STATE BANK OF VIETNAM BANKING ACADEMY Foreign Language Faculty GRADUATION THESIS THE TREND OF TRADE PROTECTIONISM IN THE WORLD AND ITS EFFECT ON VIETNAMESE ECONOMY Lecturer: MA. Can Thuy Lien Student: Nguyen Minh Chi Class: K17ATCC Student Code: 17A7510020 May 2018 TABLE OF CONTENTS DECLARATION. LIST OF ABBREVIATIONS. LIST OF FIGURES AND TABLES.
Scope and subject of the study. Research/ Thesis structure. 4 CHAPTER 2: OVERVIEW OF TRADE PROTECTIONISM. Definition of trade and trade protectionism.
Reasons behind trade protectionism:. Trade protection instruments. Direct protection instruments. Indirect protection instruments.
Advantages and disadvantages of trade protectionism. Advantages of trade protectionism. Disadvantages of trade protection. 14 CHAPTER 3: THE TREND OF TRADE PROTECTIONISM AND ITS EFFECT ON VIETNAMESE ECONOMY.
Trade protectionism trend in the world. Protection tendencies in general. Protection trends in specific market sectors. Effect of trade protection in Vietnam.
On macroeconomic scale. On microeconomic scale. For government level. For enterprise level.
40 DECLARATION I declare that this graduation thesis entitled “The trend of trade protectionism in the world and its effect on Vietnamese economy” is my own work in design and execution. The thesis has not been submitted to any other university for any degree. All the sources used have been indicated and duly acknowledged. Signature Nguyen Minh Chi ACKNOWLEGDMENTS The completion of this graduation thesis could not have been possible without the instruction and support of individuals whom I cannot thank enough for their great contribution through the process of this study.
First and foremost, I would like to express my sincere gratitude to my research supervisors, Ms. Can Thuy Lien. Without her assistance and dedicated involvement in every step throughout the process, this paper would have never been accomplished. Second, I would like to extend my deep appreciation to the lecturers of Foreign Languages faculty and the other faculties for their useful guidance and valuable knowledge during the last four years.
Finally, I want to show gratefulness to my parents and to my fellow friends for providing me with unfailing support and continuous encouragement throughout my years of study and through the process of researching and writing this thesis. This accomplishment would not have been possible without them. Student Nguyen Minh Chi LIST OF ABBREVIATIONS US United State EU European Union WTO World Trade Organization ASEAN Association of Southeast Asian Nations AFTA ASEAN Free Trade Area NAFTA North American Free Trade Agreement GDP Gross Domestic Product OECD Organization for Economic Co-operation and Development FDI Foreign Direct Investment NTB Non-Tariff Barrier FTA Free Trade Agreement BTA Bilateral Trade Agreement TTIP Transatlantic Trade and Investment Partnership VDA German Association of the Automotive Industry AISI American Iron and Steel Institute SMA Steel Manufacturers Association FMCG Fast Moving Consumer Goods TPP Trans-Pacific Partnership MOIT Ministry of Industry and Trade MOF Ministry of Finance HTS Harmonized Tariff Schedule MOST Ministry of Science and Technology IT information technology GATT General Agreement on Tariffs and Trade VASEP Vietnam Association of Seafood Exporters and Producers LIST OF FIGURES AND TABLES Table 1: Main instruments of protection Figure 1: Protectionism by the G20 Figure 2: The USA imposes the highest number of protectionist measure Figure 3: Vietnam exports forecast Figure 4: Vietnamese Rice Export Revenue Figure 5: Vietnamese seafood export in 2017 (USD mil. Research background Support for trade protection flares up periodically, usually during periods of slow economic and income growth.
There are worrying indications that trade protectionism is on the rise again, with many countries are pursuing this tenet. The trend towards the use of tariffs and other trade protectionism measures has been growing in G20 countries since the Global Financial Crisis and there are clear signs that the protectionist trend could accelerate. In the US, trade protectionism is being strongly promoted since President Donald Trump was elected in 2016. Meanwhile, proponents of trade protectionism have also been empowered in parts of Europe.
So far, it is unclear how different countries‘ trade policies will change. While some think there will only be a slight change, others fear that there will be a major backsliding on protection and a renunciation of the globalizing trading system. Trade protection policy has always been an essential and important policy in the economic development of every nation, whether it is a developed or developing country, they all want to build and develop equal and sustainable domestic industries. In the 21st century, while the process of globalization and regionalization has gone a long way with the introduction of economic organizations created to set a common playing field and rules for the development of international trade such as WTO, EU, AFTA, NAFTA ., trade protectionism has gained more attention.
The economic globalization is on the verge of bankruptcy because nations around the world are increasing their trade protection after the global financial crisis to protect their products domestically by restricting imported goods as well as the funds they choose to dump or move out of the country. The influence of trade protectionism to the world economy is not to be underestimated. With the vast change of global economy today, 2 developed and developing countries, including Vietnam will all be affected by the growing trend of trade protectionism. As a result, the topic “The trend of trade protectionism in the world and its effect on Vietnamese economy‖ is chosen for this graduation thesis.
Research objectives The research focuses on analyzing the trade protectionism trend in general, trade protection policy in Vietnam in particular and their impact on Vietnam‘s economy, thereby proposing recommendation to deal with the growing trend of trade protectionism. Scope and subject of the study Subject: The subject of the research focuses on the trend of trade protectionism in the world and its effect on Vietnamese economy. Scope: The research concentrates on studying the trade protectionism trend in the world since the global crisis in 2008 till now. Research questions This research focuses on three main questions: What is trade protectionism? How is trade protection policy implemented in different countries? What are the impacts of trade protectionism on Vietnamese economy? 3 5.
Research methodology The methods uses in the thesis are quantitative and qualitative one. In quantitative method, numerical data and statistic are collected to support the thesis effectively. In qualitative method, the thesis is based upon information acquired via qualitative researches with various views and attitudes for different researchers. Therefore, the author is able to draw reasonable conclusion and thus provide suitable recommendation.
Research/ Thesis structure The thesis consists of 5 main chapters: Chapter 1: Introduction Chapter 2: Overview of trade protectionism Chapter 3: The trend of trade protectionism trend and its effect on Vietnamese economy Chapter 4: Recommendation Chapter 5: Conclusion 4 LITERATURE REVIEW In the recent years, there have been many literatures discussed about the subject of trade protectionism. Some researchers have approached this issue by analyzing the growing trend trade protection on a global scale. For example, research of Fredrik Erixon and Razeen Sally (2010) focused on analyzing the effects of global crisis on world trade and the increasing of ―Creeping protectionism‖ with the topic ―Trade, Globalization And Emerging Protectionism Since The Crisis‖. Per Altenberg (2016), in the ―Protectionism in the 21st Century‖ issued by the National Board of Trade, directly focused on analyzing the nature and effect of current trade protectionism in a broad view.
On the other hand, Luca Ferrini (2012) with the paper ―What are the Main Causes and Effects of Economic Protectionism?‖ and Lawrence Low (2009) with the article ―Nine Reasons For Protectionism‖ both discussed about the main causes of trade protectionism. In addition, the Food and Agriculture Organization published a resource manual by José María Caballero, Geraldo Calegar and Carlo Cappi (2000) titled ―Multilateral Trade Negotiations On Agriculture‖ which had a part covered the issue of instruments of protection and their economic impact. On the matter of advantages and disadvantages of trade protectionism, there is Paul Goodman (2018) with the article ―The Pros and Cons of Import Tariffs and Trade Protectionism”. Meanwhile, Professor Arthur S.
Guarino (2018) wrote an article named ―The Economic Effects of Trade Protectionism‖ which both explained the reasons for trade protectionism and some of its effect on the economy in theory. Moreover, there are Preety Bhogal (2017) with the article ―China’s protectionist tendencies will continue‖ and Ana Swanson (2018) with ―Will 2018 Be the Year of Protectionism? Trump Alone Will Decide‖ which discussed about the current situation of trade protectionism in general. When discussing about trade protectionism in specific market sectors, there are Justin Jacobs (2018) –“ China-US trade war heats 5 up”- which focused on energy sector, Steve Garnsey (2017) – ―New wave of protectionism threatens the automotive sector‖, Ankit Bhatia (2017) – ―How Protectionism Is Affecting the Global Steel Trade‖, or Greenberg Center for Geoeconomic Studies (2017) with ―The Rise of Digital Protectionism‖. Based on the analysis of these researches, while the authors did cover the general growing trend of trade protectionism around the world, they did not provide any solution for countries facing the challenge of trade protection or focus on analyzing any specific nation or group of countries.
In the context of Vietnam, some articles discussing about the influence of trade protectionism on Vietnamese market include ―Vietnam’s exports still going strong despite US protectionism‖ by Nhan Dan news (2017), ―Vietnam steelmakers urge protection of exporters‖ by The Saigon Times Daily (2018), ―Impact of U. Steel Tariffs on Vietnam‖ by Vietnam Briefing (2018), or ―VN exporters fear protectionist Trump policy‖ by Vietnamnews (2016). There is also a research by Doan Thien Thu (2014) with the title ―Tìm hiểu về các hàng rào mậu dịch và liên hệ thực tiễn tại Việt Nam”. The research approached the aspect of protection policies applied in Vietnam as well as the effects of protection policies in specific market sectors.
Since the author only focused on the domestic trade protection policies in Vietnam, they did not take into account of the growing trade protectionism trend in the world and its effect on Vietnamese economy. Therefore, from the limitation of previous studies, the researcher will study further into the aspects that these authors had overlooked. This thesis will take the opportunity to dig deeper into the issue of rising trade protectionism around the world in the gap from 2008 to now as well as its effect on Vietnamese economy, thereby assess the situation and propose suitable solutions for Vietnam in facing challenge from the growing trade protectionism. 6 CHAPTER 2: OVERVIEW OF TRADE PROTECTIONISM 1.
Definition of trade and trade protectionism In economical transactions, ―trade‖ is referred mainly when cross-border purchases of goods happen. According to Investopedia, the term ―trade‖ is a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the exchange of goods or services between parties. Trade is essential for satisfaction of human wants, is conducted not only for the sake of earning profit; but also to provide service to the consumers. Trade is an important social activity because the society needs uninterrupted supply of goods forever increasing and ever changing but never ending human wants.
Trade can be divided into following two types: domestic trade and international trade. Domestic trade or home trade, as explained by Gaurav Akrani (2011) in ―What is Trade? Meaning and Nature - Different Types of Trade‖, is conducted within the political and geographical boundaries of a country. It can be at local level, regional level or national level. International trade refers to the exchange of goods and services across national borders.
In most countries, it represents a significant part of gross domestic product (GDP). However, there are two contrasting views regarding the level of control placed on trade: free trade and trade protectionism. Free trade is the approach with no restrictions on trade, with the idea that supply and demand factors, operating on a global scale, will ensure that production happens efficiently.