Vietnam National University

International School
__***__

INTERNATIONAL TRADE MANAGEMENT

Class: INS3019_02 – Group 2

Nguyen Huong Tra 21070581

Luu Hoai Linh 21070522
Hoang Minh Ha 21070032
Ha Thi My Anh 21070462

Hanoi, December 2023

 Table of Contents
A. Part 1: Trade Situation Analysis ................................................................................................. 3
I. Overview of UK’s International Trade in 2022 ............................................................................ 3
II. UK International Trade Analysis in 2022 .................................................................................... 3
1. Major exports and imports products......................................................................................... 3
a. Exports .................................................................................................................................. 3
b. Imports ................................................................................................................................. 4
2. Major trading partners (major exporters & importers) ............................................................. 5
3. Analysis of trade theories in the UK ........................................................................................ 7
3.1. The UK’s comparative advantages and bilateral trade relations ....................................... 7
3.2. The gravity model and trade integration ........................................................................... 8
B. Part 2: International Trade Policy Analysis ................................................................................ 9
I. Executive summary ..................................................................................................................... 10
II. Introduction ............................................................................................................................... 10
III. Main Body Headings ................................................................................................................ 11
1. Introduction about Vietnam - US BTA & WTO accession ................................................... 11
a. Vietnam - US BTA ............................................................................................................. 11
b. WTO ................................................................................................................................... 12
2. Advantage of Vietnam - US BTA .......................................................................................... 14
2.1. Advantages of Vietnam - US BTA and Situation in Vietnam after Vietnam - US BTA 14
2.2. Benefits from a specific Industry perspective ................................................................. 24
2.3. Evaluate the special benefits of the VN-US BTA compared to benefits from other FTAs
.......................................................................................................................................... 28
3. Limitations and difficulties when Vietnam joined the WTO ................................................. 29
3.1. Real economy .................................................................................................................. 29
3.2. Macroeconomic and Financial Stability .......................................................................... 34
a. Inflation .............................................................................................................................. 34
b. Balance of payments .......................................................................................................... 35
c. Financial System ................................................................................................................ 36
d. State Budget ....................................................................................................................... 36
3.3. Social Issues .................................................................................................................... 37

1
 4. Assess whether benefits from the WTO meet Vietnam's initial expectations ? ..................... 38
IV. Conclusion ............................................................................................................................... 40
C. References ................................................................................................................................. 42

2
A. Part 1: Trade Situation Analysis

I. Overview of UK’s International Trade in 2022

One of the key participants in global trade is the United Kingdom. According to the World

Trade Organization, the nation ranks eighth in the world for imports and exports of products,

second for exports, and sixth for imports of commercial services.

With 67 million citizens and a GDP of $3.1 trillion (2022), the United Kingdom is a significant

player in global trade. Despite its tiny size—roughly the same as Oregon—the United Kingdom

leads the G7 in GDP growth (4.0%) in 2022 and has the second-biggest economy in Europe

(International Trade Administration, 2023). The amount of products and services exported in

2022 rose by 4.8% over 2021, following two years of declines due to the COVID-19 epidemic

and Brexit. According to FMI, the amount of goods and services imported increased by 8.4%.

(Santander Trade, 2023).

In particular, the Russian invasion of Ukraine caused trade disruptions in several product

categories, which changed the UK's trading relationships and raised import costs. In 2022, the

gap between trade-in value terms and trade with the impact of inflation increased significantly,

particularly concerning imports from the EU (Office for National Statistics, 2023).

II. UK International Trade Analysis in 2022

1. Major exports and imports products

a. Exports

The total value of goods exports in 2022 was £415,880 million (Office for National Statistics,

2023). The share of Machinery & transport equipment in the overall export value was 32.9%.

It contains the three main exported goods, which made up the majority value of Machinery &

transport equipment (£136,755 million): intermediate mechanical power generators (20.3%),

3
cars (18.1%), aircraft (7.8%). Chemicals (15%) and fuels (14.7%) are ranked second and third

in overall export value, respectively.

Figure 1: List of top 9 main UK exported products in 2022. (Source: Office for National

Statistics – UK trade statistics)

b. Imports

In 2022, UK goods imports were worth £645,800 million (Office for National Statistics, 2023).

The three largest imported products, representing 32.3%, 18.1%, and 13.1% of the total,

respectively, are Machinery & transport equipment, Fuels and Miscellaneous manufactures.

Therein, Machinery & transport equipment included cars, telecoms & sound equipment

4
(capital) and intermediate mechanical power generators, were approximately 17.5%, 10.8% and

10.6% of the total value of Machinery & transport equipment in turn.

Figure 2: List of top 9 main UK imported products in 2022. (Source: Office for National

Statistics - UK trade statistics)

2. Major trading partners (major exporters & importers)

● Major exporting partners

Importers
Value exported in 2022 Trade balance 2022 (USD

(USD Thousand) Thousand)

5
World 530,481,545 -285,818,339

United States of America 63,818,198 -33,843,962

Netherlands 43,262,220 14,081,740

Germany 41,328,252 -29,856,903

Ireland 36,303,915 18,028,998

China 35,414,586 -67,106,487

Table 1: The UK’s major exporting partners in 2022 (Source: Trademap)

● Major importing partners

Exporters

Value imported in 2022 Trade balance 2022 (USD

(USD Thousand) Thousand)

World 816,299,884 -285,818,339

China 102,521,073 -67,106,487

United States of America 97,662,160 -33,843,962

Germany 71,185,155 -29,856,903

Norway 53,228,357 -48,953,557

France 34,876,193 -4,427,567

Table 2: The UK’s major importing partners in 2022 (Source: Office for National Statistics -

UK trade statistics)

6
Despite facing regulatory, economic, and pandemic-related challenges, the UK remains a vital

market for U.S. exports, witnessing a substantial increase to $157.1 billion in 2022. The key

export sectors encompass financial services, industrial supplies, agriculture, cybersecurity,

healthcare, consumer goods, and more. The U.S.-UK investment relationship, the world's

largest, exceeds $1.5 trillion, directly supporting over 2.6 million jobs. However, recent surveys

indicate a decline in U.S. investment confidence, primarily attributed to persistent uncertainties

post-Brexit, policy concerns, political instability, immigration issues, high inflation, and labor

shortages.

3. Analysis of trade theories in the UK

3.1. The UK’s comparative advantages and bilateral trade relations

The UK's comparative advantage lies in the financial, insurance and pension services sectors.

The UK has entered into new trade agreements with 62 non-EU countries. These agreements

cover approximately 13% of all UK goods exports in 2019. The UK's new post-Brexit trade

deal with the EU means that close to 60% of the UK’s goods export market was covered by

new trade deals at the start of the year. However, since the 62 new agreements largely replicate

what was already in effect and trade with the EU is now subject to higher barriers than before,

the UK will still have seen an increase in trade frictions .

Bilateral trade agreements are negotiated more easily, because only two nations are party to the

agreement. Bilateral trade agreements initiate and reap trade benefits faster than multilateral

agreements .

In conclusion, the UK's comparative advantage in the financial, insurance and pension services

sectors, coupled with its new trade agreements with non-EU countries and post-Brexit trade

deal with the EU, provide a strong foundation for its bilateral trade relationships. The UK's

7
focus on free and fair trade will help it to drive forward an export-led and investment-led

recovery.

3.2. The gravity model and trade integration

a. Economic Size

Both the UK and the USA possess enormous economies, which makes a great impact on their

trading relationship.

The USA: : The United States has the world's largest economy in terms of nominal GDP. It

boasts a diverse range of industries, including manufacturing, services, technology, finance,

and agriculture. The country's large consumer market and high purchasing power make it an

attractive destination for exporters.

The UK: The United Kingdom boasts a diversified and developed market economy with a

strong emphasis on services, particularly in finance. While manufacturing has decreased, the

UK remains a player in sectors like automobiles and pharmaceuticals. The nation is recognized

for innovation, especially in fintech and biotechnology.

The substantial economic size of both countries provides a strong foundation for trade and

investment flows between the UK and the United States. The availability of goods and services

in each market and the potential for market expansion contribute to a significant trade

relationship

b. Distance

The United Kingdom (UK) and the United States (USA) share crucial advantages that amplify

their roles in global trade. Both nations benefit from a strategic alignment of time zones,

fostering continuous and efficient trading cycles. Their historical and cultural ties, including

8
the common use of the English language and shared legal frameworks, create a seamless

business environment. These shared advantages not only facilitate smoother bilateral trade

between the UK and the USA but also contribute to their combined influence in international

commerce, reinforcing their positions as economic powerhouses with enduring global

partnerships.

c. Trade Agreement

As of my last knowledge update in January 2023, the U.S.-UK Free Trade Agreement (FTA) is

a significant trade agreement between the United States and the United Kingdom. This FTA

aims to facilitate trade between the two nations by reducing or eliminating barriers, fostering

economic cooperation, and promoting mutual benefits. It covers various aspects such as goods,

services, and intellectual property.

This agreement fosters mutual economic growth by minimizing tariffs on goods, promoting

innovation in services through intellectual property protection, and encouraging regulatory

alignment. This strategic alliance enhances cross-border trade, investment, and job creation,

solidifying a close economic partnership. The FTA, with mechanisms for dispute resolution,

underscores shared interests and global collaboration between the U.S. and the UK.

B. Part 2: International Trade Policy Analysis

Topic 3: The Economic Costs and Benefits of the Vietnam-US Bilateral Trade Agreement

(BTA) and Vietnam's WTO Accession

Before implementing the VN-US BTA, many in Vietnam were skeptical of the benefits, as the

US market was distant, large, and had numerous regulations. Conversely, before joining the

WTO in 2007, enthusiasm was widespread in Vietnam, with many believing that WTO

membership would bring positive changes. However, the outcomes of these two events differed

9
significantly from expectations. Vietnam's exports surged shortly after the BTA took effect. At

the same time, after joining the WTO in 2007, Vietnam experienced an economic crisis marked

by increasing trade deficits, inflation, rising interest rates, and a more than 25% currency

depreciation within two weeks in May 2008.

Question: Why did Vietnam benefit from the BTA but not from WTO accession?

I. Executive summary

The study provided the analysis about the different outcomes of VN-US BTA and Vietnam's

WTO accession. Exports from Vietnam increased rapidly after the BTA went into force.

Whereas, Vietnam, after joining the WTO in 2007, went through an economic crisis

characterized by growing trade deficits, rising interest rates, inflation, and currency

depreciation. The reasons results of these two events are then drawn, and areas for further

implementation are also identified.

II. Introduction

In Vietnam, the benefits of VN-US BTA implementation are initially thought to be skeptical

while joining the WTO is believed to result in beneficial improvements. However, the outcomes

of implementing the VN-US BTA and accessing WTO of Vietnam are different from the

expectation.

The study's goal is to provide information about “Why did Vietnam benefit from the BTA but

not from WTO accession?”. From that, areas for further improvements are proposed for the

Vietnamese government and policy makers.

To attain these goals, the following research steps are addressed below:

● Introducing about VN-US BTA & Vietnam’s WTO accession

● Analyzing the advantages of VN-US BTA

10
 ● Analyzing the challenges that Vietnam faced after joining WTO

● Assessing whether benefits from the WTO meet Vietnam's initial expectations

III. Main Body Headings

1. Introduction about Vietnam - US BTA & WTO accession

a. Vietnam - US BTA

● Overview of Vietnam - US BTA

Vietnam and the United States signed a bilateral trade agreement (VN-U.S. BTA) in July 2000.

This is the most comprehensive agreement ever signed between Vietnam and the United States.

The Agreement is drafted based on WTO principles and regulations, especially principles and

regulations related to intellectual property and trade in services. The agreement includes 140

pages of agreements, took nearly five years to negotiate and enter into force, is highly technical,

and is written by the World Trade Organization (WTO) and trade principles. and other

international investments. The BTA can essentially be summarized as a commitment by both

parties to create the necessary conditions for the other party's products, businesses, and citizens

to have fair access to compete in the other party's markets. At the same time, the agreement

includes 63 articles and 14 annexes with 7 chapters, specifically:

(I) Trade in goods;

(II) Intellectual property rights;

(III) Trade in services;

(IV) Developing investment relations;

(V) Business facilitation;

(VI) Provisions related to transparency and right to complain;

(VII) General provisions.

11
 ● VN - US Role:

Firstly, it establishes and makes legally binding rules applicable to trade and investment

between signatories.

Secondly, it serves as a trade liberalization tool, because during the BTA negotiations, each

country offers "concessions" (promises to reduce or eliminate certain trade barriers). certain)

towards the other country on a reciprocal basis. The BTA includes a series of far-reaching

commitments by both sides related not only to tariffs and quotas in goods trade but also to the

transparency of laws and regulations, the protection of intellectual property rights, resolving

trade disputes, market access for trade in services, foreign investment regulations, customs

procedures and business facilitation.

Thirdly, increase deeper integration, BTA sets the stage for Vietnam to join the World Trade

Organization (WTO) and deepen economic relations with the United States.

● Decision making

The decision-making process leading up to the agreement involved various factors and

stakeholders on both sides: Ways and Means Committee. The House of Representatives as well

as the Senate Finance Committee, the National Assembly of Vietnam and the US

● Purpose: expand and improve trade and investment relations between the two countries

b. WTO

The World Trade Organization (WTO) is the only global international organization dealing

with the rules of trade between nations. At its heart are the WTO agreements, negotiated and

signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is

to help producers of goods and services, exporters, and importers conduct their business,

ensuring that trade flows as smoothly, predictably and freely as possible. (WTO)

Role:

12
 - Operating a global system of trade rules

- Acting as a forum for negotiating trade agreements

- Settling trade disputes between its members and it supports the needs of developing

countries.

Decision making:

All major decisions are made by the WTO's member governments: either by ministers (who

usually meet at least every two years) or by their ambassadors or delegates (who meet regularly

in Geneva). (WTO)

Main Principles: The WTO embodies the following main principles (Hoang Chi Cuong, 2013)

● Most-Favoured-Nation (MFN): treating other partners equally

● National Treatment (NT): treating foreigners and locals equally

● Free Trade: gradually, through negotiations

● Predictability: through binding and transparency

● Fair Competition

● Encouraging Development and Economic Reform

Purpose: To open trade for the benefit of all

Member Accession

Any state or customs territory having full autonomy in the conduct of its trade policies may

become a member (“accede to”) the WTO, but all WTO members must agree on the terms. This

is done through the establishment of a working party of WTO members and through a process

of negotiations. (WTO)

Vietnam Accession to WTO: After the process of requesting, fact-finding and negotiating,

Vietnam officially became the 150th WTO member on January 11, 2007.

Budget

13
The WTO derives most of the income for its annual budget from contributions by its members.

These contributions are based on a formula that takes into account each member's share of

international trade. (WTO)

2. Advantage of Vietnam - US BTA

2.1. Advantages of Vietnam - US BTA and Situation in Vietnam after Vietnam - US BTA

2.1.1. Vietnam's overall economic benefits from Vietnam - US BTA (GDP, TRADE, FDI)

● Surge in Export & Import (Trade) (Trade)

- After BTA

Table 1: Export and Import Growth Rates, Shares in GDP and the Trade

Deficit (percentage)

Table 2: Bilateral Trade Between Vietnam and the US: 1996 to 2002

14
Trade and investment relations between the United States and Vietnam began in 1994 after

President Clinton lifted the 19-year trade embargo against Vietnam. Every year since 1998,

Vietnam has received a waiver from the Jackson-Vanik Amendment, which is necessary for

socialist countries like Vietnam to access government-sponsored export credits and investment

guarantees. US government support. Normal trade relations between the two countries, the key

element of which is the reciprocal most favored nation status, have existed only since December

2001 when the BTA came into force. It's no surprise that Vietnam is only just beginning to

exploit the huge US market.

As Table 2 shows, from 1996 to 2001, Vietnam's exports to the United States grew by an

average of 27% per year, while total exports grew at a lower rate of about 20% (see Table 1).

However, by 2001, right before the BTA took effect, the US market only accounted for about

7% of Vietnam's export turnover. Furthermore, with a value of about one billion US dollars in

2001, Vietnam's exports were only 0.2% of US imports from developing countries. In 2002, the

first year under the BTA, exports to the US more than doubled (up 128% for the year), while

total exports grew at a rate of about 10%. In fact, about 90% of the increase in Total Vietnam's

export turnover in 2002 can be attributed to the increase in exports to the US.

As a result, in just one year under the BTA, the US market's share of total exports doubled, to

14%. but significantly faster than total U.S. exports and faster than the overall 20% growth in

Vietnam's imports in 2002 (see Table 1). This will be demonstrated more clearly below.

- Before BTA

15
The income gap between Vietnam and the United States shows a positive difference in both

scenarios, and this is statistically significant in both the export and import equations. This is

mainly due to the fact that Vietnam regularly exports products such as agricultural products,

seafood, furniture, textiles, footwear and electronic components to the United States, while also

importing other products. high-tech products and services from the United States to Vietnam.

The exchange rate has a positive change in the export equation and a negative change in the

import equation, which is consistent with economic theory. This means that when the

Vietnamese Dong depreciates, Vietnam's exports are boosted, but conversely, it also reduces

US demand for goods imported from Vietnam. However, the impact of exchange rates on US-

Vietnam trade is still considered relatively small. This can be explained because in recent years,

a large part of Vietnam's exports to the US have been unprocessed agricultural products and

raw fuels, which have low added value and are inelastic. according to price. At the same time,

Vietnam also imports machinery and raw materials from the US to serve domestic production

and consumption, and these products also have low price elasticity. Therefore, exchange rate

fluctuations do not have a significant impact on bilateral trade between Vietnam and the US.

16
The coefficient of the BTA (Asia-Pacific Trade Agreement) variable in the export and import

model is statistically significant, and this reflects the fact that the BTA has had a positive impact

on both Vietnam's exports and imports in transactions with the US. The tariff reduction starting

in December 2001 when the BTA took effect has created a strong impetus for Vietnam's trade.

Preferential agreements in the BTA are of great importance and have contributed significantly

to the growth of bilateral trade value between Vietnam and the United States in a situation of

mutual benefit and good diplomatic relations between the two. nation.

Since 2000, Vietnam has not only become an important export market but also a significant

importer of many products from the United States, thanks to the implementation of the BTA

and the strong diplomatic relationship between the two countries. nation.

In particular, the coefficient of the BTA variable in the export model with a value of 1.203,

greater than 1, means that BTA has a positive impact on Vietnam's exports to the US. In fact,

since the BTA took effect in 2001, Vietnam's export value to the US has continuously grown.

Despite being affected by the world economic recession due to the Covid-19 pandemic from

the first quarter of 2020 to the second quarter of 2022, Vietnam's export value to the US market

still maintains growth. BTA also contributed to the growth of Vietnam's import turnover from

the US, with the dummy variable having a positive and statistically significant coefficient in

the import model.

Besides, a number of other pieces of evidence and parameters show that the bilateral trade

agreement between Vietnam and the United States has shown a positive impact on both import

and export flows of Vietnam and the United States, because the two countries have taken

advantage of enjoying a win-win game for a while. In particular, this agreement has shown a

positive impact on both Vietnam's exports and imports. The tariff reduction process began in

December 2001 after the BTA took effect, with a tariff reduction roadmap. long term:

17
Vietnam's export value to the United States has undergone a leap, increasing nearly eight times

to 8.56 billion USD in 2006, five years after the Vietnam-US Bilateral Trade Agreement. (BTA)

took effect from December 10, 2001. The influence of BTA on the Vietnamese economy was

demonstrated through a summary conference in Hanoi on July 17.

BTA has made an important contribution to promoting Vietnam's rapid economic growth. This

will not only promote trade between the two countries but also attract greater foreign investment

flows to Vietnam, as Deputy U.S. Mission to Vietnam Jonathan Aloisi shared at a conference

organized by Trade Acceleration Support Agency (STAR-Vietnam project) and Central

Institute for Economic Management (CIEM).

During the five-year period of BTA implementation, Vietnam's commercial sector has

undergone the most positive transformation. According to Steve Parker, a senior economist at

STAR-Vietnam, the country's export value increased from 1.1 billion USD in 2001 to 8.56

billion USD in 2006, accounting for 21.6% of the total price. export value.

Mr. Parker also emphasized that the US has reduced the average tariff on Vietnamese goods

from 40% to about 4% since the BTA took effect. Vietnam's main export industries to the US

such as garments, footwear, seafood, tea and furniture experienced strong growth during this

period.

BTA has also promoted US investment in Vietnam. Parker commented that by the end of 2006,

US direct investment in Vietnam had reached 4.5 billion USD, ranking sixth among 75

countries and territories investing in Vietnam.

Although BTA has brought many positive impacts to the Vietnamese economy, to maintain

future growth, continued legal reform and increased investment from both the private and public

sectors are needed. , and is especially interested in education, training and health. American

18
experts participating in the conference emphasized paying attention to and solving the

challenges that the integration process is presenting.

According to the prediction of Mr. Nguyen Duy Khien, Vietnam Trade Counselor in the United

States, Vietnam's fast-growing economy is expected to earn about 10 billion USD from

exporting goods to the United States in 2007. , an increase of 25% compared to 2006.

The United States is currently Vietnam's largest export market, while in the ASEAN region,

Vietnam ranks 38th among countries and territories exporting to the US and ranks 70th among

importing countries. products from abroad.

2.1.2. Investment ( Investment )

VN-US BTA is expected to bring many great benefits to FDI capital flows into Vietnam through

improving the investment environment, opening the market, and encouraging economic reform,

thereby promoting growth and economic growth. international economic integration. VN-US

BTA has impacted FDI in four main ways:

- First, it makes foreign investment easier and therefore potentially more attractive by

committing Vietnam to changing from its current licensing regime to a registration

system. Vietnam's move from a licensing regime to an automatic registration system

makes foreign investment easier and more attractive by reducing delays and

manipulation. In the new system, businesses simply need to register their investment

projects and automatically receive approval if they meet standards and regulations. The

process becomes more transparent and faster, significantly reducing the time and effort

that businesses have to spend. From there, increasing the attraction of foreign

investment, Vietnam becomes a more attractive and reliable market, leading to growth

in new projects and investments. Several foreign companies have expanded their

19
 operations in Vietnam after this reform, such as Samsung, Intel, and many companies

from Europe and Asia, investing in manufacturing, technology and services.

- Second is opening the US market. The opening of the US market, a major economy,

makes Vietnam an attractive export destination, attracting companies that want to

expand operations in Vietnam to access the US market more effectively. Besides,

Vietnam has great opportunities in expanding and accessing large markets. Indeed, the

export opportunities opened up by BTA will be especially attractive to major

Vietnamese investors in Asia in labor-intensive manufacturing, Taiwan, Korea,

Thailand, Malaysia. and China. American footwear. For example, giant Nike

subcontracts with Taiwanese and Korean companies in Vietnam to produce 25 million

pairs of shoes per year, equivalent to about 10% of Nike's shoe production worldwide.

Therefore, the most significant initial impact of BTA on FDI may be on Asian FDI in

Vietnam, not on US FDI inflows. However, as Vietnam's economy continues to grow

and BTA commitments are implemented, greater demand for consumer goods, finance,

telecommunications and trade services, etc. is expected. (industries where US

companies have a competitive advantage) will attract US businesses, greater interest

from US investors.

- Third, BTA has a positive influence on the psychology of investors, especially from the

United States, making them less hesitant to invest in Vietnam. Yes, when the BTA was

signed, it sent a strong signal that Vietnam is committed to opening up and improving

its business environment. This creates confidence for investors that Vietnam is a reliable

market with great potential. Besides, BTA helps reduce the perception of risk when

investing in Vietnam. Investors see that there is a clearer and more stable legal

framework, reducing concerns about sudden policy changes or political instability.

After BTA, many large US corporations have started or expanded investment in

20
 Vietnam, many cooperation projects between US and Vietnamese businesses have been

established, investment funds from the US and internationally have started. pay more

attention to the Vietnamese market, by buying shares in Vietnamese companies or

establishing investment funds here. These are the most concrete evidence. For example,

Intel opened a large chip manufacturing facility in Vietnam, and Ford has expanded its

manufacturing operations. These investments are not only based on cost advantages but

also reflect confidence in Vietnam's economic future and stable investment

environment.

- Fourth, one of the important fields that Vietnam has opened up under the BTA

commitment is telecommunications and electricity production. Previously, these fields

were mainly controlled by the state and had little participation from foreign businesses.

BTA has pushed Vietnam to ease controls and open up to foreign investment, facilitating

competition and innovation. It has brought many benefits to Vietnam, from creating a

favorable investment environment, attracting foreign capital, to promoting innovation

and improving economic capacity. In fact, after the BTA was implemented, Vietnam

opened the telecommunications market to foreign investment. A specific example is the

entry of international telecommunications companies such as Vodafone and Singtel.

They invested in local telecommunications companies and brought in new technology

and management experience. This has promoted competition, reduced rates, improved

service quality, and increased innovation and technological development. Furthermore,

General Electric (GE) from the United States has signed large contracts to supply new

turbines and technology to power plants in Vietnam. This investment not only provides

the necessary capital but also brings advanced technology and modern management

techniques, helping to increase production capacity, improve efficiency and meet

growing electricity demand.

21
On the other hand, information from the research report "Trade Liberalization and Foreign

Direct Investment in Vietnam" (Nguyen Nhu Binh & Jonathan Haughton) simulated the impact

of BTA on FDI capital flows into Vietnam and found that:

In the above graph, we see that the lag effects from any change are clearly shown. Specifically,

the immediate impact from the application of BTA was a remarkable 30% growth in real FDI

inflows. This will lead to basic FDI doubling, opening a new era. This is a significant step

forward by any standard. Although these analyzes are inherently uncertain, especially when

projecting further into the future, they still represent a significant influence. With an additional

800 million USD in annual FDI, investment will increase by 9%. Assuming that the capital

output rate remains constant, the annual growth rate, from 6.75% in 2000 and 6.8% in 2001,

would see an increase of about 0.6 percentage points. To maintain these benefits, Vietnam also

needs to quickly join the WTO and must therefore implement the reforms considered a

prerequisite for membership. This would signal the government's continued commitment to

22
economic and trade liberalization. Joining the VN-US BTA is an important premise in

developing and joining the WTO later.

2.1.3. Extend long-term MNF treatment to Vietnam

CRS Report for Congress, The Vietnam-U.S. Bilateral Trade Agreement

After signing the BTA, the next step aimed at deepening the trade relationship between the US

and Vietnam is to re-establish and maintain the long-term National Preferential Status (MFN),

also known as under the name of the National Equal Treatment Regulation (NTR) or the

National Permanent Preferential Regulation (PNTR) for Vietnam. To do this, Congress would

need to rescind Title IV provisions related to Vietnam, a step that has been taken with other

countries such as China, Albania and Georgia.

Restoring Permanent National Preferential Status (MNF) after the bilateral trade agreement

between Vietnam and the United States not only opens the door for Vietnamese goods and

services to enter the US market through tariff reduction but also It also promotes economic

growth and job creation, while attracting foreign investment. This also marks an important step

forward in strengthening the long-term and stable partnership between the two countries,

enabling businesses to forecast and plan more effectively. Additionally, it enhances Vietnam's

position internationally and encourages continued economic reform. The benefits go beyond

strengthening trade relations and positively impact consumers and businesses in both countries,

from improved product diversity and competitive prices for American consumers to expanding

cooperation and innovation opportunities for Vietnamese businesses.

23
 Vietnam’s Path to Commercial Normalization with the United States

Sources: CRS Report for Congress, The Vietnam-U.S. Bilateral Trade Agreement

2.2. Benefits from a specific Industry perspective

2.2.1. Garment industry

24
 Nhập khẩu từ Việt Nam, một số nước và sản phẩm chọn lọc 1999 (Sources: CRS Report for

Congress, The Vietnam-U.S. Bilateral Trade Agreement)

It is expected that Vietnam's textile and garment exports will witness a strong breakthrough.

Currently, Vietnam's garment export sales to the US only reached less than 40 million USD in

1999, affected by high non-MFN tax rates. However, the Japanese market and countries in the

European Union witnessed more impressive figures, with more than 500 million USD and 640

million USD respectively. From the case of Cambodia, which was granted MFN status by the

United States in 1996, the World Bank predicts that Vietnam's textile and garment exports could

increase nearly 10 times, reaching 384 million USD in the first year after being granted MFN

status. receive MFN status. Although the BTA Agreement does not specifically mention

Vietnam's textile and garment exports to the US, the safeguard provisions could allow the US

to establish quotas on these imported products if there is a sudden increase. Officials from both

25
the US and Vietnam have expressed interest in negotiating a bilateral textile and apparel

agreement once the BTA is approved by Congress, which would likely include export quotas.

Meanwhile, some members of the US Congress have asked the Bush administration to publicly

commit to negotiating this agreement, emphasizing that any agreement must link the size of

quotas with reform. improving labor rights in Vietnam.

Vietnam's main export industries to the United States include the garment industry (item codes

61 and 62) and the leather and footwear industry (item code 64). Garment has ranked second

on Vietnam's export rankings to the US market, after China. The leather and footwear industry

has also built a long history of development and occupies an important position in this market,

thanks to advantages such as abundant labor, high skills, and low labor costs.

Furthermore, businesses operating in Vietnam's garment and footwear sectors have made

significant efforts to meet the United States' strict technical and social responsibility standards.

This includes ensuring products meet quality and safety requirements, while taking measures

to protect the environment and manage workers in a sustainable way. From these efforts,

Vietnam's garment and footwear industry has built a reputation and credibility, helping them

continue to enjoy success in the US market.

26
 VN-US Export

2.2.2. Agricultural and aquatic products

Agricultural and aquatic products

After the VN-US Bilateral Trade Agreement was signed, Vietnam's seafood export industry

witnessed a significant leap with sales reaching more than 9.4 billion USD at the end of October,

an impressive growth of 33% % Compared with the last year. Notably, the pangasius industry

emerged with a breakthrough growth rate of 77%, bringing in 2.1 billion USD and accounting

for nearly a quarter of total seafood export revenue.

Since 2003, after the VN-US Bilateral Trade Agreement took effect and competitors such as

China and Taiwan were subject to anti-dumping taxes ranging from 55% to 120%, Vietnam's

wooden furniture export industry ( Product code 94) has witnessed significant growth, quickly

occupying the fourth position in the list of Vietnam's exports to the United States.

27
2.2.3. Technology and services

Technology and services

After the VN-US BTA, Vietnam has witnessed outstanding growth in the Information

Technology and services industry, making a major contribution to the country's digital

transformation. In particular, the skyrocketing demand for cloud computing and cybersecurity

has boosted IT services, making this industry an important pillar in the digital economy.

2.3. Evaluate the special benefits of the VN-US BTA compared to benefits from other

FTAs

+ Scale of market influence: The VN-US BTA is a partnership agreement, which

means it not only facilitates free trade but also covers many different aspects of

the relationship between the two sides. , including issues of security, human

rights and sustainable development. Meanwhile, many other FTAs focus mainly

on trade and intellectual property rights. Besides, although Vietnam has trade

agreements with many other countries and regions, not many markets can match

the size and potential of the US market.

+ The Vietnam-U.S. Bilateral Trade Agreement (BTA) significantly reduced

tariffs and offered greater reductions compared to other Free Trade Agreements

(FTAs). This agreement marked a crucial step in improving trade relations

between Vietnam and the United States, leading to increased trade and

investment opportunities for both nations. The BTA provided Vietnamese goods

with better access to the U.S. market and vice versa, helping to diversify and

expand economic relations. It also set a precedent for future trade agreements

and economic policies between the two countries.

28
 + Priority industries: Each FTA has its own priority industries, with special

commitments and benefits for each industry. The VN-US BTA has special

commitments on agriculture and services, which are two major strengths of

Vietnam, while other FTAs can focus on different areas such as industrial

production, oil and gas. gas, or financial services.

3. Limitations and difficulties when Vietnam joined the WTO

3.1. Real economy

a. Trade

In 2007 and 2008, the value of merchandise exports climbed by 21.9 percent and 29.5 percent,

respectively, to reach US$48.6 billion and US$62.9 billion. Aside from improved market access

provided by the WTO framework, other reasons were primarily responsible for the growth in

exports. A 21.9 percent export growth rate in 2007 is neither outstanding compared to the 22.7

percent growth rate in 2006, nor is it similar to expectations before the country joined the WTO.

The 2008 export growth rate of 29.5% was mostly caused by an increase in global commodity

prices. When the impact of growing prices for main commodities like rice, coal, crude oil,

coffee, rubber, etc. is taken out (Figure 2), the total value of merchandise exports increased by

less in 2008.

29
When measured at CIF prices, the overall value of item imports in 2007 increased by 39.6% to

US$62.7 billion, a significant increase from the 20.1% growth in 2006. The overall value of

merchandise imports was approximately $80.4 billion in the US in 2008, although growth was

just 28.3 percent. This resulted from the economic downturn and the appearance of excessively

stringent trade deficit restrictions in 2007.

b. Investment

The enormous increase in FDI inflows between 2006 and 2008 was the primary driver of the

shift in Vietnam's total real investment. Vietnam remained a desirable location for foreign direct

investment (FDI) despite the unfavorable events that occurred both inside and outside the

country's economy in 2008; this indicates the trust that foreign investors had in Vietnam's

potential for growth. In 2007, registered FDI amounted to US$21.3 billion, while implemented

and disbursed FDI (through BOP) reached US$8.1 billion and US$6.7 billion, respectively.

30
These numbers, while impressive, seem far too low in comparison to what was recorded the

following year. An estimated US$64 billion in foreign direct investment (FDI) was recorded in

2008; of that amount, US$11.5 billion and about US$8.3 billion were implemented and

distributed, respectively (Figure 3 and Table 3). As a result, the percentage of FDI increased

sharply from 15.9% in 2006 to 24.8 % in 2007 and 29.7% in 2008 (Table 1).

Nonetheless, some people have doubts about how effective the recent FDI infusions have been.

The ratio of implemented FDI to registered FDI was just 41% in 2006, 31% in 2007, and 18%

in 2008—much lower than the average of 52.7 percent for the years 1988–2007. A contributing

factor in this was the fact that some FDI projects were only registered with the intention of

"booking a place" in Vietnam. As a matter of fact, in 2008, the proportion of registered capital

to chartered capital was a mere 25.6%, considerably less than in prior years. The "bottlenecks"

in Vietnam's economy—which, despite improvements, indicate institutional, infrastructure, and

human resource weaknesses—were another reason for the delayed implementation of foreign

direct investment. Furthermore, the fourth quarter of 2008 saw the detrimental effects of the

global financial crisis become evident. The pace of new FDI registration was significantly

slower and the implementation of several FDI projects, particularly large ones, was delayed.

31
32
c. Economic Growth

Following its entry into the WTO, Vietnam's economy grew quickly thanks to gains in

investment and exports. GDP growth in 2007 was 8.5%, which was higher than the 8.2%

increase in 2006 (Table 2). However, at the time, the sustainability of such strong growth was

still in doubt because of worries about the inefficiency of public investment. However, the

concern of global financial crisis, recession, and macroeconomic instability in 2008 led to a

slowdown in economic activity and growth. The pace of economic growth was just 6.2%,

compared to 6.5% in the first nine months.

33
3.2. Macroeconomic and Financial Stability

a. Inflation

Up to the third quarter of 2007, the CPI-based inflation rate was very constant, although not

being particularly low year over year. But starting in September 2007, the rate of increase in

consumer prices quickened. Year-over-year inflation had already reached 12.6% by the end of

2007 (Figure 4). After that, the percentage increased sharply to 28.3 percent in August 2008,

and it even continued to remain high at 16.5% even after food and beverage prices—which

account for approximately 43 percent of the basket of goods and services used to calculate the

CPI—were subtracted. The tremendous and unprecedented increase in foreign capital inflows

in 2007 is one of the factors contributing to the sharp spike in inflation, which left policymakers

greatly perplexed, especially when it came to coming up with a response.

34
b. Balance of payments

Vietnam's current account deficit was enormous, amounting to roughly US$7 billion, or 9.9%

of GDP, in 2007 and US$12.3 billion, or 13.6% of GDP, in 2008. Considering that the nation's

2006 current account deficit was barely US$0.2 billion, or 0.3 percent of GDP, this outcome is

astounding. The jump in trade deficit from around US$2.8 billion (or 4.6 percent of GDP) in

2006 to roughly US$10.4 billion (14.6 percent of GDP) in 2007 and US$14.4 billion (15.9

percent of GDP) in 2008 was a major factor in the growth in the current account deficit.

35
c. Financial System

The banking sector, along with the capital and real estate sectors, had a boom in activity in 2006

and 2007. Expectations of profit potential following Vietnam's opening of its services market

in accordance with WTO agreements led to this boom. But there are also now more hazards to

the financial system as a result of the banking and financial industry expansion. The absence of

sufficient foundations for long-term sustainable financial development is one factor

contributing to this rise in hazards. The financial and banking industry boom was not kept up

with by the continued weakness in risk management and control.

d. State Budget

The entire budget revenue has been decreasing in relation to GDP, even though it has increased

in absolute terms. Total budget revenue as a percentage of GDP decreased steadily from 28.7%

in 2006 to 27.6% in 2007 and 26.8% in 2008. Total budget revenue will continue to show a

great deal of uncertainty due to an overreliance on trade and highly volatile crude oil revenues.

36
3.3. Social Issues

The level of job creation in 2007 is not as stunning as it may have been before WTO entry. The

working labor force increased by 2.3 per cent, compared to 2.7 per cent in 2006. The

unemployment rate in urban areas rose sharply to approximately 5.1% in 2008 after first

declining somewhat to 4.8% in 2006 and 4.6% in 2007. In addition, the rate of unemployment

among young individuals rose; 42.5 percent of jobless individuals were in the 15–24 age range,

and this group saw the greatest rate of unemployment at 14.2 percent (CIEM 2008b).

Vietnam's population, most of whom have medium-to-low incomes with little variation in their

sources of income, faces more difficulties in their social lives due to their increased

susceptibility to external shocks. A compelling illustration is the impact of the recent years'

high inflation. The actual income of many social groups was severely weakened by this sudden

and severe increase in the level of consumer prices, which was far higher than the growth in

wages. Table 5 shows that while real income for workers across all businesses increased in

2006 and 2007, it was significantly impacted by high inflation in 2008.

37
4. Assess whether benefits from the WTO meet Vietnam's initial expectations ?

Initial expectation (Hoang Chi Cuong, 2013)

● Trade: Further integrate the country into the world economy to have a more predictable

access to foreign markets through WTO membership and subsequently result in higher

exports.

● Investment: Attract more foreign direct investment (FDI) and, more generally, to use

WTO membership as a seal of approval recognized by the international business

community

● Political reasons: WTO membership is considered as a means to signal their

commitment to joining the international community of market - based economies and

facilitate both political and economic reform processes within the country.

Vietnam Commitments to the WTO (Hoang Chi Cuong, 2013)

38
 ● Plurilateral commitments related to abiding by the WTO agreements

● Bilateral commitments with trading partners concerning the market access for goods

and services.

Joining two international trade agreements, BTA and WTO, brings Vietnam economic and

social benefits, which directly affect human life.

However, despite being called one of the world's fastest-growing economies in recent years,

Mr. Vu Tien Loc - Chairman of the Vietnam Chamber of Commerce and Industry (VCCI),

said that Vietnam's WTO journey had not gone as planned. Firstly, GDP growth is weaker

than it was during Vietnam's prior phase of restricted integration. Secondly, agriculture is

being harmed. This industry expanded by 1.36% in 2016, compared to 4% each year from

2001 to 2006. Thirdly, the import-export arrangement is a source of contention. Key exports

include resource-intensive, processing-intensive, and labor-intensive sectors. (The Ministry of

Finance, 2017)

Moreover, the main driving force of developing countries seeking to join the WTO is the boost

they hope membership will bring to the industry their exports, thanks to improved market access

internationally. After being admitted as a WTO member in 2001, China has increased its exports

and imports quite spectacularly. If developed countries do as they promised at the start of the

Doha Development Round, above all by improving access to their markets and reducing

subsidies for their agriculture, the benefits of Vietnam and other developing countries will be

more substantial. Sadly, the Round's progress to date has been disappointing, and there remains

the possibility that rich countries will renege on their commitments. Along with expanding sales

of agricultural products and textiles, Vietnam hopes to increase the attractiveness of foreign

direct investment. Vietnam also looks forward to taking advantage of access to the dispute

resolution mechanism, a mechanism that applies international trade rules. As a member of the

39
WTO, Vietnam will have a voice in developing these rules. However, significant benefits from

WTO membership are by no means guaranteed. (Oxfam International, 2004)

Besides, in the agricultural sector, under the strong pressure of the Ban Cong Tac’s members,

Vietnam has proposed a common agricultural tariff ceiling of 25.3%, whereas the current rate

is 27.1%. As a developing country with a majority of its population relying on agriculture for

their livelihood, it's argued that Vietnam should not be forced to further reduce its tariffs,

especially considering that its ASEAN neighbors, Thailand and the Philippines (members of

the Ban Cong Tac on Vietnam's accession), have higher agricultural tariffs of 36% and 34%

respectively. Furthermore, Nepal, a Least Developed Country (LDC) that completed its

accession negotiations in 2003, has an average agricultural tariff of 42%. (Oxfam International,

2004)

Countries participating in the WTO, like Vietnam, may not enjoy low tax rates like existing

members. Especially after joining the WTO, Vietnam may not be fully granted the benefits of

MFN status as part of the accession process. (Oxfam International, 2004)

IV. Conclusion

In conclusion, the economic impacts of Vietnam's bilateral trade agreement (BTA) with the

United States and its accession to the World Trade Organization (WTO) present a contrasting

picture. The skepticism that surrounded the BTA before its implementation was quickly

dispelled as Vietnam experienced a surge in exports to the US, a market which, despite its

distance and regulatory complexity, proved to be highly beneficial for Vietnam's growing

40
industries. This success can be attributed to the targeted nature of the BTA, which allowed

Vietnam to take advantage of specific opportunities in the US market.

On the other hand, Vietnam's WTO accession, while initially met with optimism, did not yield

the expected positive outcomes. The country faced an economic crisis with trade deficits,

inflation, rising interest rates, and significant currency depreciation. This can be partly

attributed to the broader and more demanding nature of WTO commitments, exposing Vietnam

to intense global competition and economic vulnerabilities that it was not fully prepared for.

It is recommended that Vietnam bolster economic resilience by diversifying export markets,

investing in education as well as prioritizing social welfare. Embracing digital transformation,

facilitating trade, and enhancing infrastructure are also crucial acts. A proactive risk

management approach, international collaboration, and a focus on innovation can navigatte

uncertainties and ensure inclusive growth, fostering a balanced and sustainable economic

future.

41
C. References

1. United Kingdom - Market Overview. International Trade Administration | Trade.gov. (2023,

November 3). https://www.trade.gov/knowledge-product/united-kingdom-market-overview

2. British foreign trade in figures. Foreign trade in figures - Santandertrade.com. (n.d.).

https://santandertrade.com/en/portal/analyse-markets/united-kingdom/foreign-trade-in-

figures#classification_by_products

3. Donnarumma, H. (2023, February 17). UK trade in goods, year in Review: 2022. UK trade

in goods, year in review - Office for National Statistics.

https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/articles/uktradeingood

syearinreview/2022

4. What is the WTO?. WTO. (n.d.). https://www.wto.org/english/thewto_e/thewto_e.htm

5. Cuong, C. H. (2013). The impact of WTO accession: Case study of Vietnam. LAP LAMBERT

Academic Publishing.

6. An assessment of the economic impact of the United States-Vietnam bilateral trade

agreement: Annual economic report for 2002. (2003). . Nhà xuất bản Chính trị quốc gia.

7. Hoan, T, T. N. (2022). Assessing the impacts of some major factors in Vietnam - United

States trade: A Gravity Model. НАУКА и просвещение.

8. Binh, N. N., & Jonathan. H. (2014). Trade Liberalization and Foreign Direct Investment in

Vietnam. Institute of Southeast Asian Studies.

9. Vietnam’s seafood industry: The record of 10 billion USD and challenges ahead. Vietnam.

(2022, May 12). https://seafood.vasep.com.vn/total-seafood-trade/news/vietnam-s-seafood-

industry-the-record-of-10-billion-usd-and-challenges-ahead-25845.html

42
10. 6Wresearch. (2023, July). Vietnam IT services market (2023 - 2028): Trends, outlook &

forecast. Vietnam IT Services Market (2023 - 2028) | Trends, Outlook & Forecast.

https://www.6wresearch.com/industry-report/vietnam-it-services-market

11. Thanh, V. T., & Duong, N. A. (2009). Vietnam after two years of WTO accession: What

lessons can be learnt? Asean Economic Bulletin, 26(1), 115–135. https://doi.org/10.1355/ae26-

1h

12. 10 năm gia nhập WTO và câu hỏi còn lại . The Ministry of Finance. (2017, January 11).

https://mof.gov.vn/webcenter/portal/ttpltc/pages_r/l/chi-tiet-tin-

ttpltc?dDocName=MOFUCM095130

13. Gia nhập WTO? Liệu Việt Nam có giành được những điều kiện có lợi cho phát triển? (2004,

October). . Oxfam International.

14. Manyin, M. E. (2002). The Vietnam-U.S. bilateral trade agreement. Congressional

Research Service, Library of Congress.

43
D. Group contribution:

On 14/12/2023 we had a group meeting (9:30 PM - 10:30 PM) on Google Meet to discuss

unanimity about the two parts as every member had already had their information-seeking

process and had their draft answer for each part before the meeting. In the meeting we explained

concepts, international trade, ... to others then agreed on the group’s direction, and divided work

for individuals.

We discussed through Zalo chat and on 23/12/2023, we had another meeting on Google Meet

to cross-check each other and finalize our report.

Group members Management issue studied Contribution to Note/ quality/

overall content deadline

Nguyễn Hương Trà Part 2: 100% Active

(leader) - Executive summary

- Introduction

- Limitations and difficulties when

Vietnam joined the WTO

Lưu Hoài Linh Part 1: 100% Active

- Overview of UK’s international

trade in 2022

- Major exports and imports of

products.

Support part 2:

Assess whether benefits from the

WTO meet Vietnam's initial

44
 expectations?

References

Hà Thị Mỹ Anh Part 2: 100% Active

- Introduction about Vietnam-US

BTA & WTO accession

- Advantages of Vietnam-US BTA

- Assess whether benefits from the

WTO meet Vietnam’s initial

expectations?

Hoàng Minh Hà Part 1: 100% Active

Major trading partners (major

exporters and importers), Analysis

of trade theories in the UK.

Support part 2:

Conclusion.

45