Assessing the impacts of deeper trade reform in Vietnam in a general equilibrium framework

To, Minh Thu and Lee, Hiro (2014): Assessing the impacts of deeper trade reform in Vietnam in a general equilibrium framework. Published in: Journal of Southeast Asian Economies , Vol. 32, No. 1 (April 2015): pp. 140-162.

Abstract

Vietnam is currently undertaking deeper trade liberalization, both by reducing tariffs and introducing reforms in other trade-related areas. In this paper, the impact of Vietnam’s trade reforms on its economic welfare and sectoral adjustments are assessed using a dynamic computable general equilibrium (CGE) model. We consider the effects of goods and services trade liberalization, an increase in foreign direct investment inflows, a reduction in administrative and technical barriers to trade, and a reduction in trade and transport margins. When all effects are combined, Vietnam’s economic welfare is projected to increase by 8.4 per cent in 2020 compared to the baseline. Many manufacturing sectors would expand, whereas agricultural, minerals and fuel sectors would contract. The output expansion is most significant in the textiles and wearing apparel sector.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade reform, unilateral trade liberalization, economic welfare, sectoral adjustments, Vietnam, CGE model
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F1 - Trade > F15 - Economic Integration; F - International Economics > F1 - Trade > F17 - Trade Forecasting and Simulation

References

Abbott, Philip, Jeanet Bentzen, Nguyen Thi Lan Huong and Finn Tarp. "A Critical Review of Studies on the Social and Economic Impacts of Vietnam's International Economic Integration", March 2007. <http://mpra.ub.uni-muenchen.de/29789/> (accessed June 2012).

Anderson, Kim, Will Martin and Dominique van der Mensbrugghe. "Estimating Effects of Price-Distorting Policies Using Alternative Distortions Databases". In Handbook of Computable General Equilibrium Modeling, edited by P. Dixon and D. Jorgenson. Amsterdam: Elsevier, 2013.

Ando, Mitsuyo. "Impacts of FTAs in East Asia: CGE Simulation Analysis". RIETI Discussion Paper 09-E-037. Tokyo: Research Institute of Economy, Trade and Industry, 2009.

Armington, Paul, "A Theory of Demand for Products Distinguished by Place of Production". IMF Staff Papers 16, no. 1 (1969): 159-178.

Athukorala, Prema-Chandra. "Trade Policy Reforms and the Structure of Protection in Vietnam". World Economy 29, no. 2 (2006): 161-187.

Blomstr?m, Magnus and Ari Kokko. "Multinational Corporations and Spillovers". Journal of Economic Survey 12, no. 3 (1998): 247-277.

Brown, Drusilla K. "Tariffs, the Terms of Trade, and National Product Differentiation". Journal of Policy Modeling 9, no. 3 (1987): 503-526.

Boumellassa, Houssein and Hugo Valin. "Vietnam's Accession to the WTO: Ex-Post Evaluation in a Dynamic Perspective". Economie Internationale, no. 118 (2009): 13-42.

Chen, Natalie, Jean Imbs, and Andrew Scott. "The Dynamics of Trade and Competition". Journal of International Economics 77, no. 1 (2009): 50-62.

Das, Sanghamitra, Mark J. Roberts, and James R. Tybout. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics". Econometrica 75, no. 3 (2007), 837-873.

Dee, Philippa, Le Thuc Duc and D. T. Hiep. "Evaluating Vietnam's WTO Accession in Services". World Bank, 2005.

Dimaranan, Betina, Le Thuc Duc and Will Martin. "Potential Economic Impacts of Merchandise Trade Liberalization under Viet Nam's Accession to the WTO", May 2005. <https://www.gtap.agecon.purdue.edu/resources/download/2164.pdf> (accessed December 2012).

Fukase, Emiko and Will Martin. "The Effect of the United States' Granting MFN Status to Vietnam". Review of World Economics 136, no. 3 (2000): 539-559.

Fukase, Emiko and Will Martin. "A Quantitative Evaluation of Vietnam's Accession to the ASEAN Free Trade Area". Journal of Economic Integration 16, no. 4 (2001): 545-567.

Hoang, Chi Cuong, Do Th? Bich Ngoc, Bui Thi Phuong Mai and Dang Huyen Linh. "Trade Liberalization and Foreign Direct Investment in Vietnam: A Gravity Model using Hausman-Taylor Estimator Approach". Journal of Science and Development 11, no. 1 (2013): 85-96.

Huff, Karen M. and Thomsas W. Hertel. "Decomposing Welfare Changes in the GTAP Model". GTAP Technical Paper no. 5. West Lafayette: Center for Global Trade Analysis, Purdue University, 2000.

Hummels, David. "Transportation Costs and International Trade in the Second Era of Globalization". Journal of Economic Perspectives 21, no. 3 (2007): 131-154.

Huong, Pham Lan and David Vanzetti. "Vietnam's Trade Policy Dilemmas". The Ninth Annual Conference on Global Economic Analysis, Addis Ababa, Ethiopia, June 2006.

Ianchovichina, Elena. "GTAP-DD: A Model for Analyzing Trade Reforms in the Presence of Duty Drawbacks". GTAP Technical Paper No. 21, West Lafayette: Center for Global Trade Analysis, Purdue University, 2003.

IMF. "Vietnam Statistical Appendix." IMF Country Report No. 06/422. Washington DC: International Monetary Fund, 2006.

IMF. "Vietnam Statistical Appendix." IMF Country Report No. 07/386. Washington DC: International Monetary Fund, 2007.

Itakura, Ken. "Impact of Liberalization and Improved Connectivity and Facilitation in ASEAN for the ASEAN Economic Community". ERIA Discussion Paper 2013-01. Jakarta: Economic Research Institute for ASEAN and East Asia, 2013.

Itakura, Ken and Hiro Lee. "Welfare Changes and Sectoral Adjustments of Asia-Pacific Countries under Alternative Sequencings of Free Trade Agreements", Global Journal of Economics 1, no. 2, article 1250012 (2012): 1-22.

Javorcik, Beata S. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages". American Economic Review 94, no.3 (2004): 605-627.

Joanna, Wolszczak-Derlacz. "The Impact of Domestic and Foreign Competition on Sectoral Growth: A Cross-Country Analysis". Bulletin of Economic Research, 2014, forthcoming.

Le, Dang Doanh. "Economic Developments and Prospects". In Vietnam Assessment: Creating a Sound Investment Climate, edited by Suiwah Leung. Singapore: Institute of Southeast Asian Studies, 1996.

Le, Dang Doanh, Vo Tri Thanh, P. L. Huong, D. H. Minh, and N. Q. Thang. "Explaining Growth in Vietnam". EADN Global Research Project, 2002.

Lee, Hiro, Robert F. Owen, and Dominique van der Mensbrugghe. "Regional Integration in Asia and Its Effects on the EU and North America". Journal of Asian Economics 20, no.3 (2009): 240-254.

Nguyen, Ngoc Anh and Nguyen Thang. "Foreign Direct Investment in Vietnam: An Overview and Analysis of the Determinants of Spatial Distribution across Provinces", June 2007. <http://mpra.ub.uni-muenchen.de/1921/1/MPRA_paper_1921.pdf> (accessed January 2013).

Nguyen, Thang. "Vietnam". A study funded by Department for International Development, UK, under contract CBTR 03 4777, Overseas Development Institute, London, June 2004.

Nguyen, Tien Dung and Mitsuo Ezaki. "Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution: The Case of Vietnam". Review of Urban and Regional Development Economics 17, no. 3 (2005): 117-215.

Otsuki, Tsunehiro. "Quantifying the Benefit of Trade Facilitation in ASEAN". In Toward a Competitive ASEAN Single Market: Sectoral Analysis, edited by Shujiro Urata and Misa Okabe. ERIA Research Project Report 2010-03. Jakarta: Economic Research Institute for ASEAN and East Asia, 2011.

Petri, Peter A., Michael G. Plummer, and Fan Zhai. "Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment". Washington, DC: Peterson Institute of International Economics, 2012.

Rama, Martin and Le Kim Sa. "Impacts of WTO Accession: Can They be Predicted? What to Do about Them?" Workshop on Growth and Social Impacts of WTO Accession, 2 November 2005, Hanoi. Vietnamese Academy of Social Sciences, 2005.

Roland-Holst, David, Finn Tarp, Dinh Van An, Vo Tri Thanh, Pham Lan Huong and Dinh Hien Minh. "Vietnam's Accession to the World Trade Organization: Economic Projections to 2020". Discussion Paper No. 0204. Hanoi: Central Institute for Economic Management, 2002.

Smith, Alasdair and Anthony J. Venables. "Completing the Internal Market in the European Community: Some Industry Simulations". European Economic Review 32, no.7 (1988): 1501-1525.

Stone, Susan and Anna Strutt. "Transportation Infrastructure and Trade Facilitation in the Greater Mekong Subregion". ADB Institute Working Paper No. 130. Tokyo: Asian Development Bank Institute, 2009.

Thanh, Vo Tri. "Vietnam's Trade Liberalization and International Economic Integration: Evolution, Problems and Challenges". ASEAN Economic Bulletin 22, no. 1 (2005): 75-91.

To, Minh Thu. "Regional Integration in East Asia and Its Impacts on Welfare and Sectoral Output in Vietnam". International Public Policy Studies 14, no. 2 (2010): 97-112. <http://ir.library.osaka-u.ac.jp/dspace/bitstream/11094/4046/1/26-07_n.pdf>.

Toh, Mun Heng and Vasudevan Gayathri. "Impact of Regional Trade Liberalization on Emerging Economies: The Case of Vietnam", ASEAN Economic Bulletin 21, no. 2 (2004): 167-182.

Trefler, Daniel, The Long and Short of the Canada-U.S. Free Trade Agreement. American Economic Review 94, no. 4 (2004): 870-895.

Truong, Dinh Tuyen, Vo Tri Thanh, Bui Truong Giang, Phan Van Chinh, Le Trieu Dung, Nguyen Anh Duong, Pham Sy An and Nguyen Duc Thanh. "T?c ??ng c?a cam k?t m? c?a th? tr??ng trong WTO v? c?c hi?p ??nh th??ng m?i t? do ??n ho?t ??ng s?n xu?t, th??ng m?i c?a Vi?t Nam v? c?c c? ch? ho?n thi?n c? ch? ?i?u h?nh xu?t nh?p kh?u c?a B? C?ng Th??ng giai ?o?n 2011-2015" [Impacts of Commitments on Opening the Market under WTO and other Free Trade Agreements on Vietnam's Production and Trade Activities and Mechanism to Improve Import and Export Management Scheme of the Ministry of Industry and Trade during 2011-2015]. Report under the European Trade Policy and Investment Support Project, 2011.

United Nations Conference on Trade and Development (UNCTAD). World Investment Report. New York: United Nations, various years.

van der Mensbrugghe, D. "LINKAGE Technical Reference Document: Version 6.0", 2005. <http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1100792545130/LinkageTechNote.pdf> (accessed October 2014).

World Bank. Vietnam - Aiming High: Vietnam Development Report 2007. Washington, DC: World Bank, December 2006. <http://documents.worldbank.org/curated/en/2006/12/7273035/vietnam-aiming-high-vietnam-development-report-2007> (assessed November 2014).

World Trade Organization. "Trade Policy Review", WTO Trade Policy Review WT/TPR/G/287. World Trade Organization, August 2013.