24/12/2022

International Trade
Management

Final Assignment

GROUP 9

CLASS COURSE: INS3019_02

INTERNATIONAL TRADE MANAGEMENT

Final Assignment

Subject : International trade management

Class code : INS3019_02

Lecturer : PhD. Le Huong Linh

Group 10 : Vũ Tú Quyên- 19071485

Nguyen Thi Mai - 19071422

Trần Thj Linh Chi- 19071320

Lê Thanh Giang- 20070145

Lê Thị Lan Phương- 19071474

Hanoi, Dec 24th, 2022

Executive summary 2

I. Introduction 3

II. In-depth international trade situation 3

1. China’s international trade situation 3

1.2. Applying trade theories 6

1.2.1 The gravity model 6

1.2.2 Trade integration 8

2. VietNam’s international trade policies 10

2.1. Changes in Vietnam's international trade policy: 10

2.2. Overview of VietNam-EU Free Trade Agreement (EVFTA): 11

2.3 The benefits and costs for VietNam from joining the EVFTA 13

2.3.1 Benefits: 13

2.3.2. Costs 17

2.4. Recommendation 18

III. Conclusion 18

References 19

Individual contribution 21
 Executive summary

In the modern highly globalized world, international trade represents a significant share of

gross domestic product for many countries. China plays an important role in international

trade. To research more about the international trade situation, our report will provide an

overview of China’s international trade situation and VietNam’s international trade policies.

More specifically, this report will go in-depth into each section. We have broken China's

international trade situation in 2021 and will apply trade theories such as Gravity model and

trade integration. For Vietnam’s international trade policies, the report will delve into

information about the Vietnam-EU free trade agreement and the benefits, costs for Viet Nam

from participating the EVFTA. This report mentions and provides readers with special

information and factors on the trade policy and international situation of Vietnam and China.

I. Introduction

Among the "bridges" connecting the economies between countries in the world, international

trade is always considered as the "biggest bridge". Through international trade, countries will

increase their trade surplus by exporting goods with comparative advantage and importing

goods that have no comparative advantage. International trade in China has taken off since

joining the World Trade Organization in 2001. Twenty-one years since then, China has

surpassed the United States to become the world's top trading nation. . Within the framework

of this document, China's international trade is approached on a global scale and focuses its

trade analysis on the top 15 countries with the largest share. This report will also discuss

Vietnam's international trade policy. When analyzing this report, we will know more about

China's import and export activities and know why China has successfully become the second
largest country in the world (after the US) in terms of imports and has the largest export

turnover (surpassing Germany)

II. In-depth international trade situation

1. China’s international trade situation

1.1. Overview of China's international trade situation in 2021.

In 2021, the total import and export turnover of China's goods will reach $6,037 billion, up

21.4% over 2020. Of which, exports will reach $3,361 billion, up 21.2%; imports reached

$2,676, up 21.5%. Also in 2021, China ranks second among countries with the largest gross

domestic product, after the United States.

● Export

In 2021, China's exports represent 15.2% of world exports for all kinds of products, it is

ranking in world exports is 1. For the whole year, China's total exports reached 3.36 trillion

USD, thanks to the demand for goods has increased dramatically around the world. The

explosion of export activity caused China's trade surplus to increase sharply, contributing

significantly to economic growth. In terms of export goods, here are the three main types of

China's exports:

● Electrical machinery and equipment and their parts; sound recorders and reproducers,

television: $898 billion (Account for 26.7% of total export value)

● Machinery, mechanical appliances, nuclear reactors, boilers; parts they export $547

billion (Account for 16.3% of total export value)

● Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed

furnishings: $139 billion (Account for 4.15% of total export value)

Product: Total all products

Source: Trademap

China's main export partners are the United States which imported about 17.1% of China's

export volume, the countries of the European Union imported about 15.4%, ASEAN imported

about 14,4%.

● Import

China's imports represent 11.9% of world imports for total all products, its ranking in world

imports is 2. China's total exports totaled $2.67 trillion. The main import products of China

are

● Electrical machinery and equipment and their parts; sound recorders and reproducers,

television imports about $668 billion (Account for 24.97% of total export value)

● Mineral fuels, mineral oils and products of their distillation; bituminous substances;

mineral imports about $393 billion (Account for 14.69% of total export value)

● Ores, slag and ash imports about $272 billion (Account for 10.16% of total export

value)
 List of top 15 supplying markets for the product imported by China in 2021

Product: TOTAL All products

Sourse: Trade map

The main import partners are Taipei, Korea, Japan, and the United States with a share of

China's total imports of 9.3%, 8%, 7.7%, and 6.8%,

1.2. Applying trade theories

1.2.1 The gravity model

For the whole year of 2021, China's total import and export turnover will reach $6,050 billion,

surpassing the threshold of $6 trillion for the first time; in which ASEAN is the largest trading

partner of the world's second-largest economy with a total turnover of more than 878 billion

USD, up 19.7% over the same period (General Administration of Customs of China). In the

top 15 trading partners with China, there are 3 countries from ASEAN including Vietnam,

Malaysia, and Thailand. In this part, we will study the determinants of China’s trade with its

ASEAN trading partners based on the Gravity model.

In international trade, the Gravity model shows the size of trade flows between two countries.

The gravity model suggests that bilateral trade flows are positively related to the economic
size (GDP or GNI) of countries i and j. It also shows that bilateral trade flows are inversely

related to the distance between the two countries.

The Gravity equation is expressed as:

𝑎 𝑐
𝑇𝑖𝑗= A x 𝑌𝑖 x 𝑌𝑗 𝑏 / 𝐷𝑖𝑗

where Tij is the value of trade between two countries i and j, A is a constant, Yi is the GDP of

country i, Yj is the GDP of country j, Dij is the distance between country i and j. And a, b, c

are allowed to differ from 1.

economy's size

The size of the economy has a direct influence on the bilateral relationship between the two

countries. An increase in GDP means an increase in the quantity of goods and services, which

has a positive effect on exports. The larger the income of the importing country, the more it

will spend and be able to import.

Gross domestic product (GDP) of the ASEAN countries from 2017 to 2027 (in billion U.S.

dollars)
 Source: Statista

In 2020, the GDP of the 10 member countries is 3.0 trillion USD, making ASEAN the fifth

largest economy in the world, after the US, China, Japan and Germany. Besides, GDP per

capita in the whole region has also tended to skyrocket in the past few years, reflecting the

region's growing economy.

On the economic front, there is a mutual complementarity between ASEAN countries and

China. Although China has relatively complete resources, some types (coal, non-ferrous

metals) are very abundant, but per capita resources are only half of the world average. For

example, in terms of oil, China has and will have to import more oil from ASEAN countries.

China will also continue to be a big market for goods (rubber, palm oil, wood, woodworking

and raw materials processing...) of ASEAN countries.

Regarding the structure of export goods, so far three-quarters of China's exports are finished

products. As for ASEAN countries (except Singapore, Thailand, Malaysia, the Philippines),

they mainly export preliminarily processed goods. Currently, electromechanical products

account for 24% of China's exports, while most ASEAN countries have great demand for

importing these goods, so this is a very effective complement to each other in cooperation and

development between ASEAN and China.

Distance

The greater the geographical distance, the greater the transportation costs as well as the risks

in the transportation process. Distance-effect estimates from the gravity model predict that a

1% increase in distance between countries is associated with a decrease in trade volume

between 0.7% and 1%. Both China and ASEAN markets have great potential and close

geographical distance to each other, so the complementation and support between economies

are very convenient to meet the needs of each country's rapid development. China and

ASEAN have a number of areas where they can invest in each other, this potential is being
exploited and it is a premise for the further development cooperation of each country in the

early years of the 21st century. That is why China trades a lot with ASEAN countries - trading

partners that share a common border or in the same Asian region.

1.2.2 Trade integration

November 2002 was an important milestone in the commercial cooperation

relationship between the Association of Southeast Asian Nations (ASEAN) and China when

the two sides signed the Framework Agreement on Comprehensive Economic Cooperation of

the ASEAN-China Free Trade Agreement (ACFTA). By 2018, China and ASEAN countries

continue to cooperate to promote free trade between the two sides, announce the "Vision of

ASEAN-China Strategic Partnership 2030", and give detailed and sets short-term goals for

total two-way trade turnover. In particular, the trade cooperation between China and ASEAN

a more comprehensive development In 2019. entered specifically, the parties have

comprehensively implemented "Upgrading the ASEAN-China Free Trade Agreement",

helping the ASEAN-China Free Trade Agreement (ACFTA) become a Free Trade Area

(ACFTA) trade area to achieve the enhancement of comprehensive economic cooperation.

This was followed by the "One Belt, One Road" initiative, which achieved satisfaction with

the "ASEAN-China Connectivity Master Plan 2025", which proposes to promote border,

nautical, and internet connection between the two partners. As a result, China has now

completed the construction of economic zones in a number of countries such as Long Giang

Industrial Park (Vietnam), Sihanoukville Special Economic Zone (Cambodia), and Rayong

Industrial Park (Thailand).

With the efforts of both sides to promote cooperation over the past years, the

ASEAN-China free trade area has become the third largest free trade area in the world, after

the ASEAN Free Trade Area. because the EU, the North American Free Trade Area
(USA-Mexico-Canada), and the two sides have gradually become each other's important

trading partners.

In addition, China is currently ASEAN's largest trading partner and second-largest

source of foreign direct investment (FDI). In 2021, FDI inflows from China to ASEAN

amounted to US$13.6 billion, nearly twice as high as US$7 billion in 2020, and accounted for

7.8% of total FDI into ASEAN.

2. VietNam’s international trade policies

2.1. Changes in Vietnam's international trade policy:

Free Trade Agreement (Source: https://www.vietnam-briefing.com/)

When Vietnam joined the World Trade Organization (WTO) in 2007, it took a key step toward

integrating with global trade. Many free trade agreements were signed by Vietnam. Vietnam is

presently a signatory to many Free Trade Agreements (FTAs) that the regional trade

organization Association of Southeast Asian Nations (ASEAN) has signed.

The advantages of free trade agreements will allow Vietnam's economy to move farther away

from basic commodities and low-tech manufacturing items in favor of more intricate
high-tech goods including electronics, machinery, cars, and medical equipment. First,

Vietnam should diversify its sourcing partners, broaden its trade networks, and import less

intermediary items from its partners, all of which should improve Vietnam's export

competitiveness.

Vietnam appears to prioritize international trade integration with trading partners outside of

ASEAN, as evidenced by recent trade agreements like the Comprehensive and Progressive

Agreement for Trans-Pacific Partnership (CPTPP), the EU-Vietnam Free Trade Agreement

(EVFTA), the UK-Vietnam Free Trade Agreement (UKVFTA), and the upcoming Regional

Comprehensive Economic Partnership (RCEP).

2.2. Overview of VietNam-EU Free Trade Agreement (EVFTA):

The EU-Vietnam Free Trade Agreement (EVFTA) is a new generation FTA between Vietnam

and the 27 EU member states. EVFTA, along with the Comprehensive and Progressive

Agreement for Trans-Pacific Partnership (CPTPP), are two FTAs with the widest scope of

commitments and Vietnam's highest level of commitment so far.

Structure

Compared to earlier free trade agreements Vietnam has signed, the EVFTA’s framework is

very different. With the EVFTA, both parties have made promises that go beyond those made

inside the WTO framework, as well as to a number of topics that Vietnam has never agreed to,

including investment (both in goods and services), SOE policies, public procurement, labor,

and the environment. As a result, EVFTA presents the government and Vietnamese businesses

with several obstacles and hurdles.

Impacts:

The EVFTA has significant impacts on imports and exports of both Vietnam and the EU.

Those effects are presented in the image below:

while improving its autonomy and ability to protect economic security. Through the EVFTA

agreement, Vietnamese businesses have the opportunity to join a new supply chain to replace

the traditional supply chain that has been interrupted due to the Covid-19 pandemic.

Currently, Vietnam is one of the top 10 commodity trading partners of the EU and the EU is

the second largest trading partner of Vietnam. In 2018, Vietnam's exports to the EU accounted

for about 19% of the country's total export turnover. The EU mainly imports electronics (e.g.

phone sets), shoes and clothing from Vietnam. The top exports from the EU to Vietnam are

electronics and high-end machinery, transport equipment and pharmaceuticals. The latter two

are the subject of a specific Annex dealing with trade in these goods between the two parties.

2.3 The benefits and costs for VietNam from joining the EVFTA

2.3.1 Benefits:

2012-2018 EU- VietNam trade value, Source Eurostat

According to a study by the Ministry of Planning and Investment on the impact of the

EVFTA, if the commitments on tariff and non-tariff reductions are thoroughly implemented,

combined with a number of factors from the trade war, Brexit, for example,... Vietnam's

economic growth will be improved in the short, medium and long term. When the Agreement

comes into effect, barriers for EU goods to access the Vietnamese market will be reduced,

forcing Vietnamese businesses to improve production quality and efficiency to increase

competitiveness in the international market. In addition, the EVFTA agreement gives Vietnam

the opportunity to attract more investment capital from the EU, especially in areas such as

high technology, modern management skills and experience. The EVFTA is expected to

contribute to an average GDP increase of 2.18 to 3.25% (for the first 5 years of

implementation), 4.57 to 5.30% (for the 5 year period subsequent) and 7.07-7.72% (for the

five-year period thereafter).

Impact on trade (import and export)

Joining the EVFTA Agreement will have a strong impact on Vietnam's import and export

turnover. It is expected that Vietnam's export turnover to the EU market will increase by

42.7% in 2025 and 44.37% in 2030 compared to that without the Agreement.

Overall, the EVFTA will contribute to diversifying our markets so as not to be too dependent

on one market, thereby helping to ensure Vietnam's economic security.

Impact on the state budget

Cutting tariffs under the EVFTA Agreement will have two-way impacts on state budget

revenues, specifically: Reducing state budget revenue due to reduction of import and export

taxes; Increase in state budget revenue due to additional revenue from domestic revenue under

the positive impact of trade, investment and economic growth.

Attracting foreign investment (FDI)

With a total FDI capital of 6.1 billion euros (2017, according to Europa data), the EU is one of

the largest foreign investors in Vietnam. According to data from Vietnam's Ministry of

Planning and Investment, in 2017, European companies had nearly 2,500 investment projects
worth about $44 billion in Vietnam, accounting for 10% of the total number of FDI projects

and 14% FDI. This contributes to promoting the strong development of Vietnam.

Impact on environmental protection issues

Chapter 13 of the EVFTA on trade and sustainable development will ensure that we can enjoy

the benefits of increased trade without the cost of environmental degradation. It places

obligations on both sides to enforce existing environmental standards while attracting trade or

investment, as well as to comply with all ratified multilateral environmental standards

agreements., such as agreements on climate change, endangered species and biodiversity.

Intellectual property rights

The EVFTA will help Vietnam go further in improving protection of intellectual property

rights, for the benefit of owners and consumers. When signing the EVFTA, Vietnam will join

the Internet Treaty of the World Intellectual Property Organization (WIPO). These treaties set

standards to prevent unauthorized online access or use of innovative products, protect the

rights of owners, and address challenges posed by technologies and transmission methods.

Improve the clean food chain

Food safety is a major concern in Vietnam despite the government's efforts, but food

poisoning still occurs frequently. Chapter 6 of the EVFTA on Sanitary and Phytosanitary

Measures (SPS) provides a framework to ensure that international standards and guidelines on

issues ranging from plant quality and animal health to Food safety are very close. This not

only helps Vietnam to serve a fastidious market like Europe, but also a driving force to

improve and develop clean food in the domestic market.

Commerce

One of the biggest costs and challenges facing Vietnam when it joins the EVFTA is the need

to rapidly improve production and quality control processes in a wide range of industries to

meet stringent requirements, strict regulations on imports into the EU market as well as the

conditions for enjoying the preferential tariff elimination of the EVFTA.

Vietnam's seafood industry is a typical example. The EU has always accounted for over 17%

of Vietnam's total seafood export value in many years. However, since Vietnam was fined

IUU yellow card by the EU in October 2017, the value of seafood exports to this market has

decreased significantly. Specifically, the EU market fell from the 2nd position in Vietnam's

seafood exports to the 5th position and the proportion of the market decreased from 17% to

13%.

Therefore, Vietnam must be very strict in the quality of products, if not, Vietnamese

enterprises cannot take advantage of the incentives and advantages brought by this

Agreement.

Labor and the environment

High labor and environmental standards are also one of the major difficulties for Vietnamese

goods exports when participating in new generation FTAs. Therefore, meeting labor

regulations to enjoy incentives is a challenge for commodity manufacturing industries in

Vietnam. In order to implement environmental provisions, Vietnam needs to adjust policies

and laws related to the environment to overcome inadequacies in environmental protection

when producing and exporting goods.

This is a difficulty in the development of commodity exports, Vietnam has not really

developed in the industrial field, productivity is still low, technology is not high. In order to

ensure the technical regulations, goods quality standards and environment for export of goods,

it is necessary to meet the requirements on technology in production. Thus, Vietnam needs to

invest heavily in advanced and modern technology, machinery and equipment, which is a

huge challenge and cost for Vietnam in the production and export of goods.

2.4. Recommendation

Based on the analysis of the results, we propose a number of policies as follows: Firstly, the

Government needs to have supportive policies, especially in terms of capital and technology

to help Vietnamese enterprises improve product quality. Second, there should be specific

instructions and guidelines for businesses to understand and grasp the regulations on food

safety and hygiene standards in particular and to overcome non-tariff barriers in general.

Third, there should be conferences, seminars and programs to disseminate the provisions of

the Agreement to businesses. This will help Vietnamese businesses better exploit the

advantages from the signing of the Agreement.

III. Conclusion

China's exports cause China's trade surplus to increase and it is the second-largest gross

domestic product in the world besides the United States. In terms of restructuring Vietnam's

import and export when joining the EVFTA, Vietnam will have the opportunity to get rid of

taxes when importing. However, we believe that the opportunities that EVFTA brings will

also go with difficulties and challenges. But this is a good time for Vietnam to increase

international trade to boost the economy.

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‌
 Individual contribution

No. Student name Student ID Task Contribution

1 Vũ Tú Quyên 19071485 Executive summary, 100%

2.3.2, III

2 Trần Thị Linh Chi 19071320 Introduction 1.1 100%

3 Nguyễn Thị Mai 19071422 1.2.1, 2.3 100%

4 Lê Thanh Giang 20070145 1.2.2 100%

5 Lê Thị Lan Phương 19071474 2.1, 2.2, 2.3.1 100%