estimating the potential impacts of free trade agreements between vietnam and the european union on...
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VIETNAM NATIONAL UNIVERSITY HANOI
UNIVERSITY OF ECONOMICS AND BUSINESS
FACULTY OF INTERNATIONAL BUSINESS AND ECONOMICS
THESIS
ESTIMATING THE POTENTIAL IMPACTS OF FREE
TRADE AGREEMENTS BETWEEN VIETNAM AND THE
EUROPEAN UNION ON VIETNAM’S GARMENT EXPORTS
Supervisor: MA. Vu Thanh Huong
Student: Le Luong Tuan Anh
Class: QH - 2010- ECLC
Hanoi, October 2014
TABLE OF CONTENTS
LIST OF FIGURE ............................................................................................................ i
LIST OF TABLE ............................................................................................................ ii
ABBREVIATIONS ........................................................................................................ iii
ACKNOWLEDGEMENT ............................................................................................. iv
CHAPTER 1 .................................................................................................................... 1
INTRODUCTION ........................................................................................................... 1
1.1. Rationale ............................................................................................................ 1
1.2. Research questions ............................................................................................ 3
1.3. Research subject and scope ............................................................................... 4
1.4. Dissertation’s structure ...................................................................................... 5
CHAPTER 2: .................................................................................................................. 6
LITERATURE REVIEW ................................................................................................ 6
2.1. Review of Free trade agreements ...................................................................... 6
2.1.1. Review of definition ................................................................................ 6
2.1.2. Review of types of Free trade agreements .............................................. 7
2.1.3. Review of Review of the theoretical effects of Free Trade Agreements 8
2.1.3.1. Static effects ......................................................................................... 8
2.1.3.2. Dynamic effects ................................................................................. 11
2.2. Review of related literature ............................................................................. 11
2.2.1. Review of trade relation between EU and Vietnam and its impacts ..... 11
2.2.2. Review of impacts of other FTAs on Vietnam economy ...................... 14
2.2.3. Review of concluded FTAs of EU and their impacts............................ 16
2.2.4. Review of trade in garment products industry ...................................... 17
CHAPTER 3 .................................................................................................................. 19
DATA AND METHODOLOGY .................................................................................. 19
3.1. Methodology .................................................................................................... 19
3.1.1. An overview of ex-ante impact assessment method ............................. 19
3.1.2. Trade indicators ..................................................................................... 21
3.1.2.1. Trade Intensity Index (TII) ................................................................ 22
3.1.2.2. Revealed Comparative Advantage (RCA) ........................................ 23
3.1.2.3. Export Specialization (ES) Index ...................................................... 24
3.1.2.4. Trade Complementary (TC) Index .................................................... 25
3.1.2.5. Strengths and limitations of trade indicators ..................................... 25
3.1.3. The SMART model ............................................................................... 26
3.2. Data .................................................................................................................. 27
CHAPTER 4: ................................................................................................................ 30
RESULTS AND DICUSSION ..................................................................................... 30
4.1. Garment industry in EU and Vietnam ............................................................. 30
4.1.1. The Garment Industry in EU ................................................................. 30
4.1.2. The Garment Industry in Vietnam......................................................... 30
4.2. Current situation of Vietnam's garments exports to EU .................................. 32
4.2.1. Vietnam-EU overall trade flows............................................................ 32
4.2.2. Vietnam – EU trade flows in garment sector ........................................ 35
4.2.2.1. Vietnam's overall garments exports to EU ........................................ 35
4.2.2.2. Vietnam's garments exports to EU by product group ........................ 37
4.3. Evaluating the possibility to bring about benefits of EVFTA for Vietnam's
exports of garment to EU .......................................................................................... 45
4.3.1. EU – Vietnam Free trade agreements situation ..................................... 45
4.3.2. Trade Intensity Index (TII) in garment industry ................................... 48
4.3.3. Revealed Comparative Advantage (RCA) in garment industry ............ 49
4.3.4. Export Specialization (ES) Index in garment industry.......................... 50
4.3.5. Trade Complementary (TC) Index in garment industry........................ 51
4.3.6. Tariff barriers in Vietnam’s garment export to EU ............................... 53
4.4. Potential effects of Vietnam-EU FTA on Vietnam's garment exports ............ 55
4.4.1. Scenarios for EVFTA ............................................................................ 55
4.4.2. Trade effects .......................................................................................... 57
CHAPTER 5 .................................................................................................................. 67
CONCLUSION ............................................................................................................. 67
5.1. Summary .......................................................................................................... 67
5.2. Opportunities and challenges for Vietnam garment export to EU .................. 69
Bibliography .................................................................................................................. 72
APPENDIX 1 ................................................................................................................... i
TOP HS62 PRODUCTS EU IMPROT FROM VIETNAM ............................................ i
APPENDIX 2 ................................................................................................................. iii
TRADE INTENSITY INDEX ....................................................................................... iii
APPENDIX 3 ................................................................................................................. vi
REAVEALED COMPARATIVE ADVANTAGE INDEX .......................................... vi
APPENDIX 4 ............................................................................................................... viii
EXPORT SPECIALIZATION INDEX ....................................................................... viii
APPENDIX 5 ............................................................................................................... xiii
THE VALUE OF TRADE EFFECT ON VIETNAM GARMENT EXPORT (US$
THOUSAND) .............................................................................................................. xiii
i
LIST OF FIGURE
Figure 2.1: Vietnam garment export to EU under MFN ................................................ 9
Figure 2.2: Impacts of Vietnam’s garment export when joining EVFTA ................... 10
Figure 4.1: Top EU's imports from Vietnam (US$) .................................................... 35
Figure 4.2: Vietnam's garment export to World (US$ thousand) ................................ 39
Figure 4.3: Vietnam’s rank in top 4 exporters to EU by HS62 (US$ thousand) ......... 41
Figure 4.4: Vietnam's rank in exporting HS 61 + HS 63 to EU in 2005-2013(US$
thousand) ....................................................................................................................... 42
Figure 4.5: The trend in Vietnam’s 4-digit garment products exported EU (US$
thousand) ....................................................................................................................... 44
Figure 4.6: EU's imports of HS620520 from Vietnam vs World ................................ 45
Figure 4.7: Trade complementary between Vietnam and EU in garment industry ..... 52
ii
LIST OF TABLE
Table 4.1: Vietnam’s recent economic indicators ......................................................... 32
Table 4.2: Vietnam – EU trade flow indicators ............................................................. 33
Table 4.3: Vietnam top 4 trading partners in 2013 ........................................................ 34
Table 4.4: Vietnam's garment export to EU and World ................................................. 36
Table 4.5: The growth rate of Vietnam garment export to EU and World (%) ............. 36
Table 4.6: Vietnam's export garment products to EU from 2005 to 2013 ..................... 38
Table 4.7: Vietnam’s value of export HS62 to EU and other destinations (US$) ......... 40
Table 4.8: Vietnam exports 4-digit garment products to EU (US$ thousand)............... 42
Table 4.9: Vietnam garment products export to EU with highest TII ........................... 49
Table 4.10: Shares of garment export value classified by RCA (%) ............................. 50
Table 4.11: Shares of garment export value classified by ES (%) ................................. 51
Table 4.12: Applied tariff rates levied by EU on Vietnam garment export (%) ............ 53
Table 4.13: Tariff rates applied by EU on garment export from China, India, Indonesia,
South Korea, Vietnam and Singapore (%) ..................................................................... 55
Table 4.14: Vietnamese garment export change in Scenario 1 and 2 (thousand USD) . 58
Table 4.15: Export change in 5 countries in scenario 3 (thousand USD) ...................... 59
Table 4.16: Overview of trade effects in 3 scenarios ..................................................... 60
Table 4.17: Top countries losing their market on garment products in the EU due to
tariff reduction by 50% (scenario 1) .............................................................................. 61
Table 4.18: Products gain most trade effect in scenario 1 ............................................. 61
Table 4.19: Top countries losing their market on garment products in the EU due to
tariff reduction by 100% (scenario 2) ............................................................................ 63
Table 4.20: Products gain most trade effect in scenario 2 ............................................. 64
Table 4.21: Trade effect in FTAs in scenario 3 (thousand USD) .................................. 65
iii
ABBREVIATIONS
ASEAN Association of South East Asia Nations
CGE Computable General Equilibrium
COMTRADE Common Format for Transient Data Exchange
EC European Commission
ECWAS Economic Community of West African States
EFTA European Free Trade Association
ES Export Specialization
EU European Union
EUCU The European Union Customs Union
EVFTA European Union - Vietnam Free trade agreement
FTA Free trade agreements
GDP Gross Domestic Product
GTAP Global Trade Analysis Project
HS Harmonized System
IDB Inter-American Development Bank
NAFTA North American Free Trade Agreement
NTBs Non-tariff barriers
PCA Partnership and Cooperation Agreement
RCA Revealed Comparative Advantage
RoO Rules of Origin
SMART Software for market analysis and restrictions on trade
TC Trade Complementary
TDE Trade diversion effect
TII Trade Intensity Index
TPP Trans-Pacific Partnership Agreement
TRAINs Trade analysis and Information System
TTE Trade total effect
UNCTAD United Nations Conference for Trade and Development
US United States
VITAS Vietnam Textile and Garment Association
WB World Bank
WITS World Integrated Trade Solutions
WTO World Trade Organization
iv
ACKNOWLEDGEMENT
The successful completion of this report might never be possible in time without
the support of some people whose inspiration and suggestion made it happen. First of
all, I would like to appreciate my major supervisor, M.A Vu Thanh Huong for her
valuable comments, guidance and encouragement from proposal write up and
questionnaire development up to submission of the final thesis write up. The
supervision and support that she gave truly help the progression and smoothness of my
progress.
My grateful thanks also go to Dr. Nguyen Manh Tuan. Information and support
from Dr. Nguyen Manh Tuan during my writing is very great indeed.
Great deals appreciated go to the contribution of my faculty – Faculty of
International Economics and Business. I am also would like to thankful all the staff in
the Faculty office that are patient in helping me to complete this thesis.
I would like to say thanks to the authors of all books and articles that I used in my
thesis for their information and available data.
Once again, I would like to express my deep appreciation for the support from
all of them.
Student
Le Luong Tuan Anh
1
CHAPTER 1
INTRODUCTION
1.1. Rationale
Being launched in 1986, the Renovation policies (called Doi Moi policies)
have considerably contributed to transform Vietnam from one of the low poorest-
income countries in the world to a lower middle income country in 2009. The
negotiation of Vietnam for membership of the World Trade Organization (WTO)
launched in 1995 and finalized in 2006, and the process of Vietnam's implementation
of WTO commitments have transformed country’s regulation and economic
environment.
The country also joined the Association of South East Asia Nations (ASEAN)
in 1995. Since then, Vietnam has participated in negotiating and signing five ASEAN
free trade agreements (FTAs) with its trading partners namely China, India, South
Korea, Japan and Australia-New Zeeland. Vietnam joined Trans-Pacific Partnership
Agreement (TPP) on 12 November 2011 which is intended to serve as a second-
generation trade agreement, including both the traditional and new provisions of trade
in goods and services (ARMANOVICA, 2012). Especially, the FTA between Vietnam
and European Union (EU) being under negotiation since 2012 is expected to bring
several benefits to both sides and concluding this FTA is considered as one of the most
important goals in the future.
The establishment of diplomatic relations between Vietnam-EU was in
October 1990, since then, the relations have moved to a more diversified partnership
which has been marked by EU-Vietnam Partnership and Cooperation Agreement
(PCA) signed on 27 June 2012 and replaced the Framework and Cooperation
Agreement in 1995. PCA has expanded the scope of EU-Vietnam cooperation in areas
2
including economy, environment, energy, science and technology, good governance,
tourism, culture, migration, counterterrorism and the fight against corruption and
organized crime (ARMANOVICA, 2012).
In October 2004, the EU became the first main trading partner to conclude
bilateral WTO accession negotiations with Vietnam. The Market Access Agreement of
2004 removed all EU quantitative restrictions for Vietnamese textiles on 1 January
2005, which put Vietnam on a par with WTO members such as China, even before
Vietnam acceded to the WTO. In return, Vietnam agreed to broaden its market to the
European Union in many areas of interest, in the 1995 (EEAS, 2010).
Currently, approximate 35 % of Vietnam's goods export to the EU duty free
under the most favored nation treatment, additionally, 10 % are eligible to enter the EU
at zero duty under the Generalized System of Preferences. The rest, accounting for
more than 55% are subject to import tariffs including footwear, textiles and fisheries
(ARMANOVICA, 2012).
In 2013, EU is the third largest trade partner and the largest export market of
Vietnam. Characteristics in import – export structure between Vietnam and EU is the
high level of mutual complement and less direct competition (European Commission,
27-08-2014). In 2013, two-way trade turnover between Vietnam and EU reached 33.8
billion USD, increasing by 16.11% over that of 2012, of which export to and import
from EU were 24.4 billion USD and 9.4 billion USD respectively. Main exports to EU
are footwear, garments, aqua-products, coffee, wooden items. EU is also the largest
sources of foreign direct investment (Tofani , 2013) for Vietnam who registered
invested capital in Vietnam over 17 billion USD in with nearly 1400 projects in most
pivotal economic sectors, mainly in industries, construction and service sub-sector
(Vietnam Chamber Of Commerce And Industry, 2014).
3
Vietnam’s garment sector has seen fast and sustainable growth over the past
years, playing an important role in national socio-economic development. Demand for
labor in the sector is huge. Export value of garment products in recent years has been
ranking number two in the country’s total export revenue, earning a major source of
foreign exchange and contributing significantly to Vietnam’s gross national product
and budget (VIETRADE, 2014). EU market was the second largest consumer of
garments and textiles from Vietnam after the US market. Despite slump in
consumption in EU market which was affected by economic difficulties, EU remained
a lucrative market due to its appeal of the world’s largest market where people are
willing to pay big money for clothes (Business Time, 2014).
To study and understand the possible outcomes of EU-Vietnam FTA (EVFTA)
on Vietnam important product exported to EU such as the garment products in the near
future, I have chosen the theme:
“ESTIMATING THE POTENTIAL IMPACTS OF FREE TRADE
AGREEMENTS BETWEEN VIETNAM AND THE EUROPEAN UNION ON
VIETNAM’S GARMENT EXPORTS”
This dissertation aims to estimate the impact of this FTA on the selected
sectors and to identify possible opportunities as well as challenges when EVFTA
negotiation comes concluded.
1.2. Research questions
The main research questions are:
"What are the potential impacts on Vietnam's garment exports to EU if
EVFTA negotiation comes concluded?"
4
In order to clarify the above question, following sub-questions will be
answered:
(i) “What are the trade flows of Vietnam’s garment industry to EU?”
(ii) "What are the possibilities to bring about benefits of EVFTA on
Vietnam's garment exports to EU?"
(iii) “What are the potential impacts of EVFTA s on exporting Vietnam’s
garment exports to EU?”
(iv) “What are the opportunities and challenges of EVFTA on garment export
and implications for Vietnam?”
1.3. Research subject and scope
Content scope:
The study focuses on the possible impacts of EVFTA on Vietnam’s exporting
of garment products to EU. In details, the research examines the background of EU-
Vietnam trade relations, and background of trade flow of Vietnam’s garment industry
to the EU. Then the study concentrates on possible outcomes of EVFTA on the
selected sectors and draws on some opportunities and challenges of exporting garment
to the EU market.
Space scope:
In this paper, the author will focus mostly on the Vietnam’s garment export to
the EU market. Some data related to World export will also be considered.
Time scope:
The data will be tracked from the year 2005 to 2014 as “The Market Access
Agreement” of 2004 removed all EU quantitative restrictions for Vietnamese garment
export was in force since 1st January 2005.
5
1.4. Dissertation’s structure
The thesis is segmented into four five chapters as follows:
- Chapter 1: Introduction
- Chapter 2: Literature review
- Chapter 3: Data and methodology
- Chapter 4: Results and discussion
- Chapter 5: Conclusion
After chapter 1 which gives background about the research, chapter 2 takes the
review of literature on this topic, and pays attention to quantitative analysis on EVFTA.
It also assesses existing findings on effects of EVFTA to support the analytical
methods used in this study. Chapter 3 examines an overview of data and methodology,
description of the data and variables used for the analysis of the model used for this
study on FTAs and the reason to choose these methods. This is followed by the results
and discussion in Chapter 4. In this regard, this study looks at the estimation results and
discussion part of this study. Finally, Chapter 5 gives conclusion, draws on some
opportunities and challenges for Vietnam’s garment export in order to expand its
market to the potential customers in EU.
6
CHAPTER 2:
LITERATURE REVIEW
2.1. Review of Free trade agreements
2.1.1. Review of definition
There are many definitions of free trade agreements (FTA). Trade agreements
between two or more countries can be known as a FTA which reflects the preferred
terminology of different countries (New Zealand Ministry of foreign affair and trade,
2014). Trade agreements make international trade easier and more efficient by
improving access for exporters and investors to other countries’ markets, reducing any
barriers to trade, and ensuring existing access is maintained. Trade agreements
establish a set of rules. They make participating countries’ regulators and officials
work more closely together to create a secure trading relationship. The negotiating
process itself brings trading relationships into sharper focus, boosting the visibility and
desirability of a market to partner countries’ businesses and investors.
However, the definition used in guideline “Free Trade Agreement (Trade in
Goods)” (Spring Singapore, 2005), which is “A free trade agreement (FTA) is a legally
binding agreement between two or more countries to liberalize trade and bring about
closer economic integration” is more suitable for my thesis. In this paper, the
framework for EVFTA mostly focuses on reducing tariffs and barriers. EVFTA allows
Vietnam and EU to give each other preferential market access to garment export.
7
2.1.2. Review of types of Free trade agreements
There are several ways to classify FTA in modern economics. The
classification of trade pacts by Wikipedia1 is divided into 4 categories including by
number and type of signatories, by sophistication, by the World Trade Organization, by
special agreements. Other report (Anne van de Heetkamp,Ruud Tusveld, 2011)
classifies FTA by Agreements without Duty Reduction Schemas; Agreements with
Duty Reduction Schemas; Unilateral, Bilateral, and Multilateral Agreements. The most
common, or perhaps well-known, and also my favorite one is classified by Holly
(2014) which define FTA into 5 main types.
- Bilateral Free Trade Agreements: “A bilateral free trade agreement is a
straightforward treaty between two countries in which both agree to reduce barriers to
trade”. EU has a number of bilateral agreements with different countries such as EU-
India, EU-South Korea, EU-Russia. Meanwhile, Vietnam has bilateral FTAs with
Japan, China, Korea, Australia/New Zealand and India.
- Multilateral Free Trade Agreements: “Several countries can enter into a
multilateral agreement, which will generally be complex in structure”. Multilateral
trade agreements are between many nations at one time. This makes them extremely
complicated to negotiate, but very powerful once all parties sign. The typical examples
of this are North American Free Trade Agreement (NAFTA) and Trans-pacific
partnership agreement (TPP).
- Regional Free Trade Agreements: “A regional free trade agreement is an
agreement among countries within a specific geographical region”. According to the
World Trade Organization (2010), there were 283 regional trade agreements in force as
of July 2010.
1 For information, access http://en.wikipedia.org/wiki/Trade_agreement (accessed on 17/10/2014)
8
- Preferential Trade Agreements: “Preferential trade agreements are
between developed and developing countries. In the agreement, the developed country
will not impose tariffs on certain goods, without requiring reciprocal commitments”.
Customs Unions: “In a customs union, the member states not only agree to free
trade among them, but also agree on common external tariffs for all states that are not
members of the customs union”. Common competition policy is also helpful to avoid
competition deficiency. Purposes for establishing a customs union normally include
increasing economic efficiency and establishing closer political and cultural ties
between the member countries. The European Union Customs Union (EUCU) is a
customs union which consists of all the member states of the European Union (EU) and
some of its neighboring countries: Andorra, Monaco, San Marino and Turkey.
2.1.3. Review of Review of the theoretical effects of Free Trade Agreements
The FTA can have both static effects and dynamic effects. Theoretically, most
of literatures belong to the static effects of FTA; however, dynamic effects are also
significant.
2.1.3.1. Static effects
The static impact refers to changes occurred in the equilibrium market price
and quantity before and after the creation of the economic bloc. This can be a trade
creation or a trade diversion (Negasi, 2009).
Trade creation occurs when domestic production in a nation that is an FTA
member is replaced by lower-cost from another member of that FTA. On other words,
when implementing an FTA, there is a shift from the consumption of higher-price
domestic products to lower-price products of other FTA members. The change in
consumption also results in the significant reduction of the domestic production
compared to imported goods. Moreover, by the formation of FTA, lower prices of
9
imported goods will generate welfare of member nations thanks to consumer surplus
and create a greater specialization in producing comparative advantage goods
(Salvatore, 2004).
Trade diversion occurs when lower-cost imports from outside the FTA
members are replaced by higher-cost imports from an FTA member. It means that there
is a shift production from more efficient producers (non-members) to less efficient
producers (members). As thus, trade diversion reduces welfare, worsens the
international allocation of resource as well as diverts the production away from
comparative advantage. Trade-diverting of an FTA leads to both trade creation and
trade diversion; hence, it can increase or decrease the welfare of members, depending
on the relative strength of these two opposing forces (Salvatore, 2004).
The two diagrams bellows will illustrate the trade effect of Vietnam garment
export to the EU market before and after FTA.
Figure 2.1: Vietnam garment export to EU under MFN
Source: MUTRAP (2010)
The figure 2.1.1 shows the perspective of a non-member exporting to an FTA
member. Vietnam exporter faces MFN tariffs, as do other non-members. The first
10
diagram shows quantities of exports (Q1), imports (M1) and tariff revenues (a+b+c+d)
captured by the EU when tariffs are t and domestic prices are Pw*(1+t).
As shown, the world price remains unchanged and so the domestic price does
not change for the EU. This assumes that Vietnam’s prices (non-FTA exporters) are
not related to the quantity that they try to export (MUTRAP, 2010).
Figure 2.2: Impacts of Vietnam’s garment export when joining EVFTA
Source: MUTRAP (2010)
Figure 2.2 shows the impact on the Vietnam exporter and EU importer when
Vietnam joins EVFTA with preferential tariffs. Vietnam will increases exports to Q2
and gains export revenue represented by area a+b+c at the expense of non-members’
trade. This is trade diversion. It is also at the expense of EU tariff revenue which is
reduced by area a+b+c. Part of this loss (a+b) is a transfer to the EU but part c is a
“dead weight” loss because the Vietnam bears an additional cost of producing the extra
export over the costs of competitive world exports. The additional cost makes Vietnam
a high cost supplier who can only supply the additional exports at the expense of its
11
world competitors because the tariff it faces is reduced on a preferential basis
(MUTRAP, 2010).
2.1.3.2. Dynamic effects
There are some dynamic effects from the view of exporter. First, there is the
competition effect, brought about by freeing imports from partner countries. Second,
the larger market provides greater possibilities for the exploitation of economies of
scale. More precisely, dynamic effects, if present, are likely to dominate static effects
(Negasi, 2009).
2.2. Review of related literature
Understanding the importance of the FTA in the business economy, many
researches and papers have been opened on various aspects towards FTAs. Especially
on the path of EU-Vietnam FTA negotiations, the assessment and analysis commercial
features of these agreements becomes more important and necessary. Most of the
studies about this issue focus on general picture about trade relations between
Vietnam-EU and implications for Vietnam, thus the number of in-depth research
focusing on specific sectors of EVFTA are less. To provide a general picture of
research about EVTFA and its ex-ante impacts on specific sectors, the following will
discuss about some related studies through particular topic
2.2.1. Review of trade relation between EU and Vietnam and its impacts
European Parliament's Committee (2012) analyzes Vietnam economic
background and the trade relations between Vietnam and EU. According to European
Parliament's Committee (2012), Vietnam is the EU's fifth-largest trading partner within
ASEAN and the 35th in general. One year later, the EU is Vietnam's second largest
trading partner after China (ARMANOVICA, 2012). Vietnam-EU relations have
moved rapidly from a focus on trade and aid to a more diversified and more political
12
partnership. The report (2012) also indicated that currently around 35 % of Vietnam's
goods enter the EU duty free under the most favored nation treatment. An additional 10
% are eligible to enter the EU at zero duty under the Generalized System of
Preferences. The rest of Vietnam's exports to the EU — more than 55% —are subject
to import tariffs (e.g. footwear, textiles and fisheries). In the past 10 years, the
European Commission has imposed many anti-dumping duties on Vietnamese goods.
Also predicting the possible outcomes for FTA between EU and Vietnam, the report
used qualitative methods, and forecasted that the output in the leather and footwear
sector might increase up significantly, while that of agricultural and electronics/
machinery sectors might decline. The production would then shift to more competitive
sectors. The prediction was based on fact and figure in the past. Overall, the report
provided general patterns about trade relations between EU and Vietnam, but lack of
in-depth analysis on specific sectors.
Also about trade relation between Vietnam and EU and its impacts, MUTRAP
(2011) provided insight analysis about economy, trade, investment, tariff and non-tariff
measurements of Vietnam. The paper covered most of prospects about future policy
between two sides, and pointed out issues about negotiation. The report showed that
Vietnam is an export-driven economy, and the hope that elimination of tariffs on
substantially all the trade with the FTA will provide important advantages for Vietnam
in comparison to other competitors in the EU markets. Furthermore, Vietnam's
expectation from an FTA with the EU were learnt from the lessons of recent FTAs
concluded by the EU, including the EU elimination of import duties on nearly all
products and promoted a far-reaching; or liberalization of trade in services covering all
modes of supply commitments to eliminate and prevent non-tariff obstacles to trade in
specific sectors; or at least the EU reduction on the customs duties gradually and within
a deadline of 10 years, with the possibility of excluding from the liberalization specific
identified sectors. The work contained qualitative assessment conducted on three
13
selected sectors of interest for Vietnamese imports (automotive, electronics and
machinery and banking) and quantitative analysis on three ones for Vietnam exports
(footwear, garments and furniture). The paper used many quantitative method
including Computable General Equilibrium Model, Gravity model and the Software for
market analysis and restrictions on trade (SMART) model. However, this work put
most of its concerns about footwear quantitative analysis, and little effort on textiles
and garment. This work only analyzed the 2digit products namely 61 (Articles of
apparel and clothing accessories, knitted or crocheted), 62(Articles of apparel and
clothing accessories, not knitted or crocheted) and 63(other made-up textile articles;
sets; worn clothing and worn textile articles; rags). It stated that the impact of an FTA
with the EU will have important effects on the export of garments from Vietnam.
In the update report by MUTRAP (2014) with the new informed study has
been conducted to update the data, models and assumptions of the 2011 study, authors
examined a sustainability impact assessment of FTA between the EU and Vietnam for
the whole Vietnam economy. This research has analyzed the salient features of the
expected impacts of EVFTA, and the outcomes of this paper were about EU-Vietnam
trade, the protection levels of each side, and then showed macroeconomic impact,
social and environment impact. Also using Gravity model and SMART model; once
again, this paper provided a short analysis on particular sectors such as agriculture,
fisheries, textiles and clothing sector, automotive industry, etc. It gave positive effects
for Vietnam’s garment export toward EVFTA. Regardless the research’s short
commentary, it still stands out from the previous report which related to impact
assessment about EU-Vietnam future FTA.
In a research on the economic impact of the FTA between the EU and ASEAN,
Houssein Boumellassa , Yvan Decreux and Lionel Fontagne (2006) estimated the
impact of this FTA for ten ASEAN countries. The assessment was conducted through
14
the use of Computable General Equilibrium Model (CGE). This analysis used Gross
Domestic Product (GDP), Total Factor Productivity (TFP) and trade policy in the pre-
experiment scenarios. As the results, the gains from an agreement accruing to ASEAN
members are very large; and the potential agreement would also have an enormous
impact on trade, production and welfare, as compared to other episodes of trade
liberalization. Although this paper did not elaborate on the specific analysis for each
country and sector; they could create the foundation to inherit and develop for later
studies.
Accordingly, there are some studies and reports about the trade relations and
the potential impacts of EVFTA; however, the research using ex-ante method on
EVFTA has not been studied systematically. On the other hand, these studies analyze
the impacts on Vietnam’s whole economy, instead of the specific sector such as
garment industry. Nevertheless, the general research situation of EVFTA still has been
lack of quality and accuracy, especially the reliable sources, whose most statistics and
material about the impacts of EVFTA are referenced from the articles, magazines or
related seminars. Therefore, in this paper, analyzing in-depth in the impacts of EVFTA
on Vietnam’s garment export to EU will be conducted, and the data will be used at the
6digits product level.
2.2.2. Review of impacts of other FTAs on Vietnam economy
In the report by MUTRAP (2010), the authors stated that currently the focus of
Vietnam’s trade strategy, in the context of ASEAN, has been the negotiation of a
number of bilateral and regional trade agreements. This study therefore aimed to
identify the impact and efficiency of several FTAs – especially, ASEAN-Korea,
ASEAN-India, ASEAN-Australia New Zealand and AFTA - through both ex-ante
(before the event) and ex-post (after the event) assessment of the main economic and
social effects on Vietnam. The methodological approach of this study was three-fold:
15
Computable General Equilibrium (CGE) model, Gravity Model, Qualitative analysis
based on partial equilibrium model, and interviews, and also using the SMART model.
The economic impacts of the FTAs were evaluated both for each FTA individually and
in total. From the results, the output of nearly all sectors was expected to increase with
regional integration. The overall increase in output and exports was comprised of
significant increases for industries in the sectors of wearing apparel, textiles,
manufactures, metal manufactures, electronics and leather products. The study focuses
on many markets and the trade in general as well as other macroeconomic issues, so it
did not provide in-depth analysis on specific factors of Vietnam. Still, the results were
proven useful in other studies and seem consistent with other findings. Hence, the
study was instructive for my focus on further research related to the ex-ante impacts of
co-operating policy and trade regime after the 7th round of EVFTA negotiations as
well.
On the other hand, the report by Deloitte (2011) referred to impacts of FTA
between India and ASEAN, and the paper also mentioned Vietnam as one of the main
trading partner in ASEAN. “Vietnam is a highly industrialized country that depends on
tourism and exports for the economic development. The per capita has been growing
owing to the foreign exchange earned from tourism, and exports from manufacturing
sector”. This paper predicted many product categories would have positive impacts
such as Agriculture, Clothes and footwear, Vegetables, Mental, Automobile, etc.
Instead of providing method to calculate the prediction, it just forecasted based on past
statistics. Another paper “The Trans-Pacific Partnership and its impact on Viet Nam’s
economy” by Peter A. Petri (2013) indicated that by using CGE model and in 18
sectors and 24 regions to calculate, Vietnam could be the biggest winner in TPP.
Scenario assumptions were tariff, good NBTs, service NTBs and FDI barriers. Vietnam
could win such large gain including more exports of manufactures (34%), and more
imports of consumer and production goods (27%). The greatest gain would be in
16
textiles, footwear and chemical sectors. The research brings positive results which
would be the firm foundation for my graduation thesis.
Nonetheless, in recent years, when EVFTA is going to be concluded, there
have been not enough in-depth studies and detailed analysis on indicator about the
potential impact of the EVFTA. It's worthy to note that many of the studies used CGE
model and mostly focus on the whole economy impacts. Consequently, it is essential
for my study to do research on FTA between Vietnam and the European Union and
assess its ex-ante impacts on the specific sector as garment industry.
2.2.3. Review of concluded FTAs of EU and their impacts
According to Yvan ( 2010), the report revealed quantitative assessment of the
EU-Korea FTA for goods, services and FDI. The report used calculations of ad
valorem tariff equivalents (AVEs) of non-tariff protection which implemented with the
new version of the Computable General Equilibrium MIRAGE model. The calculation
of AVEs shows that protection due to non-tariff barriers (NTBs) exceeds tariff
protection to a large extent, especially in Korea. Generally, the majority of
manufactured industries shows higher NTB levels in Korea than in the EU, especially
textiles, leather-clothing, metals, machinery and above all cars and trucks as well as
other transport equipment. In details, results of the simulations show that the effects of
the EU-Korea FTA on GDP are positive for both the EU (0.08%) and Korea (up to
0.84%). Welfare gains are also positive and significant for Korea (up to 1.12%). These
gains are mainly due to terms of trade improvement, capital accumulation (through
increased investment) as well as variety gains (increase in the number of varieties
available to the consumer due to the FTA). On the other hand, the EU welfare gain is
smaller (+0.02%). The higher welfare gains expected for Korea are essentially due to
its initial higher level of protection as well as to its smaller economic size relative to
the EU. The report focuses on the main strength of Korea such as automobile and
17
electronic devices. From the report, we can see that the FTA between Korean and EU
were expected to boost both import and export from EU to Vietnam. This is a
foundation for my thesis do a research in –depth in Vietnam’s garment export to EU.
Other report by Stephen Karingi, Nassim Oulmane, Mustapha Sadni-Jallab
Rémi Lang, et Romain Perez (2005) indicated the change in export and import from
EU to Economic Community of West African States (ECWAS). The report used GTAP
model and SMART model; however the analyzing was from the view of importer from
EU. The results were shown in each country of ECWAS indicating that FTA between
ECWAS and EU could bring benefits to both ECWAS and EU. According to
(LAWRENCE & ISAAC, 2011), the report of Uganda examined trade effects, revenue
effects and welfare effects by using SMART model. However, the report analyzed
from the view as Uganda is an importer of the EU. The SMART model resulted in
many positive effects on trade effects, revenue effects, and welfare effects. This study
is my reference for my thesis structure’s part of SMART model.
In summary, there are many researches about FTAs with EU using several
different methods. However, most of these reports analyzed the effects of FTAs from
the view of domestic importer from EU. My thesis will inherit the method of research
organization in these reports and analyze the effects of EVFTA from the view of
Vietnam – exporter to EU.
2.2.4. Review of trade in garment products industry
According to Embassy of Denmark in Vietnam (2010) the trade flow in textiles
and clothing products were accessed a comprehensive overview of the textile and
clothing sector in Vietnam. To demonstrate a precise evaluation and get an
understanding of the Vietnamese market, this paper updated with facts, trends and
recent history essentials, simultaneously was reinforced by desk research,
interviews/meetings. In this paper, the authors also explained about the informal trade
18
barriers in the Vietnamese textiles industry and the accelerated development situation
in recent years. Also by illustrating export data to EU countries, this study pointed out
that the textile and clothing sector has made a remarkable contribution to Vietnamese
economic development.
Also about trade flows in Vietnam garment export, Angie (2012) identified the
development of the textile and garment manufacturing in the context of the prevailing
arguments on pursuing market-oriented liberalization, and the impacts of these
developments on workers in Vietnam. The method of the study are using secondary
publications, as well as interviews, analyzing on the impacts of textiles industry and
examined efforts by Vietnam’s leading textile and clothing corporations to promote
linkages. The limitations of this study are the fact that it only expressed general
observation, but lack of specific in details about market destinations (EU, US, Japan).
To sum up, trade relations between Vietnam and EU would be enhance into
higher intensity if EVFTA come concluded in the near future. My thesis will use the
structure of these above researches, and then update the data to the latest version of
trade flows in 2014 in specific EU market for analyzing the effects of EVFTA on
Vietnam’s garment products.
19
CHAPTER 3
DATA AND METHODOLOGY
3.1. Methodology
3.1.1. An overview of ex-ante impact assessment method
Ex-ante Impact Assessment was officially introduced into European
Commission (EC) policy making in 2002. It is understood as a formal procedure to
analyses potential effects of new policies before their adoption (Karen Tscherning,
Hannes König, Birthe Schößer, Katharina Helming, Stefan Sieber, 2008). Vietnam and
EU are negotiating FTA which will be taken place and come into enforce in the near
future, that why ex-ante method is suitable for my paper, which will estimate the
possible outcomes of EVFTA in advance.
Theoretically, the net welfare effect of a FTA is uncertain according to Viner
(1950), Lipsey (1970), and Panagariya (2000). To determine how much a proposed
FTA is worth, there is need for empirical methods. The practical methods used in ex-
ante impact assessment are: trade indicators, SMART (software for market analysis
and restrictions on trade) in WITS (world integrated trade solution), and the GTAP
(Global Trade Analysis Project) model (Michael G. Plummer, David Cheong, Shintaro
Hamanaka, 2010).
Each method differs mostly in terms of the questions about a proposed FTA
that it could answer (Michael G. Plummer, David Cheong, Shintaro Hamanaka, 2010).
The simplest method uses trade indicators to estimate specific inferences about
the possible effects of joining an FTA. The trade indicators focus on the following
questions:
(i) To what extent is trade intraregional?
20
(ii) What is the comparative advantage of each FTA member?
(iii) Are a country’s exports of a good regionally oriented?
(iv) How complementary is trade between a given pair of FTA members?
(v) How similar are the exports of a given pair of FTA members?
The advantage of the method is that the data requirements are minimal, and
easy to implement. On the other hand, the disadvantage of them is that they do not
provide precise numbers that quantify the effects of an FTA on trade, production,
consumption, or welfare.
The second method - the SMART model presents a method grounded in
microeconomic theory that provides some quantification of the economic effects of an
FTA in an individual market. Researchers may be interested in a particular market for
some reasons. This method can provide numeric answers to the following questions:
(i) How much will imports increase?
(ii) How much will exports from regional partners increase?
(iii) How much will exports from outsiders decrease?
(iv) How much will tariff revenue fall?
This method requires data on trade data, the initial tariff protection and values
for certain behavioral parameters. The method could quantify the effects of an FTA in
a specific market at the most disaggregated level; however its disadvantage is ignoring
interactions with other markets.
Finally, The third method is the most sophisticated method of evaluating a
proposed FTA, which is able to answer the issues: (i) Real gross domestic product
(GDP) change, (ii) trade balance change, (iii) terms of trade change, (iv) import and
export prices in a particular sector, (v) output and trade in different sectors within the
21
country change, (vi) trade diversion, country’s welfare change. The main advantage of
this third method is that, given FTA-related policy changes in various markets, the
analysis can quantitatively capture the effects of these changes on all markets, rather
than just one market. However, this comes at a cost of modeling complexity and
substantial data requirements.
In my paper, the first and the second will be used. The reason to use the first
method is it easy to compute at customized level and the data is available and reliable.
It’s also provides us an overview of possible impacts on the sector and give us the
orientation for Vietnam’s garment export. The second method is also perfect for my
study, because it help to analyze the effects of EVFTA on individual garment market.
As from the view of Vietnam’ garment exporter, the SMART model could show the
change in the export and import after EVFTA, as well as the trend in trade effects.
Once again, the method provides us the orientation for Vietnam’s garment export to the
EU market.
3.1.2. Trade indicators
According to Mikic and Gilber (2007) "A trade indicator is an index or a ratio
used to describe and assess the state of trade flows and trade patterns of a particular
economy".
These indicators are easily constructed with a country’s trade statistics. In this
thesis, some indicators including trade intensity index, revealed comparative
advantage, export specialization index, and complementarity of Vietnam with EU
trading partners will be calculated. These indicators can be used at the initial stage of
decision making to conclude EVFTA, to examine whether the effect on Vietnam’s
garment export to EU in EVFTA is good or not; and types of products should be
concentrated in the future.
22
3.1.2.1. Trade Intensity Index (TII)
Trade Intensity Index (TII) is a method of trade research in deciding the right
market for interested product. Knowing only the major markets trends will not suffice.
The relations between the two countries in terms of trade relations is an area of
immense importance to be analyzed in the export plan since it may result into
important regulations for an exporting country resulting into poor competitive position
vis a vis other competing suppliers (Karen Tscherning, Hannes König, Birthe Schößer,
Katharina Helming, Stefan Sieber, 2008)
TII is based on an actual observation of bilateral trade flow, and it measures
that intimacy of the trading relationship between any given two countries/groups.
Higher is the TII, better will be our export possibility and therefore an exporter should
choose the market with high TII values (The World Bank, 2011).
The formula for the TII index is:
TIij = (xij/XiT)/(xwj/XwT).
Where
Xij = the values of country i’s exports to country j
XiT = country i’s total exports
Xwj = the values of world exports to country j
XwT = are total world exports
Interpretation: The TI index measures if the value of trade between two
countries is larger or smaller than expected based on their importance in world trade. A
value greater than unity indicates larger trade flows than might be expected. In this
sense, higher values are more favorable to an FTA (MUTRAP, 2010) (The World
Bank, 2011).
23
3.1.2.2. Revealed Comparative Advantage (RCA)
In international trade theory, gains from trade come from specialization in a
country’s comparative advantage products, for example sectors in which a country
produces relatively more efficiently. The revealed comparative advantage (RCA)
index, introduced by Balassa (1965), can be used to discover the products in which a
country has a comparative advantage. Measures of revealed comparative advantage
(RCA) have been used to help assess a country’s export potential. The RCA indicates
whether a country is in the process of extending the products in which it has a trade
potential, as opposed to situations in which the number of products that can be
competitively exported is static. It can also provide useful information about potential
trade prospects with new partners. Countries with similar RCA profiles are unlikely to
have high bilateral trade intensities unless intra-industry trade is involved. RCA
measures, if estimated at high levels of product disaggregation, can focus attention on
other nontraditional products that might be successfully exported (Karen Tscherning,
Hannes König, Birthe Schößer, Katharina Helming, Stefan Sieber, 2008) (MUTRAP,
2010) (The World Bank, 2011).
The formula for the RCA index is:
RCAij = (xij/Xit)/(xwj/Xwt)
Where
Xij = the values of country i’s exports of product j
Xit = the country’s i the total exports
Xwj = the values of world exports of product j
Xwt = world total exports
Interpretation: A country is said to have a revealed comparative advantage if
the value of the index exceeds 1 and a revealed comparative disadvantage if the index’s
24
value is below 1. The larger the difference between countries’ RCA indices, the more
suitable they are as FTA partners. If countries have similar RCA profiles, it is unlikely
that trade will be much affected by any FTA. Thus, the RCA should be computed for
Vietnam and any potential partner and then compared (Karen Tscherning, Hannes
König, Birthe Schößer, Katharina Helming, Stefan Sieber, 2008).
3.1.2.3. Export Specialization (ES) Index
The export specialization (ES) index is a slightly modified RCA index in
which the denominator is usually measured by specific markets or partners. It provides
product information on revealed specialization in the export sector of a country (The
World Bank, 2011).
The formula for the ES index is:
ES = (xij / Xit) / (mkj / Mkt)
Where
Xij = export values of country i in product j
Xit = total exports of country i
Mkj = are the import values of product j in market k
Mkt = total imports in market k
Interpretation: The ES is similar to the RCA but with reference to a particular
market. This makes it especially useful for identifying potential FTA partners. In
particular, the indicator shows the ratio of country i’s export potential to country k’s
import needs. If the ES is greater than unity it indicates favorable specialization
opportunities in market k. A value less than unity indicate a revealed comparative
disadvantage in market k (MUTRAP, 2010).
25
3.1.2.4. Trade Complementary (TC) Index
The trade complementarity index can provide useful information on prospects
for intraregional trade in that it shows how well the structures of a country’s imports
and exports match. It also has the attraction that its values for countries considering the
formation of a regional trade agreement can be compared with others that have formed
or tried to form similar arrangements according to Michaely (1996).
The formula for the TC index is:
TCkj = 100 - Σabs(mik – xij)/2
Where
Mik = the share (%) of good i in region k’s total imports
Xij = the share (%) of good i in the total exports of country j
Interpretation: The TC Index aims to reveal the prospects for intraregional
trade by showing how well the structures of a country’s imports and exports match. It
is useful to calculate this index for prospective FTAs and then compare it with other
FTAs and their performance. A value of zero indicates no goods that are exported by
one country are imported by the other and a value of 100 indicates the export and
import shares exactly match. Higher values are more favorable to a proposed FTA (The
World Bank, 2011).
3.1.2.5. Strengths and limitations of trade indicators
According to (David , June 2010), The main strengths of using trade indicators
are easy to understand, of which their data requirements are easily satisfied, and their
computation is sometimes available. On the other hand, their main drawbacks are that,
due to the fact that indicators are theoretical, interpretation may be difficult.
Additionally, for the indicators presented in the trade indicators section, the results may
be meaningless if the indicators are computed for trade categories being too aggregated
26
or unsuitably classified. In order to obtain more relevant information from them, trade
data could be reclassified based on country’s production structure and the computations
could be performed at a more disaggregated level. Finally, these trade indicators are
able to answer only a limited number of specific questions regarding an FTA.
3.1.3. The SMART model
This dissertation uses the SMART model due to its strength in analyzing the
tariff effect of an individual market on disaggregated product lines. It also has the
ability to examine the effects of trade policy reforms in the presence of imperfect
substitutes. SMART is a static partial equilibrium model developed by the United
Nations Conference for Trade and Development (UNCTAD) and the World Bank
during the 1980’s, mainly to assess the impact of General Agreement on Trade and
Tariffs (GATTs) rounds. Its theory is borrowed from Laird and Yeats (1986).
SMART model and the simulation tools are part of the World Integrated Trade
Solutions (WITS) trade database and software suite provided jointly by the UNCTAD.
SMART simulates the impact of a given trade policy change (tariff reduction) for a
single market on trade creation and diversion effects, net trade effect (aggregating trade
creation and trade diversion effects); tariff revenue variations; and welfare effect,
among others.
This model focuses on the changes in imports into a particular market when
there is a change in trade policy which is tariff policy in this paper. The demand side of
the market in SMART is based on the assumption that commodities are differentiated
by their country of origin. Assume that, for a particular commodity, imports from one
country are an imperfect substitute for those from another country. Thus, even though a
FTA involves preferential trade liberalization, import demand does not completely shift
to a source from within the FTA. There is also an assumption that consumers’ demand
27
is decided in a two-stage optimization process including allocating their spending by
commodity and by national variety.
In SMART, an FTA will affect both the price index of the commodity and the
relative prices of the different national varieties. Suppose that there are three countries:
X,Y, and Z. X imports a good from Y and Z, but only FTA is being formed between X
and Y. Reducing the tariff on imports from partner Y will lower the domestic price of
the variety coming from Y and the price index of the commodity. Domestic consumers
therefore want to buy and import more of the commodity, which is a trade creation in
SMART. The cheaper price of imports from Y relative to Z also causes consumers to
switch sourcing their imports from Z to Y, which is a trade diversion in SMART. Since
this substitution of imports is perfectly balanced in the SMART model, the substitution
does not affect the overall imported quantity, but simply reallocates market shares
among foreign partners based on changes in relative prices. However the FTA results
in an increase in imports from the country or countries benefiting from preferential
trade thanks to lower prices. In summary, the importing country will experience an
increase in imports, FTA export partners will have an increase in exports, and outsiders
will see their exports of the commodity fall. Besides trade effects, SMART can
calculate changes in tariff revenue as well (David , June 2010) (MUTRAP, 2011)
(Michael G. Plummer, David Cheong, Shintaro Hamanaka, 2010).
3.2. Data
The data utilized for the analysis of Vietnam-EU garment trade flows below
have been collected from different sources: Comtrade, Eurostat, Trademap and WITS.
These data have been updated to the latest version (2014).
The Harmonized Commodity Description and Coding System generally
referred to as "Harmonized System" or simply "HS" is a multipurpose international
product nomenclature developed by the World Customs Organization (WCO) (World
28
Customs Organization, 2012). The textile and garment sectors are classified from
chapter 50 to 63 in Harmonized System (HS). The garment sectors are 61 (Articles of
apparel, accessories, knit or crochet); 62 (Articles of apparel, accessories, not knit or
crochet); and 63 (Other made textile articles, sets, worn clothing, etc.). In this study,
my focus will be only the HS section 61, 62 and 63.
The data used for trade indicators will be calculated from official value of
import and export of Vietnam’s garment to EU on Trademap. This paper focuses on
6digits HS products in garment sector with update statistics in 2014.
The data used for tariff will be derived from MACmap and Inter-American
Development Bank (IDB) and World Bank (WB) (2014).
The data used for SMART analysis is in-built in WITS along with Common
Format for Transient Data Exchange (COMTRADE), Trade analysis and
Information System (TRAINs), IDB and CTs databases. These are real import figures
reported by countries at customs points at different product levels. The data required
are: the import value from each foreign partner, the tariff faced by each foreign partner,
the import demand elasticity for the commodity, the export supply elasticity for the
commodity, and the substitution elasticity between varieties of the commodity. Note
that SMART accepts just one import demand elasticity for the commodity, not one for
each national variety. Furthermore, the export supply elasticity must be the same for all
foreign exporters of the commodity. SMART also expects that the substitution
elasticity is the same for any pair of varieties of the commodity. The data for 6digits
HS products in HS62 will be used in my simulation, because my study only focuses on
the highest values of 6digits HS products
This study used a SMART simulation model to estimate the trade, revenue,
and welfare effects of possible EVFTA tariff reduction on selected product. The
analysis captured the possible trend of tariff reduction in the future. The simulation
29
results are summarized in part (4.6). The number of products, however, varies across
the various tables due to the import dynamics resulting from the tariff changes.
The data in my thesis will be tracked from 2005 to 2014; because The Market
Access Agreement of 2004 removed all EU quantitative restrictions for Vietnamese
textiles took effect on 1 January 2005. From this time, the export of Vietnam garment
to EU increased significantly compared to the previous time.
30
CHAPTER 4:
RESULTS AND DICUSSION
4.1. Garment industry in EU and Vietnam
4.1.1. The Garment Industry in EU
The garment industry in Europe covers a vast array of activities, ranging from
the production of clothes to most sophisticated productions of hi-tech synthetic yarns,
industrial fibers or the more simple transformations of fibers to yarns and fabrics.
The garment industry plays an important part in the European manufacturing
industry, employing around 2 million people in 128.000 companies. This sector
accounts for 3% of total manufacturing value added in Europe. Preceded by China, the
EU is the world's second largest exporter of garment, exporting more than €36.3 billion
of products, mainly high quality clothes; whose main destinations were Russia,
Switzerland, USA, Turkey and Tunisia. At the same time, Europe is a net importer of
garment products with a total of €80.5billion (MUTRAP, 2011).
In 2009, the industry was severely affected by the economic crisis. However,
for many decades, the textiles and clothing sectors were a notable exception to the
progressive liberalization of trade in manufactured goods. Since 2009, trade in garment
industry is fully liberalized and there are no longer any quantitative restrictions in the
EU on garment import including imports originating in China. As a result, China has
become the EU's biggest provider of textiles and clothing, and continues to capture
market share in EU from other traditional providers in Asia.
4.1.2. The Garment Industry in Vietnam
The textile and garment sector in Vietnam is one of the country’s largest
industries and a key contributor to its economic growth. In 2013, Vietnam’s textile and
garment exports increased 18 percent year over to total approximately US$20 billion,
31
accounting for 15 % of the country’s gross domestic product and 18 % of its total
exports, according to the Vietnam National Textile and Garment Group (VINATEX,
2014). The textile and garment industry comprises some 4,000 enterprises and provides
employment for more than 7.7 million people. One recent feature of the Vietnamese
textiles industry is the increasingly higher number of foreign invested firms.
The industry’s main export market is the United States (US), and garment
exports to that country in 2013 increased 14.2 %, according to VINATEX reports.
Exports to the EU that year increased 8.8 %; to Japan, 20 %; and to South Korea, 44 %.
Though the Vietnamese garment sector is a major exporter of garments, it is
heavily dependent upon imported raw materials and inputs, especially from China.
Vietnam’s cotton production satisfies only 1 % of the sector’s demand, and its fabric
production satisfies only about 12 to % of demand. China is the largest supplier of raw
materials to Vietnam, providing approximately 50 % of imported textile raw materials
(Textile World Asia, 2014).
The Vietnamese industry is aware of the need to develop domestic raw
material production and reduce its dependence on imports, especially in light of the
TPP, and other FTA with Australia, Brunei Darussalam, Canada, Chile, Japan,
Malaysia, Mexico, New Zealand, Peru, Singapore and the United States. The TPP
negotiations recently allow Vietnam’s textile and garment exports duty-free access into
the United States, potentially on the basis of the yarn-forward rule of origin, which
would require that every stage of the garment production be done in Vietnam or other
TPP member countries.
Vietnam is currently in negotiations to sign FTAs with four important markets:
Customs Union which comprises Russia, Belarus and Kazakhstan; South Korea; the
EU; and TPP with 11 other countries. If signed, the FTAs could benefit Vietnam’s
32
garment industry by improving the competitiveness of its exported goods and
increasing foreign direct investment into Vietnam.
The EU is the second-largest importer of Vietnam’s garment exports (behind
USA), and the Vietnam Textile and Garment Association (VITAS) is optimistic that a
pending FTA with the European Union will be a boon for Vietnam’s industry. The
group has said that Vietnamese textile and garment exports to Europe could increase by
as much as 20 percent once the deal is finalized (Textile World Asia, 2014)
4.2. Current situation of Vietnam's garments exports to EU
4.2.1. Vietnam-EU overall trade flows
Many data sources confirm that Vietnam is an export-driven country
(MUTRAP, 2011; MUTRAP, 2010) (ARMANOVICA, 2012) (IMF, 2014). Table 4.1
indicates that “increasing from 60% in 2009 to estimated 85.1% in 2014, exports have
been the largest part of Vietnam’s GDP”.
Table 4.1: Vietnam’s recent economic indicators
Indicator 2009 2010 2011 2012 2013 20142
GDP (current prices) (US$
billion) 101.6 112.8 134.6 155.6 170.6 187.8
GDP PPP (US$ billion) 354.7 382.1 414.3 443.9 475.0 509.5
Real GDP growth (%) 5.4 6.4 6.2 5.2 5.4 5.5
Goods & services exports (%
GDP) 61.9 70.7 78.6 79.8 83.6 85.1
Source: ABS and IMF (2014)
Table 4.2 shows that Vietnam’s export to EU from 2005 to 2013 contributed in
the vicinity of 17% of total share, with the highest 21.43% in 2012 and the lowest
2 IMF/EIU forecast
33
15.66% in 2009. Additionally, the export from Vietnam to EU illustrated a significant
proportion in growth, which reached the peak in 43.3% in 2012. The negative growth
rate in 2009 was caused by EU industry at that time and the global financial crisis. The
trough of the crisis can be identified as early 2009 in most industries in the EU. The
recession affected EU-27 manufacturing and services industries, and then was felt on a
global scale (European Commission, 2011).
Table 4.2: Vietnam – EU trade flow indicators
Indic
ator
VN export to
World (US$
million)
VN export to EU
(US$ million)
VN-EU export
growth (%)
VN-EU export
share (%)
2005 39.8898 7.53975 - 18.9
2006 48.26655 9.36225 24.2 19.4
2007 61.82595 10.66905 14 17.26
2008 74.08395 11.6478 9.2 15.72
2009 67.7025 10.6002 -9 15.66
2010 84.8934 12.99375 22.6 15.31
2011 101.3567 17.54055 35 17.31
2012 117.3056 25.1397 43.3 21.43
2013 173.3333 28.72935 14.3 16.57
Source: Author's calculation from Eurostat Comext - Statistical regime 4 and
Eurostat IMF (2013)
According to table 4.2.3, despite the fact that EU was not in Vietnam’s top 4
importers (indeed it ranked 6th
– accounting for 4.8%), it was Vietnam’s biggest export
destination in 2013 (19.7%). In general, highest total trade with Vietnam in 2013 was
China with 23.1%, creating a gap of approximate 10% to EU (the second biggest).
34
Table 4.3: Vietnam top 4 trading partners in 2013
Import Export Total trade
Partner Value
Share
in
World
(%)
Partner Value
Share
in
World
(%)
Partner Value
Share
in
World
World 128.395 100.0 World 99.763 100.0 World 228.131 100.0
China 40.992 31.9 EU 19.602 19.7 China 52.763 23.1
South
Korea 17.787 13.9 USA 17.583 17.6 EU 25.717 11.3
Singapore 9.185 7.2 China 11.771 11.8 South
Korea 22.789 10.0
Japan 8.875 6.9 Japan 9.905 9.9 USA 21.811 9.6
Source: Eurostat IMF (2014)
As can be seen from the below figure 4.4, the top five HS codes EU imported
from Vietnam were 85 (Electrical, Electric equipment), 64 (Footwear, gaiters and the
like, parts thereof) 84 (Nuclear reactors, boilers, machinery and mechanical appliances;
parts thereof), 62 (Articles of apparel and clothing accessories, not knitted or
crocheted), 09 (Coffee, tea, mate and spices). In general, HS 64 registered the highest
value, accompanied by 62 over years. Recent 2 years witnessed a remarkable increase
in the value of section 85. However, over years observed, no structural changes are
apparent as these five products retained their share in Vietnamese export.
35
Figure 4.1: Top EU's imports from Vietnam (US$)
Source: Author’s calculation from Trade map
4.2.2. Vietnam – EU trade flows in garment sector
4.2.2.1. Vietnam's overall garments exports to EU
According to table 4.4, the values of Vietnam garment export to EU and World
were significant and increased over the period.
Although the value of Vietnam garment export to EU rose gradually, the share
of those in the EU market decreased slightly by time. Increasing by approximately 6%
to reach a peak at nearly 29% in 2006, the number then fell gradually to 17.25% in
2013. The slight drop in the Vietnam’s garment export share in the EU market was due
to the competitiveness from other rivals including China and India. However, these
results still show a positive sign because the value of Vietnam garment export to EU in
2013 was much more 5 times than that of 2005.
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2005 2006 2007 2008 2009 2010 2011 2012 2013
All products
85 Electrical, electronicequipment
64 Footwear, gaiters and thelike, parts thereof
84 Machinery, nuclearreactors, boilers, etc
62 Articles of apparel,accessories, not knit orcrochet09 Coffee, tea, mate andspices
36
Table 4.4: Vietnam's garment export to EU and World
Year
Vietnam garment
export to EU (US$
thousand)
Vietnam garment
export to World (US$
thousand)
Share of
Vietnam export
to EU (%)
2005 1134840 4827120 23.51
2006 1664502 5789363 28.751
2007 2050055 7649472 26.8
2008 2526115 8954532 28.21
2009 2254719 8865805 25.432
2010 2493371 10932991 22.806
2011 3251731 13655046 23.813
2012 3037819 14974284 20.287
2013 3324189 19270705 17.25
Source: Author’s calculation from Trade map
As can be seen from table 4.5, the growth rates of Vietnam’s garment export to
EU were higher than those of World. In details, the Vietnam garment export growth
rate reached a peak in 2006 with 46.67% and remained high until 2011 with 30.41%.
Exceptionally, the growth rates were negative in 2009 and 2012 due to the EU crisis at
that time (Bao Moi, 2012). This data means that Vietnam garment export was oriented
toward the EU market.
Table 4.5: The growth rate of Vietnam garment export to EU and
World (%)
2006 2007 2008 2009 2010 2011 2012
Vietnam
garment
export to EU
46.67 23.16 23.22 -10.74 10.58 30.41 -6.57
Vietnam
garment
export to
World
19.93 32.12 17.06 -0.99 23.31 24.89 9.66
Source: Author’s calculation from Trade map
37
To sum up, EU is one of Vietnam’s biggest importers of garment products
whose share of import accounted for average 20% in total. The growth rate in
exporting garment products from Vietnam to EU was also very high, and Vietnam
garment export was oriented toward the EU market.
4.2.2.2. Vietnam's garments exports to EU by product group
This study now concentrates on the export of garment products from Vietnam to
EU on HS 62, HS 61, and HS 63. As can be seen from table 4.6, garment export to EU
accounted for over 15% in total Vietnam export to EU from 2005 to 2012 before going
down to over 10% in two latest years. In garment export, HS62 processed
overwhelming indicators over the remainder (HS61 and 63), and the data continued
rising over the period. Though the Vietnam export garment account for large
proportion in the nation total export to EU, it only contributed nearly 2% in total
import garment into EU from World.
In Vietnam’s garment export to EU, HS62 comprised 66.3%, followed by HS61
with 26.92%. The remainder was contributed by HS63.
38
Table 4.6: Vietnam's export garment products to EU from 2005 to 2013
2005
2006 2007 2008 2009 2010 2011 2012 2013
HS62 (US$ thousand) 77132
5
1073
295
1338
006
1661
265
1493
229
1639
466
2158
209
1997
863
2268
483
HS61 (US$ thousand) 25854
7
4615
23
5592
74
7046
84
6200
02
6939
82
8855
39
8287
68
8396
82
HS63 (US$ thousand) 10496
8
1296
84
1527
75
1601
66
1414
88
1599
23
2079
83
2111
88
2160
24
Total (US$ thousand) 11348
40
1664
502
2050
055
2526
115
2254
719
2493
371
3251
731
3037
819
3324
189
%Import from
Vietnam/World 0.85 1.15 1.24 1.39 1.35 1.43 1.63 1.75 1.80
%Vietnam export
Garment/total products
to EU
14.09
16.7
7
16.2
8
16.5
3
17.1
5
16.2
7
15.2
7
11.1
9
10.0
1
Source: Author’s calculation from Trademap and Comtrade
According to figure 4.2, the HS code 62 was also Vietnam’s the biggest part in
garment export to the world (which contributed around 43% in total share), followed
by the HS section 61 (which was approximate 35% in total). This was accompanied by
the HS section 63 with nearly 5% in total.
39
Figure 4.2: Vietnam's garment export to World (US$ thousand)
Source: Author’s calculation from Trade map
Now we should compare the value of Vietnam garment export to EU and other
destinations. Because of the limitations of my study, now the paper will concentrate
only on the highest values of garment product, which is HS62. The data for HS61 and
HS63 will be calculated in general.
Since 2005, the export of Articles of apparel, accessories, not knit or crochet
increased gradually (HS62). Clearly, Vietnam’s biggest import of HS62 was USA
(around 50% in total), which was followed by EU (around 30% in total). The export
growth of this type of product in USA, EU, Japan and South Korea experienced a
considerable rise year over year. (Table 4.7)
Slightly over 27% of HS62 was directly exported to EU in 2005; this data
thereafter reached a peak in 2008 before decreasing to around 23% in 2013. Despite
down trend in percentage, the volume of export rose significantly by years.
0
2000000
4000000
6000000
8000000
10000000
12000000
Valuein
2005
Valuein
2006
Valuein
2007
Valuein
2008
Valuein
2009
Valuein
2010
Valuein
2011
Valuein
2012
Valuein
2013
HS62
HS61
HS63
40
Table 4.7: Vietnam’s value of export HS62 to EU and other destinations
(US$)
2005 2006 2007 2008 2009 2010 2011 2012 2013
World 2837741 3385356 4168867 4605473 4354375 5219491 6910222 7438869 9851671
USA 1489884 1730456 2266688 2399669 2143760 2571761 2876430 2931740
EU 771325 1073295 1338006 1661265 1493229 1639466 2158209 1997863 2268483
Japan 419463 438656 478416 525207 580488 629234 949388 1130812
South
Korea 31879 46259 37814 67307 120470 249462 583515 759771
Source: Author’s calculation from Trademap and Comtrade
Based on calculated data, China remained its highest position exporter to EU in
HS62, which accounted for approximate 30% in total export to EU; meanwhile those
of India made up about 4% over the period. The numbers of Vietnam comprised nearly
2.7% in total market share (Figure 4.3)
There was a domination in the value of HS62 export from China to EU, which
was by far more significant than the second highest – India. The value of Vietnam and
Indonesia were identical over the period (Figure 4.3). Clearly, China and India are two
strongest competitors of Vietnam’s garment exporter, who processed overwhelming
values of export HS62 to EU over Vietnam. If Vietnam’s garment exporter hopes to
expand its share in EU market, he needs to strengthen his comparative advantages in
garment products against China and India.
41
Figure 4.3: Vietnam’s rank in top 4 exporters to EU by HS62 (US$ thousand)
Source: Author’s calculation from Trademap
The main importers in EU were Germany, France, United Kingdom, and Italy.3
Figure 4.4 indicates that China continued dominating the share in export
HS61+63 to EU, whose data was 20 times as much as those of Vietnam and Indonesia.
Note that the total value in export of Vietnam was one-fifth of Indonesia in 2005;
however, this number surpassed its rival in 2012 and became the third biggest export to
EU.
3 This information is based on EUROTEX (2013)
0
5000000
10000000
15000000
20000000
25000000
30000000
2005 2006 2007 2008 2009 2010 2011 2012 2013
china
india
vietnam
indonesia
42
Figure 4.4: Vietnam's rank in exporting HS 61 + HS 63 to EU in 2005-
2013(US$ thousand)
Source: Author’s calculation from Trademap
The study now focuses on the biggest garment products exported from Vietnam
to EU in HS62. The table bellows will analyze in-depth 4-digit HS 62 to find out which
4-digit HS products have larger proportions in exporting.
Table 4.8: Vietnam exports 4-digit garment products to EU (US$
thousand)
Product
code 2005 2006 2007 2008 2009 2010 2011 2012 2013
HS6204 11321
2
21931
1
29988
3
34998
7
31557
2
34643
5
43133
9
42538
8
49366
9
HS6203 11281
0
20607
7
24933
2
29545
8
23989
4
26239
9
38248
4
38495
1
42328
2
HS6202 12758
6
13770
9
18887
9
25524
8
21813
5
22969
0
35327
6
30713
8
35354
2
HS6201 13065
2
14526
8
16458
8
20203
1
21556
2
23165
7
29410
3
25400
0
29135
1
HS6205 10462
5
12342
5
13455
3
15415
3
15214
6
15393
6
22784
6
20981
9
22643
6
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2005 2006 2007 2008 2009 2010 2011 2012 2013
China
India
Vietnam
Indonesia
43
HS6210 38229 66255 87666 12599
5
12097
9
15289
0
18283
4
16067
2
16568
3
HS6206 14455 25822 41353 53833 48295 55947 66736 62894 10080
3
HS6211 46273 61704 63010 98466 78063 84254 80826 81716 85117
HS6212 41689 48005 62080 69929 52403 63817 73757 49307 60801
HS6216 10104 6567 6890 9475 10717 14242 19821 22286 23955
HS6209 4847 7510 9021 10560 13636 13976 16494 18671 20112
HS6207 1928 5131 8952 11129 9868 8880 12161 6507 8503
HS6215 14216 12676 13347 13927 9233 14179 8787 7672 7903
HS6208 5527 4579 5104 5885 4529 3163 4625 3844 4032
HS6217 2666 1781 1687 2232 1536 859 1083 1128 1732
HS6214 939 1035 1134 1537 1539 1725 1691 1357 1101
HS6213 125 139 171 218 168 299 343 512 456
Source: Author’s calculation from Trademap and Comtrade
From table 4.8, top products Vietnam exports to EU from 2005 to 2013 were
HS6204 (Women's suits, jackets, dresses skirts, etc&shorts), HS6203 (Men's suits,
jackets, trousers etc & shorts), HS6202 (Women's overcoats, capes, wind-jackets etc
o/t those of hd 62.04), HS201 (Men's overcoats, capes, wind-jackets etc o/t those of hd
62.03), and HS6205 (Men's shirts).
Based on calculated data, the top five 4-digit HS products in section HS62 made
up more than 75% in total year over years. The value of top 4-digit products rose
significantly from 2005 to 2013. This means Vietnam’s garment industry in Vietnam
become stronger, and more mature. Note that the tariff rates at that time were nearly
unchanged, which reveals that the supply of Vietnam’s garment products increased and
the EU import demand also expanded.
44
Figure 4.5: The trend in Vietnam’s 4-digit garment products exported EU
(US$ thousand)
Source: Author’s calculation from Trademap
At this point, my paper will focus on products with the highest export values in
HS 62 including HS6204, HS6203, HS6202, HS6201, and HS6205. The study will
analyze trade flows in 6 digits, which means 60 products will now be studied.
In the 6-digit 60 products of HS6204, HS6203, HS6202, HS6201, and HS6205,
the biggest proportion was HS620520 (Mens/boys shirts, of cotton, not knitted).
Because the table illustrate of 60 products was too big, for more information please see
the APENDIX 1.
Figure 4.6 shows that most of the value of product HS HS620520 Vietnam
export was to EU, however, this number was small compared to that of EU import
from the World. As mentioned above, EU is the second biggest importer of Vietnam
garment products, and Vietnam is the third exporter garment product to EU in return.
The reason for our small value in EU’s market is because of the domination of China
0
100000
200000
300000
400000
500000
600000
2005 2006 2007 2008 2009 2010 2011 2012 2013
HS6204
HS6203
HS6202
HS6201
HS6205
Other
45
and India’s garment product in EU. Hope that, if EVFTA comes concluded in the
future, the trade barriers between Vietnam and EU will reduce, helping the
competitiveness of Vietnam garment product increase. This might expand the value of
Vietnam garment export to EU in the future.
Figure 4.6: EU's imports of HS620520 from Vietnam vs World
Source: Author’s calculation from Trademap
4.3. Evaluating the possibility to bring about benefits of EVFTA for Vietnam's
exports of garment to EU
4.3.1. EU – Vietnam Free trade agreements situation
EU is a huge market with 28 members and one of the most important trade
partners of Vietnam. Currently, Vietnam and EU is negotiating a FTA started from
June 2012 and expected to be finalized by the end of 2015. The two sides cooperated
earlier in a ''scoping'' phase, in which the EU assisted Vietnam in meeting prerequisites
for its 2007 accession to the World Trade. Both sides hope to negotiate a
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
Valuein
2005
Valuein
2006
Valuein
2007
Valuein
2008
Valuein
2009
Valuein
2010
Valuein
2011
Valuein
2012
Valuein
2013
European Union (EU 27)'simports from Viet Nam
Viet Nam's exports toworld
European Union (EU 27)'simports from world
46
comprehensive agreement that covers many aspects such as market opening
commitments, investment, environment, competition, and sustainable development.
EVFTA once concluded may have great impacts on each industry and the whole
Vietnam economy (WTO Center, 07-02-2014).
FTA negotiations between EU and Vietnam will aim to roll back tariffs and
non-tariff barriers to trade. Other trade-related areas such as public procurements,
regulatory issues, local market competition and intellectual property rights will also be
prioritized by EU negotiators. Vietnam, on the other hand, is expected to push for more
streamlined compliance mechanisms to meet rising EU import regulations on food
hygiene, chemical residues, illegal fishing and legally cut timber. Despite many
obstacles, Vietnam aims to expand its presence in lucrative EU markets. Vietnamese
negotiators are expected to press Brussels to grant Vietnam the preferential status given
to market economies - a recognition that Hanoi has indicated it wants this included in
any potential FTA.
Delegations from the European Free Trade Association (EFTA) States and
Vietnam met on 22-25 May 2012 in Hanoi for a first round of negotiations on a free
trade agreement (EFTA, 29-05-2012).
The second round of negotiations between the EFTA States and Vietnam, held
on 16-19 October 2012 in Geneva, saw constructive discussions on the full range of
topics covered by the draft free trade agreement (EFTA, 22-10-2012).
The third negotiation round EVFTA was held from April 23rd to 26th, 2013 in
HCM city (WTO Center, 19-06-2013).
The fourth EVFTA negotiation round was taking place in Brussels from July 1st
to 5th, 2013 in Brussels, Belgium. At this negotiation round, two sides had accelerated
47
discussion in all aspects and obtained positive progresses on basis of mutual benefit
balance (WTO Center, 18-09-2013).
Vietnam and the EU kick-started the fifth round of their free trade agreement
(FTA) negotiations in Hanoi on November 4 (WTO Center, 07-11-2013).
The EU and Vietnam completed the sixth round of negotiations for EVFTA.
The talks were held in Brussels from 13-17 January (WTO Center, 07-02-2014).
The 7th negotiation round of EVFTA was held from March 17 to 26, 2014 in
Hanoi. Two sides have been active in accelerating negotiation in all aspects, especially
is the fields both sides have benefits in (WTO Center, 26-05-2014).
The 8th negotiation round of EVFTA was conducted from June 23 to 27, 2014
in Brussels, Belgium. In this round, negotiation in all aspects has been accelerated,
especially is in those two sides have benefits (Ministry of Industry and Trade, 03-06-
2014).
The EU and Vietnam completed the 9th round of negotiations for EVFTA. The
talks were held in Danang, Vietnam, from 22-26 September (European Commision,
29-09-2014).
In this latest round, talks intensified in all areas of the proposed FTA. Four
chapters – trade in goods, services, investment, and state owned enterprises – saw
particular progress in the technical discussions. Work was almost completed on trade
and sustainable development and the chapter on cooperation was closed. The chief
negotiators also had intense discussions on all outstanding key areas.
The talks aim at an ambitious and comprehensive agreement on goods, services
and investment. In addition to eliminating tariffs and non-tariff barriers, negotiators are
tackling other trade-related issues, such as public procurement, regulatory issues,
competition, trade and sustainable development, and Geographical Indications. Once in
48
place, the agreement will further strengthen EU-Vietnam trade and investment ties and
create more predictable business opportunities on both sides (European Commision,
29-09-2014).
4.3.2. Trade Intensity Index (TII) in garment industry
As mentioned in the early part of this chapter, the study focuses in-depth in
individual market of garment export. The products examined in this part will be the 60
products at 6 - digit level of HS 62 namely HS6204, HS6203, HS6202, HS6201, and
HS6205.
TII measures the extent to which trade between Vietnam and EU is higher or
lower than would be expected based on the countries’ importance in world trade. A
value for TII greater than unity is viewed as indicating a more favorable FTA as the
countries already trade more than might be expected. The results from my calculation
indicate a high attractiveness of trading with EU under EVFTA for Vietnam.
In APENDIX 2, the index for TII in 60 mentioned products are revealed.
Overall, most of the numbers are extremely high compared to unity, which ranges from
1 to over 200. Apparently, exports garment products to EU have been higher than
expected. As a reflection, EU has been an attractive destination for Vietnam to export
these garment products. EU must be seen as an increasingly favorable export
destination, as the respective TIIs increased almost continuously over the period 2005-
2013. Notably, the table 4.9 below shows some HS-6 in HS 62 with highest TI index
from the results including HS620119, HS620199, HS620219, HS620299, HS620341
and HS620412. These products should be specialized to export to EU.
49
Table 4.9: Vietnam garment products export to EU with highest TII
Product Code 2005 2006 2007 2008 2009 2010 2011 2012
620119 77.17 82.99 94.74 112.96 149.12 89.10 101.94 101.94
620199 26.10 60.58 62.82 77.15 82.59 82.38 141.28 141.28
620219 56.69 61.81 94.62 93.74 124.98 133.57 118.45 118.45
620299 46.48 55.48 60.84 62.26 62.22 71.05 122.32 122.32
620341 40.73 74.49 52.51 41.95 27.86 55.29 120.22 121.86
620412 88.22 129.02 72.73 89.76 55.11 110.14 224.73 205.44
Source: WITS (2013)
To sum up, all the 60 garment products analyzed show high TII over the time.
Some products such as HS620119 (Mens/boys overcoats&sim articles of oth textile
materials,not knittd), HS620199 (Mens/boys anoraks&similar articles,of oth textile
materials,not knittd), HS620219 (Womens/girls overcoats&similar articles of other
textile mat,not knit), HS620299 (Womens/girls anoraks&similar article of oth textile
materials,not knit), HS620341 (Mens/boys trousers and shorts,of wool or fine animal
hair,not knitted) and HS620412 (Womens/girls suits, of cotton, not knitted) are very
attractive for Vietnam to export to EU.
4.3.3. Revealed Comparative Advantage (RCA) in garment industry
The RCA index is particularly useful, and much used in policy analysis, because
it mimics a country’s comparative advantage. Theoretically, when the RCA > 1, the
product’s share in national exports exceeds its share in world exports and in this sense
“reveals” a country’s comparative advantage in that product. A higher RCA has the
interpretation of a stronger comparative advantage and, of course, an RCA < 1
indicates a revealed comparative disadvantage even though some of the more narrowly
defined products in this sector are typically nonetheless exported. The RCA used here
are compared at the products at 6 digits level for trade between Vietnam and EU.
50
Vietnam enjoyed comparative advantage nearly in all 60 products (Appendix 3).
The results cover wide range of RCA figures, covering from 0 to 184. Noticeably, the
products with RCA>1 account for the majority of Vietnam’s exports despite their RCA
indexes decreased over time4. Some of the products with RCA<1 rose their index over
time and become more attractive in trade. In fact, Vietnam’s garment products have
been examined as one of the most comparative advantage ones in the world
(MUTRAP, 2010).
The results of RCA also indicate that Vietnam’s garment export to EU have
very strong comparative advantage, and export garment product to EU should be
specialized and expand in the future.
Table 4.10: Shares of garment export value classified by RCA (%)
2005 2006 2007 2008 2009 2010 2011 2012 2013
RCA>1 80 76.67 83.33 83.33 83.33 96.67 93.33 96.67 85
RCA<1 and 20 21.66 16.67 16.67 16 1.67 5 - -
RCA<1 and
more than
2012
0 1.67 0 0 1.67 1.67 1.67 - -
Source: Author’s calculation from Trademap (2014)
To sum up, more than 90% of Vietnam garment exports to EU enjoy high RCA
and Vietnam’s garment products have been examined as one of the most comparative
advantage ones in the world (MUTRAP, 2010).
4.3.4. Export Specialization (ES) Index in garment industry
The ES is a measure at the sector level of Vietnam’s export strengths against the
import needs of trading partners. An ES > 1 indicates favorable specialization
opportunities for Vietnam in the partner market.
4 The Vietnam – EU trade data in 2013 was minor data.
51
Similarly to RCA, ES of most of 60 products examined were more than 1,
which means that there are several specialization opportunities for Vietnam to export to
EU's market. The range of results covers from 0 to 140. As can be seen from table
4.11, more than 80% of products indicate opportunities for specialization to export to
EU. The remainder’s indexes climbed over time. This means that Vietnam garment
export to EU should be specialized in the future, and the conclusion of EVFTA would
bring many opportunities in specialization of Vietnam garment export.
Table 4.11: Shares of garment export value classified by ES (%)
2005 2006 2007 2008 2009 2010 2011 2012 2013
ES>1 76.67 76.67 81.67 73.77 76.67 88.33 90 91.67 83.33
ES<1 and
increase 20 21.67 18.33 26.67 23.33 11.67 10 8.33 16.67
ES<1 and
decrease 3.33 1.67 0 0 0 0 0 0 0
Source: Author’s calculation from Trademap (2014)
To sum up, most of Vietnam garment export to EU experience increase ES.
Based on the results, Vietnam garment export to EU should be specialized in the
future, and the conclusion of EVFTA would bring many opportunities in specialization
of Vietnam garment export to EU.
4.3.5. Trade Complementary (TC) Index in garment industry
Trade Complementarity (TC) Index (%) ranges from zero to 100 and compares
the export strengths of Vietnam with the import needs of EU as revealed by actual
trade flows. High values are indicative of more trade creation and a value of 100
indicates the most favorable match-up.
This index is calculated for the total 60 products, and be shown in the table 4.7
The data from this result demonstrates reveal of extremely high trade complementary
52
in 60 products of Vietnam (nearly indicates most favorable match-up) with EU. The
rates were all over 96% and appear to have experienced increasingly complementary
trade between Vietnam and EU. This high complementary level shows that Vietnam
can potentially promote to export garments to EU and gain substantial benefits from
that exports.
Figure 4.7: Trade complementary between Vietnam and EU in garment
industry
Source: Author’s calculation from Trademap (2014)
In summary, from 4 upper trade indicators, we could infer that EU is being a
potential market for Vietnam's garments export and the future EVFTA potentially
brings about substantial benefits for Vietnam's garment exporters. This is because of
many reasons. Firstly, all the 60 garment products analyzed show high TII over the
time. Moreover, more than 90% of Vietnam garment exports to EU enjoy high RCA
and Vietnam’s garment products have been examined as one of the most comparative
advantage ones in the world. Also, most of Vietnam garment export to EU experience
increase ES and the conclusion of EVFTA would bring many opportunities in
0.962
0.964
0.966
0.968
0.97
0.972
0.974
0.976
0.978
0.98
2005 2006 2007 2008 2009 2010 2011 2012 2013
TTC
TTC
53
specialization of Vietnam garment export to EU. Finally, the high complementary level
shows that Vietnam can potentially promote to export garments to EU and gain
substantial benefits from that exports.
4.3.6. Tariff barriers in Vietnam’s garment export to EU
Although Vietnam is benefiting from the GSP (Generalized System of
Preferences), allowing imports of a wide range of goods at preferential rates, important
product categories that represent the large majority of Vietnamese exports to the EU
are still taxed above-average. Under the current EU Rules of Origin (RoO), garment
products from Vietnam very often do not meet the requirements for GSP preferences.
Consequently, the European retailers generally do not import Vietnam's garment
products under preferential terms (certificate of origin Form A) but under normal
conditions (Form B). This is because most fabric for garment production is imported to
Vietnam and not manufactured within the country as stipulated by the RoO. Indeed,
80% of material and input used in garment products of Vietnam are imported (Foreign
Trade Association, 2012)
Table 4.12 below illustrates the tariff rate levied by the EU on Vietnam's
garment export. This data is calculated with the data resource from MACMAP and
WTO.
Table 4.12: Applied tariff rates levied by EU on Vietnam garment export (%)
Average tariff 2005 2007 2010 2013
Simple average tariff 15.43
11.78
11.78
11.78
Weighted average
tariff
13.33
11.798
11.799
11.799
Source: Author’s calculation from MACmap (2014)
54
Accordingly, the simple average tariff EU applied on Vietnam garment export
reduced significantly between 2005 and 2007, decreasing by about 4% from 2005 to
2007. Thereafter, the tariff rate remained unchanged at 11.78% until 2013.
On the other hand, the weighted average tariff was recorded to approximate to
the counterpart. In 2005, the weighted average tariff was nearly 2% less than the
simple one. From 2007 to 2013, the weighted tariffs were almost the same as the
simple, which is slightly 0.15% higher than the counterpart during the period. Higher
weighted tariff means that higher tariffs are applied to all garment products exported
from Vietnam than other products with the lowest rate of 9.6% and the highest of 14%.
In 2005, the highest tariff rate applied on Vietnam garment export was 30%,
however, this number reduced to 14% since then. At this time, all Vietnam garment
export to EU has the same duty of tariff rate, which means the negotiation of EVFTA
should focus on reducing tariff rate of products with high TII (HS620119, HS620199,
HS620219, HS620299, HS620341 and HS620412), or with high RCA and ES (HS
620333, HS 620341, HS 620343, HS 620413, and HS 620433).
Note that the simple tariff on Vietnam's garment export of 11.7 % to EU was
substantially higher compared to the simple average tariffs applied by the EU on total
exports of Vietnam - around 4.1% (decreased from 4.5% in 2005)5 (MUTRAP, 2011).
There will be potential for Vietnam’s garment export to EU, on account of EVFTA
would negotiate to reduce the tariff rates of Vietnam’ garment export to the same level
as the simple average tariffs applied by EU on Vietnam’s total export.
Table 4.13 compares the tariff rates EU applied on Vietnam's and other nation’s
garment 2013. Generally, the applied tariffs on global garment import to EU are
similar. The lowest average rate was applied on South Korea’s garment export. The
remainders are the same at 11.5% except for Singapore, whose rate was 0.7% lower.
5 COMTRADE data
55
However, the minimum rate of South Korea was 0%, which is by far much less than
the others. These lower tariff rates of Singapore and Korea are the result from FTAs
between EU and these nations. This means that the FTAs between Korea and EU, and
Singapore have benefited Korea’s garment export even though garment was not this
nation’s strength. Therefore, we could hope that, as the FTA between Vietnam and EU
comes concluded, tariff rate on Vietnam's garment exports to EU might reduce to at
least the levels eligible for Singapore and Korea.
Table 4.13: Tariff rates applied by EU on garment export from China, India,
Indonesia, South Korea, Vietnam and Singapore (%)
Simple average MFN Preferential rate
China 11.56 11.5
India 11.56 9.25
Indonesia 11.56 9.24
South Korea 11.51 0
Viet Nam 11.556 9.24
Singapore 11.48 11.48
Source: IDB (2013)
4.4. Potential effects of Vietnam-EU FTA on Vietnam's garment exports
4.4.1. Scenarios for EVFTA
The scenario for EVFTA in the SMART model is related only to the tariff
barriers – tariff rates. In my thesis, the scenario will be made on the assumption of
tariff reduction of Vietnam garment export to EU when EVFTA concludes. Each
assumption will give different circumstances of tariffs between garment export from
Vietnam to EU.
6 The tariff rate in table 4.5.2 are slight different from table 4.5.1 because of small differences in the database of
IDB and MACmap
56
Scenario 1- Vietnam and EU conclude FTA in the future, however
Vietnam’s textile and garment products remain in the sensitive sector. In this
scenario we assume that half of trade barriers would be eliminated between Vietnam
and EU, granting that our textile and garment with preferential tariff rate relative 50%
lower compared to the current one (9.6%).
The reason for this scenario is that even though Vietnam and EU form FTA, the
EU wants to protect their domestic textile and garment industry, meaning that EU levy
4.8% tariff rate on or garment product. Moreover, those regulations like RoO or TBT,
SPS would not be completely removed which mean an actual trade barrier will be
applied on our products. In this model, there are no other scenarios for trade barriers
but tariff rate, so let assume that the tariff rate will be 50% lower than the current one.
The products which are not classified in sensitive products will receive duty free, so the
50% reductions of sensitive ones in current tariff rate are used in the first scenario.
Scenario 2 – the EU concludes FTA with Vietnam and all Vietnam’s
product will not be classified in the sensitive sector. This scenario is the one most
Vietnamese researcher expect from EVFTA. The assumption would be that all
commodities including garments from Vietnam will be exported to EU free duty.
Vietnam’s garment product will not be in classified in the sensitive sector; not a single
tariff rate was implied on “made in Vietnam” products. In this assumption scenario, we
do not consider if other FTAs between EU and partners are concluded.
Scenario 3 – the EU concludes FTA with Vietnam and its current partners
including India, Malaysia, Thailand and Singapore. According to recent report by
European Commission, other FTAs under negotiation from 2007 in Asia are likely to
conclude in the near future, which mean these nations will favor from EU duty free to
their export garment products. No duty will be levied on these mentioned nations’
57
garment export (0%). Other FTAs under negotiation are FTAs between EU – China
and EU – Japan, however they are not considered in this assumption. The explanations
for that are the FTAs between EU – China now focuses on investment instead of trade;
and the latter are in the very initial stage and could not conclude in near future.
4.4.2. Trade effects
The results of simulation are shown in 6 different tables, however, the most
important table as the view of Vietnam who tries to export garment product to EU is
the trade creation table. This table shows detail on total trade effect, trade creation
effect, and trade diversion effect.
Overall statement
Take a look from exporter view report in the table 4.14 for overview. Note that
the total Vietnam export change equal the trade total effect and the EU import change
equal the trade creation effect mentioned below. In the scenario 1 and 2, both
Vietnamese garment export will increase by 110.68% and 21.43% respectively,
meaning that lower trade barriers between Vietnam and EU will increase the value of
Vietnam export by a significant proportion. EU import change is the trade creation
effect, which is very small compared to the EU previous total garment import value. In
the scenario, the value import in EU will increase by 0.2% in the scenario 1 and that of
double in the second scenario.
58
Table 4.14: Vietnamese garment export change in Scenario 1 and 2 (thousand
USD)
Source: Author’s calculation from WITS (2014)
In the third scenario, all the 5 nations increase the export by over 20% if they
conclude FTAs with EU. Exceptionally, India’ garment export rises by the most
considerable rate, accounting for about 25%. It’s worthy to note that the value of
export before FTAs of Vietnam and India are significant so their increase in export are
by far more than those of the remainder. Once again, if other FTAs conclude, there are
no thread to Vietnam’s garment export to EU, because the export growth remain high
in 3 scenario and our value hardly be affected by other FTAs. These results also
indicate the strong position of Vietnam garment export in to EU as Vietnam has joined
the top 5 export textile and garment to the world.
Scenario 1 Scenario 2
Vietnam
Export
before
Vietnam
Export
change
EU Import
change
Vietnam
Export
before
Vietnam
Export
change
EU Import
change
Total
1417351.03
151388.323
62780.507
1417351.03
303603.831
125935.875
Growth
(%)
10.68
0.20
21.42
0.40
59
Table 4.15: Export change in 5 countries in scenario 3 (thousand USD)
Vietnam India Malaysia Singapore Thailand
Export
growth (%)
20.82342
25.27243
27.35285
20.61371
21.18124
EU import
change
0.977819
Source: Author’s calculation from WITS (2014)
Generally, the results from these 3 scenario show that there is a domination in
the value of trade diversion. Additionally, the lower tariff rate on Vietnam’s garment
export, the larger value of trade effect will be (Table 4.16). The trade creation accounts
for 41.5% in both the scenario 1 and 2, while that of scenario 3 contributes 42.6%.
More trade diversion effects are recorded in the simulations, which mean that there will
be a shift in demand of EU’s garment import from the world to Vietnam import when
EVFTA is concluded. This is a positive result for the potential effect of EVFTA,
granting that if the FTA between Vietnam and EU concludes in the future, there will be
an increase in our garment export to EU market destination even the trade barriers are
not completely removed.
The total trade effect in scenario 3 is negligible 3% lower than the second
scenario; which indicates that other EU FTAs affect slightly Vietnamese the garment
export to EU. This motivates Vietnam to continue negotiating EVFTA for the garment
export in the future without concerning about whether other FTAs with EU could affect
Vietnam’s garment export. Also, the results indicate Vietnam’s strong position in
exporting garment product to EU.
60
Table 4.16: Overview of trade effects in 3 scenarios
Scenario 1 Scenario 2 Scenario 3
% tariff cut in HS62 and other factors 50% 100% 100% and other EU
FTAs
New tariff rate (%) 4.8% 0% 0%
Trade total effect (TTE) 151388.32
1
303603.82
7 295140.993
Trade creation effect 62967.934 125935.87 125935.87
Trade diversion effect (TDE) 88420.387 177667.95
7 169205.123
TDE as % of TTE 58.5% 58.5% 57.4%
Exports before (US$ thousand)
1417351.0
3
1417351.0
3
1417351
Exports after(US$ thousand) 1568739
1720955
1712492
Export change in revenue(US$
thousand) 151388.3
303603.83
1 295141
Source: Author’s calculation from WITS (2014)
Scenario 1
In the scenario 1 the trade diversion is approximately 88,420,000 USD, which
contributes about 58% in the total trade effect. The trend in this scenario is that the
reduction of 50% on Vietnam garment export to EU will create more trade diversion
effects than the creation one. This means that EVFTA will boost the value of
Vietnam’s garment export to EU by 88 million USD, and 58% of that value will be
gained by the increase in EU import demand from Vietnam by diverting from other
market of rest of the world. In this scenario, Vietnam will be the only nation who
benefits positive total trade effects, while the remainder will suffer from negative trade
diversion effects. The total trade diversion among Vietnam and the remainder are equal
0. As shown in this scenario, Vietnamese garment is relative cheaper than those of
61
others; hence the trade diversion effect is positive. As such, Vietnam can expand its
market in the European Union and achieve greater market shares of garment products.
Table 4.17: Top countries losing their market on garment products in the EU
due to tariff reduction by 50% (scenario 1)
Country Trade diversion effect (US$ thousand) Share (%)
China -17832.562
31.88972
Bangladesh -96818.4
5.873628859
India -7055.4
2.323882
Indonesia -4209.33
1.386454
Source: Author’s calculation from WITS (2014)
Accordingly, table 4.17 shows that China is the most affected country in the
scenario with more than 32% of total trade diversion, meaning that 32% in the increase
of Vietnam’s garment value exported to EU will come from the loose of Chinese
garment exporter in the scenario. The situation are the same for Bangladesh, India and
Indonesia whose their market will divert 5.8%, 2.3% and 1.4% respectively in their
value to Vietnam.
Table 4.18: Products gain most trade effect in scenario 1
Product code Total trade effect (US$ thousand)
620520 19706.37
620193 16817.53
620293 15316.04
620343 13277.72
620342 12395.08
620463 10239.69
620213 8889.428
620462 8871.146
62
620520 8780.992
620193 6716.059
620293 6381.788
620433 5795.277
620343 5355.611
620342 5191.626
620443 4718.798
620333 4435.244
620462 4056.042
620463 3993.114
620213 3766.15
620212 3555.844
620192 3051.627
620113 2324.021
Source: Author’s calculation from WITS (2014)
Thanks to the dismantlement of tariff by 50% on garment products, the trade
creation and trade diversion of Vietnam witness an enormous rise, leading to a huge
growth in export from Vietnam to the EU. The specific change in value is shown in
table 4.18.
As the simulation in progressive scenario, the export of Vietnam in HS62 after
tariff reduction from the EU rises by 1.1 times compared to the previous exports value
(from 1.41billion USD to over 1.56 billion USD). Unsurprisingly, the major products
in HS62 obtaining high trade creation effect such as men’s shirts of cotton, men’s or
women’s overcoats of man-made fibers, men’s and women’s trousers of synthetic
fibers or cotton also accomplish an efficient goal in exports.
Scenario 2
The result in the second scenario is similar to the former one, but greater value in
trade effect. In the scenario 2, trade diversion is 177667.957 USD, which also
63
comprises 58% as in the first one. This means that EVFTA will boost the value of
Vietnam’s garment export to EU by 177 million USD, and 58% of that value will be
gained by the increase of EU imports demand from Vietnam by diverting from other
market of rest of the world. The tariff rate is 0%, which makes the total trade effect as
twice as the first scenario. The price of Vietnamese garment products now are relative
cheaper than others, meaning that the trade diversion effect is positive. Similarly, the
top nations suffer from negative trade diversion effects are China, India, Indonesia,
Bangladesh (table 4.19).
Table 4.19: Top countries losing their market on garment products in the EU
due to tariff reduction by 100% (scenario 2)
Country Trade diversion effect Share (%)
China -17832.562
31.88972
Bangladesh -96818.4
5.873628859
India -7055.4
2.323882
Indonesia -4209.33
1.386454
Source: Author’s calculation from WITS (2014)
Note that the effect of trade on the first and the second scenario are the same in
proportion but different in the scale. Once again China is the most affected country in
the scenario with more than 32% of total trade diversion, meaning that 32% in the
increase of Vietnam’s garment value exported to EU will come from the loose of
Chinese garment exporter in the scenario. The situation are the same for Bangladesh,
India and Indonesia whose their market will divert 5.8%, 2.3% and 1.4% respectively
in their value to Vietnam.
64
Table 4.20: Products gain most trade effect in scenario 2
Product code Total trade effect
620520 39411.82
620193 33852.64
620293 30923.9
620343 26566.57
620342 24790.45
620463 20487.71
620213 17930.04
620462 17742.27
620433 11623.71
620443 9441.127
620333 8884.487
620212 7131.972
620192 6119.029
620113 4666.203
620432 4064.274
620332 3903.348
620453 3132.544
620469 2745.548
620439 2439.768
620292 2252.825
620211 2170.251
620323 1924.233
620530 1872.179
620322 1846.935
620452 1809.25
620442 1684.943
620112 1474.88
620219 1463.857
620331 1327.804
Source: Author’s calculation from WITS (2014)
As the simulation in progressive scenario, the export of Vietnam in HS62 after
tariff reduction in scenario 2 from the EU rises by 1.21 times compared to the previous
65
exports value (from 1.41billion USD to over 1.72 billion USD). The major garment
products gain high trade creation in this scenario is the same as the 1st scenario.
Scenario 3
The scenario 3 is more complicated than the first two ones. In this scenario, all
the nations concluding FTA with EU will benefit positive total trade effects. Once
again, the trade diversion effect dominates the creation one. As can be seen from the
table 4.21, India gains the most value in trade total effect, followed by Vietnam. This is
accompanied by Thailand, Malaysia and Singapore in order. This means that FTAs
with these nations will increase their garment export value into EU, and India and
Vietnam are the two nations gain most trade effects in this scenario.
As explained in the scenario 3 assumption before, China and EU haven’t
negotiated any FTAs about trade but investment so China will not be considered in
scenario 3.
Table 4.21: Trade effect in FTAs in scenario 3 (thousand USD)
Vietnam India Malaysia Singapore Thailand World
Trade
total
effect
295141
388042.6
6531.79
1165.8
30534.83
314514.4
Source: Author’s calculation from WITS (2014)
From table 4.21, if India, Malaysia, Thailand, Singapore and Vietnam conclude
their FTAs with EU, many countries will suffer from negative trade diversion effect.
The most negative effect is recorded in China’s figure with -194801000USD,
accompanied by that of Turkey and Tunisia respectively. There will be shift in EU's
import demand from other nations to those of Malaysia, Thailand, Singapore, India and
Vietnam.
66
The garment products gain highest trade effect in this scenario is the same as the
scenario 1 and 2 namely 620520, 620193, 620293, 620343, 620342, 620463, 620213,
620462, 620520, 620193, 620293, 620433, 620343, 620342, 620443, 620333, 620462,
620463, 620213,620212, and 620192.
To sum up the simulation of SMART model, as the trade barriers between
Vietnam and EU reduce via 3 scenarios, the garment export from Vietnam to EU will
significantly increase. The products gains most trade effects in 3 scenarios are the
same, which are 620520, 620193, 620293, 620343, 620342, 620463, 620213, 620462,
620520, 620193, 620293, 620433, 620343, 620342, 620443, 620333, 620462, 620463,
620213,620212, and 620192. Furthermore, there will be little thread for Vietnam
garment export into EU if other FTAs between EU and its partners come concluded.
The results indicate that Vietnam should continue negotiating EVFTA on reducing
tariff rate of garment products.
EVFA conclusion cold help strengthen the position of Vietnam garment
industry in the EU market and there will be positive impacts for this industry under
EVFTA in the future.
67
CHAPTER 5
CONCLUSION
5.1. Summary
Vietnam and EU have a strong diplomatic trade relation since 1990. Now, the
EU is one of Vietnam’s biggest trading partners and also the second biggest importer
of Vietnam garment products. Importantly, EU remains as an attractive market for
Vietnam’s garment export since 2005 to 2014.
Vietnam is an export driven country whose nearly 20% values of total good are
exported into the EU. The research also confirms that EU is one of most important
importers of Vietnam's goods. Moreover, Vietnam garment value export to EU ranks
within the top 4 HS product's values.
The Vietnam garment export to EU’s growth rate reached a peak in 2006 with
46.67% and remained high until 2011 with 30.41%. Garment exported to EU
accounted for over 15% in total Vietnam export to EU from 2005 to 2012 before going
down to over 10% in two latest years; though the Vietnam export garment to EU only
contributed nearly 2% in total import garment into EU from World.
In Vietnam’s garment export to EU, HS62 comprised 66.3%, followed by HS61
with 26.92%. At the moment, Vietnam is in top 4 HS62 exporters to EU.
The study analyzes trade flows in 6 digits, which means 60 products in HS6204,
HS6203, HS6202, HS6201, and HS6205 are studied.
EU is the second biggest importer of Vietnam garment products, and Vietnam is
the third exporter garment product to EU in return. If EVFTA comes concluded in the
68
future, the trade barriers between Vietnam and EU will reduce, helping the
competitiveness of Vietnam garment product increase. This might expand the value of
Vietnam garment export to EU in the future.
From 4 upper trade indicators, we could infer that EU is being a potential
market for Vietnam's garments export and the future EVFTA potentially brings about
substantial benefits for Vietnam's garment exporters. Firstly, all the 60 garment
products analyzed show high TII over the time indicating a high attractiveness of
trading with EU under EVFTA for Vietnam. Moreover, more than 90% of Vietnam
garment exports to EU enjoy high RCA and Vietnam’s garment products have been
examined as one of the most comparative advantage ones in the world. Also, most of
Vietnam garment export to EU experience increase ES and the conclusion of EVFTA
would bring many opportunities in specialization of Vietnam garment export to EU.
Finally, the high complementary level shows that Vietnam can potentially promote to
export garments to EU and gain substantial benefits from that exports.
The simple average tariff EU applied on Vietnam garment export reduced
significantly between 2005 and 2007, decreasing by about 4% from 2005 to 2007
before remaining unchanged at 11.78% until 2013. The weighted tariffs were slightly
0.15% higher than the counterpart during the period. There will be potential for
Vietnam’s garment export to EU, because EVFTA would negotiate to reduce the tariff
rates of Vietnam’ garment export to the same level as the simple average tariffs applied
by EU on Vietnam’s total export.
As the FTA between Vietnam and EU comes concluded, tariff rate on Vietnam's
garment exports to EU might reduce to at least the levels eligible for Singapore and
Korea.
69
When the trade barriers on garment products between Vietnam and EU reduce,
the EU would increase their import garment products from Vietnam, diverting from
other market of rest of the world toward Vietnam .Furthermore, there will be little
thread for Vietnam garment export into EU if other FTAs between EU and its partners
come concluded. The results indicate that Vietnam should continue negotiating
EVFTA on reducing tariff rate of garment products.
EVFA conclusion cold help strengthen the position of Vietnam garment
industry in the EU market and there will be positive impacts for this industry under
EVFTA in the future.
5.2. Opportunities and challenges for Vietnam garment export to EU
Opportunities:
The analyzing fact and figure on Vietnam and EU garment trade flows indicates
important position of Vietnam garment export to EU. This brings opportunity for
Vietnam garment exporter to expand market in the EU and negotiate EVFTA in the
future.
The simple average tariff rate EU levied on Vietnam total export were higher
than that of Vietnam garment export. If EVFTA comes concluded in the future, the
trade barriers between Vietnam and EU would reduce, helping the competitiveness of
Vietnam garment product increase. This might expand the value of Vietnam garment
export to EU in the future.
According to trade indicators results, we could infer that EU is being a potential
market for Vietnam's garments export and the future EVFTA potentially brings about
substantial benefits for Vietnam's garment exporters.
70
High TII over the time reveals a high attractiveness of trading with EU under
EVFTA for Vietnam. This brings opportunity to expand Vietnam garment export to EU
in the future.
High RCA indicates that Vietnam’s garment exports to EU have very strong
comparative advantage, and export garment product to EU should be strongly
competitive in the EU market under EVFTA and Vietnam garment would have chance
to expand market in EU in the future.
Increasing ES shows that conclusion of EVFTA would bring many opportunities
in specialization of Vietnam garment export to EU.
High complementary level shows that Vietnam can potentially promote to
export garments to EU and gain substantial benefits from that exports.
The results of SMART model reveal opportunities to increase Vietnam garment
export to EU when trade barriers on garment products between Vietnam and EU reduce
under EVFTA.
The results of SMART model also shows opportunities for Vietnam to dominate
garment export share in EU even if other FTAs between EU and its partners come
concluded.
Positive results from trade indicators and SMART model show positive effects
for Vietnam garment export under EVFTA; bringing the chances to attract investment
in to garment industry in Vietnam.
All the positive results from above analyzing enhance the opportunity for
Vietnam an EU conclude EVFTA in the near future.
Challenges:
71
The analyzing fact and figure on Vietnam and EU garment trade flows indicates
challenges for Vietnam to compete its market share with China and India in EU.
The research on tariff barriers shows the challenges to negotiate the reduction of
tariff rates on Vietnam garment export to EU.
The SMART model illustrates challenges for Vietnam garment exporters to
remain their strong position in EU market when all FTAs between EU and its partners
come concluded.
Beyond the scope this study, the strict regulations of EU under GSP are
challenges for Vietnam garment product to expand its market in EU.
Implications for Vietnam:
Vietnam should continue negotiating EVFTA with EU and conclude it in near
future.
Vietnam garment exporters must take advantage of every opportunity to
penetrate this market.
Vietnamese garment enterprises should specialize and strengthen its garment
export to EU. Furthermore, the Vietnam garment industry should increase their
competitiveness in many production factors (labor skills, infrastructure, the models of
products, etc.). Vietnam should strengthen supporting industry garment products in
order to increase its comparative advantages.
72
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VIETRADE, 2014. Vietnam Trade Promotion Agency. [Online]
Available at:
http://www.vietrade.gov.vn/en/index.php?option=com_content&view=article&id=133
0:strengths-of-the-vietnam-textile-and-garment-industry&catid=270:vietnam-industry-
news&Itemid=232
[Accessed 30 November 2014].
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Available at: http://www.wcoomd.org/en/topics/nomenclature/overview/what-is-the-
harmonized-system.aspx
[Accessed 29 November 2014].
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Available at: http://wtocenter.vn/content/eu-and-vietnam-hold-sixth-round-fta-talks
[Accessed 29 November 2014].
WTO Center, 07-11-2013. WTO Center VCCI. [Online]
Available at: http://wtocenter.vn/content/vietnam-eu-begin-new-round-fta-negotiations
[Accessed 29 November 2014].
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Available at: http://wtocenter.vn/content/4th-negotiation-round-vietnam-%E2%80%93-
eu-free-trade-agreement
[Accessed 29 November 2014].
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Available at: http://wtocenter.vn/content/third-round-fta-vietnam-%E2%80%93-eu
[Accessed 29 November 2014].
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Available at: http://wtocenter.vn/content/7th-negotiation-round-vietnam-%E2%80%93-
eu-free-trade-agreement
[Accessed 29 November 2014].
77
Yvan , D., 2010. The Economic Impact of the Free Trade Agreement (FTA) between
the European Union and Korea, Korea: European Commission.
i
APPENDIX 1
TOP HS62 PRODUCTS EU IMPROT FROM VIETNAM
Product code European Union (EU 27)'s imports from Viet Nam
'620463 36987 53725 97035 142209 160719 138928 139681 156156 121611 142495
'620462 19136 25345 73427 86902 93277 75650 79336 91958 91777 93736
'620433 6558 12021 9296 15296 21718 26493 24364 45881 64484 87411
'620443 2734 2682 4041 6729 9484 13127 18683 35144 43062 56429
'620432 1041 3147 5716 7522 9937 7319 19476 15277 21439 29435
'620453 4394 7343 11576 13170 15641 14102 16350 18885 19097 19637
'620469 1099 1139 1674 5933 14435 15618 12752 19848 12931 15832
'620439 756 836 736 1404 2068 3205 5189 10670 12139 15525
'620442 856 695 1721 3744 6039 5037 8608 10025 10373 10931
'620452 1559 2368 6917 9009 7516 7466 9015 11951 14019 9258
'620444 203 239 213 215 354 796 1954 3497 3634 5216
'620449 449 314 177 863 1396 1341 1980 4942 4357 2776
'620459 95 579 864 1255 1727 2902 4089 2922 2215 2036
'620431 45 173 499 676 474 930 2001 1031 1600 860
'620461 13 77 510 816 1071 603 1010 1569 806 698
'620422 934 156 190 365 235 152 42 90 510 391
'620423 1763 1284 2301 1320 1263 393 846 484 291 264
'620419 1317 124 426 39 56 58 63 30 62 176
'620451 22 34 221 175 499 648 359 284 259 143
'620441 0 0 0 12 178 85 253 124 181 131
'620413 3145 761 685 1401 975 411 251 335 189 111
'620429 220 116 1018 117 277 259 123 134 66 99
ii
'620412 339 20 49 292 50 49 3 97 161 64
'620411 30 6 7 417 588 4 3 6 25 9
'620421 11 23 11 0 0 0 0 1 100 0
'620343 34028 45393 90722 111667 128659 113405 126172 175119 164373 175468
'620342 47207 42007 89514 102473 112986 78425 82241 109870 120305 133720
'620333 5555 11153 10024 13175 17183 20205 18771 35759 44909 56717
'620332 4983 7998 5654 7411 8983 8724 7814 11916 15225 18591
'620323 1065 2490 2849 2842 13610 4314 10629 23759 12250 9160
'620331 64 45 150 206 627 1258 2427 4644 6014 8879
'620341 292 682 494 1159 1043 1776 5966 8168 6390 6487
'620339 388 540 71 867 614 993 2192 4554 5029 5789
'620349 1865 1585 3025 4833 6073 6428 5162 6423 6151 4606
'620312 707 674 1491 2919 3530 2716 557 1240 1823 1548
'620322 285 129 614 1105 1031 484 118 342 1247 1379
'620311 25 51 270 402 681 950 284 385 331 728
'620319 183 27 1170 208 237 160 44 234 860 126
'620329 252 28 20 64 198 55 17 75 38 79
'620321 3 9 0 0
'620293 97287 81810 86135 103089 128020 111249 123811 165540 159562 174347
'620213 31391 29958 28949 44213 61589 56259 62877 111200 92003 103903
'620212 4173 4885 7586 16396 24492 18221 14164 20846 19456 31382
'620211 472 1149 1128 2353 8615 7799 10079 21315 14673 15912
'620292 9291 9137 12826 21514 29901 18766 13954 15917 12033 12048
'620219 792 129 36 327 1032 3646 2940 11681 7229 8355
'620299 211 150 279 302 502 1185 376 2513 843 6281
'620291 216 364 772 684 1100 1013 1495 4263 1332 1308
'620193 104636 97461 100437 114204 134971 151806 167745 217391 186152 210588
iii
'620192 16879 16714 25768 27939 32166 30654 30460 36570 33516 33927
'620113 12907 12285 11461 12387 19649 18520 14364 22375 18779 28738
'620112 5246 3256 5645 8091 9094 5835 5019 8237 8685 8114
'620199 262 178 296 267 333 1181 1026 2875 2086 3336
'620191 610 201 563 672 2366 4083 4823 3845 2816 3115
'620111 804 136 915 769 3366 2948 8061 2567 1380 2963
'620119 802 421 189 260 81 533 157 236 585 572
'620520 94236 92078 109762 117964 139500 141449 144752 213863 194712 211420
'620530 11405 9757 10643 10569 8927 5473 6432 9214 9132 9813
'620590 3298 2638 3010 6019 5721 5228 2759 4773 5971 5200
'620510 51 153 10 0
Source: Trademap(2014)
APPENDIX 2
TRADE INTENSITY INDEX
Product Code Trade Intensity
2005 2006 2007 2008 2009 2010 2011 2012
620111 78.88 84.98 43.14 44.01 54.53 17.50 9.70 9.70
620112 62.05 58.02 53.30 73.12 88.92 54.61 48.79 48.79
620113 52.73 57.30 65.39 55.78 67.38 73.32 64.78 64.78
620119 77.17 82.99 94.74 112.96 149.12 89.10 101.94 101.94
620191 ------- 50.31 0.28 ------- 1.74 1.68 18.76 18.76
620192 3.41 22.56 15.36 47.30 36.28 63.88 41.37 41.37
iv
620193 41.41 44.39 35.75 67.57 38.02 54.18 44.86 44.86
620199 26.10 60.58 62.82 77.15 82.59 82.38 141.28 141.28
620211 67.41 74.78 67.52 68.54 72.10 24.51 28.92 28.92
620212 12.31 11.19 10.38 11.88 9.76 26.43 14.59 14.59
620213 59.29 61.83 53.69 48.72 63.54 56.15 55.11 55.11
620219 56.69 61.81 94.62 93.74 124.98 133.57 118.45 118.45
620291 38.40 ------- ------- --------- --------- 1.44 8.64 8.64
620292 7.78 5.07 73.78 30.83 39.45 13.19 20.95 20.95
620293 29.08 33.50 92.33 97.27 60.11 49.96 39.41 39.41
620299 46.48 55.48 60.84 62.26 62.22 71.05 122.32 122.32
620311 48.90 34.29 5.65 0.17 1.86 6.72 1.76 1.76
620312 27.33 68.57 90.60 31.84 29.40 34.72 21.30 21.30
620319 75.73 42.45 25.48 9.06 6.79 1.17 2.45 23.87
620322 29.89 18.50 118.78 77.39 43.45 1.35 3.60 --------
620323 66.70 111.50 131.34 145.79 181.24 126.68 110.47 193.24
620329 64.15 86.21 148.99 325.65 271.03 150.79 129.09 36.26
620331 109.88 372.45 ------ 0.67 4.23 3.67 14.23 59.52
620332 52.21 162.65 46.94 41.97 27.47 26.29 44.59 36.25
620333 48.48 85.86 56.19 69.65 76.15 83.54 75.55 65.94
620339 73.89 57.85 64.48 68.27 77.96 75.12 63.05 61.13
620341 40.73 74.49 52.51 41.95 27.86 55.29 120.22 121.86
620342 26.95 62.52 23.29 31.56 21.06 21.91 30.01 41.55
620343 67.37 46.68 90.65 68.06 58.84 64.72 58.82 45.44
620349 55.91 88.49 67.72 64.62 68.50 64.82 63.86 56.63
620411 65.56 66.30 42.97 ------- 5.61 9.99 -------- 11.32
v
620412 88.22 129.02 72.73 89.76 55.11 110.14 224.73 205.44
620413 3.40 48.26 33.90 4.69 23.83 35.03 33.29 77.15
620419 79.02 32.11 62.36 114.70 69.15 10.54 32.64 26.75
620421 106.96 30.50 70.13 95.55 ------- ------- 0.84 6.50
620422 4.43 45.61 4.17 2.68 ------- 5.16 25.59 8.36
620423 31.97 2.08 47.09 19.56 61.58 59.76 30.68 27.81
620429 4.06 27.08 86.87 136.00 54.47 55.83 52.31 72.21
620431 0.46 147.01 8.58 -------- 0.99 1.41 28.37 3.57
620432 15.62 36.32 21.36 16.89 14.77 36.03 33.74 35.78
620433 25.77 28.77 30.02 28.28 44.59 58.30 68.18 58.20
620439 40.93 48.54 56.77 48.85 54.11 56.95 65.54 71.76
620441 31.36 181.04 77.99 16.48 10.21 117.58 13.31 3.21
620442 18.07 32.55 22.24 10.76 15.44 38.33 38.54 26.05
620443 13.38 49.86 42.34 10.47 14.29 20.86 21.33 29.43
620444 -------- 10.49 6.38 5.15 5.29 6.32 13.71 15.80
620449 29.58 31.78 24.69 26.58 33.22 40.38 61.49 87.90
620451 2.96 40.91 31.01 60.80 0.50 6.73 8.09 2.23
620452 24.19 66.55 32.99 23.07 20.96 27.98 36.61 35.85
620453 16.00 14.84 13.42 28.94 25.02 25.78 29.30 38.10
620459 31.89 50.78 53.09 53.40 71.42 71.65 96.86 87.07
620461 34.42 46.60 20.75 ------- ------- 2.90 3.72 4.63
620462 21.10 21.95 16.34 11.71 16.52 15.84 23.41 21.57
620463 19.86 43.41 37.53 35.41 45.24 44.43 47.97 42.99
620469 38.56 56.15 53.39 56.78 59.13 68.04 74.72 77.33
Source: WITS(2014)
vi
APPENDIX 3
REAVEALED COMPARATIVE ADVANTAGE INDEX
RCA
HS code 2005 2006 2007 2008 2009 2010 2011 2012 2013
'620111 5.714254 1.645745 2.006181 1.064774 1.340983 1.595945 1.548218 1.385446 4.330061
'620112 2.297501 2.598275 3.061543 2.307609 1.627715 2.165469 5.201032 4.727848 5.111856
'620113 48.21375 36.25218 29.48782 30.94357 29.27987 27.39918 20.74642 20.01442 9.283428
'620119 204.4877 363.6714 173.6117 95.23681 100.2854 98.26638 57.53744 55.75084 1.732781
'620191 0.109175 0.60749 1.257644 0.651886 0.574177 1.892852 2.354413 4.70056 5.413651
'620192 2.704292 2.626601 0.639759 1.27481 0.89594 1.414188 3.239006 3.138087 7.777448
'620193 2.245367 1.373796 3.318604 1.980631 3.663512 5.7581 10.45527 11.25097 16.71511
'620199 38.0478 241.7289 265.0636 180.8266 152.8043 170.7626 98.94986 64.15877 4.400351
'620211 23.1681 9.443763 0.579414 0.327039 1.509076 1.281725 1.222796 1.50213 4.211045
'620212 1.254565 2.232076 5.189028 5.64579 7.036234 5.205492 6.455879 5.246219 9.606488
'620213 9.42201 11.65076 14.29603 12.81164 8.587064 7.560365 7.382417 7.878529 9.227869
'620219 119.6486 52.07792 52.1117 57.06889 68.71856 65.91602 75.67625 65.79817 5.211349
'620291 0.087191 0.112488 1.422534 0.138218 0.286988 3.498577 8.018639 7.77638 4.120914
'620292 0.904814 0.577069 0.389188 1.045816 1.138089 1.361065 4.410642 3.981604 5.525924
'620293 3.564048 1.920619 2.847231 2.734639 3.009098 4.639099 7.803455 8.084795 13.03466
'620299 39.54086 94.57836 184.8981 127.928 133.217 125.6051 89.80496 41.53477 7.802659
'620311 0.242486 0.16584 0.357666 0.679336 0.510658 0.887223 0.625444 1.379854 3.093377
'620312 6.99335 8.831557 4.105107 1.472677 1.434789 1.275656 2.005397 5.603477 6.311255
'620319 53.41801 27.71338 27.17494 17.97262 23.74195 24.71196 26.002 18.66786 0.496264
'620321 1.246953 0.555361 38.25629 0 0 0 0 0 0
'620322 1.45837 6.940756 1.912367 1.957689 3.975264 1.436975 4.271605 1.000975 1.104604
'620323 13.20229 44.29845 37.36538 17.47826 11.82556 6.816152 15.98206 12.88628 5.744005
vii
'620329 42.28001 16.82739 79.57193 117.8198 102.5713 66.62475 64.51133 66.79514 0.236961
'620331 0.037726 0.062729 0.204389 0.620776 0.850975 1.091275 0.9731 1.065318 2.398992
'620332 2.732841 0.964467 2.027873 0.478486 1.01396 1.342302 3.04068 1.156147 4.15383
'620333 26.04829 39.37666 39.95501 21.42624 13.34916 14.91575 16.11936 11.66065 9.624693
'620339 114.089 40.4237 69.16494 107.4147 104.0275 109.2544 100.3348 85.4732 4.044199
'620341 10.2315 12.70584 18.44824 4.421761 2.127736 2.667925 1.740866 1.503314 4.70029
'620342 0.847706 0.809538 2.228775 2.724541 2.595014 2.954077 3.635965 3.335201 3.796191
'620343 5.327822 7.115218 10.41424 10.31646 10.70504 14.19784 14.49106 13.18077 16.51556
'620349 82.42697 140.7313 72.73128 79.6054 67.22766 69.64436 54.13529 47.90672 3.958452
'620411 3.008586 2.237915 0.206468 0 0.619133 0.082032 0.166757 0.431315 0.138564
'620412 8.61694 8.834105 4.01058 2.436882 4.618416 5.117914 12.22679 8.00163 0.69515
'620413 3.318986 5.431381 8.225692 27.64854 18.60492 14.31574 13.72792 8.231151 16.24777
'620419 75.6643 33.1449 41.82981 12.28084 5.220658 8.819831 15.52901 2.482608 0.656943
'620421 19.56421 108.9768 101.2648 4.085496 4.865078 5.356435 12.18958 10.90522 0
'620422 0.948643 3.648887 6.725704 7.752418 6.779901 6.021239 3.463738 1.162608 0.991365
'620423 33.51964 37.62604 25.7903 7.989644 21.77077 8.629271 8.179438 13.98501 4.370412
'620429 45.46157 9.984197 19.6328 11.78787 14.05678 12.07108 9.612047 7.853315 0.246541
'620431 0.069318 0.062675 0.045192 0.203692 0.590816 1.30512 1.430723 1.776571 1.70991
'620432 0.956841 0.721918 1.858842 2.943186 2.507409 2.63702 3.221408 4.366167 5.749626
'620433 6.393425 9.766919 12.86757 8.853273 8.285373 7.641489 11.15006 10.61451 12.09608
'620439 17.58755 15.93115 34.74889 43.9218 38.78877 55.15046 43.01717 45.6048 5.1364
'620441 0.053648 0.054977 0.440669 0.493837 0.248569 2.982106 0.705949 0.69363 0.959363
'620442 0.650813 0.668756 2.080061 2.291296 0.899265 1.57134 1.412955 1.494989 3.404554
'620443 3.826518 42.07408 5.98994 4.25784 4.496144 4.209916 4.609346 4.547666 5.218743
'620444 1.86567 2.635736 3.342516 3.494316 3.806139 3.259132 2.134719 2.398386 2.026801
'620449 8.898904 6.754846 9.652579 3.842104 3.821955 5.383725 5.387047 5.219343 0.822813
'620451 0.898033 0.126743 0.032347 0.374544 0.868628 1.568609 2.077399 2.298196 3.004537
viii
'620452 1.634424 0.823152 1.384454 1.401378 1.503396 3.079249 2.869153 3.591014 4.84484
'620453 2.094038 1.929941 3.847089 4.925057 6.378665 6.20493 6.430418 6.314178 6.900541
'620459 5.627551 2.653664 9.830654 10.78781 10.82449 10.42011 8.793395 9.774228 1.897393
'620461 0.845982 1.026473 0.207771 0.063007 1.442114 1.560523 2.248312 1.374571 2.31008
'620462 1.512335 1.207756 3.097177 3.587484 3.813219 4.189756 3.78893 3.697027 5.093033
'620463 6.469144 5.23839 9.353536 9.028916 9.904705 10.50105 12.96676 13.93188 14.74919
'620469 27.94797 16.34752 30.16334 34.66486 29.11651 25.60629 17.66291 17.78001 4.54336
'620510 232.5778 119.5061 16.91494 0 0 0 0 0 0
'620520 3.38027 2.767038 4.033659 3.716208 3.866949 4.320589 4.47056 4.240924 6.22201
'620530 13.99788 8.905876 9.685047 9.549159 8.728956 11.38334 10.93417 10.35869 9.694648
'620590 46.34564 64.73049 44.60778 44.37887 49.55689 51.33722 42.54054 37.06186 3.691195
Source: Author’s calculation from Trademap (2014)
APPENDIX 4
EXPORT SPECIALIZATION INDEX Export Specialization
HS
code 2005 2006 2007 2008 2009 2010 2011 2012 2013
'620111 4.29268687
2 1.262061
1.52046573
8
0.728639
3
0.915993
7
1.04449089
9
1.07720167
5
1.02635665
4
3.24298
71
'620112 1.36701469
9
1.567487
9
1.88160761
2 1.373331
0.971073
7
1.22992630
3
2.98273815
5
2.70704849
8
2.83217
88
'620113 29.9578926
7
23.03864
2
19.8907316
8
20.43753
7
18.51520
9
17.5476980
6
13.2732239
3
12.7703448
7
5.81710
87
'620119 161.444050
4
382.1635
4 157.647062
76.51824
1
88.12975
8
88.5848237
6 51.3048467
42.3964285
3
1.23710
01
'620191 0.11258061
4
0.558868
6 0.99138491
0.485871
1
0.383368
2
1.31240551
3
1.82142586
5
3.95074609
1
4.68952
52
ix
'620192 2.08780467
9
1.900300
9
0.45477154
4
0.834679
6
0.611688
3
0.99337220
3
2.27136723
9
2.32937813
2
5.83725
76
'620193 1.77468120
7
1.138785
6 2.8338736
1.629574
7
2.938388
7
4.52118685
8
8.08682824
9 9.50384245
14.5786
09
'620199 29.4433202
2
166.6606
2
180.530785
2
128.2689
1
107.0105
5
123.592242
8
72.2598269
8
50.0112917
2
3.41707
87
'620211 17.7938597
2
7.688690
7
0.45495399
3
0.230800
4
1.025935
6 0.82940626
0.82603780
1
1.04119440
2
2.96514
55
'620212 0.87887441
3
1.561721
5
3.46938250
2
3.714860
5
4.499741
4
3.12909250
5
3.98840917
2
3.34727047
6 5.90621
'620213 6.20639517 8.421083
5
10.9309759
4
9.304588
4
6.063703
9
5.29002408
1
4.81794155
7
5.37380473
8
6.40093
84
'620219 124.101258
9
60.29592
1
52.9745668
6
58.67213
2
62.71522
1
56.5011268
7
59.9348515
7 52.679191
3.92097
25
'620291 0.07668391
1
0.087524
3
1.04889921
5
0.083211
9
0.178154
1
2.30738332
3
5.59357781
7
5.28566830
1
2.79327
38
'620292 0.66434721
3
0.400860
5
0.24974640
9
0.638649
6
0.712024
5
0.84590166
2
2.66355962
1
2.62435840
7
3.78579
89
'620293 2.57488699
4
1.440425
9
2.20736092
7 2.055398
2.173888
5
3.26788266
5
5.40473799
7
5.48372173
1
8.87181
16
'620299 45.4203629
9
91.41106
6
140.987242
2
95.51926
3
90.42866
6
80.8068510
1
55.1396919
3
29.8837226
6
4.76903
91
'620311 0.24004482
5
0.152473
5
0.30855540
9
0.545145
6
0.431839
2
0.75786812
9
0.52632854
8
1.19812316
6
2.80215
89
'620312 4.54256286
6 6.285436
3.06966131
7
1.201155
6
1.316060
9
1.30551966
1
2.00384991
4
5.96704214
8
7.41977
53
'620319 56.6297192 26.58902 26.4262759
6
15.98877
3
22.56033
5
18.0658445
3
20.6001166
1
12.7217301
9
0.42757
28
'620321 0.86182253
4 0.490306
36579.2356
7 -- -- -- -- -- --
x
'620322 0.98645552
5
4.751838
6
1.50292569
6
1.415833
8
3.205313
4
1.20921328
8
3.84014236
4
0.88260065
5
1.01840
41
'620323 10.5290953
6
36.67559
1
31.3578187
8
14.33543
8
10.24189
5
5.00760513
5
10.6131790
1
10.3088736
4
6.17540
08
'620329 52.9157290
3
31.41469
2
115.365959
8
119.3085
2
97.76431
7
91.2307010
7
79.0483469
7
58.3807185
5
0.17972
66
'620331 0.03191482
5 0.051726
0.17091728
5
0.482402
6
0.608712
3
0.74999241
6
0.67851652
9
0.76036448
5
1.74202
95
'620332 2.09434600
9
0.706358
6
1.39086138
2
0.331271
3
0.690351
2
0.88440439
8 1.90439121
0.70633173
9
2.58493
04
'620333 20.3253696
2
31.18881
8
31.4455650
1
15.88291
5
9.320134
7
9.96235314
8
10.8936013
5
7.60634553
6
5.90687
99
'620339 117.224262
5 39.85404
62.7988964
8
93.07120
3
85.87626
1 88.7402101
80.8464700
4
63.2350897
2
2.95367
58
'620341 9.75373409
7
12.32842
7
18.3702170
4
3.888891
7 1.653368
2.13908185
6
1.45331703
1
1.26697667
3
4.00579
82
'620342 0.68204636
4
0.653560
7
1.77254748
1
1.994013
3
1.869825
7
2.04722961
3
2.43830702
6
2.27202525
6
2.58340
57
'620343 5.27359636
1
7.171148
4
10.2919147
7
9.567936
4
9.655147
9
12.5816026
7
12.7053763
2
11.9580752
3
15.2849
8
'620349 83.1836855
2
146.8120
3
72.6161725
1 78.38045
69.07701
8
68.9152992
9
54.6703697
1
42.4213762
5
3.74316
98
'620411 3.04710541
1 2.479756
0.20558516
8 0 0.687311
0.12876683
2
0.33445849
1
0.72902567
6
0.30199
71
'620412 5.96989159
7
6.862407
1
3.37296081
5
2.266639
8
3.536223
5
3.21998704
2
7.56318528
5
4.67894587
8
0.49317
55
'620413 5.42244708
9
9.957464
4
13.1081959
3
44.14670
6
34.92449
5
27.5755685
3
25.2301755
3
13.6364678
4
25.2356
67
'620419 82.1818620
1
33.68345
6
36.3794626
8
9.308504
6
4.373191
5
8.55266881
5
13.8263834
3 2.81160304
0.81952
93
xi
'620421 11.1449400
4
82.11213
4 59.4034608
2.018222
8
2.223586
6
2.65916842
3
6.66128902
3
6.35989062
1 0
'620422 0.54995855
3
2.032387
9
4.17271483
5
5.536452
9
5.017146
1 4.01937446
2.67855835
7 0.84584027
0.79080
15
'620423 24.2309094
5
26.21139
7
20.4080356
3 6.363823
18.59330
7
8.06971667
8
7.21364711
6
11.6030400
2
2.97271
33
'620429 50.2604175
7
13.29464
9
32.3577758
7
17.94800
9
14.89010
9
13.7503720
6
14.8881990
8
9.25804022
5
0.35497
19
'620431 0.06223522
2
0.055800
5
0.03928267
1
0.166705
8
0.466054
7
1.02337435
4
1.07812218
2
1.32284533
5
1.18836
01
'620432 0.85007888
7
0.580349
2
1.41633055
9
2.176295
3
1.838524
9
1.81843689
6
2.02879602
8
2.67556424
4
4.00594
23
'620433 5.17052878
3
7.914491
2 10.1813373
6.851974
4
6.329342
9
5.70752956
9 7.81430424
6.72838172
5
8.60671
28
'620439 16.6139499
3
14.67036
4
30.0955079
7
34.37831
7
27.81087
6
39.1039453
2
28.2853175
2
28.9592085
1
3.23332
33
'620441 0.05396420
3
0.060704
9
0.41736488
6
0.414311
2
0.193914
4
2.18301654
5
0.52498983
6 0.55491588
0.74541
69
'620442 0.55913342
8
0.550403
6
1.65597181
4
1.728708
5 0.650591
1.10058657
8
0.93963737
3
1.07727889
2
2.62799
28
'620443 4.42534764
6
45.43627
8
5.77396843
2
3.920639
9
3.669528
1
3.24968282
1
3.38403493
2
3.48529981
9
3.90864
63
'620444 1.47387818
9
1.882406
4
2.31575398
1
2.401879
9
2.552194
6
2.14939927
3
1.39483990
2
1.54960477
4
1.42388
43
'620449 9.80817652
3
6.830509
1
9.53944910
6
3.354086
1
2.932193
1
4.16454578
7 4.51916771
4.46964819
7
0.66335
84
'620451 0.82423435
6
0.120678
3
0.02773136
5
0.319649
9
0.646467
3
1.14862885
2 1.47992974
1.76739384
3
2.30136
05
'620452 1.32212770
4
0.663938
3 1.03797314
1.016899
6
1.069228
5
2.13988074
7
1.86755388
3
2.50635354
6
3.48340
14
xii
'620453 1.56335581
4
1.493572
6
2.97304332
2
3.730355
4 4.775141
4.85860920
5
5.10896839
5
5.31346179
4
5.49576
57
'620459 4.95376720
1
2.277782
3 8.23719104
8.120714
1
7.823709
5
8.01853487
7
6.87055347
1 8.22530492
1.47102
73
'620461 0.83512602
6
1.093074
2
0.21235270
5
0.053473
9
1.152999
3
1.22753181
9
1.72900620
9 1.01145139
1.65419
21
'620462 1.46430403
9
1.152193
4
2.85398697
1
3.040119
7 3.232354
3.41869436
8
2.81924785
3 2.80848242
3.83397
67
'620463 5.06639506
6
4.233728
7
7.38543179
4
6.929782
1
7.424388
7
7.82960390
4
9.93529478
3
10.8968029
1
11.8646
78
'620469 30.1277922
5
17.65773
9
30.5085387
9
33.94956
8
25.14261
5
22.5981809
8 16.36389
16.1311051
7
4.08401
2
'620510 349.980772
6
166.6440
5 ---- ---- ---- ---- ---- ---- ----
'620520 3.13100204
8 2.391024
3.35886751
3
2.938669
9
3.023844
6
3.32198868
5
3.41421038
2
3.33997253
4
4.94543
93
'620530 18.2487903
7
11.74748
2
12.5957920
6
11.81620
2
11.20073
5
14.7246215
6 14.1120615
14.7324724
2
13.1180
16
'620590 62.4100476
2
92.86741
5
64.4628967
7
56.03332
6
61.63695
7
68.2684529
2
62.2110919
9
51.4319595
4
5.39682
4
Source: Author’s calculation from Trademap (2014)
xiii
APPENDIX 5
THE VALUE OF TRADE EFFECT ON VIETNAM GARMENT EXPORT (US$
THOUSAND)
Scenario 1: tariff rate 4.8% Scenario 2: Only VN-EU FTA Scenario 3: VN-EU and other FTAs
HS
code Trade creation Trade diversion Trade creation Trade diversion Trade creation Trade diversion
620111 36.26 154.257 72.52 308.748 72.52 307.761
620112 300.123 435.979 600.247 874.633 600.247 859.843
620113 781.129 1542.892 1562.258 3103.945 1562.258 3093.537
620119 63.04 32.286 126.08 64.626 126.08 63.84
620191 121.858 138.558 243.716 278.199 243.716 274.332
620192 1264.409 1787.218 2528.818 3590.211 2528.818 3486.561
620193 6716.063 10101.463 13432.125 20420.516 13432.125 20194.422
620199 302.22 152.748 604.44 307.013 604.44 303.599
620211 259.15 825.676 518.301 1651.95 518.301 1644.241
620212 2176.4 1379.444 4352.8 2779.172 4352.8 2754.346
620213 3766.15 5123.278 7532.299 10397.74 7532.299 10376.194
620219 322.08 405.371 644.159 819.698 644.159 807.423
620291 28.192 48.189 56.384 96.554 56.384 95.5
620292 476.567 648.505 953.134 1299.691 953.134 1282.875
620293 6381.787 8934.255 12763.574 18160.322 12763.574 18083.42
620299 189.204 304.702 378.407 616.849 378.407 605.891
xiv
620311 28.885 37.079 57.77 74.157 57.77 73.665
620312 145.044 103.789 290.088 207.932 290.088 207.862
620319 6.65 7.657 13.3 15.312 13.3 15.038
620322 834.822 88.622 1669.645 177.29 1669.645 168.376
620323 490.576 467.525 981.152 943.081 981.152 908.649
620329 2.791 5.96 5.583 11.921 5.583 11.864
620331 287.963 375.918 575.926 751.878 575.926 739.889
620332 901.199 1049.978 1802.398 2100.95 1802.398 2038.083
620333 1538.405 2896.839 3076.811 5807.677 3076.811 5673.84
620339 115.563 370.245 231.125 740.94 231.125 727.934
620341 200.21 248.134 400.419 496.275 400.419 486.938
620342 5191.626 7203.451 10383.254 14407.197 10383.254 13948.056
620343 5355.61 7922.105 10711.22 15855.353 10711.22 15050.069
620349 203.446 244.617 406.892 489.241 406.892 467.222
620411 0.382 0.524 0.763 1.048 0.763 0.974
620412 2.259 3.805 4.517 7.611 4.517 6.511
620413 6.547 6.894 13.094 13.791 13.094 12.647
620419 4.503 10.799 9.006 21.601 9.006 18.01
620422 17.002 22.547 34.004 45.096 34.004 40.604
620423 14.065 16.488 28.13 32.979 28.13 27.402
620429 1.817 6.566 3.634 13.131 3.634 9.267
620431 71.603 44.533 143.206 89.065 143.206 86.989
620432 502.507 1527.793 1005.014 3059.26 1005.014 2972.487
620433 1871.24 3924.037 3742.481 7881.231 3742.481 7786.756
620439 489.889 729.117 979.778 1459.99 979.778 1426.954
620441 9.641 6.104 19.281 12.208 19.281 11.681
620442 281.948 560.479 563.897 1121.046 563.897 732.823
xv
620443 1989.94 2728.858 3979.88 5461.246 3979.88 4700.612
620444 66.013 303.211 132.026 606.471 132.026 483.345
620449 187.039 162.404 374.078 324.908 374.078 302.27
620451 4.761 6.897 9.523 13.794 9.523 13.488
620452 405.763 498.813 811.525 997.724 811.525 841.023
620453 621.178 944.793 1242.356 1890.188 1242.356 1735.054
620459 59.386 99.92 118.771 199.859 118.771 171.487
620461 25.321 33.67 50.643 67.336 50.643 64.788
620462 4056.041 4815.104 8112.083 9630.185 8112.083 9380.63
620463 3993.114 6246.573 7986.229 12501.484 7986.229 11757.425
620469 477.017 895.659 954.033 1791.515 954.033 1718.315
620520 8780.989 10925.381 17561.979 21849.844 17561.979 18509.49
620530 353.12 582.528 706.24 1165.94 706.24 1134.187
620590 187.427 280.15 374.854 560.335 374.854 508.634
Total 62967.934 88420.387 125935.87 177667.957 125935.87 169205.123
151388.321 303603.827 295140.993
Source: Author’s calculation from WITS (2014)