72797 v1 World Trade Indicators 2009/10 Vietnam Trade Brief Trade Policy imports. In September 2008, the government announced a 5 percent tariff on oil imports as oil Vietnam concluded its accession to the World Trade prices fell in the second half of the year. To restrict the Organization (WTO) in 2007, significantly liberalizing importation of luxury commodities and reduce the its trade regime in the process. In particular, tariffs on trade deficit, the government also increased import textiles (which is the second largest export sector) tariffs on luxury goods in July 2008.3 In light of the were cut by more than half their value upon accession financial crisis, Vietnam increased tariffs on some and subsidies given to the textile sector were dairy products, meat and poultry products, iron, and removed.1 The simple average of the MFN applied steel in the first four months of 2009.4 It also reduced tariff rate (16.8 percent) in 2007 has not changed tariffs on imports of cotton and fuels to reduce costs significantly in the past decade, and is higher than the of exporters. averages for both the East Asia and Pacific (EAP) External Environment region and low-income countries (9.6 and 12.5 percent, respectively). When taking into account actual The simple average of the rest of the world tariff faced trade flows, the MFN applied tariff drops to 15 by Vietnamese exports is 10 percent. When the percent. Based on the MFN applied tariff, Vietnam volume of exports is taken into account, Vietnam’s ranked 158th out of 181 countries (where 1st is least rest of the world tariff is 6.1 percent, above the restrictive). Tariff protection for agricultural goods regional average of 4.6 percent. The tariff faced by its (24.2 percent) is nearly 10 percentage points higher agricultural products is relatively high at 19 percent, than for non-agricultural goods and is 9 percentage and by the non-agricultural ones it is 4.9 percent. In points higher than the average for the EAP region. December 2008, Vietnam signed an Economic Since 2005, Vietnam has had a maximum tariff on all Partnership Agreement with Japan covering trade, goods (excluding alcohol and tobacco) of 100 percent. financial services, and migration.5 In March 2008, as a Vietnam’s applied tariff rates were above its bound member of the Association of South-East Asia rates in 2007, as reflected in the wedge between bound Nations (ASEAN), it signed a less expansive free trade and applied tariffs (the overhang), of negative 5.5 agreement (FTA) with Japan, whereby Japan agreed to percent, compared with 29.3 percent on average for eliminate tariffs on 93 percent of goods exported from the country’s regional neighbors. Vietnam ranked 57th ASEAN member countries. Further improving the out of 148 countries in its commitment to liberalize country’s market access, in the same month, the services trade according to the GATS Commitment government signed a preferential trading deal with Lao Index. People’s Democratic Republic that will reduce import tariffs.6 In February 2009, a comprehensive free trade In response to rising food prices in early 2008, the deal, which is expected to be implemented by the end government banned rice exports through June.2 As the of 2009, was signed between ASEAN members and economic crisis spread, Vietnam simplified its rules for Australia and New Zealand. In August 2009, a FTA rice exports, while stiffening quality checks on some between India and the ASEAN countries was signed and is expected to take effect in January 1, 2010. Over the course of 2008, Vietnam had four anti-dumping investigations initiated against it and has had an Unless otherwise indicated, all data are as of August 2009 additional three initiated against it in the first half of and are drawn from the World Trade Indicators 2009/10 2009. In addition, one countervailing duty Database. The database, Country Trade Briefs and investigation was initiated against it by the United Trade-at-a-Glance Tables, are available at States in the second quarter of 2009. The central bank http://www.worldbank.org/wti. maintained a crawling peg to the U.S. dollar in 2008, If using information from this brief, please provide the but widened the band around the official exchange following source citation: World Bank. 2010. “Vietnam rate halfway through the year to allow for more Trade Brief.� World Trade Indicators 2009/10: Country Trade flexibility. Over the course of 2008 the Vietnamese Briefs. Washington, DC: World Bank. Available at dong depreciated by 1.2 percent against the U.S. http://www.worldbank.org/wti. dollar.7 World Trade Indicators 2009/10 Vietnam Trade Brief Behind the Border Constraints 2008 in nominal terms, due to increases in global commodity prices but are expected to fall by 12.4 In terms of the conduciveness of its institutional percent in 2009. Remittances were equivalent to 7.9 environment to business, Vietnam ranked 93rd out of percent of GDP in 2008, while foreign direct 183 countries in the 2010 Ease of Doing Business investment as a share of GDP was 9.8 percent in 2007. index. The Logistics Performance Index, a measure of the extent of trade facilitation, rates Vietnam at 2.89 on a scale from 1 to 5 with 5 being the highest Notes performance, compared with 2.58 for the EAP region. 1. IMF, 2007. It ranked 53rd in the world and 5th in the EAP region 2. FAO, 2009. (with Malaysia leading the regional group). It 3. ESCAP August 2008, p. 4; October 2008, p. 5. performed best in lowering domestic logistics costs 4. World Bank PREM Trade Group, January 2009, p. 17; while its weakest performance is in the quality of April 2009, p. 3. transport and IT infrastructure for logistics. In April 2009, as trade finance became scarcer, the government 5. Bilaerals.org, 2009a-d. passed a fiscal stimulus package that contained 6. Economic and Social Commission for East Asia, April provisions aimed at increasing credit incentives for 2008, p. 5. exporters.8 7. Asian Development Bank, 2009, pp. 273–274; IMF, 2009. 8. WTO, 2009, pp. 76–77. Trade Outcomes 9. All nominal trade growth data from General Statistics The global economic slowdown is expected to put a Office of Vietnam, 2009. damper on the fast growth experienced by Vietnam in 10. U.S. Department of State, 2009. the past several years. Vietnam’s growth rate of total 11. Asian Development Bank, 2009, p. 262. trade increased through 2007 to reach 26 percent, but 12. All quarterly data from IMF, 2009. slowed down in 2008 to an estimated growth rate of 17.7 percent in real (constant 2000 U.S. dollars) terms. References Real export growth was an estimated 18.2 percent while real import growth was an estimated 17.2 Asian Development Bank. 2009. Asian Development percent. Expectations are that exports and imports will Outlook 2009: Rebalancing Asia’s Growth. Manila. fall in 2009 by 6.8 and 3 percent in real terms, Bilaterals.org. April 2009a. “Japan-Vietnam.� . ———. April 2009b. “AANZFTA.� . trade equal to 135 percent of GDP in 2008. This is ———. August 15, 2009c. “India-ASEAN FTA: Trade due in part to its double-digit growth in nominal terms in Goods (2009).� . of both exports and imports every year since 2002.9 In ———. April 2009d. “Japan-ASEAN.� . by an estimated 28.8 percent in 2008. By the second ———. April 2009e. “Japan-Vietnam.� . exports, including crude oil, garments, footwear, and rice, had declined due to the economic downturn.10 Economic and Social Commission for East Asia and the Production of crude oil also fell in 2008.11 Despite Pacific (ESCAP). April 2008. E-TISNET Monthly this, total exports increased by an estimated 29.1 News. United Nations. percent in nominal terms in 2008. Growth slowed in ———. August 2008. E-TISNET Monthly News. United the fourth quarter, however, when exports grew by Nations. only 4.7 percent in nominal U.S. dollar terms ———. October 2008. E-TISNET Monthly News. United compared to the corresponding period in 2007.12 Nations. Vietnam’s main export destinations (the United States, Food and Agriculture Association of the United Nations the EU, and Japan) will most likely decrease demand (FAO). 2009. “Policy Measures Taken by in 2009. A fall in goods exports is expected to lead to a Governments to Reduce the Impact of Soaring decrease in total exports of 20.7 percent in 2009. The Prices (As of 15 December 2008).� FAO. decline in the first quarter of 2009 was 3.4 percent. Total imports grew by an estimated 28.6 percent in Vietnam Trade Brief World Trade Indicators 2009/10 General Statistics Office of Vietnam. 2009. “Export and ———. April 21, 2009. “Update on Trade Measures and Import of Goods.� . DC. International Monetary Fund (IMF). August 2009. World Trade Organization. July 15, 2009. “Report to the International Financial Statistics (Country Tables). TPRB from the Director-General on the Financial IMF, Washington, DC. and Economic Crisis and Trade-Related ———. December 2007. “Vietnam: Selected Issues.� Developments.� Geneva. IMF Country Report No. 07/385. IMF, Washington, U.S. Department of State: Bureau of East Asian and DC. Pacific Affairs. March 2009. “Background Note: World Bank PREM Trade Group. January 14, 2009. Vietnam.� Washington, DC. “Update on the Impact of the Financial Crisis on Trade and Trade Finance.� World Bank, Washington, DC.