4.3.2.

THE CONS OF TRADE WAR IN VIETNAM

The benefits from US-China trade war truly do wonder for Vietnam in the foreseeable future.
Specifically, by substituting Vietnam’s Chinese exports of the goods in the US market and also
from the China’s tendency to retarget its manufacturers to Vietnam.

Nevertheless, within the long term , Vietnam, as a developing country relying on exporting and
foreign investment, undoubtedly faces obstacles from the trade war.

There is firm belief that Vietnam will come in for both opportunities and disadvantages from
US-china trade war. In the short term, trade tensions between the US and China will be
beneficial for Vietnam through the t boost in exports for the time being and investment from
foreign countries.

In addition, it is undeniable that Vietnam will have to deal with trade war’s challenges . The fact
that US government may impose higher tariffs on Vietnam due to the fact that China is taking
advantage of Vietnam as a disguise for its products labeling “made in Vietnam”, putting our
country under a dilemma.

Cheap Chinese steel is unacceptably disguised as Vietnam ‘s products and then re-exported to
the US. Do Duy Thai, Chairman of Viet Steel corporation has fiercely expressed his concern for
this problem. The same cases for Vietnam leather, footwear and handbag Association. The final
goods from China nation exporting to Vietnam through corporation with Vietnamese
entrepreneurs and renaming their goods as made in Vietnam in order to export to US
successfully makes everything out of control. To stop this, US must impose high tariff on our
country.

Thus, there is high probability that Vietnam will be hit by higher tariffs from US policy .To some
extent, Chinese’s policy to base their main production facilities in Vietnam does provide certain
advantages to our export and investment for a short – period of time, yet makes Vietnam become
a “full potential-risk haven “.Nguyen Bich Lam, our GSO, has clearly stated that by allowing
China’s waves of companies stepping into our nation would lead us to become a polluting, small-
scale industrial technologies, limiting all the potential gain and partnership from its giant
competitive neighbor.

Another setback from the trade war is the flow coming from US, China consumer goods and
agricultural products. For instance, provided that 25% tariff levied on US pork by China, US will
have difficulty in taking over the market shares in China, forcing this nation to export its pork to
Vietnam, making our country an ideal potential destination .Once there is a migration from the
import of US pork, our populace protection will fall since US ‘s meat is much more cheaper than
that of Vietnam,( 35,000VND per kg is smaller than 48,000 to 50,000 VND per kg ). The
opportunity cost is smaller for US, help it gain its place in the domestic market. Since the first
half of 2018 , 50% of US pork has exported to Vietnam, according to Nguyen Van Ngoc,
Chairman of the Animal Livestock Association.

Chinese and US agricultural products bear a strong resemblance to those above scenarios . China
is known to be the big market for agricultural products such as fruits, rice and seafood from
Vietnam. The abundance in supply and relatively cheap of Chinese vegetables and fruits have
inevitably created a great deal of tension on Vietnam’s agricultural products being sold in both
China and the domestic market of Vietnam. More importantly, Vietnam stands high chance of
being targeted by US in terms of fruits industries if Chinese ‘t tariffs are too high. Therefore ,
Global economy soon will see a slowdown in its growth, tightening our financial statement,
leaving capital spending fall dramatically.

4.2.3 . THE PROS AND CONS OF TRADE BARRIERS

Literally ,Trade barriers are defined as world’s rules and restrictions imposed by the relevant
government. Its main goals are to protect populace’s industries through additional cost and limits
on imports and exports . Trade barriers exist in various types, among these are :

(1) Tariffs

Since Vietnam signed agreement to become official member of WTO, it has boosted a lot in
agricultural exports. Nevertheless, the national trade deficit has not been properly made in
progress, which worsen the agricultural export.

On January 11,2007, WTO has required Vietnam to abide by agriculture-related regulations as a

member of organization . 1118 tariffs belonging to farm produce were urge to be taken into
effect for approximately three to five years weighing at the cost of 23,5 %

Vietnam has guaranteed its commitment to cut down on tariffs for 69 goods from 15 foresty
product groups. 9 fishery products are averagely adjusted from 32,2% to 20,1% . Besides,
obligations to eliminate the government’s assistance on agricultural exports from the moment it
joins WTO

Viet Nam has committed to apply low tariff to farm produce imported under quotas and high

tariff to those outside quotas. It has also pledged to apply, manage tariff in a transparent and
nondiscriminatory way which are in accordance with WTO regulations.

BENEFITS OF TRADE BARRIERS :

Benefits 1: Shielding

The most comment measure to protect local industry are trade barriers, which are beneficial to
underdeveloped countries. Especially when that country places tariffs on other imports and the
domestic industries use it wisely since it gives the economy a chance to become self-sufficent
and competitive in itself. The government’s business is being hidden from the powerful foreign
industry. Thus , young economies can strongly benefit from placed trade barriers

Benefits 2: Protectionism

Being used as shields for domestic industry, trade barriers are served to protect consumers as
well. Additionally, if there are any exporting-goods unhealthy or bad quality, the countries that
import those goods can impose a trade barrier to for their populace’s protection. For instance, if
Brazil tends to export meat to the US, a trade barrier may be put in place by US due to the
health threat of that good. The threat to a country’s religion or customs from goods are
undeniable as well. During a mutiny within a British –ruled Indian colony, The British started
producing cartridges made of animal fat so as to stop Indians from using gun cartridges.
Besides , it was against their religion to eat the kind of meat like this. Consequently, the Indians
have no choice but to place trade barrier on this good to protect religion interests

Benefits Overview

The benefits of trade barriers are similarly inter-related: all in all, they are meant to protect either
a country's businesses or their consumers. They are often helpful in developing sustaninability
and strength in economies, or keeping citizens away from unwanted or low quality goods.

COSTS OF TRADE BARRIERS...

Costs 1: This Means War!

Trade wars are foremost cause which are usually brought by trade barriers. As a result ,
retaliation frequently occurs in countries that are imposed trade barriers and so forth. Sometimes,
this trade war can seriously get out of control, leading to the downfall of an economy.The Smoot
– Hawley tariff act of 1930 is an outstanding example of a minor trade war, right before the
Great Depression. The consequence for this is that it makes Canada and Great Britain responded
their own tariff .Some believe that this may lead to the Great Depression, whereas many claim
this is a falsity

Costs 2: Surpluses and Infant Economies

More specifically, limitations on imports from trade barriers can lead to overproduction of
goods, especially in the case of agricultural enterprise. Thus ,leading to surpluses of goods which
makes a major slow-down for the whole economy ‘s efficiency. In worse cases, business can fall
down. On the other hand, these types of barriers are said to extremely do harm to
underdeveloped and poor countries. Hampered by other countries’ trade barriers, country
developing its economy finds it difficult to establish a stable economy and trade system.

Costs 3: Whiplash!

While some countries impose trade barriers to protect their own business, this can occasionally
cause reverse negative effects. Tariffs on imports are safe for domestic country, but it forces
consumers into limited choices. In worse scenarios , trade barriers are made used to make super
cheap and low – quality goods. Therefore, consumers have not choice but to purchase limited
available goods which are strongly believed to have inferior quality and smaller endowments.

Costs Overview

To be blunt , trade barriers have a wider variety of costs, which are said to be both beneficial
and harmful to the country’s economy. These barriers are not always a positive government
interference, but in fact they occasionally decrease economy’s performance, create unexpected
surpluses , and possibly trade wars and so forth.

Expected Tariffs and Non-tariffs measures of Vietnam in future

CPTPP Signed: Opportunities for Vietnam’s Enterprises

On 8th of March, in Chile , the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership or CPTPP. 13.5 percent of the global economy, signed by 11 countries, are
represented by the agreement, a total of US$10 trillion dollars and 15 percent of the global trade
revenue, equal to US$5 trillion.

Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and
Vietnam, etc are key members of the agreement
From a recent study by the World Bank about the economic impacts of CPTPP on Vietnam, the
country’s GDP is expected to grow by 3.5 percent by 2030, provided that there is an increase in
production.

Imports and Exports

According to CPTPP, imports and exports are predicted to grow by 5.3 and 4.2 percent
respectively. The gain could be much higher at 7.6 and 6.9 percent for imports and exports
respectively if productivity rises.

Tariffs

The average trade-weighted tariffs under CPTPP will be inclined to fall from 1.7 percent to 0.2
percent for Vietnamese exporters.

4.5.OPPORTUNITIES AND CHALLENGES

4.5.3KEY LESSONS

There is no requirement for a company to have an import or export for establishing a trading
company in Vietnam. Yet , to be capable of conducting import or export business activity,
investor are forced to register with the Department of Planning and Investment (DPI).All imports
and exports must abide by the relevant government regulations on quarantine, safety and quality
standards, and must be strictly inspected by the relevant agencies before clearing customs.
Following trade conditions, several various types of duties on the import and export of the goods
will be imposed by Vietnam . If the company wishes to find detailed information on a certain
range of goods, they should visit the website of Vietnam Customs

4.5.5CHALLENGES

The lack of preparation is probably the biggest hurdle for domestic firms to take advantage of the
CPTPP. The support industries are pale and with strict rules of origin conditions, it will be
extremely difficult for firms to fully realize the benefits of CPTPP.

Additionally , CPTPP provides a greater market access for both domestic firms in Vietnam, and
the domestic market for foreign goods, leading to an increase in competition. Thus, I Industries
such as automobile and agriculture will come in for extreme competition from different member
countries.
4.5.5 RECOMMENDATIONS

Short-term Tactical Responses

In order to avoid the disguise of Chinese goods as Vietnamese products, The relevant
governments should seriously adopt a more selective policy to draw attention from FDI.
Simultaneously, decisive actions against pollutions-extending investments should be enhanced
through more stringent environmental requirements and enforcements.

Strategic Response 1: Aiming for a truly Market Economy

Due to the fact that Chinese goods are being relocated through VN to US, there is high
likelihood that Vietnam will suffer high tariff from US. To truly lessen this risk, true market
economy must be strongly prioritized . Proactive in helping domestic companies must be
prioritized by the governments.

Strategic Response 2:

Promoting Sustainable Growth through efficient public investment

Largely dependent on exports and foreign investments, Vietnam , as a developing country,

should take actions to implement fiscal policies to support economic growth to be taken into
effect . Significantly, Vietnam is announced not to achieve the growth rate expectedly, putting
attribution to the failure of spending the planned treasury on public investment, according to
Vuong Dinh Hue, our Deputy Prime Minister.