The Future of International Trade: Trends and Challenges for Vietnam | Schemes and Mind Maps Economic Growth and Globalization

9.Should Vietnam follow free trade or protectionist policies? Why

Short essays

1.Explain the terms “labor abundant” and “labor intensive” in H-O model.

Example.

In the Heckscher-Ohlin (H-O) model of international trade:

- Labor abundant: This refers to a country that has a relatively large amount of labor

compared to its capital (machinery, factories, etc.). Imagine Country A with a large

population and limited factories. The ratio of labor (L) to capital (K) in Country A, (L/K),

is high, indicating it's labor abundant.

For example, The H-O model assumes that the two countries (United States and France)

have identical technologies, meaning they have the same production functions available to

produce steel and clothing, the aggregate preferences are the same across

countries.,France, by implication, has more workers per unit of capital in the aggregate

and thus is labor abundant compared to the United State

- Labor intensive: This describes a good or product that requires a significant amount of

labor to produce relative to capital.

Example: Sewing clothes by hand is a labor-intensive activity compared to using

automated machinery.

2.Explain and analyze Vietnam trade model in the recent years, based on

international trade theories.

Export-Oriented Industrialization (EOI): Vietnam's model aligns closely with EOI.

The country has focused on attracting foreign investment, particularly in labor-intensive

industries like garments and footwear. This strategy leverages Vietnam's comparative

advantage in cheap labor to boost exports and drive economic growth.

Comparative Advantage: EOI builds on the theory of comparative advantage. Vietnam,

with its lower wages, has a comparative advantage in producing labor-intensive goods

compared to developed economies. This allows them to compete effectively in the global

market.

The New Trade Theory: However, Vietnam's model is evolving. The "New Trade

Theory" emphasizes the role of economies of scale and increasing returns in international

trade. We see this reflected in Vietnam's recent shift towards higher value-added exports

like smartphones. This suggests a move beyond just cheap labor towards building a more

sophisticated manufacturing base.

Trade Agreements and Regional Integration: Vietnam has actively pursued Free Trade

Agreements (FTAs) like the Comprehensive and Progressive Agreement for Trans-Pacific

Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). These

agreements reduce trade barriers, making Vietnamese exports more competitive and

increasing foreign investment.

3.Key feature of Vietnam’s trade in 2023

Partial preview of the text

Download The Future of International Trade: Trends and Challenges for Vietnam and more Schemes and Mind Maps Economic Growth and Globalization in PDF only on Docsity!

9.Should Vietnam follow free trade or protectionist policies? Why Short essays 1.Explain the terms “labor abundant” and “labor intensive” in H-O model. Example. In the Heckscher-Ohlin (H-O) model of international trade:

Labor abundant: This refers to a country that has a relatively large amount of labor compared to its capital (machinery, factories, etc.). Imagine Country A with a large population and limited factories. The ratio of labor (L) to capital (K) in Country A, (L/K), is high, indicating it's labor abundant. For example, The H-O model assumes that the two countries (United States and France) have identical technologies, meaning they have the same production functions available to produce steel and clothing, the aggregate preferences are the same across countries. France, by implication, has more workers per unit of capital in the aggregate and thus is labor abundant compared to the United State
Labor intensive: This describes a good or product that requires a significant amount of labor to produce relative to capital. Example: Sewing clothes by hand is a labor-intensive activity compared to using automated machinery. 2.Explain and analyze Vietnam trade model in the recent years, based on international trade theories. Export-Oriented Industrialization (EOI): Vietnam's model aligns closely with EOI. The country has focused on attracting foreign investment, particularly in labor-intensive industries like garments and footwear. This strategy leverages Vietnam's comparative advantage in cheap labor to boost exports and drive economic growth. Comparative Advantage: EOI builds on the theory of comparative advantage. Vietnam, with its lower wages, has a comparative advantage in producing labor-intensive goods compared to developed economies. This allows them to compete effectively in the global market. The New Trade Theory: However, Vietnam's model is evolving. The "New Trade Theory" emphasizes the role of economies of scale and increasing returns in international trade. We see this reflected in Vietnam's recent shift towards higher value-added exports like smartphones. This suggests a move beyond just cheap labor towards building a more sophisticated manufacturing base. Trade Agreements and Regional Integration: Vietnam has actively pursued Free Trade Agreements (FTAs) like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). These agreements reduce trade barriers, making Vietnamese exports more competitive and increasing foreign investment. 3.Key feature of Vietnam’s trade in 2023

Total import and export turnover of goods: For the whole year 2023, the total export and import turnover of goods is estimated at 683 billion USD, down 6.6% compared to the previous year. Of which, exports decreased by 4.4%, and imports decreased by 8.9%. Trade balance: Although import-export activities did not meet expectations, the trade balance still recorded a trade surplus for the 8th consecutive year with a record surplus estimated at 28 billion USD, 2.3 times higher than expected. 2022. Export of goods : Export turnover of goods in 2023 is estimated to reach 355.5 billion USD, down 4.4% compared to the previous year. There are 35 items with export turnover of over 1 billion USD, accounting for 93.6% of total export turnover. Import of goods : Import turnover of goods in 2023 is estimated to reach 327.5 billion USD, down 8.9% compared to the previous year. There are 44 imported products worth over 1 billion USD, accounting for 92.4% of total import turnover. Export market The US continues to be Vietnam's largest export market, accounting for 28.5% of total export turnover.China ranked second with 21.3%, followed by Japan (10.6%), EU (10.3%) and South Korea (6.3%).Exports to traditional markets such as the EU and Japan decreased, while exports to new markets such as the Middle East, South Asia and Latin America increased. Import market: China continues to be Vietnam's largest import market, accounting for 31.3% of total import turnover.Japan ranked second with 23.6%, followed by South Korea (14.5%), ASEAN (10.9%) and the US (6.2%).Imports from traditional markets such as the EU and Japan decreased, while imports from new markets such as China and Korea increased. Some key export industries: Phones and electronic components (accounting for 28.1% of total export turnover). Textiles and footwear (accounting for 18.5%). Machinery, equipment, tools and spare parts (accounting for 10.7%). Agricultural products (accounting for 8.5%). 4.Analyze the world trade situation in 2023; make predictions about future international trade trends. 4.1 The current world trade situation 2023 saw a significant decline in global trade activity compared to the record high of

According to WTO data, global merchandise trade volume decreased by 1 .2% in 2023 Deglobalization problem: The factor that has the biggest impact on global trade today is that globalization is no longer popular. Although the world is in need of cheap raw materials from Russia, China's strong production capacity and America's financial and technological superiority, countries have not yet found a consensus on many issues side Reduction in shopping demand : The savings of people around the world are running out, and tightening lending conditions are further reducing overall market demand. Besides, Long-term high energy prices and inflation reduce demand for goods. Geopolitical tensions : Trade wars, sanctions, and regional conflicts cast long shadows, disrupting supply chains and altering trade patterns. The ongoing war in Ukraine is a stark

Businesses and policymakers must understand these trends and prepare for their impact to succeed in the evolving trade landscape. 6.Explain how to measure the government’s protection to domestic producers. Example of how to measure ERP. ERP = Vt − Vw Vw ERP: Effective rate of protection

Vt: Value added in presence of tariff
Vw: Value added in free trade Example:
The free trade world price of a suit: $
Imported Wool value $ 80
A nominal tariff: 10% Calculate ERP:
The domestic value added = the price of final suit – the cost of imported wool = $100 - $ 80 = $
Tariff imposed on each suit will be $100 * 10% = $ 10 USD => nominal tariff
ERP = $10/$20 = 50% **7.Impacts of trade on labor. Example. Positive Impacts:
Job Creation:** Increased exports can lead to job growth in exporting industries as demand for domestic products rises abroad. This can create opportunities for workers involved in manufacturing, transportation, and logistics. - Wage increases : Higher demand for labor in certain fields can lead to better wages for those workers. This can improve income inequality and overall societal well-being. - Skill development : Exposure to international markets can encourage skill development as companies adapt to compete globally. This can lead to a more skilled workforce and increased productivity. - Access to new opportunities : Trade opens doors to new markets and careers for workers, allowing them to find employment in different sectors or even abroad. This can increase career options and mobilit. Example : Prior to major trade integration, Vietnam's footwear industry was relatively small.International trade agreements, like joining the World Trade Organization (WTO) in 2007, opened doors for Vietnamese footwear exports. Major footwear brands saw Vietnam as a competitive producer due to its skilled labor force and lower production costs. This led to a surge in foreign direct investment (FDI) in the footwear sector, establishing numerous factories across Vietnam. As a result,

employment in the footwear industry boomed. Millions of jobs were created, particularly for women in rural areas, who traditionally had limited job opportunities. Negative impacts :

- Job losses: Increased imports, especially from countries with lower labor costs, can lead to job losses in domestic industries that can't compete on price. This is a major concern in manufacturing sectors like textiles and steel. - Wage stagnation: Competition from cheap labor abroad can put downward pressure on wages in similar industries domestically. Low-skilled workers are often most affected by this. - Declining worker rights: In some cases, companies may relocate to countries with weaker labor regulations to avoid stricter environmental or safety standards. This can lead to a decline in worker protections overall. - Outsourcing : Companies may choose to outsource jobs to countries with lower labor costs to reduce production costs. This can lead to job losses in developed countries and negative impacts on communities - Changes in working conditions : Increased competition can pressure companies to cut costs, potentially leading to changes in working conditions, such as longer hours, fewer benefits, and less job security. Example : USMCA aimed to modernize NAFTA and expand trade between the three nations. While it has led to increased trade and economic growth, concerns have arisen about its impact on certain US labor sectors. Manufacturing jobs in some areas have seen declines due to competition from Mexico, which has lower labor costs. This has sparked debate about the agreement's fairness and the need for policy interventions to support affected workers and communities. 8.Impacts of trade on environment. Example. Negative impacts:  Increased pollution: Trade can lead to increased production to meet global demand. This can result in more air and water pollution from factories, and more waste generation.  Pollution havens: Countries with less strict environmental regulations may attract industries that produce a lot of pollution. This is called the "pollution haven hypothesis" - basically, dirty production gets exported to countries with lower environmental standards.

Moreover, it increases competition and opportunity for innovation. There is An incentive to seek new ways to export or compete with importers. With FTAs, More productive firms engage in exports and Free trade makes the economy as a whole more efficient. Nowadays, no two forces are driving this global economic transformation more than technology and trade Free trade also has other dynamic impacts , such as increased productivity and efficiency, that leads the economy to growth and increases welfare of each country. Free trade make good for consumers has lower prices, more variety, better labor when moving to other countries with higher wage, attract foreign investment/and technology transfer and lower government spending Example: Vietnam has actively participated in cooperation with international organizations and forums in the field of science and technology, such as the Association of Southeast Asian Nations (ASEAN), UNESCO, Asia-Europe Summit (ASEM), Asia- Pacific Economic Cooperation (APEC)... 9 .2 Arguments for against free trade Opponents of free trade argue that it can lead to some negative effects. With terms of trade argument, at some tariff rate, the national welfare will begin to decrease as the economic efficiency loss exceeds the terms of trade gain, imported tariff can lead to retaliation, and eventually lower welfare. Moreover, there is Market failure in free trade, The government to address a domestic market failure when better policies are not feasible, such as Failure of labor market, Externalities, Monopoly, Asymmetric information, Political arguments Free trade also leads to income inequality, more difficult competition from domestic firms, and reduce government revenue due to a decrease in tariff revenue. In some countries, outsourcing from free trade leads to unemployment or brain drain, which can expand the gap between developed and developing countries. In addition, free trade harm environment, exhaustion of natural resources.

. Job Losses: Free trade can lead to job losses in domestic industries as companies relocate production to countries with lower labor costs. This can result in unemployment, economic hardship, and social unrest in the affected countries. Example : The North American Free Trade Agreement (NAFTA) has been linked to job losses in the manufacturing sector in the United States, as companies moved production to Mexico to take advantage of lower wages. Vietnam should continue to pursue a free trade policy but with selective protectionist measures in some sectors. Overall, free trade brings many benefits to Vietnam, including: 10.Explain advantages and disadvantages of free trade policy. Apply the AEC to support your arguments. 11.Analyze the decreasing roles of WTO in the recent years, especially after China- US trade war. 12.Analyze the importance of agreement on agriculture in the WTO framework. The key commitments in the WTO’s Agreement on Agriculture. 13.Challenges for Vietnam’s enterprises in ASEAN trade integration. 14.Challenges for Vietnam’s trade when EVFTA is implemented

The Future of International Trade: Trends and Challenges for Vietnam, Schemes and Mind Maps of Economic Growth and Globalization

Related documents

Partial preview of the text

Download The Future of International Trade: Trends and Challenges for Vietnam and more Schemes and Mind Maps Economic Growth and Globalization in PDF only on Docsity!