The Trans -Pacific Partnership Agreement: an Opportunity for Viet Nam to reduce its
Economic Dependence of China
Scott H. Murray &Tai H. Pham Discipline of Mathematics & StatisticsAugust, 2014
Contents
1. Problem statement2. Members of AEC, TPP, RCEP &
FTAAP 3. USA’s TPP Vision 4. China’s FTAAP Vision5. Theories of international trade6. The Extended Input-Output Table 7. Scenarios 8. Conclusion
1. Problem statement
• The ASEAN Economic Community (AEC) by 2015
• The Trans-Pacific Partnership (TPP) by 2014.
• Quantitative assessment of economic effects of AEC and TPP on the textile & apparel, footwear and furniture industries in Vietnam
The flagship FTAs: AEC, TPP, RCEP & FTAAP?
2. Members of AFTA, TPP, RCEP & FTAAP
CambodiaIndonesiaLaosMyanmarPhilippinesThailand
BruneiMalaysiaSIngaporeViet Nam
AEC
AustraliaJapanNew Zealand
Canada Chile Mexico Peru United States
TPP
Russia
Taiwan
FTAAP
ChinaKorea
RCEP
India
TPP
RCEP
FTAAP
3. USA’s Trans-Pacific Partnership Agreement vision
• Strengthen ties across three continents: America, Asia, and Oceania
• Become basis and means to establish the Free Trade Area of the Asia Pacific (FTAAP)
• The baseline: existing US trade and investment agreements
• Create mutual benefits among participants• Ensure third parties do not take advantage of the
agreement• Apply “yarn-forward” style rules of origin
4. China’s Free Trade Agreement of the Asia Pacific vision
• Build step by step the ambitious “New Silk Road” and “New Maritime Silk Road” through bilateral negotiation, Sanghai Cooperation Organization (SCO), ASEAN & APEC
• Compete with the USA
China’s New silk road vision
FTA: Beneficial to poor countries?
5. Theories of international trade
Mercantilism & Neo-mercantilism
Division of labor & new international division of labor
Comparative advantage &
complementary and competing economies
The Viner’s model & Extended Input-
Output Model
5.1. China encourages exports and discourages imports
2006 2007 2008 2009 2010 2011 2012 2013
-1000
-800
-600
-400
-200
0
200
400
169 256
151 141 139
(796)(731)
(418)
(539) (518)
49
(134)
China United States of America Japan Viet Nam
Year
Billion USD
5.2. China keeps its exchange rate weak
5.3. China & New International Division of Labor
Trade indicators
5.4. China & Viet Nam are competing economies
Revealed symmetric comparative advantage (RSCA) index
=Revealed comparative advantage (RCA)
RSCA =(RCA -1)
(RCA +1)
HS codeRSCA of VIetnam, relative
toRSCA of China, relative to
China Global Vietnam Global
01-05 Animal & Animal Products 0.8 0.5 (0.8) (0.4)
06-15 Vegetable Products 0.8 0.5 (0.8) (0.5)
16-24 Foodstuffs 0.3 (0.1) (0.3) (0.4)
25-27 Mineral Products 0.7 (0.1) (0.7) (0.8)
28-38 Chemicals & Allied Industries (0.5) (0.7) 0.5 (0.3)
39-40 Plastics / Rubbers 0.2 0.1 (0.2) (0.1)
41-43 Raw Hides, Skins, Leather, & Furs 0.0 0.4 (0.0) 0.4
44-49 Wood & Wood Products 0.1 (0.1) (0.1) (0.2)
50-63 Textiles 0.1 0.6 (0.1) 0.5
64-67 Footwear / Headgear 0.5 0.8 (0.5) 0.6
68-71 Stone / Glass (0.1) (0.2) 0.1 (0.1)
72-83 Metals (0.4) (0.4) 0.4 0.0
84-85 Machinery / Electrical (0.4) (0.1) 0.4 0.3
86-89 Transportation (0.5) (0.7) 0.5 (0.3)
90-97 Miscellaneous (0.2) 0.0 0.2 0.3
98-99 Commodities not elsewhere specified 0.6 (0.6) (0.6) (0.9)Explanatory notes
Maximum value 1Minimum value -1
Critical point Comparative advantage =
>0
HS code - top ten
RSCA of VIetnam, relative to
RSCA of China, relative to
China Global Vietnam Global
'85 Electrical, electronic equipment (0.2) 0.1 0.2 0.3
'27 Mineral fuels, oils, distillation products, etc
0.8 (0.1) (0.8) (0.8)
'64 Footwear, gaiters and the like, parts thereof
0.5 0.8 (0.5) 0.6
'62 Articles of apparel, accessories, not knit or crochet
0.4 0.7 (0.4) 0.5
'61 Articles of apparel, accessories, knit or crochet
0.2 0.7 (0.2) 0.6
'84 Machinery, nuclear reactors, boilers, etc (0.6) (0.4) 0.6 0.2
'03 Fish, crustaceans, molluscs, aquatic invertebrates nes
0.8 0.8 (0.8) (0.0)
'94 Furniture, lighting, signs, prefabricated buildings
0.1 0.6 (0.1) 0.5
'09 Coffee, tea, mate and spices 0.9 0.9 (0.9) (0.4)
'10 Cereals 1.0 0.7 (1.0) (0.8)Explanatory notes
Maximum value 1Minimum value -1
Critical point Comparative advantage =
>0
Trade indicators
5.4. TPP & Vietnam are complementary
HS codeRSCA of VIetnam, relative to RSCA of TPP, relative to
TPP Global Vietnam Global
01-05 Animal & Animal Products 0.5 0.5 (0.5) (0.0)
06-15 Vegetable Products 0.5 0.5 (0.5) 0.1
16-24 Foodstuffs 0.1 (0.1)
(0.1) (0.2)
25-27 Mineral Products (0.0) (0.1)
0.0 (0.1)
28-38 Chemicals & Allied Industries (0.7) (0.7)
0.7 (0.1)
39-40 Plastics / Rubbers 0.1 0.1 (0.1) (0.0)41-43 Raw Hides, Skins, Leather, & Furs 0.7 0.4 (0.7) (0.4)
44-49 Wood & Wood Products (0.1) (0.1)
0.1 0.0
50-63 Textiles 0.8 0.6 (0.8) (0.5)64-67 Footwear / Headgear 1.0 0.8 (1.0) (0.8)
68-71 Stone / Glass (0.2) (0.2)
0.2 0.0
72-83 Metals (0.3) (0.4)
0.3 (0.0)
84-85 Machinery / Electrical (0.2) (0.1)
0.2 0.1
86-89 Transportation (0.8) (0.7)
0.8 0.2
90-97 Miscellaneous 0.0 0.0 (0.0) 0.0
98-99 Commodities not elsewhere specified (0.7) (0.6) 0.7 0.3
Explanatory notes
Maximum value 1
Minimum value -1
Critical point Comparative advantage =
>0
HS code - top ten
RSCA of VIetnam, relative to
RSCA of TPP, relative to
TPP Global Vietnam Global
'85 Electrical, electronic equipment 0.0 0.1 0.1 0.0
'27 Mineral fuels, oils, distillation products, etc 0.1 (0.1) (0.2) 0.1
'64 Footwear, gaiters and the like, parts thereof
1.0 0.8 (0.8) 1.0
'62 Articles of apparel, accessories, not knit or crochet 0.9 0.7 (0.7) 0.9
'61 Articles of apparel, accessories, knit or crochet 0.9 0.7 (0.7) 0.9
'84 Machinery, nuclear reactors, boilers, etc (0.4) (0.4) 0.1 (0.4)
'03 Fish, crustaceans, molluscs, aquatic invertebrates nes 0.8 0.8 (0.1) 0.8
'94 Furniture, lighting, signs, prefabricated buildings 0.7 0.6 (0.3) 0.7
'09 Coffee, tea, mate and spices 1.0 0.9 (0.5) 1.0
'10 Cereals 0.6 0.7 0.2 0.6 Explanatory notes
Maximum value 1Minimum value -1
Critical point Comparative advantage = >0
Extended Input-Output Table
for Vietnam
Inaccurate data of value of exports and imports between Viet Nam and
countries
2007 2008 2009 2010 2011 2012 2013
0
20
40
60
80
100
120
140
160
Viet Nam_imports_Countries
Countries_exports_Viet Nam
Viet Nam_exports_Countries
Countries_imports_Viet Nam
Billion USD Countries_export > VN_import: 3.3%Countries_import > VN_export: 5.8%
Inaccurate data of value of exports and imports between Viet Nam and China
2007 2008 2009 2010 2011 2012
0
5
10
15
20
25
30
35
Viet Nam_imports_China
China_exports_Viet Nam
Viet Nam_exports_China
China_imports_Viet Nam
Billion USD
China_export > VN_import: 8.6%
China_import > VN_export: 1.2%
Inaccurate data on exports and imports between TPP and Viet Nam
2007 2008 2009 2010 2011 2012
0
10
20
30
40
50
60
Viet Nam_imports_TPP
TPP_exports_Viet Nam
Viet Nam_exports_TPP
TPP_imports_Viet Nam
Billion USDTPP export > VN_import: 4.6%
TPP_import > VN_export: 10.2%
Inaccurate data on exports and imports between ASEAN* and Viet Nam
2007 2008 2009 2010 2011 2012
0
2
4
6
8
10
12
Viet Nam_imports_Asean*
Asean*_exports_Viet Nam
Viet Nam_exports_Asean*
Asean*_imports_Viet Nam
Billion USD VN_imports > ASEAN*_exports: 0.02%VN_exports > Asean*_imports: 27.0%
6. Extended Input-Output Table for Vietnam
Domestic 67%
TPP 10%
Asean* 4%
China 6%RCEP* 3%FTAAP* 5%
RoW 6%
Intermediate use
ASEAN 9%
RCEP 23% FTAAP 28%
67%
11%4%7%
6. Extended Input-Output Table for Vietnam
Domestic 70%
TPP 8%
ASEAN* 3%
China 5%RCEP* 4%
FTAAP* 3%
RoW 6%
Consumption use
RCEP 20% FTAAP 23%
ASEAN 7%
70%
9%3%6%
6. Extended Input-Output Table for Vietnam
Domestic 59%
TPP 12%
ASEAN* 3%
China 8%
RCEP* 4%FTAAP* 4%
RoW 10%
Investment use
29% > 0
41% = 0 30% < 0
RCEP 27% FTAAP 31%
ASEAN 8%
59%
13%
3%9%
TPP 29%
ASEAN* 10%
China 19%
RCEP* 11%
FTAAP* 12%
RoW 20%
IMPORT
ASEAN 25%
RCEP 68%
FTAAP 81%
TPP 55%
Asean* 7%China 7%RCEP* 3%
FTAAP* 3%
RoW 25%
EXPORT
ASEAN17%
RCEP 47%
FTAAP 74%
6. Extended Input-Output Table of Vietnam
USE45%PRODUCE
55%
6.1. Vietnam's imports from the blocs
2007 2008 2009 2010 2011 2012.000
5.000
10.000
15.000
20.000
25.000
30.000
35.000
18.3
23.8
20.7
25.1
31.433.3
11.9
15.116.3
23.1
29.1
34.2
TPP ASEAN* China RCEP*
Year
Billion USD
6.2. Vietnam's exports to the blocs
2007 2008 2009 2010 2011 2012.000
10.000
20.000
30.000
40.000
50.000
60.000
26.6
33.8
28.6
33.4
40.8
50.5
3.2 4.3 4.77
11.1
16.2
TPP ASEAN* China RCEP*
Year
Billion USD
Top ten exporters to Vietnam
Viet Nam imports from: 2007 2008 2009 2010 2011 2012 2013
China 11.9 15.1 16.3 23.1 29.0 34.2 48.6
Korea, Republic of 5.8 7.8 7.1 9.7 13.5 15.9 21.1
Singapore 6.5 8.7 7.0 7.4 10.2 10.4 10.9
Japan 5.7 7.8 6.5 8.2 9.6 10.7 10.6
Taipei, Chinese 6.8 7.9 6.0 7.5 9.0 8.4 8.9
Thailand 4.0 5.0 4.7 5.8 7.1 6.7 7.2
India 1.2 1.8 1.8 2.5 5 3.7 6.0
United States of America 1.9 2.8 3.1 3.7 4.3 4.6 5.0
Malaysia 2.3 2.4 2.3 3.5 3.8 3.8 4.2
Germany 1.7 1. 5 1.6 2.0 2.6 2.5 2.5
Indonesia 1.4 1.7 1.5 1.9 2.4 2.3 2.4
Australia 1.2 1.3 1.1 1.4 2.1 1.8 2.0
Unit: Billion USD
Top ten exporters to Vietnam
Viet Nam imports from: 2007 2008 2009 2010 2011 2012 2013
China 19.9% 20.1% 22.9% 25.2% 25.0% 27.0% 33.8%
Korea, Republic of 9.7% 10.4% 10.0% 10.6% 11.6% 12.5% 14.7%
Singapore 10.9% 11.6% 9.8% 8.1% 8.8% 8.2% 7.6%
Japan 9.6% 10.4% 9.1% 8.9% 8.3% 8.4% 7.4%
Taipei, Chinese 11.4% 10.5% 8.4% 8.2% 7.8% 6.6% 6.2%
Thailand 6.7% 6.6% 6.6% 6.3% 6.1% 5.3% 5.0%
India 2.0% 2.4% 2.5% 2.7% 4.3% 2.9% 4.2%
United States of America 3.2% 3.7% 4.4% 4.0% 3.7% 3.6% 3.5%
Malaysia 3.9% 3.2% 3.2% 3.8% 3.3% 3.0% 2.9%
Germany 2.8% 2.0% 2.2% 2.2% 2.2% 2.0% 1.7%
Indonesia 2.3% 2.3% 2.1% 2.1% 2.1% 1.8% 1.7%
Australia 2.0% 1.7% 1.5% 1.5% 1.8% 1.4% 1.4%
Unit: Billion USD
Top ten importers from Vietnam
Viet Nam exports to: 2007 2008 2009 2010 2011 2012 2013
United States of America
11.4 13.9 13.0 15.9 18.5 21.4 26,0
China 3.2 4.3 4.7 7.0 11.1 16.2 16.9
Japan 6.1 9.1 7.0 8.2 11.6 15.1 14.2
Germany 2.9 3.5 3.2 3. 9 5.6 6.6 7.4
Korea, Republic of 1.4 2.0 2.4 3.3 5.1 5.7 7.2
Malaysia 1.8 2.3 2.1 2.6 3.4 5.2 6.0
United Kingdom 1.9 2.2 1.9 2.2 3.0 3.9 4.5
France 1.7 1.8 1.7 1.9 2.7 3.5 3.7
Australia 3.7 4.4 2.5 2.8 2.9 3.3 3.7
Thailand 1.1 1.4 1.4 1.4 2.0 3.0 3.3
Singapore 2.1 2. 4 2.3 1.6 1.7 2.2 3.1
Italy 1.0 1.2 1.0 1.2 1.8 2.33 2.9
Unit: Billion USD
Top ten importers from Vietnam
Viet Nam exports to: 2007 2008 2009 2010 2011 2012 2013
United States of America
21.8% 20.5% 21.1% 20.7% 18.5% 16.8% 18.8%
China 6.1% 6.4% 7.6% 9.1% 11.1% 12.7% 12.2%
Japan 11.7% 13.5% 11.3% 10.7% 11.6% 11.8% 10.3%
Germany 5.6% 5.2% 5.2% 5.1% 5.6% 5.2% 5.4%
Korea, Republic of 2.7% 3.0% 3.9% 4.3% 5.1% 4.5% 5.2%
Malaysia 3.4% 3.4% 3.4% 3.4% 3.4% 4.1% 4.3%
United Kingdom 3.6% 3.3% 3.1% 2.9% 3.0% 3.1% 3.3%
France 3.3% 2.7% 2.8% 2.5% 2.7% 2.7% 2.7%
Australia 7.1% 6.5% 4.1% 3.6% 2.9% 2.6% 2.7%
Thailand 2.1% 2.1% 2.3% 1.8% 2.0% 2.4% 2.4%
Singapore 4.0% 3.5% 3.7% 2.1% 1.7% 1.7% 2.2%
Italy 1.9% 1.8% 1.6% 1.6% 1.8% 1.8% 2.1%
Unit: Billion USD
The scenarios reduceseconomic dependence on China
1( ) Arr rsI A
Final use
(Y)
Direct, IndirectRequirements
Matrix
(I - A)-1
Output (X)
7. Scenarios
7.1. The Extended Input-Output Table
Intermediate
used
Final use
Total ConsumptionInvestment Export
HHs. Govt.
Domestic
1,171,126 552,607 76,626
294,203
757,554
2,852,116
TPP 174,174 73,383 724 59,563 307,844
Asean* 62,671 24,118 239 15,155 102,183
China 114,097 45,628 470 40,394 200,589
RCEP* 57,560 34,727 264 21,433 113,984
FTAAP* 80,441 27,615 297 17,940 126,293
RoW 97,805 57,489 486 52,317 208,097
Total Import
586,748 262,960 2,480
206,802
1,058,990
Total Intermediate
1,757,874
Value added
1,094,242
Total
2,852,116 815,567 79,106
501,005
Unit: Billion VND
7.2. Scenario 1
Intermediate
used
Final use
Total ConsumptionInvestment Export
HHs. Govt.
Domestic
1,171,126 552,607 76,626
294,203
707,225
2,801,787
TPP 174,174 73,383 724 59,563 307,844
Asean* 62,671 24,118 239 15,155 102,183
TPP + AEC 119,802 47,909 494 42,414 210,619
RCEP* 57,560 34,727 264 21,433 113,984
FTAAP* 80,441 27,615 297 17,940 126,293
RoW 97,805 57,489 486 52,317 208,097
Total Import 592,453 265,241 2,504 208,822 1,069,020
Total Intermediate 1,763,579
Value added 1,038,208
Total 2,801,787 817,848 79,130 503,025
Unit: Billion VND
GDP - 5.1%
7.3. Scenario 2
Intermediate
used
Final use
Total ConsumptionInvestment Export
HHs. Govt.
Domestic
1,171,126 552,607 76,626
294,203
707,225
2,801,787
TPP 174,174 73,383 724 59,563 307,844
Asean* 62,671 24,118 239 15,155 102,183
TPP + AEC 131,782 52,700 543 46,655 231,680
RCEP* 57,560 34,727 264 21,433 113,984
FTAAP* 80,441 27,615 297 17,940 126,293
RoW 97,805 57,489 486 52,317 208,097
Total Import 604,433 270,032 2,553 213,063 1,090,081
Total Intermediate 1,775,559
Value added 1,026,228
Total 2,801,787 822,639 79,179 507,266
Unit: Billion VND
GDP - 6.2%
Scenarios reduce economic dependence on China
1( ) Arr rsI A
Final use (∆Y)
Direct, IndirectRequirements
Matrix
(I - A)-1
Output (∆X)
7.4. Scenarios (cont.)
7.5. Scenario 3Unit: Billion VND
Intermediate
used
Final use
Total ConsumptionInvestment Export
HHs. Govt.
Domestic 1,171,787 552,607 76,626 295,203 777,071 2,872,294
China + AEC + TPP 115,705 46,541 479 41,202 203,927
RoW 472,651 217,332 2,010 166,408 858,401
Total Import 588,356 263,873 2,489 207,610 1,062,328
Total Intermediate 1,760,143
Value added 1,112,151
Total 2,872,294 816,480 79,115 501,813
GDP + 1.6%
7.6. Scenario 4Unit: Billion VND
Intermediate
used
Final use
Total ConsumptionInvestment Export
HHs. Govt.
Domestic 1,171,787 555,082 76,626 295,244 777,071 2,872,810
China + AEC + TPP 115,705 46,541 479 41,202 203,927
RoW 472,651 217,332 2,010 166,408 858,401
Total Import 588,356 263,873 2,489 207,610 1,062,328
Total Intermediate 1,760,143
Value added 1,115,667
Total 2,872,810 818,955 79,115 502,854
GDP + 2.0%
7.7. Scenario 5Unit: Billion VND
Intermediate
used
Final use
Total ConsumptionInvestment Export
HHs. Govt.
Domestic 1,171,787 559,385 76,626 296,806 777,071 2,881,675
China + AEC + TPP 115,705 46,541 479 41,202 203,927
RoW 472,651 217,332 2,010 166,408 858,401
Total Import 588,356 263,873 2,489 207,610 1,062,328
Total Intermediate 1,760,143
Value added 1,121,531
Total 2,881,675 823,258 79,115 504,416
GDP + 2.5%
8. Conclusion
Thanks for listening!