MỤC LỤC

Câu 1. Why do nation trade ? (What are 3 key questions of Trade Theories ?)......................3
1.1. What are the Benefits and Costs of Free Trade ( present: at
individual/firms/nations) ?..................................................................................................3
1.2. Non – economic Cost of Free Trade?..........................................................................4
1.3. What are the Benefits and Arguments against Protectionism ? = What are some of the
major Arguments for and against an Free Trade ?..............................................................4
 Arguments against Free Trade:.................................................................................7
Câu 2. What were the Mercantilist’s views on Trade ?..........................................................8
2.1. What are the new contributions of Mercantilist’ views on Trade ?..............................8
2.2. What is the weak point of Mercantilism ? Discuss ?...................................................8
Câu 3. How were the Adam Smith (theory of absolute advantage)’s views on Trade ?.........8
3.1. How were gains from trade generated ?......................................................................9
3.2. What policies did Adam Smith advocate in International Trade ?.............................10
3.3. What did he think was the proper function of government in the Economic life of the
nation ?............................................................................................................................. 10
Câu 4. In that way was Ricardo’s law of Comparative Advantage superior to Smith’s
Theory of Absolute Advantage ?..........................................................................................10
4.1. Why this theory ( David Ricardo - trade base on Comparative Advantage ) is more
relevant to the modern trade situation ?............................................................................11
4.2. How do gains from trade arise with Comparative Advantage?..................................12
Câu 5. What are the Sources of Comparative Advantage?...................................................12
Câu 6. What is meant by labor-intensive commodity ?.....................................................13
6.1. Capital-intensive commodity ?..................................................................................13
6.2. What is meant by capital-abundant nation?...............................................................13
6.3. What does the Heckscher and Ohlin theory postulate ?..............................................13
6.4. What can we say from the trade pattern between two countries?..............................13
Câu 7. What is primary function of tariffs in industrial nations?..........................................14
7.1. What are the advantages and disadvantages of Ad Valorem and Specific Tariff ?....14
7.2. What is meant by the consumption, production, trade, revenue, and redistribution
effects of a Tariff ?...........................................................................................................14
Câu 8. What is an Import Quota ?........................................................................................15
 8.1. How are they similar to and different from the Effects of an Equivalent Import
Tariff ?.............................................................................................................................. 15
8.2. How does the revenue effect of an Import Quota differ from that of a Tariff ?.........16
Câu 9. What is meant by Dumping ?....................................................................................16
9.1. What are the different types of Dumping?.................................................................16
9.2. Why does Dumping usually lead to Trade Restrictions ?..........................................17
Câu 10. Why do nation subsidize exports?...........................................................................19
10.1. What are the main function of subsidy?...................................................................19
10.2. To what problems do these subsidies give rise ? Give some examples....................20
10.3. What are the major forms of subsidies that government grant to domestic
producers ?....................................................................................................................... 20
Production subsidy.......................................................................................................20
Oil subsidies.................................................................................................................20
Transport subsidies.......................................................................................................20
Housing subsidies.........................................................................................................20
Câu 11. What are the Benefits and Arguments against Protectionism ?...............................23
11.1. What are the main Argument of Trump against Free Trade?...................................24
11.2. What are the current trends from the Protectionism wave ? You could give some
examples these trends ?....................................................................................................25
Câu 12. What are the main drivers of Globalization?...........................................................26
12.1. What are the benefits and challenges of Globalization............................................26
Câu 13. Countries find themselves limited in the aid they can provide without detriment to
their own citizens. What is the globalization?......................................................................28
13.1. Describe the benefits and challenges of current wave of Globalization for Vietnam’s
economy........................................................................................................................... 28
Câu 14. What are the benefits and challenges of ASEAN Economic Community?.............31
14.1. Describe the opportunities and economic benefits of Vietnam in the AEC.............32
Câu 15. Why Vietnam actively participates in many FTAs?................................................33
15.1. What are the benefits and costs of Vietnam when we sign FTAs and join WTO?...33
Câu 16. Present the different level of Economic Integration?..............................................35
16.1. What is the advantage and benefits of FTA, and Custom Union for one country?. 36
Câu 17. What are the key principles of WTO and how it differ from FTA?.........................38
Câu 1. Why do nation trade ? (What are 3 key questions of Trade Theories ?)

Countries trade to each other when they don’t have enough resources or capacity to satisfy
their own need. Besides, countries selling goods and services to each other almost always
generates mutual benefits. By developing and exploiting their domestic scare resources, they
can produce a surplus and trade this for things they need.
Reasons countries trade goods with each other include:
 Differences in the technology used in each country ( …, differences in each country’s
ability to manufacture products)
 Differences in the total amount of resources ( including labor, capital, and land ) found
in each country.
 The proximity of countries to each other (…, how close they are to one another)

1.1. What are the Benefits and Costs of Free Trade ( present: at
individual/firms/nations) ?

International trade that takes place without barriers such as tariff, quotas and foreign ex-
change controls is called free trade. Thus, under free trade, goods and services flow between
countries freely. In other words, free trade implies absence of governmental intervention on
international exchange among different countries of the world.
 Benefits of free trade:
 Individual:
 Consumption of better quality products with lower prices.
 Consumption of diverse products.
 Firms:
 Greater business opportunities.
 Greater profit.
 Promoting competitiveness is the factor for a long – term grown.
 Operating on a larger scare lead to cost saving
 Nation:
 Fast economic growth.
 Job creation.
 Increasing in trade between countries.
 Costs of free trade:
 Individual:
 Loss of jobs employed in the less competitive industries.
  Firms:
 Face stronger competition and may lose competitive edge.
 Some of the primary non-financial costs to business are the threat to domestic
industry.
 Being a significant challenge to any infant industries within a country.
 Nation:
 Greater income disparity.
 Possibility of environmental degradation in developing countries.
 Greater vulnerability to foreign shocks.
 Some of the primary non-financial costs to business are the threat to nation
security, domestic policy and legislation.

1.2. Non – economic Cost of Free Trade?

 Dependence on other countries.

 Vulnerability to trade disruption
 Crisis included ( earthquake, flood, disease )
 Policy included ( sanctions, tariffs, export bans )

1.3. What are the Benefits and Arguments against Protectionism ? = What are
some of the major Arguments for and against an Free Trade ?

*Benefits and Arguments Against Protectionism:

 Benefits of Protectionism:
1) Infant Industries:
The infant industry argument suggests that new industries should be given temporary
protection in order to enable them to build up this experience. This argument applies where
the industry is small and young, and where costs are high but fall as the industry grows.
According to this argument, there are some industries in which a country would really have
comparative advantages if and only if it could get them started. If faced with foreign
competition, such infant (young and growing) industries would not be able to pass the initial
period of experiment and financial stresses.
2) Diversification of Industries:
A policy of production is also advocated to diversify a developing country’s industrial
structure. A country cannot rely on one or a few industries only; it is necessary that a large
number of industries of diverse varieties develop in the long run. This strategy will reduce
the risk of losing foreign markets; for, in case of failure to export one commodity, other
goods may be exported.
 3) Employment Protection:
The dynamics of the world economy mean that at any time some industries will be in
decline. If those industries were responsible for a significant amount of employment in a
country in the past, their decline would cause problems of regional unemployment.
4) Employment Creation:
Protection to home industries may create employment opportunities in the country, and thus
reduce the magnitude of unemployment. But this argument is also fallacious; for protection
may create employment in some home industries, but by reducing imports it reduces
employment opportunities in the foreign countries.
5) Balance of Trade:
Some countries experience imbalance in their trade with the rest of the world. If they are
importing too many goods they may correct a temporary problem by imposing tariffs on
imports. A suitable tariff policy can create and maintain a favourable balance of trade. The
restrictions on imports for the purpose of protection will create a surplus in the balance of
trade of the country.
6) Dumping to Reflect Low Marginal Cost of Production:
Dumping is a problem which confronts many countries. By following the practice of
dumping foreign sellers try to capture the home market by selling their goods at low prices.
Protection of home industries is necessary to resist such a policy.
7) Improving the Terms of Trade:
Countries can improve their position when they are the sole (or dominant) buyer of a
commodity. Of course, this would lower the incomes received by the producers and so
might be thought undesirable as they are mostly poor countries.
8) Retaliation:
Protecting an industry as a retaliation for protection introduced by other countries is
questionable. Example, it was used by the USA when it felt that the European Union was
using hidden subsidies to lower the price of steel exported to the USA.
9) Unfair Foreign Competition:
Often countries follow a policy of protectionism against unfair foreign competition. ‘Unfair’
competition can take a variety of forms such as export subsidy, dumping,…
 Arguments against Protectionism:
 It creates obstacles or barriers to free multinational trade. Due to high tariffs imposed by
other countries, a country is not allowed to produce goods in which it has cost
advantages. So, protection reduces world production and consumption of internationally
traded goods,
 Owing to higher tariff on imports, the consumers are compelled to buy home goods,
often of inferior quality and often at higher prices,
 Protection gives shelter to weak home industries. If it is permanent, home industries
would not get any incentive to compete freely with their foreign counterparts. There
would be need for continuation of protection for an indefinite period,
 Protection may lead to trade wars and international conflicts among trading nations,
 Protection give rise to such abuse as ‘wire-pulling’ in political quarters, vested interest in
the protected sector, etc.

*Arguments for and Against Free Trade:

 Arguments for Free Trade:
1) Advantages of Specialization:
Firstly, free trade secures all the advantages of international division of labour. Each country
will specialize in the production of those goods in which it has a comparative advantage
over its trading partners. This will lead to an optimum and efficient utilization of resources
and, hence, economy in production.
2) All-Round Prosperity:
Secondly, because of unrestricted trade, global output increases since specialization,
efficiency, etc., make production large scale. Free trade enables countries to obtain goods at
a cheaper price. This leads to a rise in the standard of living of people of the world. Thus,
free trade leads to higher production, higher consumption and higher all-round international
prosperity.
3) Competitive Spirit:
Thirdly, free trade keeps the spirit of competition of the economy. As there exists the
possibility of intense foreign competition under free trade, domestic producers do not want
to lose their grounds. Competition enhances efficiency. Moreover, it tends to prevent
domestic monopolies and free the consumers from exploitation.
4) Accessibility of Domestically Produced Goods and Services:
Fourthly, free trade enables each country to get commodities which it cannot produce at all
or can only produce inefficiently. Commodities and raw materials unavailable domestically
can be procured through free movement even at a low price.
5) Greater International Cooperation:
Fifthly, free trade safeguards against discrimination. Under free trade, there- is no scope for
cornering raw materials or commodities by any country. Free trade can thus promote
international peace and stability through economic and political cooperation.
6) Free from Interference:
Finally, free trade is free from bureaucratic interferences. Bureaucracy and corruption are
very much associated with unrestricted trade.
In brief, restricted trade prevents a nation from reaping the benefits of specialization, forces
it to adopt less efficient production techniques and forces consumes to pay higher prices for
the production of protected industries.

 Arguments against Free Trade:

1) Advantageous not for LDCs:
Firstly, free trade may be advantageous to the advanced countries but not to the backward
economies. Free trade has brought enough misery to the poor, less developed countries, if
past experience is any guide. India was a classic example of colonial dependence of UK’s
imperialistic power prior to 1947. Free trade principles have brought colonial imperialism in
its wake.
2) Destruction of Home Industries/Products:
Secondly, it may ruin domestic industries. Because of free trade, imported goods become
available at a cheaper price. Thus, an unfair and cut-throat competition develops between
domestic and foreign industries. In the process, domestic industries are wiped out. Indian
handicrafts industries suffered tremendously dining the British regime.
3) Inefficiency becomes Perpetual:
Free trade cannot bring all-round development of industries. Comparative cost principle
states that a country specializes in the production of a few commodities. On the other hand,
inefficient industries remain neglected. Thus, under free trade, an all-round development is
ruled out.
4) Danger of Overdependence:
Fourthly, free trade brings in the danger of dependence. A country may face economic
depression if its international trading partner suffers from it.
The Great Depression that arose in 1929-30 in the US economy swept all over the world and
all countries suffered badly even if their economies were not caught in the grip of the then
Depression. Such overdependence following free trade also becomes catastrophic during
war.
5) Penetration of Harmful Foreign Goods:
Finally, a country may have to change its consumption habits. Because of free trade, even
harmful commodities (drugs, etc.,) enter the domestic market. To prevent such, restrictions
on trade are required to be imposed.
In view of all these arguments against free trade, governments of less developed countries in
the post-Second World War period were encouraged to resort to some kind of trade
restrictions to safeguard national interest.
Câu 2. What were the Mercantilist’s views on Trade ?

 Mercantilism is :
 Economic philosophy in 17th and 18th centuries, in England, Spain, France, Portugal and
Netherlands.
 Belief that nation could become rich and powerful only by exporting more than it
imported.
 The Mercantilist’s views on Trade:
 Export surpluses brought inflow of gold and silver.
 Trade policy was to encourage exports and restrict imports.
 One nation gained only at the expense of another.

2.1. What are the new contributions of Mercantilist’ views on Trade ?

The benefits of mercantilism include increased employment, the development of new

technologies and products, and positive cultural exchanges as mercantilist nations seek new
markets and raw material sources. The philosophy is based on the belief that maximizing
exports and minimizing imports is the best route to national prosperity. Besides, the
philosophy led to the reduction of barter trade as countries switched to bullion-based
monetary systems. Mercantilism also sparked a huge increase in the volume and breadth of
trade between countries, and it contributed to the growth of colonialism. Moreover,
Mercantilism contributed to the development of full-time standing armies and navies
because mercantilist nations scrambled to protect markets and sources of raw materials.

2.2. What is the weak point of Mercantilism ? Discuss ?

 Mercantilism is a philosophy of a zero sum game- where people benefit at the

expense of others. It is not a philosophy for increasing global growth and reducing
global problem. Also, increasing other people wealth can lead to selfish benefits, e.g.
growth of other countries, increases markets for our exports. Trying to impoverish
other countries will harm our growth and prosperity.
 Mercantilism which stresses government regulation and monopoly tends to lead to
inefficiency and corruption.
 Mercantilism justified Empire building and the poverty of colonies to enrich the
Empire country.

Câu 3. How were the Adam Smith (theory of absolute advantage)’s views on
Trade ?

Adam Smith was an 18th-century Scottish economist, philosopher, and author, and is
considered the father of modern economics. Smith's ideas–the importance of free markets,
assembly-line production methods, and gross domestic product (GDP)–formed the basis for
theories of classical economics.
Adam Smith is most famous for his 1776 book, "The Wealth of Nations". Smith started with
the simple truth that for two nations to trade with each other voluntary, both nations must
gain. If one nation gained nothing or lost, it would simply refuse to trade. But how does this
mutually beneficial trade take place, and from where do these gains from trade come?
According to Adam Smith, trade between two nations is based on absolute advantage. When
one nation is more efficient than (or has an absolute advantage over) another in the
production of one commodity but is less efficient than (or has an absolute disadvantage with
respect to) the other nation in producing a second commodity, then both nations can gain by
each specializing in the production of the commodity of its absolute advantage and
exchanging part of its output with the other nation for the commodity of its absolute
disadvantage. By this process, resources are utilized in the most efficient way and the output
of both commodities will rise. This increase in the output of both commodities measures the
gains from specialization in production available to be divided between the two nations
through trade. He used absolute advantage to explain the benefits of trade:
 A country that has an absolute advantage produces greater output of a good or
service than other countries using the same amount of resources.
 Smith stated that tariffs and quotas should not restrict international trade.
 Contrary to mercantilism Smith argued that a country should concentrate on
production of goods in which it holds an absolute advantage. No country would then
need to produce all the goods it consumed.
 Definition “absolute advantage”: The advantage in the production of a product enjoyed
by one country over another when it uses fewer resources to produce that product than
the other country does.
 Example: If US uses 15 hours of labor to produce one unit of tomatoes and Mexico uses
10 hours to produce the same amount of tomatoes, Mexico has absolute advantage in the
production of tomatoes.

3.1. How were gains from trade generated ?

Countries selling goods and services to each other almost always generates mutual benefits.
 When a buyer and a seller engage in a voluntary transaction, they are both usually better
off.
 Countries use finite resources to produce what they are most productive at (compared to
their other production choices), and then trade those products for what they want to
consume.
 Countries can specialize in production, while consuming a great diversity of goods and
services through trade.
 Trade benefits countries by allowing them to export goods made with relatively
abundant resources and import goods made with relatively scarce resources.
 When countries specialize, they may be more efficient due to the larger scale of
production.
 Countries may also gain by trading current resources for future resources (international
borrowing and lending) and from international migration.

3.2. What policies did Adam Smith advocate in International Trade ?

Adam Smith and other classical economists advocated policy of laissez-faire, or minimal
government interference with economic activity. Free trade would cause world resources to
be utilized most efficiently, maximizing world welfare.
Smith was in favor of free trade.
 He derived his support for free trade among nations by basing it on the obvious
desirability of trade among individuals: "It is the maxim of every prudent master of a
family, never to attempt to make at home what it will cost him more to make than to
buy".
 According to Smith, free trade expands the extent of the market and, thereby, allows
greater division of labor
 Free trade also increases productivity by allowing countries to specialize in what
they do well.

3.3. What did he think was the proper function of government in the Economic life
of the nation ?

 As one might expect from Smith’s conviction that markets were extremely efficient,
he was in favor of a government that did not hamper the working of the market.
 However, Adam Smith emphasized the fact that the government should maintain law
and order, ensure the defense of the nation from foreign enemies, erect and maintain
public works that private citizens would not build, subsidize education for those who
could not afford it, and regulate international trade when free trade endangers ‘infant
industries’ or compromises national security.

Câu 4. In that way was Ricardo’s law of Comparative Advantage superior to

Smith’s Theory of Absolute Advantage ?

 Definition “comparative advantage”:

 The advantage in the production of a product enjoyed by one country over another
when that product can be produced at lower cost in terms of other products
(Opportunity Cost) than it could be in the other country.
 Definition “absolute advantage”:

 The advantage in the production of a product enjoyed by one country over another
when it uses fewer resources to produce that product than the other country does.

* Comparative Advantage superior to Smith’s Theory of Absolute Advantage:

If Advancedland is more productive than Backwardland in every productive activity, would
both countries benefit from trade? The law of absolute advantage has no answer to this
question. But Ricardo’s law of comparative advantage showed that the answer is yes.
In Smith’s theory technologically advanced countries would produce all the goods in the
world because they are better at doing that. Having absolute advantage, they have lowest
absolute costs, that is spend less factors in making one unit of product. But there is only so
many workers and so much capital in those countries. They cannot be the manufacturing
center for everything. If they tried, the demand for workers and capital would result in
higher wages and interest rates, that would make goods produced too expensive for the rest
of the world.

Instead Ricardo focused on relative costs of production. Which questions not how much
resources were spent per unit, but how much potential production of other goods was
sacrificed to make additional unit. Now the picture would make sence. Tech-advanced
countries still outperform everybody else in any particular good. But they have to choose
what to produce and what to sacrifice. Which opens up a possibiity for other countries to
also produce something profitably.

4.1. Why this theory ( David Ricardo - trade base on Comparative Advantage ) is
more relevant to the modern trade situation ?

Comparative advantage takes a more holistic view, with the perspective that a country or
business has the resources to produce a variety of goods. The opportunity cost of a give
option is equal to the forfeited benefits that could have been achieved by choosing an
available alternative in comparison.
In general, when the profit from two products is identified, analysts would calculate the
opportunity cost of choosing one option over the over.
The first is to look at them directly -- if it costs China 50 cents to make a pound of rice, and
it costs the United States 1 dollar to make a pound of rice, for example, then China has a
comparative advantage in rice production because it can produce at a lower opportunity
cost; this is true as long as the costs reported are in fact true opportunity costs.
 4.2. How do gains from trade arise with Comparative Advantage?

Because the concept of absolute advantage doesn't take cost into account, it's useful to also
have a measure that considers economic costs. For this reason, we use the concept of
a comparative advantage, which occurs when one country can produce a good or service at a
lower opportunity cost than other countries. Economic costs are known as opportunity cost,
which is simply the total amount that one must give up in order to get something.
U.S U.K
Wheat (bushels/labor hour) 6 1
Cloth (yards/ labor hour) 4 2

U.S U.K
Wheat UK has higher opportunity
2
1 W US= C US 1 W UK =2C UK cost than US in Wheat
3
production
Cloth US has higher opportunity
3 1 cost than UK in Cloth
1 CUS = W US 1 CUK = W UK
2 2 production
 U.K has absolute disadvantage in both goods.
 Since U.K labor is half as productive in cloth but six time less productive in wheat
compared to U.S, the U.K has a comparative advantage in cloth.
 U.S has comparative advantage in wheat.

Câu 5. What are the Sources of Comparative Advantage?

The sources of comparative advantage:

Countries’ comparative advantage comes from:
 Accumulated Physical and Human Capital
 Difference in cultures and social institution
 Dynamic comparative advantage – “learning by doing” which develops industry specific
expertise
 “Infant industry” argument for tariffs and subsidies
 Difference in natural resources, topography, climate may play an initial role – but
acquired advantage dominate differences in initial conditions.
 Technological change and government policies.
Example:
 China – workforce/ technology
 Alberta – oil
 India – technology/ skilled people
 New Zealand – sheep
 Mexico – greenhouse/ climate
Câu 6. What is meant by labor-intensive commodity ?

The term “ labor intensive” refers to a process or industry that requires a large amount of
labor to produce its goods or services. The degree of labor intensity is typically measured in
proportion to the amount of capital required to produce the goods or services: the higher the
proportion of labor costs required, the more labor intensive the business.

6.1. Capital-intensive commodity ?

Capital intensive commodity is described by examples by capital intensive industries

include automobile manufacturing, oil production and refining, steel production,
telecommunications, and transportation sectors (e.g., railways and airlines). All these
industries require massive amounts of capital expenditures.

6.2. What is meant by capital-abundant nation?

A country is capital abundance if its endowment of capital relative to other

factors is large compared to other countries. Relate capital abundance can be
defined by either the quantity definition or the price definition.

6.3. What does the Heckscher and Ohlin theory postulate ?

The Heckscher-Ohlin model is an economic theory that proposes that countries export what
they can most efficiently and plentifully produce. Also referred to as the H-O model or
2x2x2 model, it's used to evaluate trade and, more specifically, the equilibrium of trade
between two countries that have varying specialties and natural resources.
Suppose that there: Airplane is Capital –intensive commodity and Rice is labor-
intensive commodity, and we have to nations: France is rich and capital-abundant
nation; Somali is a labor abundant country.

6.4. What can we say from the trade pattern between two countries?

France is rich and a capital-abundant nation, so France has comparative advantage in

Airplane. Besides, Somali has comparative advantage in Rice because Somali is a labor
abundant country.
Each country is exporting the good for which it has the comparative advantage. This
confirms that the pattern of trade is determined by comparative advantage which is the first
lesson of the Ricardian model. There are gains from trade for both countries which is the
second lesson of the Ricardian model.
Câu 7. What is primary function of tariffs in industrial nations?

A tariff is simply a tax on imports (import tariff) or exports (export tariff). Tariffs are the
most common type of trade restriction. Governments impose tariffs to raise revenue, protect
domestic industries, or exert political leverage over another country.

7.1. What are the advantages and disadvantages of Ad Valorem and Specific
Tariff ?

 Ad valorem: % of value ( a percentage of the monetary value of 1 unit of

import)
 An advantage to this tariff is the change in tax charges with varying import prices
and it tends to maintain a constant degree of protection for domestic produces.
 A disadvantage is this tariff taxes based on the value of the import which can be
difficult to determine at times.
 Specific: $ per unit (a monetary sum that must be paid to import 1 physical
unit of a product)
 An advantage of a specific tariff that is easy to apply on imports, regardless of their
price. It protects domestic producers during a recession because consumer seek to
purchase cheaper goods and the specific tariff raises the price of cheap imports.
 A disadvantage of this tariff is that consumers will buy the imported goods with
relatively more expensive due to the set amount of tax with foreign products.

7.2. What is meant by the consumption, production, trade, revenue, and

redistribution effects of a Tariff ?

 Consumption effect: Imposition of tariff raises the price, and as a result, the demand
for the commodity falls. Total outlay on consumption of the commodity is larger or
smaller depending upon whether demand is inelastic or elastic.
 Production effect: A tariff has protective effect for the domestic industries. It tends
to raise the domestic price of the imported commodity, reduce the domestic demand
for that commodity and thereby stimulates its domestic production.
 Trade effect: If the foreign supply of a good is perfectly elastic or if the foreign
suppliers are ready to supply the product at a constant price, the imposition of tariff is
not likely to improve the terms of trade for the tariff-imposing country. In case the
foreign supply of a good is not perfectly elastic, the imposition of tariff can have
 varying effects upon the terms of trade of the tariff-imposing country depending
upon the elasticity of demand and supply in the two trading countries.
 Revenue effect: As a result of tariff, the expenditure on imported goods is reduced.
This will increase the export surplus of the country and thereby the income from
foreign trade. The money shifted from imports can now be spent on the domestically
produced goods. If the country is at less than-full employment level, this will raise
income and employment in the country.
 Redistribution effect: refers to the transfer of real income from the consumers to the
producers as a result of tariff. The imposition of tariff, on the one hand, causes a
reduction in consumer’s satisfaction and, on the other hand, provides a larger
producer’s surplus for domestic producers and revenues to the government.

Câu 8. What is an Import Quota ?

A quota is a government-imposed trade restriction that limits the quantity of a certain goods
that a country can import or export during a particular period. Countries use quotas in
international trade to help regulate the volume of trade between them and other countries.
Countries sometimes impose quotas on specific products to reduce imports and
increase domestic production. In theory, quotas boost domestic production by restricting
foreign competition.

8.1. How are they similar to and different from the Effects of an Equivalent Import
Tariff ?

 Similar to:
 Raises price
 Reduces imports and consumption
 Increases domestic output
 Different from:
*A Tariff:
 Produces government revenue
 Lets imports rise when demand increases
 Maintains link between domestic and international prices.
*A Quota:
 Creates monopoly profits for those with import licences
 Makes prices rise when demand increases
  Removes link between domestic and international prices

8.2. How does the revenue effect of an Import Quota differ from that of a Tariff ?

Imposing a tariff has three effects: First, it encourages inefficient domestic production;
second, it induces consumers to reduce their purchases of the tariffed good below efficient
levels; and finally it raises revenues for the government. Only the first two of these
necessarily impose costs on society in terms of efficiently loss.

A tariff raises revenue for the government. A quota generates no government revenue. All
the benefits of a quota go to protected domestic producers and to those imports who manage
to get the scarce and valuable import permits used with quotas. Since permits are limited,
permit-holders can buy the good at the low foreign price and resell it at higher domestic
price.

The difference between the price of importer pays the foreign supplier and the price the
importer can charge the domestic consumers times the number of units imported is a
monopoly profit that comes from having a licence to import. These monopoly profits are
precisely equal to the revenue the government would have received under a tariff.

Câu 9. What is meant by Dumping ?

Dumping is a term used in the context of international trade. It's when a country or
company exports a product at a price that is lower in the foreign importing market than the
price in the exporter's domestic market.

9.1. What are the different types of Dumping?

 Sporadic dumping:
Manufactures practice sporadic dumping to get rid of excess merchandise. A
manufacturer with unsold inventories avoids starting a price war in the home market to
preserve his competitive position. Excess supplies are destroyed. Example, Asian
farmers dumped small chickens into the sea. Another method is to have the excess
supply dumped in a foreign market where the product is normally not sold. Thus,
sporadic dumping is aimed at liquidating excess stocks that may arise occasionally.
 Persistent dumping:
 Persistent dumping as the name itself implies is the most permanent type of dumping.
It involves consistent selling at lower prices in one market than in the rest of the market.
This practice is based on the fact that markets vary in terms of overhead costs and
demand characteristics. In persistent dumping, the firm may use marginal cost pricing
abroad while using full cost pricing (covering fixed costs at home) in domestic market.
Japan, for example, sold consumer electronics at high prices in its own country. This
is because it has no foreign competition. But it lowered prices in the U.S market in order
to maintain market share.
 Predatory dumping:
It involves sale of goods in overseas markets at a price lower than the home market
price. This is selling at a loss to gain access to a market and eliminate competition. After
the competition is eliminated, the company becomes a monopolist. Monopoly position is
then used to increase the price.

9.2. Why does Dumping usually lead to Trade Restrictions ?

The effects of dumping on the country, in which a monopolist dumps his commodity,
depend on whether dumping is for a short period or a long period and what are the nature of
the product and the aim of dumping.

1. If a producer dumps his commodity abroad for a short period, then the industry of the
importing country is affected for a short while. Due to the low price of the dumped
commodity, the industry of that country has to incur a loss for some time because
less quantity of its commodity is sold.
2. Dumping is harmful for the importing country if it continues for a long period. This
is because it takes time for changing production in the importing country and its
domestic industry is not able to bear competition. But when cheap imports stop or
dumping does not exist, it becomes difficult to change the production again.
3. If the dumped commodity is a consumer good, the demand of the people in the
importing country will change for the cheap goods. When dumping stops, this
demand will reverse, thereby changing the tastes of the people which will be harmful
for the economy.
 4. If the dumped commodities are cheap capital goods, they will lead to the setting up
of a now industry. But when the imports of such commodities stop, this industry will
also be shut down. Thus ultimately, the importing country will incur a loss.
5. Predator dumping is the most dangerous type. If the monopolist dumps the
commodity for removing his competitors from the foreign market, the importing
country gets the benefit of cheap commodity in the beginning. But after competition
ends and he sells the same commodity at a high monopoly price, the importing
country incurs a loss because now it has to pay a high price.

=> Because of these reasons above, importing countries will have some measures such as
tariff duty, import quota,…to protect their economy from the stagnation of production or the
risk of bankruptcy of domestic producers.
*Analyze one case study many government have used: China with steel industry, solar
panel.
China’s solar panel:
China, the world's largest producer of solar panels, accounts for about two-thirds of
global production. As China ramped up its PV cell production to meet solar targets, they use
one of the types of dumping is predator dumping. Chinese companies of selling their
products to other markets at a price less than what they charge in China, operating at a loss
in order to put competitors out of business. Clean Technica reports that from 2010 to 2013,
PV system costs have fallen by over 50 percent, while the number of suppliers has declined
from 250 to 150.

China’s steel:

China’s hold over the international steel market is pretty clear. It produces half the
world’s steel and in 2015, finished imports from China to the EU were up 140% on 2013.
Imports now account for a quarter of the EU market, and at the same time, prices for a range
of major EU product classes have collapsed.

This trend, replicated to differing degrees worldwide, has led to accusations in the

US and elsewhere that China is selling its steel at a loss, or more accurately in this case,
keeping costs artificially low so that other producers cannot compete, in a practice widely
known as “dumping”.
Câu 10. Why do nation subsidize exports?

Export subsidies come in a variety of forms, but they share the trait in benefiting from
government funds. These funds enable them to offer their products or services to other
countries at lower prices, or low interest loans to foreign buyers to stimulate the nation’s
exports. The objective of this support is to enable domestic producers to “win” sale by
undercutting the prices charged by producers in foreign countries.
The imposition of export subsidies on foreign imports, as well as other foreign trade
policies, are commonly justified for at least five of reasons:
1. Domestic Employment: Because foreign imports are produced in other countries by
foreign workers, subsidizing exports and increasing domestic production also
increases domestic employment.
2. Low Foreign Wages: Subsidizing the exports of domestic production "levels the
competitive playing field" compared to imports produced by foreign workers who
receive lower wages.
3. Infant Industry: If foreign imports compete with a relatively young domestic
industry that is not mature enough nor large enough to benefit from economies of
scale, then export subsidies protect the "infant industry" while it matures and
develops.
4. Unfair Trade: Foreign imports might be sold at lower prices in the domestic
economy because foreign producers engage in unfair trade practices, such as
"dumping" imports at prices below production cost. Export subsidies once again seek
to "level the competitive playing field."
5. National Security: Export subsidies can also encourage domestic production of
goods that are deemed critical to the security of the national economy.

10.1. What are the main function of subsidy?

A subsidy is a benefit given to an individual, business, or institution, usually by the

government. It is usually in the form of a cash payment or a tax reduction. The subsidy is
typically given to remove some type of burden, and it is often considered to be in the overall
interest of the public, given to promote a social good or an economic policy.
A subsidy typically supports particular sectors of a nation’s economy. It can assist
struggling industries by lowering the burdens placed on them, or encourage new
developments by providing financial support for the endeavors.

10.2. To what problems do these subsidies give rise ? Give some examples.

 An export subsidy lowers consumer surplus and raise producers surplus in the
exporter market.
 An export subsidy raise producers surplus in the export market and lowers it in the
import country market.
 National welfare falls when a large country implements an export subsidy.
 National welfare in the importing country rises when a large exporting country
implements an export subsidy.
  An export subsidy of any size will reduce world production and consumption
efficiency and thus cause world welfare to fall.
Examples:

10.3. What are the major forms of subsidies that government grant to domestic
producers ?

Production subsidy
A production subsidy encourages suppliers to increase the output of a particular product by
partially offsetting the production costs or losses. The objective of production subsidies is to
expand production of a particular product more so that the market would promote but
without raising the final price to consumers. 
Export subsidies: An export subsidy is when the government provides financial support to
companies for the purpose of exporting goods to sell internationally. An export subsidy is
implemented once the good is exported. The exporter will report the volume of exports to
the government, who will, in turn, compensate them. Export subsidies can be used to boost
the trade surplus or decrease a trade deficit for the country undertaking the subsidy.
Oil subsidies
An oil subsidy is one aimed at decreasing the overall price of oil. *
Agriculture subsidies:
Federal governments subsidize their agricultural industries, often to protect domestic food
prices. *
Transport subsidies
The government subsidizes many elements of the transportation sector to assure the fast,
efficient, reliable, and economical movement of people, commercial goods, and mail from
one place to another. *
Housing subsidies
Housing subsidies help give citizens the opportunity to own homes by providing interest
rate subsidies and down payment assistance. The most common interest rate subsidy that
homeowners utilize is the mortgage interest deduction, which is a reduction in taxes
calculated annually on federal income returns. The government also provides financial
assistance in the form of matching funds for low-income families who are saving up for a
down-payment.
Healthcare subsidies:
Forms of government healthcare subsidies include funding medical research and paying for
prescription drug development and trials.
*A subsidy may provide import – competing producers the same degree of protection
as tariff or quota but at a lower cost in terms of national welfare. It could have long-
term benefits for the economy. Explain.
Subsidy:
A subsidy takes the form of a payment, provided directly or indirectly, to the receiving
individual or business entity. Subsidies are generally seen as a privileged type of financial
aid, as they lessen an associated burden that was previously levied against the receiver, or
promote a particular action by providing financial support.

A subsidy typically supports particular sectors of a nation’s economy. It can assist

struggling industries by lowering the burdens placed on them, or encourage new
developments by providing financial support for the endeavors. 

Economists who promote a mixed economy often argue that subsidies are justifiable to
provide the socially optimal level of goods and services which will lead to economic
efficiency. In contemporary neoclassical economic models, there are circumstances where
the actual supply of a good or service falls below the theoretical equilibrium level—an
unwanted shortage, which creates what economists call a market failure.

One form of correcting this imbalance is to subsidize the good or service being under
supplied. The subsidy lowers the cost for the producers to bring the good or service to
market. If the right level of subsidization is provided, all other things being equal, the
market failure should be corrected. In other words, according to general equilibrium theory,
subsidies are necessary when a market failure causes too little production in a specific area.
They would theoretically push production back up to optimal levels.

Tariff:

Except in all but the rarest of instances, tariffs hurt the country that imposes them, as their
costs outweigh their benefits. Tariffs are a boon to domestic producers who now face
reduced competition in their home market. The reduced competition causes prices to rise.
The sales of domestic producers should also rise, all else being equal. The increased
production and price causes domestic producers to hire more workers which causes
consumer spending to rise. The tariffs also increase government revenues that can be used to
the benefit of the economy.

There are costs to tariffs, however. Now the price of the good with the tariff has increased,
the consumer is forced to either buy less of this good or less of some other good. The price
increase can be thought of as a reduction in consumer income. Since consumers are
purchasing less, domestic producers in other industries are selling less, causing a decline in
the economy.

Generally, the benefit caused by the increased domestic production in the tariff-protected

industry plus the increased government revenues does not offset the losses the increased
prices cause consumers and the costs of imposing and collecting the tariff. We haven't even
considered the possibility that other countries might put tariffs on our goods in retaliation,
which we know would be costly to us. Even if they do not, the tariff is still costly to the
economy.
=> The gains from a tariff are clearly visible but the costs are hidden, it will often appear
that tariffs do not have a cost. By understanding this we can understand why so many
government policies are enacted which harm the economy.
Quota:
Quotas are similar to tariffs. In fact, they can be represented by the same diagram. The main
difference is that quotas restrict quantity while tariffs work through prices.
A quota generates no revenue for the government. However, if the government auctions the
right to import under a quota to the highest bidder then quotas are similar to a tariff. But a
quota leads to corruption. Usually officials charged with the allocation of import licences
are likely to be exposed to bribery.
Secondly, a quota creates a monopoly profit for those with import licences. This means that
consumer surplus is converted into monopoly profits. Thus, a quota is likely to lead to a
greater loss of consumer welfare.
Thirdly, allied to this disadvantage of a quota is that a quota is much more restrictive in
effect as it restricts competition. Thus, a quota may ultimately lead to concentration of
monopoly power among importers and exporters.
Finally, a quota has the tendency to distort international trade much more than tariffs since
its effects are more vigorous and arbitrary.
=> Thus, we will have to make a choice between a tariff and a quota. A tariff is usually
considered a less objectionable method of trade restriction than an equivalent quota. A tariff
permits imports to increase when demand increases and, consequently, the government is
able to raise more revenue.
Conclusion:
A subsidy may provide import – competing producers the same degree of protection as tariff
or quota but at a lower cost in terms of national welfare. But subsidy has more advantages
than tariff and quota. We can use tariff and quotas in a long time because they will arise
many problems which I said. But subsidy don’t have those.

Câu 11. What are the Benefits and Arguments against Protectionism ?

*Benefit:
 If a country is trying to grow strong in a new industry, tariffs will protect it from
foreign competitors. That gives the new industry’s companies time to develop their
 competitive advantages. give ailing domestic industries a chance to recover and
prosper
 Protectionism also temporarily creates jobs for domestic workers. The protection of
tariffs, quotas, or subsidies allows domestic companies to hire locally. This benefit
ends once other countries retaliate by erecting protectionism.
 Reduce the trade deficits.

*Argument against protectionism:

Higher Prices for Consumers
Import tariffs in particular push up prices for consumers and insulate inefficient domestic
sectors from genuine competition. They penalise foreign producers and encourage an
inefficient allocation of resources both domestically and globally.
Reduction in Market Access for Producers
Export subsidies depress world prices and damage output, profits, investment and jobs in
many lower and middle-income developing countries that rely heavily on exporting primary
and manufactured goods for their growth.
Extra Costs for Exporters
For goods that are produced globally, high tariffs and other barriers on imports act as a tax
on exports, damaging economies, and jobs, rather than protecting them. For example, a
tariff on imported steel can lead to higher costs and lower profits for car manufacturers and
the construction industry.
Adverse Effects on Poverty
Higher prices from tariffs tend to hit those on lower incomes hardest, because the tariffs
(e.g. on foodstuffs, tobacco, and clothing) fall on products that lower income families spend
a higher share of their income. Tariffs can therefore lead to a rise in relative poverty.
Retaliation and Trade Wars
There is the danger that one country imposing import controls will lead to retaliatory action
by another.

*Give some examples and trade tools that developed Nations: US,EU,Japan used to
protect their Industry/ Agricultural.
Trade tools:
 Tariff: this is a tax on import.
 Quota: this is a physical limit on the quantity of import.
 Subsidies: if a government subsidies domestic production this give them an unfair
advantage over competitors.
  Administrative barriers: making it more difficult to trade.
Example:
*US
 Tariffs on imports of Chinese tires into US. The US imposed tariffs of 35% on
imports of types from China.
 Trump tariffs. In March 2018 President Trump imposed tariffs on steel (25%) and
aluminum (10%) from most countries President Trump raised tariffs on imports of
many Chinese goods such as fridges, washing machines and clothes.
 America’s sugar quota.
 Clothing: textiles (fabrication of cloth) and apparel (assembly of cloth into clothing).
Until 2005, quotas licenses granted to textile and apparel exporters were specified in
the Multi-Fiber Agreement between the U.S. and many other nations
*EU
 EU Common Agricultural Policy (CAP). Despite reforms and some reduction in
tariff rates, the EU still impose substantial tariff rates on many agricultural markets.
The aim is to increase prices for domestic European farmers in order to increase their
income.
 Escalated tariffs. This occurs when higher tariffs are placed on processed food. This
creates a disincentive for countries to process and add value to the raw commodity.
For example, a WTO report found that the average EU tariff on primary food
products (in 2008) was 9.9% but for processed food products it was more than twice
as high, at 19.4%
 Subsidy of European airlines. For example, European airlines have been criticized for
receiving ‘unfair’ support from their government. Though European governments
respond they were just preventing the airline from going bust
 EU announces tariffs on Chinese solar panels

11.1. What are the main Argument of Trump against Free Trade?

 Rebalance American Trade Relationships by Promoting National Security:

According to the Trump administration, trade policy should focus more on the
national interests of the United States and for this reason must be harmonious with
the country’s national security strategy. Accordingly, the Trump Administration has
not only initiated several 232 investigations but implemented 232 tariffs on steel and
aluminum.
 Re-Negotiation of “Outdated and Imbalanced” Trade Agreements: At the top of the
agenda stood NAFTA and the free trade agreement with South Korea (KORUS).
Trump castigated NAFTA as “the worst deal ever”. After several years of
negotiation, the United States, Canada, and Mexico ratified U.S.-Mexico-Canada
Agreement (USMCA) in late 2019/early 2020. The agreement is largely similar to
NAFTA but differs from it in some key areas; for example, it contains much stricter
 rules of origin and will thus have major implications for regional value chains. The
United States ratified the agreement late 2019; it is scheduled to come into force in
summer of 2020.
 Aggressive Enforcement of U.S. Trade Law: The Trump administration is no longer
willing to tolerate unfair trade practices and is prioritizing the rigorous application of
national trade laws, with a clear focus on China. In July 2018, the United States
imposed a first round of 301 import duties of 25 percent on imports of Chinese goods
worth 34 billion U.S. dollars. After more than a year of tit-for-tat tariff retaliation, the
two countries agreed on the so-called Phase-One Deal in early 2020 – an agreement
far from a traditional free trade agreement, featuring many aspects of managed trade.
 Defending American Interests at the WTO: The Trump administration is highly
critical of the WTO, denouncing that the WTO was no longer “able to keep up with
modern economic challenges” and as such, should be reformed. Among other things,
the Trump Administration criticizes the dispute settlement system for overstepping
its mandate. As a response, the Trump administration threatens the functioning of the
entire organization by blocking the appointment of members to the Appellate Body
and by refusing to engage in serious reform discussions.

11.2. What are the current trends from the Protectionism wave ? You could give
some examples these trends ?

 The election of President Trump represents the cusp of the current wave of
protectionism and populism that emerged in the aftermath of the Global Financial
Crisis of 2008.
 As the Brexit vote and the emergence of populist leaders such as Vladimir Putin in
Russia showed, the disaffection and dissatisfaction among the masses against
globalization and free trade as well as outsourcing have boiled over leading to the
current wave of protectionism and populism in the United States and Europe.
 Indeed, even the developing economies have been affected by nationalism and a
revolt against the liberal order as can be seen in India and other Asian countries.

Câu 12. What are the main drivers of Globalization?

 The main drivers of Globalization:

1. Technological drivers:
 Technology shaped and set the foundation for modern globalization.
  Innovations in the transportation technology revolutionized the industry.
 The rapid growth of the Internet is the latest technological driver that created global
e-business and e-commerce.
2. Political/Government drivers:
- Liberalized trading rules and deregulated markets lead to lowered tariffs and allowed
foreign direct investments in almost all over the world.
3. Market drivers:
 As domestic markets become more and more saturated, the opportunities for growth
are limited and global expanding is a way most organizations choose to overcome
this situation.
 Common customer needs and the opportunity to use global marketing channels and
transfer marketing to some extent are also incentives to choose internationalization.
4. Cost drivers:
 Sourcing efficiency and costs vary from country to country and global firms can take
advantage of this fact.
 Other cost drivers to globalization are the opportunity to build global scale
economies and the high product development costs nowadays.
5. Competitive drivers:
 With the global market, global inter-firm competition increases and organizations are
forced to “play” international.
 Strong interdependences among countries and high two-way trades and FDI actions
also support this driver.

12.1. What are the benefits and challenges of Globalization.

 Benefits & Challenges of Globalization:

 Benefits:
1. Increased Flow of Capital:
 Increased trade to larger and more diverse markets results in greater revenues and
increased gross domestic product (GDP)
 For example: World GDP has grown from about $50 trillion in 2000 to about $75
trillion in 2016
2. Lower Costs for Products:
 Globalization allows companies to find lower-cost ways to produce their products.
 It also increases global competition, which drives prices down and creates a larger
variety of choices for consumers.
 Lowered costs help people in both developing and already-developed countries live
better on less money.
3. Access to New Markets:
 Businesses gain a great deal from globalization, including new customers and diverse
revenue streams.
  Companies interested in these benefits look for flexible and innovative ways to grow
their business overseas.
4. Access to New Cultures:
 Globalization makes it easier than ever to access foreign culture, including food,
movies, music, and art.
5. Access to New Talent:
 Globalization allows companies to find new, specialized talent that is not available in
their current market.
6. The Spread of Technology and Innovation:
 Many countries around the world remain constantly connected, so knowledge and
technological advances travel quickly.
7. Higher Standards of Living Across the Globe:
 Developing nations experience an improved standard of living—thanks to
globalization.
 Across the globe, nearly 1.1 billion people have moved out of extreme poverty since
1990

 Challenges:
1. International Recruiting:
 Recruiting across borders creates unknowns for HR teams.
 To ensure successful hires, HR teams must factor in challenges like time zones,
cultural differences, and language barriers to find a good fit for the company.
2. Loss of Cultural Identity:
 The success of certain cultures throughout the world caused other countries to
emulate them.
 When cultures begin to lose their distinctive features, we lose our global diversity.
3. Global Expansion Difficulties:
 For businesses that want to go global and discover the benefits of globalization,
setting up a compliant overseas presence is difficult.
 Companies must be aware of how to navigate new legal systems in new countries.
Otherwise, missteps lead to impediments and severe financial and legal
consequences.
4. Exploitation:
 Exploiting cheap markets and lax regulations in developing nations has caused
pollution and suffering in those countries, even as profits soar abroad.
5. High Investment Costs:
 Globalization presents challenges for multinational corporations in terms of capital
investment and leadership. Setting up a business in a new country, especially a
developing country, requires substantial upfront capital. The needed infrastructure
may not be in place.
  For companies looking to sell products abroad, getting those items overseas can be
expensive, depending on the market.
6. Immigration Challenges:
 Increasing populations of immigrants and refugees present a challenge for
industrialized nations.
 Though countries may wish to help, too large an influx puts a strain on resources and
social structures.

Câu 13. Countries find themselves limited in the aid they can provide without
detriment to their own citizens. What is the globalization?

- Globalization is a process of interaction and integration among the people,

companies, and governments of different nations, a process driven by international
trade and investment and aided by information technology. This process has effects
on the environment, on culture, on political systems, on economic development and
prosperity, and on human physical well-being societies around the world.
Globalization has several facets, including the globalization of markets and the
globalization of production.

13.1. Describe the benefits and challenges of current wave of Globalization for
Vietnam’s economy.

 Benefits:
1. Increasing export revenues
 The second year of WTO membership saw a sharp increase in the country’s export
turnover. Export turnover in 2008 reached US$62 billion, 29.5 percent higher than
that in 2007.
 Vietnamese commodities have been exported widely to 150 countries and territories,
with many sectors benefiting from WTO membership including labor-intensive
industries like clothing, footwear and electronics.
 An example of quick development in export after joining WTO is textile and garment
industry. Vietnam has become one of the ten largest exporters of textiles and
garments in the world after earning US$7.7 billion from exporting these commodities
in 2007.
2. Rapid increase in foreign direct investment (FDI)
 As a WTO member, Vietnam has become an attractive destination for foreign
investors.
 During the three years of WTO membership, total registered FDI into Vietnam
reached more than $114 billion, 4.5 times higher than the target set for the 2006-2010
period.
3. Increase in enterprises’ awareness, adaptation and performance
  Joining WTO means that Vietnam has entered a large “play ground” where
Vietnamese enterprises have to compete with many giant players-big foreign
corporations with strong financial power and experience. This is also a chance for
state-owned enterprises pending on the Government protection and subsidies
restructure their operation. Otherwise they will be defeated even in the domestic
market. So under the competition pressure, the Vietnam’s enterprises will become
more effective and competitive.
4. More favorable legal system for trading activities
 Global economic integration and accession to the WTO have given Vietnam a chance
to refine its policy and legal system to be more transparent, sustainable and
predictable to be in line with WTO regulations and to attract more foreign investors.
 As a WTO member, Vietnam is treated as a full WTO membership. Vietnamese
enterprises have a healthy environment for development in foreign markets. If there
are trade disputes, they can be treated under WTO’s Dispute Settlement Mechanism.
“Vietnamese enterprises will be judged by the WTO international court, which
means we have more advantages to protect our rights.”

 Challenges:
1. Low competitiveness of nation, enterprises and products
 Vietnamese enterprises are mainly medium and small-sized.
 Firstly, the inadequate supply of infrastructure. The lack of high-quality
infrastructure and logistical services is both a pressing concern and an impediment.
 Secondly, difficulty in accessing financing Vietnam’s financial depth ratio, the stock
market just accounted for 6% GDP and still in the pilot stage and incomplete, number
of commercial banks services offered, ratio of bad debts…,
 Thirdly, poor system of higher education and training, is a big challenge.
Inadequately trained faculty, ineffective teaching methods, and lack of access to
modern technologies severely limit students’ learning. Government sponsored
educational reform has not kept pace with the need to transmit from an agricultural
economy to an industrial economy.
2. Issues relating to macro policies and administrative procedure
 A widening trade deficit, an overheating economy, and a global rise in commodity
prices caused inflation to shoot up to 23 percent in [Link] in turn triggered a crisis
of confidence, big swings in interest rates, and a sharp fall of the dong, the local
currency.
 Vietnamese public administration has been laden with the following problems: red-
tape, ineffectiveness, inefficiency, cumbersomeness, corruption, and an unskilled and
under-qualified public service. The administration is clearly not keeping itself abreast
of economic level.
3. Difficulties in agricultural sector
 Farmers lack knowledge and professional skills. Production technology is small
and backward, which increases the production costs compared to those of other
countries and makes the quality of the products low.
 Agricultural enterprises are often of small size and disperse. As a result, they have
weak financial capacity to improve production technology and labor productivity.
 There are no shared strategies on developing in foreign markets, no strong and
famous trade mark.
 The slow and inaccurate market forecast about the world’s demand and price
forecast by functional agencies, causing a lot of damages to agricultural
enterprises and farmers.
Câu 14. What are the benefits and challenges of ASEAN Economic Community?

Benefits Challenges
Open more regional cooperation and will Economic Divide:
improve the scale effectiveness, -Another stumbling block could be the
dynamism and competitiveness of Asean glaring economic divide between the
members. lesser developed Vietnam, Cambodia,
Laos and Myanmar and the richer
ASEAN will make it possible for simple Singapore, Malaysia, Indonesia, Brunei,
movement of goods, services, financials Thailand and the Philippines.
investment, capital and people. - The lopsided growth of infrastructure in
these countries could be a challenge in
Offer new ways of collaborating supply implementing projects, and corruption
chains, or access to brand-new makers for may also play spoilsport.
recognized products.
No Asean identity:
- "One of the constraints on the
governments, and one of the reasons
Asean finds it difficult to make progress
together is because there is not a very
strong sense of Asean identity. It's really
a Singaporean identity, or Malaysian or
Indonesian. So that's the first priority.”

South China Sea dispute:

- One of the most sticky points for the
Asean countries is the ongoing South
China Sea dispute.
- While Malaysia, Vietnam and
Philippines have contested China's claims
over islands in the region, other Asean
nations such as Singapore and Myanmar
have taken a different stand

14.1. Describe the opportunities and economic benefits of Vietnam in the AEC.

1. The AEC would create greater opportunities for Vietnam to export goods and
services to the ASEAN market.
 ASEAN is a large-scale potential market for Vietnamese enterprises with a
population of 600 million and a regional GDP of around 2,200 billion USD.
 Most goods and services traded between ASEAN countries will be taxed at 0%. The
tariffs and non-tariff removal will facilitate businesses to help cut the cost of imports,
lower production costs, increase competitiveness and boost exports.
  In addition, through separate FTAs between ASEAN and each of the major economic
partners and RCEP, Vietnamese exports will also receive a 0% tariff treatment in the
markets of China, Japan, Korea, India, Australia and New Zealand => Vietnamese
firms will be able to penetrate deeper into the global and regional production and
supply chain.
 Over the years, since participating in ASEAN, Vietnam has seen strong economic
growth thanks to strengthening investment promotion activities and promoting
exports to regional markets.
2. FDI inflows in ASEAN, including Vietnam, will be facilitated due to the region’s
propitious investment environment.
 Together with the advent of the AEC, this may position the 10 ASEAN countries as
attractive alternative locations for foreign direct investment.
3. AEC 2015 will help Vietnamese workers have more job opportunities, especially
skilled workers.
 Businesses will invest more to create a better working environment, as well as
improved salary conditions, rested, on the welfare of workers.
 Joining AEC will help the workers in Vietnam are protected by the legitimate rights
of their legal, Vietnam legal system is gradually adapted towards ensuring the rights
of workers, increasing the worker's voice in the management place and running the
country with the spirit of "the people know, people discuss, people do and people
check" and building the rule of law, the state of the people, by the people and for the
people.
 Help ASEAN countries to better utilize their human resources. Vietnamese workers
will have more opportunities to find jobs abroad.
 Create more favourable conditions for skilled workers to work in the region.
 Câu 15. Why Vietnam actively participates in many FTAs?

 Vietnam actively participates in many FTAs because :

 Have better trade relations with some other partners in other regions contributed to
helping Vietnam balance its trade deficit.
 Contributed to raising Vietnamese exports. (The exports reached only US$ 5.4 billion
in 1995, US$ 14 billion in2000, US$48 billion in 2007 and US$ 213 billion in 2017).
 Create conditions for Vietnamese businesses to promote economies of scale to
increase productivity and reduce production costs.
 Enable Vietnam is economic development to continue to shift away from exporting
low tech manufacturing products to high tech goods
 Successful negotiation and signing of FTA with major partners will also help
improve Vietnam's image in the international arena, create a new position and force,
and serve the country's long-term economic development goals.
 Ensuring equal accessibility.
 Help Vietnam improve its infrastructure, attract more investment capital.
 Transfer the knowledge and technology
 Accelerate administrative reform.
 Abolish barriers for the market access

15.1. What are the benefits and costs of Vietnam when we sign FTAs and join
WTO?

 Benefits & costs of Vietnam when sign FTAs and join WTO

FTAs
Benefits Costs
- Enable Vietnam’s economic - Such agreements are likely to trigger
development to continue to shift away aggressive competition from foreign
from exporting low-tech manufacturing rivals on local businesses – particularly in
products and primary goods to more the agriculture sector including meat and
complex high-tech goods dairy products from the EU, Australia and
Canada
- Sophisticated business practices and
technology will help boost Vietnamese - If local firms do not adapt, make use of
labor productivity and expand the new market opportunities and potential
country’s export capacity. partnerships with foreign firms – they
could find competing in the market
- Trade agreements will allow Vietnam challenging.
to take advantage of the reduced tariffs,
both within the ASEAN Economic - The Vietnamese government would also
Community (AEC) and with the EU and need to continue on its path of reforms –
US to attract exporting companies to strengthening the banking sector,
produce in Vietnam and export to partners removing corruption, refining legal and
 outside ASEAN. tax structures, and improving trade
facilitation.
- Vietnam's participation in trade
agreements will also ensure compliance
with national standards, from employee
rights to environmental protection.

WTO
Benefits Cost
- Vietnam has access to markets for goods - Competition will be fiercer, with more
and services in all member countries with "competitors", on a wider and deeper
reduced import tariffs and non- scale
discriminatory service sectors. - In the world, the "distribution" of
benefits of globalization is uneven.
- When participating in WTO, Vietnam's Countries with low developed economies
business environment is increasingly benefit less
improved.
- International economic integration in a
- Vietnam has the same status as other globalized world, interdependence among
members in global trade policy making, countries will increase. In the context of
has an opportunity to fight to establish a limited potential of the country,
fairer, more reasonable, conditional incomplete legal system, limited
economic order. to protect the interests of experience in operating a market
the country, the business. economy, this is not small difficulty.

- Integration into the world economy also

- International economic integration raises
promotes the domestic reform process, new issues in protecting the environment,
ensuring that Vietnam's reform process is
protecting the national security,
more synchronized and more effective. preserving the fine cultural identity and
traditions of the nation, against pragmatic
- WTO accession will enhance our lifestyles and pursuing coin.
position in the international arena,
creating conditions for Vietnam to
effectively implement foreign policies.

Câu 16. Present the different level of Economic Integration?

 Economic Integration, also referred to as regional integration, describe different ways how
economics can integrate. The degree of Economic Integration can be classified into 6 stages:
1. Preferential Trade Agreement (PTA):
 A trade policy that favors one country over another.

Most obvious cases: Charge a lower, or zero, tariff on imports from one country while
charging a higher tariff on imports from another.
2. Free Trade Agreement (FTA)
  Trading block with no trade barriers
 Eliminate tariffs & other restrictions amongst member countries
 Association of trading nations
 Members agree to remove all tariff and nontariff barriers among themselves
 Each member maintains its own set of trade restrictions against outsiders
 North American Free Trade Agreement (NAFTA)
3. Customs Union (CU)
 Common trade policy regarding nonmembers
 Form a common tariff on imports against nonmembers
 Agreement among two or more trading partners
 To remove all tariff and nontariff trade barriers between themselves
 Each member nation imposes identical trade restrictions against nonparticipants
 Belgium, the Netherlands, and Luxembourg
4. Common Market
 Allows free movement of factors of production
 Free movement of factors production across national borders within the economic
block
– Group of trading nations
– Free movement of goods and services among member nations
– Initiation of common external trade restrictions against nonmembers
– European Union (EU), 1992
5. Economic Union
 Coordination of economic policies among members
 Unification of monetary and fiscal policies, harmonization of tax rates
 National, social, taxation, and fiscal policies are harmonized and administered by a
supranational institution
 Requires an agreement to transfer economic sovereignty to a supranational authority
6. Monetary Union
 Political unification, formation of a single nation
 Ultimate degree of economic union
 Unification of national monetary policies
 Acceptance of a common currency administered by a supranational monetary
authority

16.1. What is the advantage and benefits of FTA, and Custom Union for one
country?

FTA
Advantage Benefits
-Increased Economic Growth -Contribute to greater economic
activity and job creation in the
-More Dynamic Business Climate: country , and deliver opportunities for
Often, businesses were protected before big and small businesses to benefit from
the agreement . These local industries greater trade and investment.
risked becoming stagnant and non-
competitive on the global market. With -Reduce and eliminate tariffs, improve
the protection removed, they have the rules that affect issues like intellectual
motivation to become true global property.
competitors.
-Give businesses and consumers
-Lower Government Spending: Many improved access to a wider range of
governments subsidize local industry competitively priced goods and
segments. After the trade agreement services, new technologies, and
removes subsidies, those funds can be put innovative practices.
to better use.
-Help obtain more benefits from
-Foreign Direct Investment: Investors foreign investment.
will flock to the country. This adds capital
to expand local industries and boost -Promote regional economic
domestic businesses integration and build shared
approaches to trade and investment
-Expertise: Global companies have more between one country and trading
expertise than domestic companies to partners.
develop local resources. When the
multinationals partner with local firms to -Support stronger people-to-people and
develop the resources, they train them on business-to-business links that enhance
the best practices. That gives local firms country's overall bilateral relationships
access to these new methods. with FTA partners.

-Technology Transfer: Local companies -Provide additional benefits and

also receive access to the latest trading partners over time, including via
technologies from their multinational in-built agendas that encourage ongoing
partners. domestic reform and trade
liberalization.

CUSTOM UNION
Advantage Benefits
-Increase in trade flows and economic a) To Producers:
integration: A free-trade agreement - Get a larger and wider market =>
increases trade between member produce more goods.
countries. It helps improve the allocation - Decrease cost of production.
of scarce resources that satisfy the wants - Offers equal protection to all
and needs of consumers and boosts manufacturers against third country
foreign direct investment. Customs imports and minimizes the possibility of
unions lead to better economic integration transshipment or trade deflection.
and political cooperation between nations
and the creation of a common market, b) To the Importers:
monetary union, and fiscal union. - Removes border controls and trade
barriers, importing goods becomes faster
 -Trade creation and trade diversion: => reduces transaction costs and results in
Trade creation occurs when the more timely deliveries.
efficient members of the union sell to less
efficient members, leading to a better c) To Consumers:
allocation of resources. Trade diversion - Get a wider choice of goods and they
occurs when efficient non-member also benefit from the advantages of
countries sell fewer goods to member increased productivity which leads to
countries because of external tariffs. It lower prices.
gives less efficient countries in the union
the opportunity to capitalize on their d) To Traders within the CU:
position and sell more goods within the - Get wider source of goods => have
union. bargaining power in dealing with
suppliers resulting in cost savings for
-Reduces trade deflection: when a non- their customers.
member country sells its goods to a low-
tariff FTA (free trade agreement) country, e) To the CU Members:
which then resells to a high-tariff FTA - Intra-regional trade is enhanced as there
country, leading to trade distortions. The are no tariffs or quotas on goods
presence of a common external tariff in originating from within the region.
customs unions helps avoid problems that - Maintain a price advantage for
arise from tariff differentials. regionally produced goods over goods
produced outside the Customs Union.

Câu 17. What are the key principles of WTO and how it differ from FTA?

 The key principles of WTO

 Non-discrimination:
- Most-favored-nation (MFN): Treating other people equally
 Each member country should treat all members as well as it treats its “most
favored nation” (i.e., the member that it treats the best)
- National treatment: Treating foreigners and locals equally
 Once a product or seller has entered a country, it should be treated the same as
products or sellers that originated inside that country
 More “open” (Freer trade):
 Lowering trade barriers is one of the most obvious means of encouraging trade.
WTO facilitates and encourages such interactions and promotes mutual discounts on
trade restrictions.
 The barriers concerned include customs duties (or tariffs) and measures such as
import bans or quotas that restrict quantities selectively.
 Predictability and transparency:
 Refers to the ability to predict the nature of the market shortly. A regulated market
where risks are less, or if the risks are known, investors and traders would be more
interested in working in such markets.
  Trade flourishes in a predictable and stable market and hence WTO encourages the
states to work in the promotion of predictability of such market.
 More fair competitiveness:
 The rules on non-discrimination — MFN and national treatment — are designed to
secure fair conditions of trade.
 The issues are complex, and the rules try to establish what is fair or unfair, and how
governments can respond, in particular by charging additional import duties
calculated to compensate for damage caused by unfair trade.
 Benefits for less developed countries (>75% are “developing” or LDCs)
- WTO was established to deal with the non-tariff barriers where GATT deals with the
tariff barriers. The principles of WTO are stronger and effective than GATT.
- The agreements themselves inherit the earlier provisions of GATT that allow for
special assistance and trade concessions for developing countries.
 Protection for environment: (***)
 Sustainable development and environmental protection are goals of the WTO.
Allowing for the optimal use of the world’s resources in accordance with the
objective of sustainable development and seeking to protect and preserve the
environment are fundamental to the WTO.
 Under WTO rules, members can adopt trade-related measures aimed at protecting the
environment... (e.g., protection of human, animal or plant life or health, and natural
resources)
 WTO has had to deal with a number of disputes concerning environment-related
trade measures. From conservation of sea turtles from incidental capture in
commercial fishing to the protection of human health from risks posed by air
pollution. WTO jurisprudence has affirmed that WTO rules do not take precedence
over environmental concerns.

 Differ from FTA

WTO FTA
- Promote trade liberalization through - One of the types of Regional Trading
worldwide agreements. Agreements (RTA).
- Trade liberalization by any one nation. -Involve states swapping trade
- Extended to all WTO members, 153 concessions with each other.
nations. - Nations reduce trade barriers only for a
- Exchange tariff preferences in line with small group of partner nations.
the non-discriminatory “most-favoured- - Discriminating against the rest of the
nation” principle. world.
- Stands for global free trade, - Stands for regionalism, pose the risk of
multilateralism. “balkanising” the global trading system.