Presentation on theme: "The Trans -Pacific Partnership Agreement: an Opportunity for Viet Nam to reduce its Economic Dependence of China Good morning everyone The Annual summer."— Presentation transcript:
1 The Trans -Pacific Partnership Agreement: an Opportunity for Viet Nam to reduce its Economic Dependence of ChinaGood morning everyoneThe Annual summer conference at Institution of Mathematics, Toulouse, FranceThe conference theme : The Rise of China and its Effects on Vietnam and the WorldTitle: The Trans-Pacific Partnership Agreement: an Opportunity for Vietnam to Reduce or Exit the Dependence of China Economy.Scott H, Murray & Tai H. Pham- Discipline of Mathematics & Statistics, University of CanberraScott H. Murray &Tai H. PhamDiscipline of Mathematics & StatisticsAugust, 2014
2 Contents Problem statement Members of AEC, TPP, RCEP & FTAAP USA’s TPP VisionChina’s FTAAP VisionTheories of international tradeThe Extended Input-Output TableScenariosConclusionMy talk is divided into the following sections
3 1. Problem statement The ASEAN Economic Community (AEC) by 2015 The Trans-Pacific Partnership (TPP) by 2014.Quantitative assessment of economic effects of AEC and TPP on the textile & apparel, footwear and furniture industries in VietnamViet Nam has signed and in effect 8 FTAs; just signed 1 FTA ; launched negotiation 6 FTAs; under consultation and study 4 FTAs.These FTAs must be modelled to maximize the governments’ efforts and the entrepreneurs can identify the opportunities and challengesThe need of the ASEAN Economic Community by 2015 ( AEC) and the Trans-Pacific Partnership (TPP) also require Viet Nam using economic models to identify interdependence of economic sectors in the ASEAN and TPP trading bloc as a whole.Determining the appropriate model for an impact assessment is not easy.Developed countries usually use Computable General Equilibrium (CGE) models or partial equilibrium models to estimate the economic effect of a free trade agreement. These models assume a stable market economy with prices set by the equilibrium between supply and demand. However, Viet Nam and the majority of ASEAN countries are still in transition to market economy. CGE model or partial model are not suitable for such economies. In addition, it is difficult to find enough data for constructing CGE model from Vietnam and ASEAN countries because these models are sensitive to missing or incorrect data.Japan has used an international Input-Output model to analyse industrial linkages which spread beyond national borders. However, this model is expensive in money and time. It is not appropriate model for Vietnam.My research explored the appropriate model for Vietnam as well as some ASEAN countries, namely the Extended Input-Output model.My presentation is the quantitative assessment of economic effects of the AEC and TPP for textile & apparel, footwear and furniture industries on Vietnamese economy.
5 2. Members of AFTA, TPP, RCEP & FTAAP RussiaTaiwanFTAAPChinaKoreaRCEPIndiaAustraliaCanadaJapanChileNew ZealandMexicoPeruUnited StatesTPPCambodiaBruneiIndonesiaMalaysiaLaosSIngaporeMyanmarViet NamPhilippinesThailandAECAssociation of Southeast Asian Nations (ASEAN) : The first economic cooperation scheme was the ASEAN Preferential Trading Arrangement in 1977; the ASEAN Free Trade Area (AFTA) in 1992 further increased economic integration between the members of ASEAN. Since then, the members of ASEAN have committed themselves to create a single market by 2015, to be called the ASEAN Economic Community (AEC).
6 TPPTrans-Pacific Partnership (TPP): TPP aims to strengthen and tie Asia and Americas.. It was originally called Trans-Pacific Strategic Economic Partnership Agreement ( TPSEP), a FRA agreement between Brunei, Chile, New Zealand and Singapore in Since 2010, the membership was expanded and given new name TPP. Since then, has been regarded as an initiative predominantly pushed and led by the US. TPP is a massive “free trade” agreement currently being negotiated behind closed doors by officials from 12 countries. The Obama administration plans to sign TPP by end of
7 RCEPRegional Comprehensive Economic Partnership (RCEP): It aims to broaden and deepen ASEAN +1 pacts ( Australia, China, India, Japan, Korea, New Zealand ) with the other 6 by end of
8 FTAAPThe creation of Free Trade Agreement Asia- Pacific (FTAAP) by 2020 is goal of Asia- Pacific Economic Cooperation (APEC). In 1994, the Bogor Goals which firmed APEC goal towards FTAAP was adopted.After 19 years since FTAAP was announced in 1994, the progress towards FTAAP is still very slow. In the APEC trade minister’s meeting in China 2014, China want to use a November international summit to start to put in place a new free trade zone among Asia -Pacific rim countries. China is looking for an endorsement of the new trade Zone, known as the FTAAP, by 2025 and for backing for a “feasibility study”.
9 3. USA’s Trans-Pacific Partnership Agreement vision Strengthen ties across three continents: America, Asia, and OceaniaBecome basis and means to establish the Free Trade Area of the Asia Pacific (FTAAP)The baseline: existing US trade and investment agreementsCreate mutual benefits among participantsEnsure third parties do not take advantage of the agreementApply “yarn-forward” style rules of originTogether with the proposed Transatlantic Trade and Investment Partnership (TTIP), the proposed Trans-Pacific Partnership (TPP ) agreement is the most significant negotiation for the U.S since the North American Free Trade Agreement (NAFTA).TPP creates a trade bloc of substance and don’t include China.The baseline : the U.S existing trade and investment agreements such as NAFTA , U.S and KoreaJob creation is one of the pact’s main goals and must be through TPP value chain.Apply “yarn- forward style rules of origin to ensure that the third parities such as China do not take advantage of the agreement.
10 4. China’s Free Trade Agreement of the Asia Pacific vision Build step by step the ambitious “New Silk Road” and “New Maritime Silk Road” through bilateral negotiation, Sanghai Cooperation Organization (SCO), ASEAN & APECCompete with the USAAsia-Pacific Economic Cooperation (APEC) is a forum of which the goal is the creation of FTA of the Asia –Pacific (FTAAP ) by In 1994, the Bogor Goals which firmed APEC goal towards FTAAP was adopted. The FTAAP was proposed in 2004 and China raised the feasibility study proposal in February, 2014The proposed FTAAP is to aims to obtain step by step the ambitiousness for the “new Maritime Silk Road”.The proposed “feasibility study “ is part of competition with the U.S because pushing FTAAP would reduce the U.S objective of having TPP set the trade policy standard.
11 China’s New silk road vision The New Silk road consists of land version and maritime version.The land version begins at Xian in China and ends at Venice, traversing Central Asia, Iran the Middle East, Eastern Europe and Germany and the Netherlands.The maritime Silk Road begins at Quanzhou in Fujian, and also ends at Venice, where it converges with the land route.The New Silk road concept is not a new idea. In 1992, Deng confirmed his vision of economic reforms based on China’s coastal development ( e.g., special economic zones in coastal provinces, open coastal cities, eastern comprehensive development zones )The “new silk road” aims to further enhances ties between Central and South Asia, Europe and the Middle East through a new project called the “Silk Road Economic Belt and 21st Century Maritime Silk Road, an initiative stretching from Europe to Asia.China is also interested in its southern neighborhood, especially ASEAN. The idea of a “21st century maritime Silk Road” through strengthened “maritime economy, environment technical and scientific cooperation. The idea has also been promoted as the “2+7” cooperation framework. Briefly, “2+7” means consensus on two issues and seven proposalsChina needs to find new export markets or preserve existing ones, as well as narrow development gaps between the well- developed coastal areas and the less-developed inland parts of the country. This is the main reason why the current group of Chinese leaders have coined the slogan “ a New Silk Road”
13 5. Theories of international trade Mercantilism & Neo-mercantilismDivision of labor & new international division of laborComparative advantage & complementary and competing economiesThe Viner’s model & Extended Input-Output ModelNeo-mercantilism is a term used to describe a policy regime which encourages exports, discourages imports, controls capital movement and centralizes currency decisions in the hands of a central government. These policies, based on an incorrect theory, damage both trading partners.The theory of Division of labor and expanding the extent of the markets has contributed for the theory of the new international division of labor (NIDL) which often referred to as global value chains or vertical specialization. This theory has produced benefits for both developing countries and economic powers.The theory of comparative advantage also contributed ideas to the evaluation of potential economic effects of an FTA. This method shows that complementary and competing are characterized by the differences and similarity in the goods and services produced between the two economies. If these two economies produce and export a different basket of goods and services, they gain greater potential from trade. Conversely, they do not gain potential benefits from trade. In other words, trade gains benefits of two economies produce and export different goods and services rather than the same goods and services.Through the extended input-output model, we can measure amplified effects of any economy, the effects of change of structure of an economy as well as a country’s net contribution of value added in TPP value chain.
14 5.1. China encourages exports and discourages imports
16 5.3. China & New International Division of Labor Global value chain is the term discribing the modern trade reality, illustrating that production consists of different links originating in difference countriesThe value chain analysis is a concept derived from business management. One of its earliest exponents was Michael Porter of Havard Bussiness School.Benefiting from global value chains is measured through contributing net value addedThe net contribution of value added in global value chains in developing countries usually labour.This is also one of any pact’s main goals .
17 5.4. China & Viet Nam are competing economies Trade indicatorsRevealed symmetric comparative advantage indexIntra-industry trade indexTrade specialization indexBilateral trade intensity indexTrade complementarity indexWe argue that an increased index of revealed symmetric comparative advantage is a basic indicator determining whether the two economies compete against or complement each other. For example, two economies that export similar products to the same markets are considered as competing economies even if their bilateral trade is increasing. They claim that an increased index of bilateral trade in a developing economy is usually caused by rises in export of raw materials or unprocessed products. On the other hand, a similar increase in a developed economy usually originates from exports competing against products from developing economies. Thus, the two economies in question are by nature competing regardless of their increased bilateral trade intensity, trade specialization, intra-industry trade, or inter-industry trade.
19 RSCA of VIetnam, relative to RSCA of China, relative to China Global HS codeRSCA of VIetnam, relative toRSCA of China, relative toChinaGlobalVietnam01-05 Animal & Animal Products0.80.5(0.8)(0.4)06-15 Vegetable Products(0.5)16-24 Foodstuffs0.3(0.1)(0.3)25-27 Mineral Products0.7(0.7)28-38 Chemicals & Allied Industries39-40 Plastics / Rubbers0.20.1(0.2)41-43 Raw Hides, Skins, Leather, & Furs0.00.4(0.0)44-49 Wood & Wood Products50-63 Textiles0.664-67 Footwear / Headgear68-71 Stone / Glass72-83 Metals84-85 Machinery / Electrical86-89 Transportation90-97 Miscellaneous98-99Commodities not elsewhere specified(0.6)(0.9)Explanatory notesMaximum value1Minimum value-1Critical pointComparative advantage = >0
20 RSCA of VIetnam, relative to RSCA of China, relative to HS code - top tenRSCA of VIetnam, relative toRSCA of China, relative toChinaGlobalVietnam'85Electrical, electronic equipment(0.2)0.10.20.3'27Mineral fuels, oils, distillation products, etc0.8(0.1)(0.8)'64Footwear, gaiters and the like, parts thereof0.5(0.5)0.6'62Articles of apparel, accessories, not knit or crochet0.40.7(0.4)'61Articles of apparel, accessories, knit or crochet'84Machinery, nuclear reactors, boilers, etc(0.6)'03Fish, crustaceans, molluscs, aquatic invertebrates nes(0.0)'94Furniture, lighting, signs, prefabricated buildings'09Coffee, tea, mate and spices0.9(0.9)'10Cereals1.0(1.0)Explanatory notesMaximum value1Minimum value-1Critical pointComparative advantage = >0
22 RSCA of VIetnam, relative to HS codeRSCA of VIetnam, relative toRSCA of TPP, relative toTPPGlobalVietnam01-05 Animal & Animal Products0.5(0.5)(0.0)06-15 Vegetable Products0.116-24 Foodstuffs(0.1)(0.2)25-27 Mineral Products0.028-38 Chemicals & Allied Industries(0.7)0.739-40 Plastics / Rubbers41-43 Raw Hides, Skins, Leather, & Furs0.4(0.4)44-49 Wood & Wood Products50-63 Textiles0.80.6(0.8)64-67 Footwear / Headgear1.0(1.0)68-71 Stone / Glass0.272-83 Metals(0.3)0.384-85 Machinery / Electrical86-89 Transportation90-97 Miscellaneous98-99Commodities not elsewhere specified(0.6)Explanatory notesMaximum value1Minimum value-1Critical pointComparative advantage = >0
23 RSCA of VIetnam, relative to HS code - top tenRSCA of VIetnam, relative toRSCA of TPP, relative toTPPGlobalVietnam'85Electrical, electronic equipment0.00.1'27Mineral fuels, oils, distillation products, etc(0.1)(0.2)'64Footwear, gaiters and the like, parts thereof1.00.8(0.8)'62Articles of apparel, accessories, not knit or crochet0.90.7(0.7)'61Articles of apparel, accessories, knit or crochet'84Machinery, nuclear reactors, boilers, etc(0.4)'03Fish, crustaceans, molluscs, aquatic invertebrates nes'94Furniture, lighting, signs, prefabricated buildings0.6(0.3)'09Coffee, tea, mate and spices(0.5)'10Cereals0.2Explanatory notesMaximum value1Minimum value-1Critical pointComparative advantage = >0
25 Inaccurate data of value of exports and imports between Viet Nam and countries Countries_export > VN_import: 3.3%Countries_import > VN_export: 5.8%Slide này mới bổ sung: năm 2007: VN_im > Countries_ex: 5,2% và Countries_im > VN_ex: 7,6%năm 2012: Countries_ex > VN_im: 11,5% và Countries_im > VN_ex: 11,4%
26 Inaccurate data of value of exports and imports between Viet Nam and China China_export > VN_import: 8.6%China_import > VN_export: 1.2%
27 Inaccurate data on exports and imports between TPP and Viet Nam TPP export > VN_import: 4.6%TPP_import > VN_export: 10.2%
28 Inaccurate data on exports and imports between ASEAN* and Viet Nam VN_imports > ASEAN*_exports: 0.02%VN_exports > Asean*_imports: 27.0%
33 6.1. Vietnam's imports from the blocs Số liệu này mới điều chỉnh: bỏ bớt năm 2006Không có 2013 do số liệu chưa đủ
34 6.2. Vietnam's exports to the blocs Số liệu này mới điều chỉnh: bỏ bớt năm 2006Không có 2013 do số liệu chưa đủ
35 Top ten exporters to Vietnam Unit: Billion USDViet Nam imports from:2007200820092010201120122013China11.915.116.323.129.034.248.6Korea, Republic of22.214.171.124.713.515.921.1Singapore6.58.77.07.410.210.410.9Japan126.96.36.1990.710.6Taipei, Chinese6.87.96.07.59.08.48.9Thailand4.05.04.76.77.2India188.8.131.523.7United States of America184.108.40.206.34.6Malaysia220.127.116.11.84.2Germany1.71. 51.62.02.6Indonesia1.41.5Australia18.104.22.168Slide nảy mới bổ sung: top 12 nước VN nhập khẩu nhiều nhất (số liệu theo các nước xuất cho VN)
36 Top ten exporters to Vietnam Unit: Billion USDViet Nam imports from:2007200820092010201120122013China19.9%20.1%22.9%25.2%25.0%27.0%33.8%Korea, Republic of9.7%10.4%10.0%10.6%11.6%12.5%14.7%Singapore10.9%9.8%8.1%8.8%8.2%7.6%Japan9.6%9.1%8.9%8.3%8.4%7.4%Taipei, Chinese11.4%10.5%7.8%6.6%6.2%Thailand6.7%6.3%6.1%5.3%5.0%India2.0%2.4%2.5%2.7%4.3%2.9%4.2%United States of America3.2%3.7%4.4%4.0%3.6%3.5%Malaysia3.9%3.8%3.3%3.0%Germany2.8%2.2%1.7%Indonesia2.3%2.1%1.8%Australia1.5%1.4%Tổng cộng: 84.5% % % % % % %
37 Top ten importers from Vietnam Unit: Billion USDViet Nam exports to:2007200820092010201120122013United States of America11.413.913.015.918.521.426,0China22.214.171.124.011.116.216.9Japan126.96.36.199.615.114.2Germany2.93.53. 188.8.131.52Korea, Republic of1.42.02.43.184.108.40.206Malaysia220.127.116.11.18.104.22.168United Kingdom1.92.23.03.94.5France22.214.171.124Australia126.96.36.199Thailand1.1Singapore2. 41.63.1Italy1.01.22.33Slide nảy mới bổ sung: top 12 nước VN xuất khẩu nhiều nhất (số liệu theo các nước nhập từ VN)
38 Top ten importers from Vietnam Unit: Billion USDViet Nam exports to:2007200820092010201120122013United States of America21.8%20.5%21.1%20.7%18.5%16.8%18.8%China6.1%6.4%7.6%9.1%11.1%12.7%12.2%Japan11.7%13.5%11.3%10.7%11.6%11.8%10.3%Germany5.6%5.2%5.1%5.4%Korea, Republic of2.7%3.0%3.9%4.3%4.5%Malaysia3.4%4.1%United Kingdom3.6%3.3%3.1%2.9%France2.8%2.5%Australia7.1%6.5%2.6%Thailand2.1%2.3%1.8%2.0%2.4%Singapore4.0%3.5%3.7%1.7%2.2%Italy1.9%1.6%Tổng cộng: 73.3% % % % % % %
39 The scenarios reduces economic dependence on China Final use(Y)Direct, IndirectRequirementsMatrix(I - A)-1Output (X)This is a hypothetical scenario!The Extended Input-Output table supplies the data for building the extended input- output model. It is the starting point for initial solution of the model.A: Direct requirement matrix . A ij is the amount of intermediate input i necessary to product one monetary unit of output j in region. For example, automobile assembly factory need the direct cost : steel, glass, plastic, tires…If the household such as individual consumers or trucking company increase their automobile, the direct requirement at automobile factory will be increased.And then steel, glass and plastic and tires factories will also increase their intermediate input requirements. This requirement is indirect requirement for level 1 .and then indirect requirement for level 2 … This is called indirect requirement matrix( A )I : Identity matrix.(𝐈−𝐀) −𝟏 : Leontief inverse ( total requirements = direct requirements plus indirect requirements).The scenario represents different A and Y . For example, what is happen if China puts trade sanctions to Viet Nam’ – what is happen is: the change of the output, the employmentsand the income including changing of Viet Nam’s economic structure and AEC and TPP value chain.The scenarios based on this formula is a future I-O picture describes the international trade of intermediate imports between countries in two trading blocs: AEC and TPP .
40 7.1. The Extended Input-Output Table Unit: Billion VNDIntermediate usedFinal useTotalConsumptionInvestment ExportHHs.Govt.Domestic1,171,126552,60776,626294,203757,5542,852,116TPP174,17473,38372459,563307,844Asean*62,67124,11823915,155102,183China114,09745,62847040,394200,589RCEP*57,56034,72726421,433113,984FTAAP*80,44127,61529717,940126,293RoW97,80557,48948652,317208,097Total Import586,748262,9602,480206,8021,058,990Total Intermediate1,757,874Value added1,094,242815,56779,106501,005The Extended Input-output table is the extension of traditional I-O table .The difference with the traditional I-O table is that the use of products is broken down according to their origin. Each product is produced either by a domestic industry or by a member countries or rest of the world. In contract to the national I-O table, this information is made explicit in the extended I-O table.An important accounting identity is that total ouput is equal total use .The extended input-Output model is the combination between Isard model and Chenery- Moses modelThe fundamental different between Isard model and Chenery- Moses model is that the interregional trade flow are only specified by region of origin and region of destination, thus inoring the specific industry or (final consumer) of destination Isard model takes into account the spillover effects , through the inclusion of one or more additional region in the system.The different between the Chenery- Moses model and the extended Input-output model is the fact that the Chenery-Moses model includes many regions in the system.
41 7.2. Scenario 1 GDP - 5.1% Intermediate used Final use Total Unit: Billion VNDIntermediate usedFinal useTotalConsumptionInvestment ExportHHs.Govt.Domestic1,171,126552,60776,626294,203707,2252,801,787TPP174,17473,38372459,563307,844Asean*62,67124,11823915,155102,183TPP + AEC119,80247,90949442,414210,619RCEP*57,56034,72726421,433113,984FTAAP*80,44127,61529717,940126,293RoW97,80557,48948652,317208,097Total Import592,453265,2412,504208,8221,069,020Total Intermediate1,763,579Value added1,038,208817,84879,130503,025GDP - 5.1%
42 7.3. Scenario 2 GDP - 6.2% Intermediate used Final use Total Unit: Billion VNDIntermediate usedFinal useTotalConsumptionInvestment ExportHHs.Govt.Domestic1,171,126552,60776,626294,203707,2252,801,787TPP174,17473,38372459,563307,844Asean*62,67124,11823915,155102,183TPP + AEC131,78252,70054346,655231,680RCEP*57,56034,72726421,433113,984FTAAP*80,44127,61529717,940126,293RoW97,80557,48948652,317208,097Total Import604,433270,0322,553213,0631,090,081Total Intermediate1,775,559Value added1,026,228822,63979,179507,266GDP - 6.2%
43 Scenarios reduce economic dependence on China 7.4. Scenarios (cont.)Scenarios reduce economic dependence on ChinaFinal use (∆Y)Direct, IndirectRequirementsMatrix(I - A)-1Output (∆X)
44 7.5. Scenario 3 Intermediate used Final use Total Consumption Unit: Billion VNDIntermediate usedFinal useTotalConsumptionInvestment ExportHHs.Govt.Domestic1,171,787552,60776,626295,203777,0712,872,294China + AEC + TPP115,70546,54147941,202203,927RoW472,651217,3322,010166,408858,401Total Import588,356263,8732,489207,6101,062,328Total Intermediate1,760,143Value added1,112,151816,48079,115501,813GDP + 1.6%
45 7.6. Scenario 4 Intermediate used Final use Total Consumption Unit: Billion VNDIntermediate usedFinal useTotalConsumptionInvestment ExportHHs.Govt.Domestic1,171,787555,08276,626295,244777,0712,872,810China + AEC + TPP115,70546,54147941,202203,927RoW472,651217,3322,010166,408858,401Total Import588,356263,8732,489207,6101,062,328Total Intermediate1,760,143Value added1,115,667818,95579,115502,854GDP + 2.0%
46 7.7. Scenario 5 Intermediate used Final use Total Consumption Unit: Billion VNDIntermediate usedFinal useTotalConsumptionInvestment ExportHHs.Govt.Domestic1,171,787559,38576,626296,806777,0712,881,675China + AEC + TPP115,70546,54147941,202203,927RoW472,651217,3322,010166,408858,401Total Import588,356263,8732,489207,6101,062,328Total Intermediate1,760,143Value added1,121,531823,25879,115504,416GDP + 2.5%