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INE3001E1 - 18050635 - Nguyen Thi Hai Yen - 08082000
INE3001E1 - 18050635 - Nguyen Thi Hai Yen - 08082000
INTERNATIONAL TRADE
(INE 3001 E)
FINAL ASSIGNMENT
Hanoi, 2021
Course: International Trade
(INE 3001 E)
Student
Nguyen Thi Hai Yen (Student ID: 18050635)
Word count
4391 words (Excluding Title Page, Table of Contents and References)
Module coordinator
Dr. Nguyen Thi Minh Phuong
Assoc. Prof. Dr. Nguyen Dac Hung
Date of submission:
06/01/2021
Plagiarism statement
“I confirm that this assignment is entirely my own work and has not been submitted in
full or in part for any other course within or outside UEB. I confirm that all references are
duly acknowledged.”
Signature: ….
Question 1: Based on theories and empirical evidence, analyze and assess trade policy
of a country in the context of Covid 19 pandemic. Should Vietnam pursue free trade or
protectionism policy in this context? Give arguments for your opinion.
Key
The COVID-19 pandemic created a public health crisis that began in March 2020,
ultimately changing all aspects of everyday life, including education, work-life balance,
and, most drastically, the economy. The damage was unprecedented in speed and ferocity.
China has been at the epicentre of disease Covid-19 and also the most affected
country in the global. Therefore, it has launched a series of trade facilitation policies and
since January 2020. Maintaining incoming trade flows of medical supplies and food
products has been seen as crucial. China also sought to minimize the disruption of
COVID-19 on its export trade flows, which supplies nearly 20% of the global
intermediate-goods trade.
Given its role in global value chains and being the first county to have taken wide-
ranging measures in relation to trade flows as a reaction to Covid-19, China is a
compelling case to analyze and assess. Indeed, the Chinese experience in facilitating trade
during tumultuous times may provide useful insights for response planning in other
countries.
China launched an emergency plan in which the central government and local
agencies joined efforts to promote cross-border trade facilitation. With this goal in mind,
the plan emphasized simplified customs procedures and reduced port charges, inspections
and quarantine. The General Administration of Customs of China (GACC) issued a series
of measures such as the following ones, to ensure both effective control against the
outbreak of COVID-19 and to facilitate resuming business operations: 10 facilitative
policies as foreign-trade businesses begin to resume operations, 10 policies to support the
China Railway (CR) Express and list of measures for coordinating work to prevent and
control the epidemic at ports and for facilitating customs clearance. Local customs offices
have refined the general measures of the GACC considering local conditions, in
accordance with the process to elaborate plans in China.
Getting medical supplies without delays required Chinese Customs and other
compliance authorities to adopt several exceptional initiatives such as the following:
- Speeding up the release of goods: Chinese Customs managed to reduce the release
time of relief cargo to 45 minutes. Expedited administrative penalty procedures
without retention of the anti-epidemic supplies, transportation conveyances or
account document. Pick-up service upon arrival for imported medicines and
medical devices On-board inspections or door-to-door inspection, while preventing
illegal activities taking advantage of the situation.
- Reducing tariffs
Import materials donated for epidemic prevention and control are exempted from
import duties, import value-added tax and consumption tax.
- Enhancing access to information about new procedures
Customs set up online services to guide importers throughout the fast clearance of
anti-epidemic supplies. Customs is holding online meetings with importers,
answers questions, and guides traders in filling in declaration forms.
- Coping with trade restrictions
A few countries have imposed restrictions on imports of live animals or animal
products from China, or on exports of supplies such as masks, protective suits and
disinfectant to China. To deal with this, the Chinese government is sending early
warning information to the affected enterprises as well as providing targeted
consulting services. It has also strengthened communication and coordination with
trading partners to create an enabling environment for bilateral trade and economic
cooperation.
- Keeping records
Customs must now keep a record of the importation of anti-epidemic supplies and
compile relevant statistics, to support decision-making related to securing these
supplies.
- Reducing costs
China Customs reduced costs by decreasing the number of declarations through
manifest consolidation. Moreover, traders can apply for an exemption or reduction
of the fee for delayed declaration in case the outbreak disrupted their operations or
if funds are low upon the resumption of business. Importing enterprises, unable to
pay taxes on schedule, may submit a payment schedule spread across a maximum
duration of three months. Fees for late payment shall be exempted or reduced,
provided that the enterprise complied to the payment schedule.
- Enhancing logistic/transport capabilities
To boost the transport capacity, China is supporting the construction of transport
hubs. Likewise, multimodal transport operations based on railway transport (i.e.
CR Express) is expected to facilitate domestic customs transit among multiple
customs districts.
- In the framework of the “Belt and Road Initiative”, China allows enterprises to
choose clearance mode for goods transported by the CR Express either at ports of
entry/exit or at local Customs. Besides, when a paper document is required for
verification, its electronic copy can be accepted by Customs upon approval before
the submission of the paper document. As an alternative to on-site audits, Customs
are conducting off-site audits via video or electronic data transmission or are
basing the audit on the inventory data provided by enterprises.
From the case of China, in my opinion, Vietnam had better pursue free trade. The
basis of International Trade is based on two theories which are “Absolute Advantage” by
Adam Smith and “Comparative Advantage” by David Ricardo. While Adam believed that
countries should concentrate their efforts on producing and selling goods in which they
have an “absolute advantage” over other countries, David Ricardo argued that a country
might have a comparative advantage over the other. Vietnam has abundant labors with
cheap wage so we can take advantage of producing and exporting labor-intensive goods
such as textile, shoes, seafood products,…to developed countries (USA, England,
Germany,…) to get profit and import capital – intensive products like machines,
technological facilities,… from them. Actually, ever since EVFTA was officially signed,
Vietnamese economy has got many benefits, our GDP is predicted to have an average rise
around 2,18% to 3,25% in the first five years. This statistic is predictable because with
EVFTA, Vietnam can export more to EU countries without having to deal with many
trade barriers like high tariffs,…This can create new markets for Vietnamese producer,
help them earn more profit and even create more jobs for Vietnamese workers. Moreover,
with the free trade agreement, European investors will flock to the country to invest
because now Vietnam can offer a great deal of offers for them, like reducing taxes, low-
labor cost, various and accessible natural resources,…Thus, technology transfer will also
take place. Local companies now can access to the latest technologies from their
multinational partners. As local economics grow, so do job opportunities. Multi-national
companies provide job training to local employees, which can help to develop the quality
of labor. Apart from that, Vietnam has been an export surplus country for a long time and
Vietnamese economy has depended on export for more than 50%. In the context of COvid
19, the global economy is severely depressed, without free trade and FTAs, Vietnam will
not be able to export necessities such as food to other countries and import medical
equipment and supplies from developed countries to treat patients in the epidemic
situation . According to statistics of the General Department of Customs (2020),
Vietnam's exports have reached most of the world's markets, many products have
gradually gained a firm foothold and improved their competitiveness in the world. Many
markets have high quality requirements such as the EU, Japan, the US, Australia...,
effectively taking advantage of FTAs such as EVFTA, CPTPP. Vietnam's trade surplus is
mainly in the markets of developed countries, which have strict quality requirements for
imported goods such as the United States (export surplus is nearly 62.7 billion USD); EU
(export surplus of nearly 20.3 billion USD). As for the EU market, for the whole year of
2020, exports to the EU market were 34.94 billion USD, down 2.3% over the same period
in 2019 due to the impacts of the pandemic. However, after 5 months of implementing the
EVFTA Agreement, exports to the EU market reached about 15.38 billion USD, an
increase of about 1.6% over the same period in 2019. Many of Vietnam's export products
have had positive changes in the EU market after the EVFTA Agreement was
implemented, typically seafood, shrimp, rice... For markets of CPTPP countries, since the
Agreement came into effect, export turnover to markets that are members of CPTPP has
achieved a positive increase. In 2020, exports to Canada maintained a positive growth
rate, reaching US$ 4.35 billion, up 11.9%; exports to Mexico reached 3.17 billion USD,
up 12.2%... Also thanks to exports, Vietnam is the only country to achieve positive
growth in Southeast Asia in 2020, an impressive turning point in the current economic
context. Last year, import and export activities continued to be a bright spot when making
Vietnam achieve a record high trade surplus. This confirmed that free trade has been
helping Vietnam's economy develop more and recover faster after the COVID-19
pandemic.
Question 2: Identify and analyze the opportunities and challenges for Vietnam’s
enterprises from EU – Vietnam Free Trade Agreement
(EVFTA)? What are policy implications for Vietnam’s government and enterprises?
Key
In the context of a modern and dynamic world economy that is tending to
"globalization", opening up and integrating, the relationship between countries is
established more widely and closely in all fields. Recognizing that, Vietnam has been
quick to take steps to keep up with the world. With the goal of "Diversifying markets,
multilateralizing economic relationships", Vietnam is moving towards the path of
exporting goods to seek and expand markets, thereby improving the competitiveness and
efficiency of the country. economy. And to do that, we have overcome many barriers and
difficult regulations to sign cooperation documents and join large commercial
organizations (ASIAN, APEC, WTO...) paved the way for the economy. Among them,
the EU-Vietnam Free Trade Agreement (EVFTA) is one of the important agreements just
approved. This is considered as the key to open the door for Vietnamese goods (especially
leather shoes, garments, seafood and agricultural products...) to penetrate this extremely
demanding but potential market.
The EVFTA Agreement was started and negotiated in the context of the growing
bilateral relationship between Vietnam and the EU, especially in the field of economy and
trade. The EU is currently one of Vietnam's leading trading partners with two-way
turnover in 2019 reaching 56.45 billion USD, of which exports reached 41.5 billion USD,
imports from the EU reached 14.9 billion USD. USD. The EVFTA is a comprehensive,
high-quality agreement that ensures a balance of benefits for both Vietnam and the EU,
which also takes into account the difference in development levels between the two
countries.
The Agreement consists of 17 Chapters, 2 Protocols and a number of
memorandums of understanding with the main contents: trade in goods (including general
provisions and commitments to open markets), rules of origin, customs and trade
facilitation, food hygiene and safety measures (SPS), technical barriers to trade (TBT),
trade in services (including general regulations and commitments to open markets).
market), investment, trade remedies, competition, state-owned enterprises, government
procurement, intellectual property, trade and sustainable development, cooperation and
capacity building, legal issues institutional theory.
Nearly 100% of Vietnam's exports to the EU will be eliminated after a short
roadmap. So far, this has been the highest level of commitment that a partner gives us in
FTAs that have been signed. This benefit is especially meaningful when the EU is
continuously one of our two largest export markets today. Once the agreement is
implemented, the EVFTA will be a huge boost to Vietnam's exports, helping to diversify
Vietnam's exports. market and export products, especially agricultural and aquatic
products as well as Vietnamese products which have many competitive advantages.
Opportunities for Vietnam’s enterprises from EVFTA
The EU is currently Vietnam's second largest trading partner. The outstanding
feature in the import-export structure between Vietnam and the EU is the great
complementarity, less direct competition. In 2019, the total two-way turnover between
Vietnam and the EU reached more than 56.45 billion USD, an increase of 1.1% compared
to 2018. In which, exports to the EU reached nearly 41.54 billion USD and imports from
the EU nearly $14.9 billion. Our main export groups to the EU are footwear, textiles,
coffee, furniture, and seafood. The EU is also a major investor in Vietnam. As of June
2014, 27 out of 28 EU countries have invested in Vietnam with more than 2375 valid
projects, total registered investment capital is over 25.49 billion USD (Ministry of
Industry and Trade, 2019) which increased by 1.19 billion USD, accounting for 7.70% of
the projects of the whole country and accounting for 7.03% of the total registered
investment capital of the countries. EU investors were present in most of the countries.
important economic sector of Vietnam, focusing most on industry, construction and some
service industries. Therefore, the signing of a free trade agreement between Vietnam and
the EU will open up opportunities for both sides. Among them are opportunities for
Vietnamese businesses.
First of all, opportunity to expand the market, promote the export of goods to the
EU market. Through this agreement, it will create better conditions for Vietnamese
businesses to access the European market, a large market with about 500 million people
and bring many benefits to Vietnamese businesses such as tax exemption and tax
exemption. at least 90% of the tariff lines on Vietnam's exports to the EU. Market
expansion opportunity was deemed evident when this agreement was signed. In addition,
the EU-Vietnam Free Trade Agreement, once formed, will create a more favorable
environment for Vietnam, taxes will be zero for most goods such as agricultural products,
food, footwear. , garment…
Secondly, Vietnam’s enterprises can create comparative advantage against their
competitors. For example, Leather and Footwear is a strategic export industry of Vietnam.
The EU is the largest export market of this industry (reaching 5 billion US dollars -
accounting for 11% of the total export turnover of this industry in 2019). First of all, the
tax reduction from 12.4% to 0% gives the industry a competitive advantage over other
countries at a reasonable cost, increasing competitiveness towards sustainable
development. For textiles, the EU market is the second largest market of the industry
(accounting for 10% of the total export turnover of the industry). The tax cut from 11.7%
to 0% will certainly be the growth engine for Vietnam's textile and garment entering the
EU in the near future. For agricultural and aquatic products, the EU is a large and
especially important market for Vietnam's seafood industry. Currently, the EU is
imposing a tax on seafood products of 10.8% (higher than the average tax rate of 3.8%).
Therefore, EVFTA eliminating tax rates will create an important advantage for Vietnam
over other competitors in the EU market. In addition, when the tax was eliminated,
Vietnamese companies can focus on technical chain so as to improve product quality.
High standard goods with low cost will help Vietnam’s enterprises become reliable
supplier in EU market.
Thirdly, with the reduction of import tax to 0%, it will create an opportunity to
import advanced and source machinery, equipment and technology from the EU market
more easily to serve production and business activities of enterprises themselves domestic
industry and they can take advantage of technology transformation. Previously, Vietnam
had to import input materials or products from some neighboring countries in the region
such as China, Thailand, etc. When the EVFTA is signed, it will be an opportunity for
Vietnam to redirect and import to EU countries. This will cause domestic enterprises to
face relatively great competitive pressure. However, many views believe that with an
economy that is highly complementary to the Vietnamese market like the EU, opening the
Vietnamese market to EU exporters and service providers is not necessarily a
disadvantage for the EU. Vietnam. EVFTA allows Vietnamese businesses and people to
buy goods and services at competitive prices, with good quality and advanced technology,
thereby having the opportunity to increase their competitiveness. paintings for
Vietnamese products. To a certain extent, this also helps Vietnam avoid having to rely too
much on a low-quality and volatile supply like China.
Moreover, opportunity to self-improve production process, improve product
quality to meet EU regulations. When the EVFTA is signed, it will create a legal basis for
trade exchange activities so that Vietnamese goods can be exported to Europe, meeting
the quality and safety standards required by this market. Commitments in areas such as
trade remedies (anti-dumping, anti-subsidy, safeguard), technical barriers to trade (TBTs),
sanitary and phytosanitary measures Whole foods (SPSs)… are available Certain impacts
on Vietnam's exports to the EU market in the recent past are expected to have more
positive effects, bringing significant benefits to Vietnam's exports in the near future. next.
With the main content of not committing to specific regulations on detailed issues, but
focusing on establishing a cooperation mechanism for transparency and quick handling of
arising disputes, the EVFTA will contribute to improving the process of implementing the
relevant regulations (opportunity to comment further on the enactment or amendment of
EU regulations, opportunity to peacefully resolve problems arising in the application
process…). Businesses themselves also have the opportunity to learn, access and express
their views related to these EU regulations. This is also a good opportunity for Vietnam to
join this agreement.
In addition, opportunity to access investment capital, modern technology, expand
business opportunities for businesses... from the EU market. More and more EU
companies choose Vietnam as a destination to invest. Vietnamese companies often lack
know-how, technology and capital. Meanwhile, but this element is relatively available in
European companies. Besides, the labor cost in Europe is quite high, much different from
the labor cost in Vietnam. This makes the competitiveness of European businesses is not
high. On the contrary, muscle The cost structure of Vietnamese enterprises is quite
attractive, the advantages of Vietnam are quite diverse, the quality of labor is better as
well as the protection of intellectual property rights better than other countries in the
region. . Therefore, cooperation between Europe and Vietnam is a relationship that brings
many benefits, helping Vietnamese companies to access European knowledge and
technology, and at the same time providing European companies with a base. Reliable,
cost-effective manufacturing in Asia.
Last but not least, opportunities for easy access to other markets with free trade
agreements with the EU. Through the signing of EVFTA, it will help Vietnamese
businesses to access and conduct trade with other partners that have FTAs with EU.