by
Mr Nguyen Van Ba
(PhD Candidate, Graduate School of Economics, Shiga University)

  "A General Equilibrium Analysis of the Economic Impacts of Vietnam’s Accession to AFTA"   

Summary

On December 4th , Mr. Nguyen Van Ba, PhD candidate at Graduate School of Economics, Shiga University presented at GRIPS his paper “A General Equilibrium Analysis of the Economic Impacts of Vietnam’s Accession to AFTA,” which is to be part of his dissertation.

The presentation began with an introduction of the recent trade policy reforms in Vietnam in the context of integration and globalization. The country’s trade performance was then resumed, with a focus in the increasingly important role of the ASEAN countries.

Next, a simple theoretical framework was proposed to explain possible impacts of Vietnam’s liberalization on ASEAN members’ imports, impacts of preferential liberalization on imports from non-member countries, as well as impacts of the improved access on the members’ markets in general.

To quantitatively investigate the above impacts, the author employed the programmed software of the Global Trade Analysis Project (GTAP) model. The theoretical structure and basic characteristics of the GTAP model was then overviewed.

In the next step, the author proposed three scenarios of simulation:

Scenario 1: AFTA1, Vietnam liberalizes the products in the Inclusion List and Temporary Excluding List and the ASEAN-5 members reciprocate the concessions.

Scenario 2: AFTA2, Scenario 1 plus liberalization of products in the Sensitive List and ASEAN-5 members reciprocate the concessions.

Scenario 3: AFTA3, Scenario 2 plus liberalization of products in the General Exclusion List and ASEAN-5 members reciprocate concessions.

In his simulations, the whole world was aggregated into 8 regions (Vietnam, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Japan, and the Rest of the World). Sectors were also aggregated into ten major groups.

After showing the simulation results, the author came to three main conclusions: (i) Trade liberalization under CEPT scheme (the IL and TEL) have positive impacts on overall economic growth of Vietnam while liberalization of industries in GEL may negatively affect GDP growth; (ii) due to the discriminatory nature of AFTA liberalization, the crowding out effect on trade volume with the non-member countries reduce the total change in expansion of trade of Vietnam; and (iii) The most fruitful impacts of trade liberalization toward agriculture sectors and labor intensive sectors, which account for the most portion of the poorest population of Vietnam, particularly in AFTA 2 scenario.

The presenter also realized the static nature of GTAP model as a shortcoming that could not capture the dynamic effects of trade liberalization under AFTA.

The discussion came with a number of questions related to the methodology and the nature of the GTAP model. One participant questioned the appropriateness of the model’s “based year” (around 1995-97) which was employed to analyze of conditions of 2004-05. The discussion was then shifted to the structure of the GTAP in general. One important issue was raised that how to handle the problem in an evolutionary context, in which imperfect competition and initial economic conditions played important role in driving the flows of recourses such as FDI. An interesting issue mentioned was that the problems of bounded possibility, i.e. the numerical results may come from mathematic calculations which did not regard the actual limitation of some industries, thus the final implication may be misled.

The discussion session was then followed by a friendly talk as usual. People listened to Mr. Hoang’s brief and lively report of the Osaka Meeting. Two other possible coming events were then mentioned and discussed: “the First Kanto Conference on the Development of Vietnam” and “the Second Meeting in Osaka.” It is expected that VDF Tokyo will play an active role in the both events.

Paper (PDF133KB)   |   Slides (PDF1,511KB)

  (by Nguyen Duc Thanh)