UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS IMPACTS OF FOOD SAFETY REGULATIONS ON VIETNAM SEAFOOD EXPORT BY DANG THI LY LY MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, February 2016 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS IMPACTS OF FOOD SAFETY REGULATIONS ON VIETNAM SEAFOOD EXPORT A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By DANG THI LY LY Academic Supervisor: Dr. NGUYEN HOANG BAO HO CHI MINH CITY, February 2016 TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT This paper employs gravity model to analyze the bilateral seafood trade between Vietnam and 17 countries from 1997 to 2012. The panel data is taken from Vietnam General Statistics Organization, International Monetary Fund, World Bank and Centre d'Etudes Prospectives et d'Informations Internationales. The Hausman Test indicates that fixed effects model is suitable for estimating the regression.
The estimation results show that food safety regulations and exchange rate significantly affect seafood export. On the other hands, importing GDP and distance is statistically insignificant. Also the trade potential result reveals that Vietnam has many opportunities to develop trade with Europe partners. Key words: Gravity Model, seafood export, Vietnam iii TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENT I have made great efforts to finish this thesis; nevertheless, it would have not been finished without support of many individual and organizations.
I highly appreciate their full support during this hard time. Iwould like toespecially thank all of my academic supervisors, the Scientific Committee, and staff of Vietnam- Netherlands Program for their guidance and support with this thesis. Finally,I would like to express my special appreciation to my whole family and classmates for helping me complete this thesis. iv TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS ABSTRACT .iv LIST OF FIGURES.
viii LIST OF TABLES. viii LIST OF APPENDICES. Significance of study. Scope of study.
Structure of thesis. FOOD SAFETY AND VIETNAM SEAFOOD EXPORT. Food safety and policy context. Hazard Analysis and Critical Control Points (HACCP).
Overview of vietnam seafood sector in vietnam. Evidence of food safety standards (sps agreement and technical barrier) impact on vietnam exports. Theoretical review of gravity model. Different origin of a product.
Trade and monopolistic competition .13 v TIEU LUAN MOI download : skknchat@gmail. Trade and differing factor endowments. Trade and differences in production technologies .RESEARCH METHODOLOGY AND DATA.25 • Theoretical gravity model with importer fixed effects ………………….26 • Theoretical gravity model with time and importer fixed effects………….26 • Theoretical gravity model with random effects…………………………….26 • Vietnam’s output of seafood .27 • Food safety regulations between importing and exporting country.27 • Importing country’s GDP. Results of Breusch-Pagan Lagrange Multiplier test, the Huasman Test, and checking of Heteroskedasticity.
Gravity model’s estimation result. Vietnam trade potential evaluation .36 vi TIEU LUAN MOI download : skknchat@gmail. Limitations and recommendations for future research .39 LIST OF APPENDICES .45 vii TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure1.1: Vietnam seafood export (1997-2012).1: Total Vietnam aquaculture export (1999-2011) .1: Average Vietnam seafood export volume (1997-2012) .2: Relationship between Vietnam seafood export and output.3: Relationship between Vietnam seafood export and importing countries’ GDP .4: Relationship between Vietnam seafood export and Japan’s GDP .5: Relationship between Vietnam seafood export and USA’s GDP .6: Relationship between Vietnam seafood export and EU15’s GDP .7: Relationship between Vietnam seafood export and distance. 23 LIST OF TABLES Table 2.1: Violations of seafood hygiene standards by Vietnamese Exports, 2002-2007 .1: Summary of Empirical Studies .1: Descriptive statistics of variable in the model .2: Definition and measurements of all variables in this study .1: Estimation results of gravity model (aggregate seafood) .2: Trade potential between Vietnam and USA, Japan and EC-15 .3: Time of convergence.
35 LIST OF APPENDICES Appendix 1: List of 15 European countries. 45 Appendix 2: Regression Results. 46 viii TIEU LUAN MOI download : skknchat@gmail.com ABBREVIATIONS CEPII Centre d'Etudes Prospectives et d'Informations Internationales EU European Union FAO Food and Agriculture Organization of the United Nations FDA Food and Drug Administration HACCP Hazard Analysis and Critical Control Point Certification System MOIT Ministry of Industry and Trade NAVIQAFED National Fisheries Quality Assurance and Veterinary Directorate SPS Sanitary and Phytosanitory Standard TPP Trans Pacific Partnership Agreement TQM Total Quality Management VASEP The Vietnamese Association of Seafood Exporters and Producers WTO World Trade Organization ix TIEU LUAN MOI download : skknchat@gmail. Problem statement Since 1984 the record of world seafood export has increased remarkably and achieved USD 102.
The top three largest markets have been EU, Japan and United States. 49 percent of world exportvalue has been from many developing countries such as Vietnam, China, Africa, etc.A export_USD 6e+08 4e+08 2e+08 EU-15 0 1995 2000 2005 2010 2015 year Source: GSO (2015) Figure 1.1: Vietnam seafood export (1997-2012) The value of seafood export has recently had a great contribution to Vietnam GDP, about 4-5%. Its aquatic product export has become one of four major export products in terms of value. In 2014, export value of seafood was USD 7.
According to Vietnam Association of Seafood Exporters and Processors (VASEP), in 2014 Vietnam exceeded the target of USD 7 1 TIEU LUAN MOI download : skknchat@gmail. However, problems of food safety in Vietnam still exist. For instance, (i) illegal food additives are widely sold; (ii) residue of antibiotics and prohibited chemicals remain in processed food; (iii) there is less understanding of SPS standards due to no linkage between government agencies and private firms; (iv) current SPS legislation is not as equivalent as the international standard. Awareness of seafood quality and safety has risen tremendously over the last decade.
Many countries have established food-safety-policy agenda and regulatory bodies that monitor the standard of imported and exported food which producers have to comply (Kim, 2009). The new food safety standards such as the Agreement on the Application of Sanitary and Measures (SPS Agreement), USA Hazard Analysis and Critical Control Points regulation (1997), EU zero tolerance for residues (2001-2002), Russia, Ukraine restricted import control (2010-2013), Japan’sstringent uniform limit (0,01ppm Ethoxyquin, 0,001ppm for Trifluralin in shrimp) in 2010-2013 etc. has become a major issue for Vietnam in the global market. For example, in order to meet EU zero tolerance of imported seafood requirement, Vietnam must apply for (i) Good agriculture practice (GAP), (ii) authorized antibiotics, (iii) analysis competence and harmonization (Phung, 2015).The strict standard of food safety, sanitary and environmental standards of EU, Japan, the United States and other countries makes Vietnam face many difficulties to comply with.If Vietnam continues to produce frozen seafood regardless of its quality and food safety regulations imposed by importers, it will lose the market share sooner or later.
Especially, Vietnam is preparing to join Trans Pacific Partnership Agreement (TPP), requirements of sanitary and phytosanitary standards become higher and higher. Because of 18,000 different kinds of tax cut, TPP ensures that all of their partners better protect health and food safety through a science- based regulation which mirrors U.S food and agriculture safety policy. In addition to TPP requirements, the more free trade, the more non-tariff methods are applied to protect local manufacturers, farmers, ranchers in other countries. Therefore, Vietnam 2 TIEU LUAN MOI download : skknchat@gmail.com should better control its supply chain, upgrade its food safety and quality assurance systems, learn the best practices from other countries,and have a good development strategy for seafood field.
This paper aims to study the impacts of food safety regulations on Vietnam seafood export. In particular, it will look at the Vietnam export situation from 1997 to 2012 to see how the food safety regulations of importing countries affect the seafood export and how Vietnam can overcome this barrier. The export markets to be observed are U. Significance of study The results of this paper might be helpful for Vietnamese Government in identifying which factors affect Vietnamese seafood export significantly.
Based on this, they can adjust the policy to enhance future export activities. In particular, exporter companies will enjoy the most benefit of this paper because they can follow changes in food safety regulations and other determinants. Research objective This paper aims to investigate the effect of food safety regulations on Vietnam seafood export with contribution of other aspects including distance, economic size and exchange rate. Research question How do food safety regulations affect Vietnam seafood export? 1.
Scope of study Vietnam export seafood to more than 60 countries around the world; however, the focus of this study will be the United States, Japan, EU-15 due to data limitation. Despiteof limited size of sample, these countries typically represent the seafood exports of Vietnam because they are the three biggest markets. The data includes 237 observations of Vietnam seafood export from 1997 to 2012. Structure of thesis This thesis is divided into six chapters with structure as below: 3 TIEU LUAN MOI download : skknchat@gmail.com After the first introduction chapter, chapter two will deal with the concept of food safety and several food safety law imposed by importing countries to see how seafood export is affected.
Also, a brief review of Vietnam seafood export situation is discussed. Chapter three will present literature review of gravity model. It will start from the traditional gravity model to the theoretical one with different assumption ranging from product origin, trade and monopolistic competition, factor endowment to technologies. Chapter four will describe how gravity model is relevant to this study.
Five hypothesis and testing methods will be mentioned in details in this chapter. Chapter five presents the empirical results of regression. Based on the empirical evidence, the effects of food safety regulations, economics size, population, exchange and distance will be discussed. The trade potential of Vietnam seafood export is also discussed.
Chapter six will conclude main findings from chapter five and provide policy recommendations. It also draws out limitation of thesis and gives recommendation for future research. 4 TIEU LUAN MOI download : skknchat@gmail. FOOD SAFETY REGULATIONS AND VIETNAM SEAFOOD EXPORTS This chapter attempts to define the concept of food safety and present the main regulations in the United States, Japan and Europe.
The overview of Vietnam seafood sector will be described, especially, several Vietnam violation cases and their effect. Food safety and policy context 2. Food safety Food safety has attracted attention of both consumers and producers and led to the establishment of new regulation in the last few decades. Consumers considered food is safe if it is not contaminated with any bacteria or harmful additives.
Hartman (2005) defined it as being free from pesticide residues, growth hormones, antibiotics and artificial ingredients. This perspective might have negative influence on the food supply chain. As a result, producers and marketers have faced critical problem of managing safe food production chain and cost of restoring consumer confidence. Food safety hazards include biological pathogens such as bacteria, viruses, fungi and e-coli.
They relate to chemical substances such as pesticides, food additives, antibiotics, heavy metals and cleaners. It can also come from foreign objects in food such as timber, glass, dirt, dust, bones, etc. Hazard Analysis & Critical Control Points (HACCP) Because about 15% of an estimate 76 million case of foodborne illness occurring every year are related to seafood products (Anders & Caswell, 2006), in 1997, United States set up a preventive system to control biological, chemical and physical hazards in food from early production stage to end users which call Hazard Analysis Critical Control Point (HACCP). This is a new approach of controlling quality of imported seafood.
Different from the Quality Circles (1970),Total Quality 5 TIEU LUAN MOI download : skknchat@gmail.