VietNamNet Bridge – Vietnam has been importing too many kinds of products from China which can be made domestically. Vietnamese consumers have been unintentionally enriching Chinese enterprises.
Following different ways, Chinese goods have been creeping to every corner of the Vietnamese market and have been firmly cementing their positions there. According to Dr Doan Huu Tue, a Lecturer of International Commercial Law under the education cooperation program between the Hanoi University for Foreign Trade and French Tours University, the trade deficit with China has increased rapidly by 4.76 times, from 2.67 billion dollars to 12.7 billion dollars in 2010.
Especially, the trade deficit has been increasing significantly since the ASEAN-China Free Trade Agreement (ACFTA) became valid on January 1, 2010, which is a foreseeable thing.
In the context of trade liberalization, the "dependency" between those economies is understandable. However, according to Tue, it would be more exact to say that Vietnamese economy now bears big influences from the Chinese economy.
Could you please tell us the basic reasons behind the big trade deficit with China?
Dr Doan Huu Tue: I would like to say about some most basic factors. First of all, it is easy to realize that Vietnam’s supporting industries have not developed; therefore, the country has to import products from China in big quantities to serve the domestic production. The statistics released by the General Department of Customs (GDC) show that the import turnover of the materials serving domestic production always accounts for 55-60 percent of the total import from China.
The second reason is that Chinese contractors won the bids to implement big projects in Vietnam, including the power, cement, bauxite, fertilizer and transport projects, thanks to the low labor force cost, cheap equipments and other advantages. When implementing the projects, Chinese contractors import machines and equipment, mostly from China. The machine and equipment imports make up 22-25 percent of the total import turnover from China.
Thirdly, Vietnamese consumer goods are inferior to Chinese goods in terms of designs and prices. Since Vietnamese consumers are “easy to be pleased”, Chinese goods, including low quality ones have been flooding the domestic market. Meanwhile, Vietnam still has not effectively safeguard measures, including the tariff and non-tariff barriers, to “filter” imports.
While Chinese authorities have been continuously changing the cross-border trade policies, the exchange rates and applying reasonable policies to boost exports, Vietnam still cannot make timely changes in order to pave the way for Vietnamese goods to penetrate the Chinese market.
Finally, I have to say that under ACFTA, 90 percent of Chinese goods will have the tariffs of 0-5 percent by 2015. This will help Chinese goods, which have been easily penetrating Vietnam through different ways, easily enter Vietnam “through the main entrance”.
The trade deficit with China seems to be the problem of nearly all countries in the world. So, should Vietnam be worried about this? How have other countries been settling the problem?
Both the US and the EU have big trade deficit levels with China, and Chinese goods have been flooding the markets. The countries all consider this a big threat to their economies, and Vietnam cannot say that this is not worrying.
Countries have been taking drastic measures to deal with the problem, both political and economic. The US and the EU have continuously accused China of deliberately undervaluing the yuan in order to gain advantages in exports.
The countries which have trade deficit with China also apply protective measures in the form of financial bailout, government aid, the safeguard remedies (anti-dumping duty, anti-subsidy duty). The US, for example, is imposing anti-dumping duties on steel pipes from China.
Once Vietnamese enterprises still have to use fiber, leather and glue made in China to make shoes for export, once Chinese contractors still win in most of the bids for big projects in Vietnam, once China-made knives, sticks, spoons are still used in Vietnamese families, it is not a surprise at all to see the trade deficit with China.
What can Vietnam gain and lose in the trade deficit?
Trade deficit is not always a big threat to the national economy. If a country imports machines and equipment to modernize its technologies and improve the productivity, it should be seen as a necessary thing.
However, in the case of trade deficit with China, we lose more than gain. Vietnam has been importing too many kinds of products from China which can be made domestically. Vietnamese consumers have been unintentionally enriching Chinese enterprises.
Do you think that Vietnam’s current disadvantages in the trade relation with China will affect Vietnam’s positions in other issues, especially in the East Sea problem?
No. Vietnam’s position does not depend on the trade relation, but on the foreign policy of the Communist Party and State, on the historical traditions of our nation, especially patriotism, bravery and solidarity of Vietnamese people.