vietnamese agriculture and global integration david vanzetti and pham lan huong australian national...
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Vietnamese agriculture and global integration
David Vanzetti and Pham Lan Huong
Australian National University and independent consultant
National CGE WorkshopMelbourne, 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
10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20170
10000
20000
30000
40000
50000
60000
70000
80000
90000
ProjectedSimulated
Historical Projection
Deviation
Schematic representation. Not to scale.
Baseline in steps
112007 2012 2017
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
ProjectedSimulated
Historical Projection
Deviation
Change in FTA tariffs on Vietnam’s exports
12
Rice Veg
Cerea
ls
Crops
Oils
eeds
Cattle
Animal
prod
ucts
Sugar
Beef
Pork&
Poult
Dairy
Proc.
Ag
0
5
10
15
20
25
30
35
40
BaseFinal
%
Source. GTAP 2010.
Change in tariffs on Vietnam’s imports
13
Rice Veg
Cerea
ls
Crops
Oils
eeds
Cattle
Animal
prod
ucts
Sugar
Beef
Pork&
Poult
Dairy
Proc.
Ag
0
5
10
15
20
25
30
BaseFinal
%
Results
• Macro• Welfare• Exports• Imports• Tariff revenue• Real wages
• Agricultural sector• Output• Exports• Imports
14
Vietnam welfare gainsin 2017 relative to 2012
15
BA
SE
AF
TA
CH
N
JPN
KO
R
AL
L
0
5000
10000
15000
20000
25000
30000
$m
Income growth important
Vietnam trade impactsin 2017 relative to base
16
AF
TA
CH
N
JPN
KO
R
AL
L
0
2
4
6
8
10
12
14
16
18
20
ExportsImports
%
Growth in imports exceed imports
Vietnam trade balancein 2017 relative to base
17
AF
TA
CH
N
JPN
KO
R
AL
L
-8000
-7000
-6000
-5000
-4000
-3000
-2000
-1000
0
$m
Welfare with and without exemptionsin 2017 relative to base
18
AF
TA
CH
N
JPN
KO
R
AL
L
0
1000
2000
3000
4000
5000
6000
7000
ExemptNo exempt
$m
Japanese rice tariffs
Real wagesin 2017 relative to base
19
AF
TA
CH
N
JPN
KO
R
AL
L
0
2
4
6
8
10
12
14
16
UnskilledSkilled
%
Fixed employment for skilled labour
Vietnam tariff revenuein 2017 relative to base
20
BA
SE
AF
TA
CH
N
JPN
KO
R
AL
L
0
1000
2000
3000
4000
5000
6000
7000
8000
$m
Agricultural sector impacts
• Output• Exports• Imports• Use of land, labour and capital• Factor prices
21
Change in outputin 2017 relative to 2012
22
Ric
eV
eget
...
Cer
ea..
.C
ane.
..O
ther
...
Oil
s...
Cat
tle
Oth
er..
.R
aw .
..F
ore
...
Fis
hin
gP
etro
...
Su
gar
Bee
fP
ork
...
Dai
ry..
.O
ther
...
Tex
tile
sM
oto
r...
Man
u..
.E
lect
...
Tra
n..
.B
usi
n..
.S
ervi
...
-20
0
20
40
60
80
100Base ALL
%
Textiles
Cassava
Change in exportsin 2017 relative to 2012
23
Ric
e
Veg
Cer
eals
Cro
ps
Oil
seed
s
Cat
tle
An
imal
pro
du
cts
Su
gar
Bee
f
Po
rk&
Po
ult
Pro
c. A
g
-50
0
50
100
150
BaseALL
%
Cassava
Switch to cassava from other crops
Change in importsin 2017 relative to 2012
24
Veg
Cer
eals
Cro
ps
Oil
seed
s
Cat
tle
An
imal
pro
du
cts
Su
gar
Bee
f
Po
rk&
Po
ult
Dai
ry
Pro
c. A
g
0
20
40
60
80
100
120
BaseALL
%
Processed agriculture.Feed.
Use of factors in agricultureChange in 2017 relative to 2012
25
Rice
Veg. f
ruit
and
nuts
Cerea
l gra
ins n
ec
Cane
suga
r
Oth
er cr
ops
Oils
eeds
Cattle
Pigs &
pou
ltry
Raw m
ilk
Fores
try
Fishing
Petro
leum
etc
Sugar
Beef
Pork
and
chick
en
Dairy
prod
ucts
Oth
er p
roc.
Ag.
-30
-20
-10
0
10
20
30
40
50
60
70
Land Labour Capital
%
Factor pricesin 2017 relative to 2012
26
Land Unskilled labour
Skilled labour
Capital Natural Res.
-40
-20
0
20
40
60
80
100
BASEALL FTA
%
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
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