the trans -pacific partnership agreement: an opportunity for viet nam to reduce its economic...

The Trans -Pacific Partnership Agreement: an Opportunity for Viet Nam to reduce its

Economic Dependence of China

Scott H. Murray &Tai H. Pham Discipline of Mathematics & StatisticsAugust, 2014

Contents

1. Problem statement2. Members of AEC, TPP, RCEP &

FTAAP 3. USA’s TPP Vision 4. China’s FTAAP Vision5. Theories of international trade6. The Extended Input-Output Table 7. Scenarios 8. Conclusion

1. Problem statement

• The ASEAN Economic Community (AEC) by 2015

• The Trans-Pacific Partnership (TPP) by 2014.

• Quantitative assessment of economic effects of AEC and TPP on the textile & apparel, footwear and furniture industries in Vietnam

The flagship FTAs: AEC, TPP, RCEP & FTAAP?

2. Members of AFTA, TPP, RCEP & FTAAP

CambodiaIndonesiaLaosMyanmarPhilippinesThailand

BruneiMalaysiaSIngaporeViet Nam

AEC

AustraliaJapanNew Zealand

Canada Chile Mexico Peru United States

TPP

Russia

Taiwan

FTAAP

ChinaKorea

RCEP

India

3. USA’s Trans-Pacific Partnership Agreement vision

• Strengthen ties across three continents: America, Asia, and Oceania

• Become basis and means to establish the Free Trade Area of the Asia Pacific (FTAAP)

• The baseline: existing US trade and investment agreements

• Create mutual benefits among participants• Ensure third parties do not take advantage of the

agreement• Apply “yarn-forward” style rules of origin

4. China’s Free Trade Agreement of the Asia Pacific vision

• Build step by step the ambitious “New Silk Road” and “New Maritime Silk Road” through bilateral negotiation, Sanghai Cooperation Organization (SCO), ASEAN & APEC

• Compete with the USA

China’s New silk road vision

FTA: Beneficial to poor countries?

5. Theories of international trade

Mercantilism & Neo-mercantilism

Division of labor & new international division of labor

Comparative advantage &

complementary and competing economies

The Viner’s model & Extended Input-

Output Model

5.1. China encourages exports and discourages imports

2006 2007 2008 2009 2010 2011 2012 2013

-1000

-800

-600

-400

-200

0

200

400

169 256

151 141 139

(796)(731)

(418)

(539) (518)

49

(134)

China United States of America Japan Viet Nam

Year

Billion USD

5.2. China keeps its exchange rate weak

5.3. China & New International Division of Labor

Trade indicators

5.4. China & Viet Nam are competing economies

Revealed symmetric comparative advantage (RSCA) index

=Revealed comparative advantage (RCA)

RSCA =(RCA -1)

(RCA +1)

HS codeRSCA of VIetnam, relative

toRSCA of China, relative to

China Global Vietnam Global

01-05 Animal & Animal Products 0.8 0.5 (0.8) (0.4)

06-15 Vegetable Products 0.8 0.5 (0.8) (0.5)

16-24 Foodstuffs 0.3 (0.1) (0.3) (0.4)

25-27 Mineral Products 0.7 (0.1) (0.7) (0.8)

28-38 Chemicals & Allied Industries (0.5) (0.7) 0.5 (0.3)

39-40 Plastics / Rubbers 0.2 0.1 (0.2) (0.1)

41-43 Raw Hides, Skins, Leather, & Furs 0.0 0.4 (0.0) 0.4

44-49 Wood & Wood Products 0.1 (0.1) (0.1) (0.2)

50-63 Textiles 0.1 0.6 (0.1) 0.5

64-67 Footwear / Headgear 0.5 0.8 (0.5) 0.6

68-71 Stone / Glass (0.1) (0.2) 0.1 (0.1)

72-83 Metals (0.4) (0.4) 0.4 0.0

84-85 Machinery / Electrical (0.4) (0.1) 0.4 0.3

86-89 Transportation (0.5) (0.7) 0.5 (0.3)

90-97 Miscellaneous (0.2) 0.0 0.2 0.3

98-99 Commodities not elsewhere specified 0.6 (0.6) (0.6) (0.9)Explanatory notes

Maximum value 1Minimum value -1

Critical point Comparative advantage =

>0

HS code - top ten

RSCA of VIetnam, relative to

RSCA of China, relative to

China Global Vietnam Global

'85 Electrical, electronic equipment (0.2) 0.1 0.2 0.3

'27 Mineral fuels, oils, distillation products, etc

0.8 (0.1) (0.8) (0.8)

'64 Footwear, gaiters and the like, parts thereof

0.5 0.8 (0.5) 0.6

'62 Articles of apparel, accessories, not knit or crochet

0.4 0.7 (0.4) 0.5

'61 Articles of apparel, accessories, knit or crochet

0.2 0.7 (0.2) 0.6

'84 Machinery, nuclear reactors, boilers, etc (0.6) (0.4) 0.6 0.2

'03 Fish, crustaceans, molluscs, aquatic invertebrates nes

0.8 0.8 (0.8) (0.0)

'94 Furniture, lighting, signs, prefabricated buildings

0.1 0.6 (0.1) 0.5

'09 Coffee, tea, mate and spices 0.9 0.9 (0.9) (0.4)

'10 Cereals 1.0 0.7 (1.0) (0.8)Explanatory notes



>0

Trade indicators

5.4. TPP & Vietnam are complementary

HS codeRSCA of VIetnam, relative to RSCA of TPP, relative to

TPP Global Vietnam Global

01-05 Animal & Animal Products 0.5 0.5 (0.5) (0.0)

06-15 Vegetable Products 0.5 0.5 (0.5) 0.1

16-24 Foodstuffs 0.1 (0.1)

(0.1) (0.2)

25-27 Mineral Products (0.0) (0.1)

0.0 (0.1)

28-38 Chemicals & Allied Industries (0.7) (0.7)

0.7 (0.1)

39-40 Plastics / Rubbers 0.1 0.1 (0.1) (0.0)41-43 Raw Hides, Skins, Leather, & Furs 0.7 0.4 (0.7) (0.4)

44-49 Wood & Wood Products (0.1) (0.1)

0.1 0.0

50-63 Textiles 0.8 0.6 (0.8) (0.5)64-67 Footwear / Headgear 1.0 0.8 (1.0) (0.8)

68-71 Stone / Glass (0.2) (0.2)

0.2 0.0

72-83 Metals (0.3) (0.4)

0.3 (0.0)

84-85 Machinery / Electrical (0.2) (0.1)

0.2 0.1

86-89 Transportation (0.8) (0.7)

0.8 0.2

90-97 Miscellaneous 0.0 0.0 (0.0) 0.0

98-99 Commodities not elsewhere specified (0.7) (0.6) 0.7 0.3

Explanatory notes

Maximum value 1

Minimum value -1


>0

HS code - top ten

RSCA of VIetnam, relative to

RSCA of TPP, relative to

TPP Global Vietnam Global

'85 Electrical, electronic equipment 0.0 0.1 0.1 0.0

'27 Mineral fuels, oils, distillation products, etc 0.1 (0.1) (0.2) 0.1

'64 Footwear, gaiters and the like, parts thereof

1.0 0.8 (0.8) 1.0

'62 Articles of apparel, accessories, not knit or crochet 0.9 0.7 (0.7) 0.9

'61 Articles of apparel, accessories, knit or crochet 0.9 0.7 (0.7) 0.9

'84 Machinery, nuclear reactors, boilers, etc (0.4) (0.4) 0.1 (0.4)

'03 Fish, crustaceans, molluscs, aquatic invertebrates nes 0.8 0.8 (0.1) 0.8

'94 Furniture, lighting, signs, prefabricated buildings 0.7 0.6 (0.3) 0.7

'09 Coffee, tea, mate and spices 1.0 0.9 (0.5) 1.0

'10 Cereals 0.6 0.7 0.2 0.6 Explanatory notes


Critical point Comparative advantage = >0

Extended Input-Output Table

for Vietnam

Inaccurate data of value of exports and imports between Viet Nam and

countries

2007 2008 2009 2010 2011 2012 2013

0

20

40

60

80

100

120

140

160

Viet Nam_imports_Countries

Countries_exports_Viet Nam

Viet Nam_exports_Countries

Countries_imports_Viet Nam

Billion USD Countries_export > VN_import: 3.3%Countries_import > VN_export: 5.8%

Inaccurate data of value of exports and imports between Viet Nam and China

2007 2008 2009 2010 2011 2012

0

5

10

15

20

25

30

35

Viet Nam_imports_China

China_exports_Viet Nam

Viet Nam_exports_China

China_imports_Viet Nam

Billion USD

China_export > VN_import: 8.6%

China_import > VN_export: 1.2%

Inaccurate data on exports and imports between TPP and Viet Nam

2007 2008 2009 2010 2011 2012

0

10

20

30

40

50

60

Viet Nam_imports_TPP

TPP_exports_Viet Nam

Viet Nam_exports_TPP

TPP_imports_Viet Nam

Billion USDTPP export > VN_import: 4.6%

TPP_import > VN_export: 10.2%

Inaccurate data on exports and imports between ASEAN* and Viet Nam

2007 2008 2009 2010 2011 2012

0

2

4

6

8

10

12

Viet Nam_imports_Asean*

Asean*_exports_Viet Nam

Viet Nam_exports_Asean*

Asean*_imports_Viet Nam

Billion USD VN_imports > ASEAN*_exports: 0.02%VN_exports > Asean*_imports: 27.0%

6. Extended Input-Output Table for Vietnam

Domestic 67%

TPP 10%

Asean* 4%

China 6%RCEP* 3%FTAAP* 5%

RoW 6%

Intermediate use

ASEAN 9%

RCEP 23% FTAAP 28%

67%

11%4%7%


Domestic 70%

TPP 8%

ASEAN* 3%

China 5%RCEP* 4%

FTAAP* 3%

RoW 6%

Consumption use

RCEP 20% FTAAP 23%

ASEAN 7%

70%

9%3%6%


Domestic 59%

TPP 12%

ASEAN* 3%

China 8%

RCEP* 4%FTAAP* 4%

RoW 10%

Investment use

29% > 0

41% = 0 30% < 0

RCEP 27% FTAAP 31%

ASEAN 8%

59%

13%

3%9%

TPP 29%

ASEAN* 10%

China 19%

RCEP* 11%

FTAAP* 12%

RoW 20%

IMPORT

ASEAN 25%

RCEP 68%

FTAAP 81%

TPP 55%

Asean* 7%China 7%RCEP* 3%

FTAAP* 3%

RoW 25%

EXPORT

ASEAN17%

RCEP 47%

FTAAP 74%

6. Extended Input-Output Table of Vietnam

USE45%PRODUCE

55%

6.1. Vietnam's imports from the blocs

2007 2008 2009 2010 2011 2012.000

5.000

10.000

15.000

20.000

25.000

30.000

35.000

18.3

23.8

20.7

25.1

31.433.3

11.9

15.116.3

23.1

29.1

34.2

TPP ASEAN* China RCEP*

Year

Billion USD

6.2. Vietnam's exports to the blocs

2007 2008 2009 2010 2011 2012.000

10.000

20.000

30.000

40.000

50.000

60.000

26.6

33.8

28.6

33.4

40.8

50.5

3.2 4.3 4.77

11.1

16.2

TPP ASEAN* China RCEP*

Year

Billion USD

Top ten exporters to Vietnam

Viet Nam imports from: 2007 2008 2009 2010 2011 2012 2013

China 11.9 15.1 16.3 23.1 29.0 34.2 48.6

Korea, Republic of 5.8 7.8 7.1 9.7 13.5 15.9 21.1

Singapore 6.5 8.7 7.0 7.4 10.2 10.4 10.9

Japan 5.7 7.8 6.5 8.2 9.6 10.7 10.6

Taipei, Chinese 6.8 7.9 6.0 7.5 9.0 8.4 8.9

Thailand 4.0 5.0 4.7 5.8 7.1 6.7 7.2

India 1.2 1.8 1.8 2.5 5 3.7 6.0

United States of America 1.9 2.8 3.1 3.7 4.3 4.6 5.0

Malaysia 2.3 2.4 2.3 3.5 3.8 3.8 4.2

Germany 1.7 1. 5 1.6 2.0 2.6 2.5 2.5

Indonesia 1.4 1.7 1.5 1.9 2.4 2.3 2.4

Australia 1.2 1.3 1.1 1.4 2.1 1.8 2.0

Unit: Billion USD

Top ten exporters to Vietnam

Viet Nam imports from: 2007 2008 2009 2010 2011 2012 2013

China 19.9% 20.1% 22.9% 25.2% 25.0% 27.0% 33.8%

Korea, Republic of 9.7% 10.4% 10.0% 10.6% 11.6% 12.5% 14.7%

Singapore 10.9% 11.6% 9.8% 8.1% 8.8% 8.2% 7.6%

Japan 9.6% 10.4% 9.1% 8.9% 8.3% 8.4% 7.4%

Taipei, Chinese 11.4% 10.5% 8.4% 8.2% 7.8% 6.6% 6.2%

Thailand 6.7% 6.6% 6.6% 6.3% 6.1% 5.3% 5.0%

India 2.0% 2.4% 2.5% 2.7% 4.3% 2.9% 4.2%

United States of America 3.2% 3.7% 4.4% 4.0% 3.7% 3.6% 3.5%

Malaysia 3.9% 3.2% 3.2% 3.8% 3.3% 3.0% 2.9%

Germany 2.8% 2.0% 2.2% 2.2% 2.2% 2.0% 1.7%

Indonesia 2.3% 2.3% 2.1% 2.1% 2.1% 1.8% 1.7%

Australia 2.0% 1.7% 1.5% 1.5% 1.8% 1.4% 1.4%

Unit: Billion USD

Top ten importers from Vietnam

Viet Nam exports to: 2007 2008 2009 2010 2011 2012 2013

United States of America

11.4 13.9 13.0 15.9 18.5 21.4 26,0

China 3.2 4.3 4.7 7.0 11.1 16.2 16.9

Japan 6.1 9.1 7.0 8.2 11.6 15.1 14.2

Germany 2.9 3.5 3.2 3. 9 5.6 6.6 7.4

Korea, Republic of 1.4 2.0 2.4 3.3 5.1 5.7 7.2

Malaysia 1.8 2.3 2.1 2.6 3.4 5.2 6.0

United Kingdom 1.9 2.2 1.9 2.2 3.0 3.9 4.5

France 1.7 1.8 1.7 1.9 2.7 3.5 3.7

Australia 3.7 4.4 2.5 2.8 2.9 3.3 3.7

Thailand 1.1 1.4 1.4 1.4 2.0 3.0 3.3

Singapore 2.1 2. 4 2.3 1.6 1.7 2.2 3.1

Italy 1.0 1.2 1.0 1.2 1.8 2.33 2.9

Unit: Billion USD

Top ten importers from Vietnam

Viet Nam exports to: 2007 2008 2009 2010 2011 2012 2013

United States of America

21.8% 20.5% 21.1% 20.7% 18.5% 16.8% 18.8%

China 6.1% 6.4% 7.6% 9.1% 11.1% 12.7% 12.2%

Japan 11.7% 13.5% 11.3% 10.7% 11.6% 11.8% 10.3%

Germany 5.6% 5.2% 5.2% 5.1% 5.6% 5.2% 5.4%

Korea, Republic of 2.7% 3.0% 3.9% 4.3% 5.1% 4.5% 5.2%

Malaysia 3.4% 3.4% 3.4% 3.4% 3.4% 4.1% 4.3%

United Kingdom 3.6% 3.3% 3.1% 2.9% 3.0% 3.1% 3.3%

France 3.3% 2.7% 2.8% 2.5% 2.7% 2.7% 2.7%

Australia 7.1% 6.5% 4.1% 3.6% 2.9% 2.6% 2.7%

Thailand 2.1% 2.1% 2.3% 1.8% 2.0% 2.4% 2.4%

Singapore 4.0% 3.5% 3.7% 2.1% 1.7% 1.7% 2.2%

Italy 1.9% 1.8% 1.6% 1.6% 1.8% 1.8% 2.1%

Unit: Billion USD

The scenarios reduceseconomic dependence on China

1( ) Arr rsI A

Final use

(Y)

Direct, IndirectRequirements

Matrix

(I - A)-1

Output (X)

7. Scenarios

7.1. The Extended Input-Output Table

Intermediate

used

Final use

Total ConsumptionInvestment Export

HHs. Govt.

Domestic

1,171,126 552,607 76,626

294,203

757,554

2,852,116

TPP 174,174 73,383 724 59,563 307,844

Asean* 62,671 24,118 239 15,155 102,183

China 114,097 45,628 470 40,394 200,589

RCEP* 57,560 34,727 264 21,433 113,984

FTAAP* 80,441 27,615 297 17,940 126,293

RoW 97,805 57,489 486 52,317 208,097

Total Import

586,748 262,960 2,480

206,802

1,058,990

Total Intermediate

1,757,874

Value added

1,094,242

Total

2,852,116 815,567 79,106

501,005

Unit: Billion VND

7.2. Scenario 1

Intermediate

used

Final use


HHs. Govt.

Domestic

1,171,126 552,607 76,626

294,203

707,225

2,801,787

TPP 174,174 73,383 724 59,563 307,844

Asean* 62,671 24,118 239 15,155 102,183

TPP + AEC 119,802 47,909 494 42,414 210,619

RCEP* 57,560 34,727 264 21,433 113,984

FTAAP* 80,441 27,615 297 17,940 126,293

RoW 97,805 57,489 486 52,317 208,097

Total Import 592,453 265,241 2,504 208,822 1,069,020

Total Intermediate 1,763,579

Value added 1,038,208

Total 2,801,787 817,848 79,130 503,025

Unit: Billion VND

GDP - 5.1%

7.3. Scenario 2

Intermediate

used

Final use


HHs. Govt.

Domestic

1,171,126 552,607 76,626

294,203

707,225

2,801,787

TPP 174,174 73,383 724 59,563 307,844

Asean* 62,671 24,118 239 15,155 102,183

TPP + AEC 131,782 52,700 543 46,655 231,680

RCEP* 57,560 34,727 264 21,433 113,984

FTAAP* 80,441 27,615 297 17,940 126,293

RoW 97,805 57,489 486 52,317 208,097

Total Import 604,433 270,032 2,553 213,063 1,090,081



Total 2,801,787 822,639 79,179 507,266

Unit: Billion VND

GDP - 6.2%

Scenarios reduce economic dependence on China

1( ) Arr rsI A

Final use (∆Y)

Direct, IndirectRequirements

Matrix

(I - A)-1

Output (∆X)

7.4. Scenarios (cont.)

7.5. Scenario 3Unit: Billion VND

Intermediate

used

Final use


HHs. Govt.

Domestic 1,171,787 552,607 76,626 295,203 777,071 2,872,294

China + AEC + TPP 115,705 46,541 479 41,202 203,927

RoW 472,651 217,332 2,010 166,408 858,401

Total Import 588,356 263,873 2,489 207,610 1,062,328



Total 2,872,294 816,480 79,115 501,813

GDP + 1.6%


Intermediate

used

Final use


HHs. Govt.

Domestic 1,171,787 555,082 76,626 295,244 777,071 2,872,810

China + AEC + TPP 115,705 46,541 479 41,202 203,927

RoW 472,651 217,332 2,010 166,408 858,401

Total Import 588,356 263,873 2,489 207,610 1,062,328



Total 2,872,810 818,955 79,115 502,854

GDP + 2.0%


Intermediate

used

Final use


HHs. Govt.

Domestic 1,171,787 559,385 76,626 296,806 777,071 2,881,675

China + AEC + TPP 115,705 46,541 479 41,202 203,927

RoW 472,651 217,332 2,010 166,408 858,401

Total Import 588,356 263,873 2,489 207,610 1,062,328



Total 2,881,675 823,258 79,115 504,416

GDP + 2.5%

8. Conclusion

Thanks for listening!

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