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3. Merchandise trade integration between Vietnam and ASEAN+3: Trade indicators approach
3.1 Revealed comparative advantage (RCA)
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Vietnam’s advantage of producing these products. Electronics are important import products of Vietnam. Imports of electronic goods of Vietnam from the ASEAN + 3 increased rapidly, from 861.5 million USD in 2001 to 27545.4 million USD in 2013 (nearly 32 times). Also, according to data from Vietnam's General Department of Customs, commodities such as petroleum, machinery, tools & parts, computers, etc. are the leading import items of Vietnam from the ASEAN + 3.
Table 1: Share of exports and imports of some commodities between Vietnam and ASEAN + 3
Unit: %
2000 2003 2006 2009 2011 2012 2013 Export Agricultural products 26.19 26.92 25.82 24.82 24.88 22.90 21.33
Garments and Textiles 12.44 9.72 8.06 9.97 11.50 11.01 13.30 Resources intensive
products 6.88 9.16 9.95 10.99 12.63 11.58 10.85
High-tech commodities 9.04 7.91 7.93 9.94 10.80 14.70 17.78
Fisheries 12.23 11.43 8.21 6.22 5.02 4.56 4.65
Electronic products 6.28 8.66 8.49 10.78 12.14 16.52 20.07 Import Agricultural products 6.13 8.15 7.09 6.32 6.79 6.13 5.57
Garments and Textiles 10.72 11.62 9.80 9.32 10.18 9.86 9.98 Resources intensive
products 25.47 23.78 26.57 20.01 19.51 17.07 13.21
High-tech commodities 13.10 10.24 11.02 16.05 17.39 23.81 29.14 Electronic products 10.91 9.73 9.73 14.20 17.53 25.32 30.47
Source: Authors’ calculations based on data from UN Comtrade
3. Merchandise trade integration between Vietnam and ASEAN+3: Trade indicators
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Industries Vietnam has comparative advantage in
Some main export commodities of Vietnam to ASEAN + 3 such as agricultural products, textiles and fisheries are those that Vietnam has comparative advantages in (Table 2). However, RCAs of these traditional export commodities tend to decrease. It is because the proportion of these commodities in Vietnam's total exports decreased over the years. Indeed, competition in exporting of these goods is increasing. In addition, Vietnam is pushing up exports of non-traditional items such as electronics and furniture, which provide high-value exports.
Results also indicated that Vietnam, China and some ASEAN countries such as Thailand, Malaysia and Indonesia have comparative advantages in the exports of traditional commodities while these items are not advantage of Japan, South Korea, and Singapore. Therefore, trade integration will significantly and positively influence on Vietnam's exports of these commodities to Japan, South Korea, and Singapore. In fact, they are also main export partner of Vietnam in fisheries, textile and agriculture products.
Table 2: RCA in Vietnam's comparative advantage industries1
Industry Country 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Agriculture
products
Vietnam 2.81 2.71 2.88 3.00 2.88 2.79 2.49 2.62 2.53 2.43 1.82 Singapore 0.25 0.25 0.24 0.24 0.25 0.26 0.25 0.25 0.27 0.27 0.28 Thailand 2.08 2.09 1.98 2.13 2.01 2.14 1.95 2.04 2.36 2.03 2.01 Indonesia 1.65 2.02 1.99 2.22 2.49 2.83 2.24 2.55 2.65 2.65 2.66 Malaysia 1.22 1.23 1.17 1.24 1.44 1.67 1.41 1.63 1.88 1.66 1.64 Japan 0.11 0.11 0.12 0.13 0.13 0.13 0.14 0.14 0.14 0.14 0.16 China 0.55 0.47 0.45 0.42 0.38 0.35 0.35 0.36 0.36 0.34 0.33 Korea 0.02 0.22 0.22 0.21 0.21 0.21 0.21 0.22 0.24 0.24 0.22 Garments
and Textiles
Vietnam 3.40 3.46 3.34 3.59 3.97 4.02 4.07 4.31 4.04 3.85 3.77 Singapore 0.26 0.23 0.21 0.19 0.19 0.17 0.16 0.14 0.13 0.13 0.15 Thailand 1.18 1.26 1.29 1.23 1.19 1.17 1.17 1.18 1.14 1.23 1.5 Indonesia 2 1.99 2 1.94 1.91 1.7 1.59 1.59 1.48 1.55 1.67
Malaysia 0.43 0.46 0.5 0.5 0.49 0.5 0.51 0.51 0.55 0.51 0.52 Japan 0.29 0.29 0.28 0.28 0.27 0.28 0.29 0.27 0.29 0.30 0.29 China 3.15 3.03 3.05 3.20 3.12 3.19 3.07 3.04 3.04 3.01 2.95 Korea 1.37 1.13 0.99 0.87 0.80 0.77 0.70 0.68 0.66 0.68 0.65 Fisheries Vietnam 13.75 12.51 12.14 12.66 12.41 12.22 10.27 10.19 9.36 6.39 6.94 Singapore 0.29 0.29 0.25 0.21 0.19 0.20 0.16 0.15 0.14 0.12 0.11 Thailand 6.80 5.89 5.80 6.02 5.82 6.28 5.68 5.13 5.11 5.01 4.16 Indonesia N/A N/A N/A N/A N/A N/A N/A 2.33 2.26 2.70 2.89 Malaysia 0.56 0.63 0.63 0.59 0.66 0.66 0.56 0.58 0.56 0.51 0.46 Japan 0.27 0.26 0.30 0.33 0.37 0.35 0.38 0.36 0.32 0.32 0.38 China 1.68 1.58 1.42 1.40 1.21 1.21 1.19 1.20 1.29 1.26 1.21 Korea 0.71 0.62 0.52 0.43 0.46 0.51 0.51 0.48 0.52 0.51 0.43
Source: Authors’ calculations based on data from UN Comrade
1 Countries in bold have comparative advantage (RCA>1)
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Industries Vietnam does not have comparative advantage in
Table 3 illustrates RCA of industries in which Vietnam does not have comparative advantage, including electronics, steel, machinery & transport equipment that are all high-value commodities. RCA of these items are low but have increased over the years, which shows a positive signal in the process of restructuring production and export of these commodities in Vietnam. In addition, RCA of electronics is larger than 1 from 2011. This is consistent with the fact that electronics exports have increased rapidly over time, becoming one of the major export products of Vietnam in recent years.
Table 3: RCA of industries Vietnam does not have comparative advantage in
Industry Country 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Electron
ics
Vietnam N/A 0.39 0.38 0.41 0.56 0.53 0.63 0.83 1.22 1.76 2.14 Singapore 3.16 3.06 2.98 3.06 3.03 2.92 2.80 2.83 2.68 2.60 2.64 Thailand 1.79 1.65 1.49 1.41 1.39 1.31 1.25 1.24 1.22 1.14 1.13 Indonesia N/A N/A N/A N/A N/A N/A N/A 0.55 0.50 0.51 0.50 Malaysia 2.44 2.74 2.70 2.47 2.45 2.33 2.44 2.35 2.48 2.35 2.32 Japan 1.85 1.71 1.63 1.57 1.57 1.60 1.58 1.43 1.44 1.42 1.32 China 1.70 1.71 1.80 1.86 1.93 2.06 2.08 2.02 2.12 2.12 2.21 Korea 2.38 2.26 2.25 2.09 2.05 2.03 2.04 1.97 1.94 1.94 2.11 Steel Vietnam 0.16 0.21 0.23 0.24 0.29 0.80 0.34 0.62 0.74 0.72 0.83 Singapore 0.24 0.24 0.27 0.28 0.30 0.32 0.36 0.27 0.27 0.30 0.31 Thailand 0.50 0.51 0.46 0.43 0.68 0.42 0.36 0.34 0.28 0.48 0.43 Indonesia 0.31 0.35 0.33 0.49 0.38 0.41 0.40 0.37 0.34 0.31 0.33 Malaysia 0.45 0.48 0.40 0.48 0.47 0.40 0.57 0.44 0.47 0.48 0.39 Japan 1.48 1.32 1.42 1.41 1.31 1.45 1.92 1.83 1.81 1.88 2.05 China 0.43 0.75 0.78 1.02 1.15 1.27 0.71 0.84 0.94 0.90 0.94 Korea 1.57 1.47 1.55 1.48 1.38 1.52 1.72 1.76 1.84 1.90 1.80 Machine
ry, transpor t equipme nt
Vietnam 0.21 0.24 0.24 0.27 0.30 0.33 0.36 0.44 0.57 0.78 0.68 Singapore 1.49 1.49 1.48 1.50 1.44 1.43 1.44 1.43 1.35 1.31 1.34 Thailand 1.06 1.09 1.13 1.17 1.18 1.19 1.13 1.18 1.11 1.17 1.21 Indonesia 0.39 0.39 0.39 0.37 0.35 0.36 0.38 0.35 0.32 0.35 0.35 Malaysia 1.38 1.34 1.37 1.37 1.28 1.22 1.29 1.23 1.14 1.10 1.10 Japan 1.62 1.61 1.62 1.66 1.66 1.75 1.61 1.66 1.72 1.73 1.68 China 1.04 1.11 1.17 1.23 1.24 1.33 1.37 1.38 1.40 1.36 1.36 Korea 1.52 1.55 1.54 1.54 1.53 1.56 1.58 1.58 1.59 1.52 1.58
Source: Authors’ calculations based on data from UN Comtrade and WTO 3.2 The trade complementary index (TC)
Index: TCkj = 100 - ∑abs (mik – xij)/2
Where: mik is the proportion (%) of goods i in total imports of country k xij is the proportion (%) of goods i in total exports of country j
TC shows intra-regional trade perspectives by pointing out the complementary in the export structure of a country with imports of another country. There is a need to calculate this index for potential FTAs, compare this with that of other FTAs and their efficiency. If the result is 0, no goods exported by a country yet to be imported by its partner country and the value of 100 means
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the exports and imports of two partners complement each other. The higher value is, the better FTA will be.
The results show that Vietnam's export structure is largely complementary with import structure of Japan, Malaysia, Philippines, Singapore, South Korea and lowest complementary with those of Cambodia and China. The opposite direction shows that the exports of Singapore, Malaysia, Korea, Japan, and the Philippines are largest complementary with the imports of Vietnam. Thus, in terms of trade in both directions, in ASEAN, the export and import structure of Vietnam and Singapore, Malaysia, the Philippines has a high degree of complementary.
Besides ASEAN, Japan and South Korea have large degree of complementary to the import and export activities of Vietnam because Vietnam has an advantage in exporting agricultural products, textiles, and fisheries while Japan and South Korea have the advantages in exporting manufactured and high-tech items. Thus, trade integration will create favorable conditions for Vietnam to strongly enhance trade with these countries. A comparison of TC index between Vietnam and Japan, South Korea, China and ASEAN in 2013 with those in 2007 and 2008 calculated by MUTRAP III (2013) shows the TC index increased over the years. This is consistent with the actual increase in importing and exporting from Vietnam to ASEAN + 3 partners.
Table 4. Trade Complementary index between Vietnam and ASEAN + 3 in 2013 Unit: %
Partners
Brunei
Cambodia Indonesia Malaysia Philippines Singapore
Thaila
nd ASEAN Japan Korea China Vietna
m:
Exporte
r 51.43 38.5 48.72 58.19 56.23 53.07 52.91 50.12 59.15 51.14 42.35 Vietna
m:
Importe
r 14.75 8.84 42.87 66.31 54.46 65.67 60.54 55.33 56.72 57.83 45.37
Source: Authors' calculations based on data from UN Comtrade 3.3. Intra-industry trade index (IIT)
The intra-industry trade index (IIT), also known as Grubel-Lloyd index, was used by Grubel and Lloyd (1975) to calculate the structure of intra-industry trade in total trade value and defined by the formula:
| |
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Where: IIT is intra-industry trade index for group of products i Xi is the total export values of group of products i Mi is the total import value of group of products i
Similarly, the total IIT index for total trade for each economy and region is calculated by the formula
∑ | |
∑
Where AIITj is intra-industry trade index of country j
The value of IIT index is from 0 to 1. The closer to 1 IIT is, the higher intra-industry trade level is, while the closer to 0 IIT shows the higher level of inter-industry trade.
Intra-industry trade takes an important role, accounting for a quarter of world trade (Koçyiğit & Şen 2007). The results in Table 5 also showed that intra-industry trade achieves the high proportion in total trade between Vietnam and the ASEAN + 3 with AIIT index over 0.53 throughout the period. AIIT index showed intra-industry trade between Vietnam and ASEAN + 3 increased sharply from 2006 to now, the period when Vietnam has signed a great deal of regional FTAs. By sector, IIT index in raw and semi-processed commodities were generally higher than that in processed (or refined) items, reflecting the economies of scale in the production of these commodities hasn’t been fully exploited yet (Dao Ngoc Tien, 2012). In detail, the IIT index of crude materials, inedible, except fuels (S2) was 0.953 in 2000 and 0.788 in 2013. The IIT index of beverages and tobacco (S1) was 0.978 in 2006 and fell to 0.528 in 2013. More than 96% of trade in mineral fuels, lubricants and related materials (S3) was intra-industry trade, reflecting export and import activities in this commodity were almost equal. The reason is that Vietnam has the potential to export raw materials and crude oil but doesn’t have advantages in refined items.
Therefore, Vietnam should invest in developing high technologies and constructing refining factories for raw materials to serve production and export activities. Intra-industry trade of beverage and tobacco products (S1) tended to decrease because Vietnam gradually masters in production and export and thus decrease to import these items. This is also a group of commodity with high import duties and many of them are on the list of sensitive products in the regional FTAs that Vietnam has signed, leading to declined in imports over the years.
Table 5: Intra-industry trade index between Vietnam and ASEAN+3 Year
AIIT index
IIT index according to industry classification code SITC
S0 S1 S2 S3 S4 S5 S6 S7 S8 S9 2000 0.538 0.250 0.198 0.953 0.839 0.545 0.101 0.292 0.467 0.727 0.949 2001 0.538 0.240 0.548 0.924 0.874 0.225 0.162 0.319 0.462 0.766 0.675 2002 0.531 0.364 0.613 0.895 0.921 0.118 0.169 0.269 0.402 0.831 0.663 2003 0.549 0.451 0.906 0.868 0.916 0.120 0.196 0.274 0.436 0.882 0.714 2004 0.563 0.433 0.940 0.845 0.872 0.090 0.177 0.281 0.510 0.917 0.823 2005 0.574 0.431 0.959 0.986 0.873 0.134 0.203 0.273 0.505 0.857 0.926
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Source: Authors' calculations based on data from UN Comtrade
In the period 2000-2013, the IIT index of processed items is lower than the IIT index of primary items. In 2000, the IIT indices of chemicals and related products (S5), manufactured goods classified by materials (S6), machinery, vehicles and spare parts (S7) are low because of high imported value. Over the years, the IIT indices of these items increased gradually since the import and export of processed items between Vietnam and ASEAN + 3 increased significantly, while the import turnover of Vietnam exceeded the export turnover throughout the period. In fact, Vietnam doesn’t have comparative advantage in producing machinery products and means of transport, thus it imports large value of these items. However, over the years, countries having comparative advantages in producing high-tech products, such as Japan, South Korea tends to expand production network, shift to ASEAN countries including Vietnam to take advantage of costs of production and preferential commitments in the FTA. At the same time, Vietnam also boost FDI inflows for domestic production. Therefore, the export of these items from Vietnam increased, though it is still significantly lower than the import of these items, which leads to increase IIT index.
In detail, analysis of intra-industry trade index between Vietnam and ASEAN, Japan, Korea, China through Table 6 shows a significant difference compared to the IIT index in Vietnam and ASEAN + 3. With ASEAN and Japan, the IIT index of Vietnam in S3 is very low, respectively 0.01 in 2000 and 0.08 in 2013, in contrast with the high IIT index of S3 in Vietnam - ASEAN +3 and Vietnam - China, Vietnam - Korea trade. This shows that the export and import of fuel, lubricants between Vietnam, South Korea and China are fairly balanced. With the processed items such as machinery, transport equipment (S7), the IIT index between Vietnam and other ASEAN countries is high, which is the opposites of the IIT index between Vietnam and Japan, South Korea, China. Because the three Northeast Asian countries have the comparative advantage in manufacturing high – tech machinery products so Vietnam imports large products from these countries. However, the IIT index of S7 between Vietnam and Japan, Korean, China is ascending. Specifically 80% of trade between Vietnam and these countries in S7 items in 2013 is intra-industry trade. This reflects the investment in producing machinery and equipment, high-tech products in Vietnam has been increasing efficiently.
2006 0.588 0.466 0.978 0.888 0.974 0.118 0.238 0.284 0.506 0.875 0.309 2007 0.548 0.504 0.969 0.863 0.948 0.183 0.222 0.282 0.427 0.927 0.991 2008 0.567 0.475 0.895 0.880 0.913 0.259 0.262 0.374 0.422 0.905 0.858 2009 0.553 0.502 0.959 0.906 0.993 0.284 0.274 0.378 0.388 0.858 0.861 2010 0.568 0.543 0.849 0.801 0.927 0.249 0.320 0.453 0.466 0.859 0.827 2011 0.590 0.468 0.692 0.773 0.973 0.344 0.377 0.480 0.488 0.732 0.762 2012 0.614 0.461 0.568 0.802 0.976 0.563 0.472 0.516 0.552 0.695 0.984 2013 0.598 0.508 0.528 0.788 0.968 0.533 0.433 0.495 0.523 0.684 0.135
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Table 6: The IIT index between Vietnam and ASEAN, Japan, South Korea, China
S0 S1 S2 S3 S4 S5 S6 S7 S8 S9 ASEAN 2000 0.43 0.13 0.58 0.01 0.09 0.07 0.37 0.75 0.99 0.44
2013 0.90 0.51 0.66 0.08 0.35 0.35 0.82 0.99 0.94 0.25
Japan
2000 0.06 0.62 0.88 0.07 0.11 0.18 0.47 0.39 0.41 0.94 2013 0.11 0.11 0.89 0.06 0.17 0.63 0.49 0.80 0.37 0.28
Korea
2000 0.25 N/A 0.45 0.04 N/A 0.04 0.14 0.14 0.71 0.70 2013 0.29 0.71 0.95 0.88 0.14 0.11 0.29 0.22 0.63 0.00
China 2000 0.25 0.10 0.37 0.28 0.03 0.20 0.14 0.03 0.24 0.96 2013 0.30 0.58 0.35 0.79 0.18 0.44 0.23 0.30 0.66 0.00 Source: Authors' calculations based on data from UN Comtrade
Table 7 shows intra-industry trade index of some major export items of Vietnam including agricultural products, textiles and electronics. The results shows that over 90% of trade in agricultural products, textiles between Vietnam and ASEAN are intra - industry trade, since Vietnam and ASEAN countries have similar comparative advantages of these items. The IIT index in agricultural products between Vietnam-Japan is lowest. With textiles, the IIT index between Vietnam and Japan, China is lowest. The reason for that is Japan is one of the partners leading textile imports from Vietnam while Vietnam imports large volume of textiles from China, not only materials but also textile and garments.
Table 7: The ITT index in some commodities between Vietnam and ASEAN+3 Country Year Agricultural
products Textiles Electronics
ASEAN 2000 0.86 0.84 0.77
2013 0.94 0.95 0.94
Japan 2000 0.11 0.64 0.51
2013 0.24 0.46 0.99
Korea 2000 0.70 0.31 0.46
2013 0.61 0.95 0.18
China 2000 0.27 0.23 0.12
2013 0.29 0.41 0.33
ASEAN+3 2000 0.49 0.91 0.58
2013 0.62 0.87 0.55 Source: Authors' calculations based on data from UN Comtrade
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