Vietnamese agriculture and global integration
David Vanzetti and Pham Lan Huong
Australian National University and independent consultant
National CGE Workshop
Melbourne, 7th October 2013
Integration
and structural adjustment
• Vietnam is signing up to bilateral,
regional and multilateral trade
agreements
• Structural adjustment
–the movement of factors of production
(capital, labour and land) between sectors.
• Declining sectors?
• Unemployment of factors, particularly
labour?
2
Objectives
• Economic integration (four FTAs)
• Assess macro and sectoral impacts
• Identify need for structural
adjustment
3
Global general equilibrium model
•
•
•
•
•
•
GTAP
Version 8, base 2007
Bilateral trade and tariffs (2010)
Includes preferential tariffs (needed for FTAs)
Whole economy
Includes resource (land, labour, capital, natural
resources) constraints
• Limitation - each country: one region, one
household
4
Scenarios
• Four FTAs
• AFTA
• China
• Korea
• Japan
• All simultaneously
• Each FTA without exemptions
5
Methodology
• Based on negotiated FTA schedules
• Specify bilateral tariff cuts for 5113 products
• Aggregate (trade weighted) to 24 sectors by
19 regions using TASTE
• Specify baseline growth assumptions
• Specify labour and capital market
assumptions
• Simulate
• Report
6
Exemptions
• Scheduled tariff cuts have exemptions for
sensitive products
• Few in number but cover large volume of
trade
• These differ by partner
• Specify HS 6 level tariff cuts (5113
products) from bilateral applied tariff
schedules as negotiated
7
Sectoral coverage
Primary
Processed
Rice
Sugar
Vegetables fruit and nuts
Beef
Cereal grains nec
Pork and poultry
Cane sugar
Dairy products
Other crops
Other processed agriculture
Oilseeds
Textiles
Cattle
Motor vehicles and other trans
Other aninmal products
Manufactures
Raw milk
Electronics
Forestry
Transport & communications
Fishing
Business services
Petroleum and coal products
Services and activities NES
8
Reported results
•
•
•
•
•
•
Welfare (national income)
Imports
Exports
Employment and wage rates
Tariff revenue
Sectoral effects (production and trade)
9
Baseline
90000
Deviation
80000
70000
60000
50000
Projected
Simulated
40000
30000
20000
Historical
Projection
10000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Schematic representation. Not to scale.
10
Baseline in steps
90000
Deviation
80000
70000
60000
50000
Projected
Simulated
40000
30000
20000
Historical
Projection
10000
0
2007
2012
2017
11
Change in FTA tariffs
on Vietnam’s exports
40
35
30
25
% 20
15
10
Base
Final
5
0
Source. GTAP 2010.
12
Change in tariffs
on Vietnam’s imports
30
25
20
% 15
10
5
Base
Final
0
13
Results
• Macro
•
•
•
•
•
Welfare
Exports
Imports
Tariff revenue
Real wages
• Agricultural sector
• Output
• Exports
• Imports
14
Vietnam welfare gains
in 2017 relative to 2012
30000
25000
20000
$m 15000
10000
5000
ALL
KOR
JPN
CHN
AFTA
BASE
0
Income growth important
15
Vietnam trade impacts
in 2017 relative to base
20
18
16
14
12
% 10
Exports
Imports
8
6
4
2
ALL
KOR
JPN
CHN
AFTA
0
Growth in imports exceed imports
16
Vietnam trade balance
in 2017 relative to base
ALL
KOR
JPN
CHN
-1000
AFTA
0
-2000
-3000
$m -4000
-5000
-6000
-7000
-8000
17
Welfare with and without exemptions
in 2017 relative to base
7000
6000
5000
4000
$m
Exempt
No exempt
3000
2000
1000
ALL
KOR
JPN
CHN
AFTA
0
Japanese rice tariffs
18
Real wages
in 2017 relative to base
16
14
12
10
% 8
Unskilled
Skilled
6
4
2
ALL
KOR
JPN
CHN
AFTA
0
Fixed employment for skilled labour
19
Vietnam tariff revenue
in 2017 relative to base
8000
7000
6000
5000
$m 4000
3000
2000
1000
ALL
KOR
JPN
CHN
AFTA
BASE
0
20
Agricultural sector impacts
•
•
•
•
•
Output
Exports
Imports
Use of land, labour and capital
Factor prices
21
80
0
-20
Rice
Vegetables fruit…
Cereal grains nec
Cane sugar
Other crops
Oilseeds
Cattle
Other animal…
Raw milk
Forestry
Fishing
Petroleum and coal…
Sugar
Beef
Pork and poultry
Dairy products
Other processed…
Textiles
Motor vehicles and…
Manufactures
Electronics
Transport &…
Business services
Services and…
Change in output
in 2017 relative to 2012
100
Base
ALL
Textiles
Cassava
60
%40
20
22
Change in exports
in 2017 relative to 2012
160
140
Cassava
120
100
80
%
60
40
Base
ALL
20
Proc. Ag
Pork&Poult
Beef
Sugar
Animal products
Switch to cassava from other crops
Cattle
Crops
Oilseeds
-60
Cereals
-40
Veg
-20
Rice
0
23
Change in imports
in 2017 relative to 2012
120
Feed.
Processed agriculture.
100
80
% 60
40
Base
ALL
20
Proc. Ag
Dairy
Pork&Poult
Beef
Sugar
Animal products
Cattle
Oilseeds
Crops
Cereals
Veg
0
24
Use of factors in agriculture
Change in 2017 relative to 2012
70
60
50
40
30
% 20
10
0
-10
-20
-30
Land
Labour
Capital
25
Factor prices
in 2017 relative to 2012
100
80
60
40
BASE
ALL FTA
%
20
0
Land
-20
Unskilled
labour
Skilled
labour
Capital
Natural
Res.
-40
26
Summary of macro results
• Income growth important. Changes implemented against
background of expanding economy
• Positive welfare effects (national income) from FTAs
• Real wage increases
• Tariff revenue reduced somewhat
• Trade balance negative
27
Policy implications
•
•
•
•
•
•
Income growth depends on capital (macro policy)
Non-tariff barriers still exist, and may increase
Structural adjustment manageable
Need flexible land, labour and capital markets
WTO virtually completed. No further tariff cuts
Ignored here other FTAs, such as EU, Trans Pacific
Partnership, Regional Comprehensive Economic
Partnership
28
The End
29