Download miễn phí Regional Integration in East Asia and Its Impacts on Welfare and Sectoral Output in Vietnam
Content
Introduction. 2
East Asia trade and cooperation. 2
Literature survey of assessments on East Asia’s regional integration. 5
Model description and scenarios. 6
Model description .6
The baseline scenario.7
Policy scenarios .9
Results. 10
Welfare effects of FTAs .10
Welfare effects of FTA accords when rice is included .12
Sectoral effects for Vietnam .13
Summary and Conclusion. 17
References. 19
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egrationImpacts of East Asian regional integration have been the topics of a large number of
studies (e.g. Brown et al., 2003; Dee, 2007; Lee et al. 2004; Park, 2006; Scollay and Gillbert,
2001; Urata and Kiyota, 2005; Zhang et al., 2006). Most of empirical studies make use of the
currently available global CGE models such GTAP model of Purdue University, CPEII
MIRAGE model and the LINKAGE model of the World Bank. The range of scenario is
diverse, including all present and hypothetical FTAs in the regions, such as AFTA, ASEAN-
CER, ASEAN-India, ASEAN-China, ASEAN-Japan, ASEAN-Korea, ASEAN+3, ASEAN+4,
ASEAN+6 and China-Japan-Korea. Percentage change in welfare (or welfare per capita) and
change in GDP and output are the most commonly used variables in empirical studies. From
previous studies, it is generally found that FTA members would benefit from regional
integration while non-members may suffer welfare loss. Total world welfare would see some
insignificant increase. In terms of percentage change in welfare or GDP, gains for ASEAN
countries and Korea are found to be generally larger than that for China and Japan. Using
GTAP simulations, Urata and Kiyota (2003) indicates that ASEAN+3 will generate 12.5%
gain in welfare for Thailand and 6.6% gain for Vietnam, while that for China and Japan is
only 0.64% and 0.16% respectively. The same pattern is found in Zhang et al (2006), Kawai
Wignaraja (2007), among others. The gain in absolute terms, however, is usually higher for
China, Japan and Korea due to the size of their economies (Ando and Urata, 2006; Lee and
van der Mensbrugghe, 2008; Plummer and Wignaraja, 2007; Tsutsumi and Kiyota, 2000;
Zhang et al., 2006).
Comparing the impacts of different FTA arrangements using the same model, it is
commonly agreed that the larger the size of the FTA, the more benefits it brings to the
member economies, but also the higher the cost for non-members. These findings are
expected because the benefits from improvements in resource allocation tend to increase with
the size of the grouping without trade barriers. Lee, Choi and Park (2003) and Tsutsumi and
Kiyota, (2000) find welfare gain for ASEAN to increase significantly in ASEAN+3,
compared with AFTA. Kawai and Wignajawa (2007), which provide income effects of
ASEAN+1, ASEAN+3 and ASEN+6 for almost all single economies in East Asia found that
the gain for member countries increase with number of countries in the FTAs. The income
effects for ASEAN improve from the 3.72% in ASEAN-China FTA4 to 5.23% in ASEAN+3
4 The effects of ASEAN-Japan and ASEAN-Korea FTAs are 2.34% and 0.66%, respectively.
6
FTA and to 5.66% in ASEAN+6 FTA. The effects on Northeast Asia rise from less than
0.3% in all ASEAN+1 FTAs to 1.85% in ASEAN+3 and 1.93% in ASEAN+6 FTA.
The focus on sectoral trade and production of previous studies is found in some studies.
Urata and Kiyota (2005) provide changes in real outputs and real exports of member
countries in East Asian FTA scenario. Their study indicates that sectors with comparative
advantage increase outputs and those with strong protection increase exports. The later result
is explained by the shift of incentive from domestic sales to export sales in the protected
sectors. In another direction, Lee and van der Mensbrugghe (2008) relate RCA rankings of
commodities with various FTA scenarios and those with the global trade liberalization to
examine how “natural” each grouping would be. Their results show that ASEAN+3 with
relatively large welfare gains and small structural adjustments would be a facilitating
intermediate step towards global free trade.
Some studies focus on impacts on specific countries. Major economic players in regional
FTAs such as China, Japan, Korea, Thailand and Singapore attract most of the attention.
However, studies on impacts of regional trade agreements on small trading country like
Vietnam have been very few. Some CGE studies have taken them as a separate region but
without focus on the rationales behind the simulated impacts as well as results at the sectoral
level. In this paper, we hope to fill in the gap by providing an analysis for the impact of East
Asian regional trade integration on Vietnam in a dynamic CGE model. We focus on welfare
changes at regional level and also changes in sectoral outputs for Vietnam, which would be
more important for policy formulation purpose.
Model description and scenarios
Model description5
The model used in this study is based on the LINKAGE model which is a dynamic global
CGE model developed by van der Mensbrugghe (2005). It spans the period 2001-2015.
In this paper, the full trade liberalization scenario is examined, in which starting from the
year 2010 tariffs among FTA member countries are reduced gradually to reach 0% in the year
2015. The model takes into account impacts of trade facilitation, such as customs
harmonization.
5 For detailed description of the model, see van der Mensbrugghe (2005)
7
The model distinguishes between four trade prices. First, producers receive price PE for
exported goods. Second, the FOB price, WPE, includes domestic export taxes or subsidies.
Third, the CIF price, WPM, includes the international trade and transport margin, represented
by the ad valorem wedge ζ, as well as a non-monetary or frictional trade cost, represented by
the iceberg parameter λ. Thus the relationship between the FOB price and the CIF price is
given by
WPMr,r’,i = (1 + ζr,r’,i) WPEr,r’,i / λr,r’,i (1)
where subscripts r, r’, and i denote exporting region/country, importing region/country, and
commodity, respectively. Finally, the domestic price of imports, PM, is equal to the CIF price,
WPM, plus tariffs (or tariff-equivalent). In our model, an increase in λr,r’,i represents a
reduction in trade-related risks, lower administrative barriers to trade (e.g. customs
procedures) and/or a fall in technical barriers. In other words, trade facilitation increase the
value of λr,r’,i.
Most of the data used in the model come from the GTAP database, phiên bản 6, which
provides 2001 data on input-output, value added, final demand, bilateral trade, tax and
subsidy data for 87 regions and 57 sectors6. For the purpose of the present study, the database
is aggregated into 12 regions and 17 sectors as shown in Table 3.
The baseline scenario
To evaluate the effect of Vietnam’s unilateral trade liberalization, we first establish a
baseline, which show the path of each economy over the period 2001-2015 in the absence of
trade liberalization. Population and labor force growth are exogenous and driven by UN-
based assumption. Labor force growth is equal to the growth of the working age population
(15-64). Capital accumulation depends on savings, investment and depreciation. Real GDP
growth rates over the period 2001-2015 in the baseline are broadly consistent with the World
Bank’s GDP forecast. We assume that the trade and transport margin declines by 1% per
annum in every country/region.
6 See Dimaranan (2006) for detailed description of the GTAP database, phiên bản 6.
8
Table 3. Regional and sectoral aggregation
A. Regional aggregation
Country/region Corresponding economies/regions in the GTAP database
Vietnam Vietnam
Singapore Singapore
ASEAN-4 Indonesia, Malaysia, Philippines, Thailand
Other ASEAN Brunei, Cambodia, Lao PDR, Myanmar
China China and Hong Kong
Japan Japan
Korea Korea
Taiwan Taiwan
Australia Australia
United States United States
European Union Austria, Belgium, Denmark, Finland, France, Germany, Great Britain,
Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden,
plus 12 new member countries since 2004
Rest of world All the other economies/regions
B. Sectoral aggregation
Sector Corresponding commodities/sectors in the GTAP database
Rice Paddy rice, processed rice
Other agriculture Wheat, other grains, vegetables and fruits, oil seeds, sugar cane and sugar
beet, plant-based fibers, crops nec, livestock, raw milk, wool, forestry
Minerals Minerals, mineral products, coal, gas and coal products
Crude oil Oil
Fishing Fishing
Food products Food products, meat products nec, vegetable oils and fats, dairy products,
sugar, food products nec, beverages and tobacco products
Textiles and apparel Textiles, wearing apparel, leather products
Wood and paper Wood products, paper products and publishing
Chemical products Chemical, rubber and plastic products
Petroleum products Petroleum products
Metals Iron and steel, nonferrous metal, fabricated metal products
Transportation equipment Transportation equipment
Machinery Machinery and equipment, electronic equipment
Other manufactures M...