10 times (from 368 million USD to 3710 million USD) and U.S. imports from Vietnam increased 18 times (from 822 million USD to 14,868 million USD). It means that exportation to U.S.
market not only had faster growth rate but seemed to higher than importation from U.S from 4 to 8 times. This can be seen the most clearly in 2006 when exportation to U.S was 7,845 million USD while importation was only 987 million USD.
(c) Merchandise trade
Bilateral trade relations between Vietnam and the United States opened when normalization was permanently established in 1994 and actually came into effect when bilateral trade agreement was signed in 2000. Merchandise trade between the two countries also developed in this process. This is always the first sector in commercial transactions between any two countries, and thus can reflect realistically relationships between them.
It is a case that because comparative advantages vary from countries to countries, the imported and exported items are usually different. In the case of Vietnam, top five exported products are Textiles and Garments, Wood and Wood products, Footwear, Fishery Products and Crude Oil while top five imported ones are Machinery, Automobiles, Cotton, Animal Feeds and Materials and Plastic Material. However, in general, exports tend to exceed imports in total value, and in 2009, the former was five times as much as the latter.
Below are some major industries which were classified quite detailed in the report
“U.S. – Vietnam Economic and Trade Relations: Issues for the 112th Congress”, (Michael F. Martin, 2011)
Table 2.5.Top 10.U.S. Exports to Vietnam and Imports from Vietnam in 2010 Unit: million USD
Top 10 exports to Vietnam Top 10 imports from Vietnam
Product Value Product Value
Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
466.235 Articles of apparel and clothing accessories, knitted or crocheted
3,359.480
Vehicles other than railway or tramway rolling stock, and parts and accessories thereof
306.611 Articles of apparel and clothing accessories, not knitted or crocheted
2,438.063
Residues and waste from the food industries; prepared animal feed
266.303 Furniture;bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated sign illuminated nameplates and the like; prefabricated buildings
1,826.354
Iron and steel 255.332 Footwear, gaiters and the like; parts of such articles
1,622.933 Cotton, including yarns and
woven fabrics thereof
254.261 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles
807.772
Meat and edible meat offal 247.676 Fish and crustaceans, molluscs and other aquatic invertebrates
647.823 Electrical machinery and
equipment and parts thereof;
sound recorders and reproducers, television recorders and reproducers, parts and accessories
189.378 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
534.195
Wood and articles of wood;
wood charcoal
156.289 Coffee, tea and spices 435.524
Plastics and articles thereof 153.806 Mineral fuels, mineral oils and products of their distillation;
bituminous substances; mineral waxes
407.495
Dairy produce; birds’ eggs;
natural honey; edible products of animal origin, nesoi
140.703 Edible fruit and nuts; peel of citrus fruit or melons
344.707
Source: U.S. International Trade Commission
Textile and Garments: Vietnam has gradually taken market share in the United States and become the top five textile exporters to this country. As mentioned above, this sector took the largest proportion in total export value, and in particular accounted for 40 percent in 2010. More details can be analyzed through features in Figure 2.9 (U.S.
International Trade Commission Michael F. Martin, 2011, p.15).
Figure 2.9.U.S. Clothing Imports from Vietnam
Unit: Billion USD
Source: U.S. International Trade Commission Vietnam’s clothing exporters to the United States were among the greatest beneficiaries of the U.S. decision to grant Vietnam conditional NTR status in December 2001. Up until 2002, exportation of clothes to U.S was small both in value (below 50 million USD) and proportion of total imports from Vietnam (below 10 percent). However, no sooner had U.S. extended conditional NTR to Vietnam than U.S. clothing imports from Vietnam shot up in value and share. As a share of total imports, clothing peaked in 2003 at 51.4 percent. The export turnover has kept increasing in value every year until
2009, with the largest year-on-year increases occurring in 2003 and 2007 - the first full years after the U.S. granted Vietnam conditional and permanent NTR status, respectively. Up to now, Vietnam has become a major source of U.S. clothing imports, second only to China.
Furniture and bedding:Furniture and bedding, especially wooden ones are among the products with fastest speed of exportation to U.S. market. This country is the largest importer of Vietnamese wooden furniture at the time being with 1.1 billion USD in 2010 (Nguyen Vu, 2010), accounting for 12 percent of total U.S. imports from Vietnam in 2010. Over the last 10 years, from 62nd position, Vietnam has surpassed last leaders such as Italy, Malaysia, and Taiwan to become the fourth-largest source for furniture and bedding imports for the United States. These results partly come from the fact that tariff applied for this types of products reduced from 50 – 55 percent to 0 – 3 percent after BTA came into effect. In addition, 9904 and 9905 – the major item codes of Vietnam are exempted from import duties. In other word, tax does not affect the comparative advantages between Vietnam and other countries in U.S. market.
Footwear:The United States is the largest market in footwear consumption worldwide with each American using five pairs annually on average. According to Vietnam Leather and Footwear Association, export turnover to U.S was 6.5 billion USD in 2011 and the best sold items are products made of plastics and rubber. Among footwear exporters to U.S. market, the first rank belongs to China, Italia and Vietnam stand the second and the third respectively. In fact, Vietnam’s market share is only five percent while the figure is 70 percent in the case of China. Unfortunately, Vietnam hardly surpasses China in this sector because this competitor has comparative advantages in cheaper labor, plentiful resource and high productivity.
Electrical machinery: Vietnam’s electrical machinery exports to the United States grew more than 1,000-fold over the last 10 years, reaching nearly 808 million USD in 2010 and over five percent of total U.S. imports from Vietnam which increased 50
percent in comparison with figures of 2009. With highest growing rate, this product stands the forth in top 10 Vietnamese exported goods to the United States.
Product Interplay:There is also a discernible interplay between Vietnam’s top exports to the United States and the top U.S. exports to Vietnam. Vietnam imports substantial amounts of cotton from the United States, which is then used to manufacture clothing to be exported to the United States. Similarly, Vietnam imports wood from the United States that may end up in the furniture that is imported by the United States from Vietnam. There is also a significant amount of cross-trade in electrical machinery - a top-10 export item for both countries - as parts and components are shipped back and forth across the Pacific Ocean.
To sum up: Since the bilateral trade agreement was signed, trade relations between the two countries have obtained significant achievements. Vietnam currently stands the 30th among U.S. partners and is regarded as the only developing countries in the negotiations by the United States. Besides that, when Vietnamese enterprises export goods to U.S. market, they have to ensure requirements such as quality, safe payment method, laws on exports and U.S. government pays special attention to green and recycling technology. It also carries out U.S. credit guaranty program (GSM – 102 and GSM – 103) in order to subsidize agriculture exports. Vietnam exports to and import from U.S. are estimated about approximately 15 billion USD and 3.5 billion USD annually. Among Vietnamese goods with high export turnover are textile, footwear, electronics, seafood and machines. However, Vietnam has to face a lot of difficulties and limitations in access to U.S. market which are expected to be improved through TPP negotiations.