tiểu luận kinh tế quốc tế international trade barrier and case study in china

ABSTRACT
This report give a concrete and detailed view about international trade barriers. According to
the term of international economic, we have researched the definition, characteristics of Trade
barriers and why it is used. And more specifically, we have discussed about the Trade barriers
in China to clearly understand how trade barriers have affected the economy.
Trade is an integral part of the total developmental effort and national growth of all
economies. It particularly plays a central role in the development plan where foreign exchange
scarcity constitutes a critical bottleneck. International trade is a factor and a product of the
economic development of nations and also well known as “engine of growth”. International
trade increases the number of goods that domestic consumers can choose from, decreases the
cost of those goods through increased competition, and allows domestic industries to ship their
products abroad.
In this paper, we will particularly discuss about international trade barriers and its case study
of Trade barriers in China. We all know that international trade benefits all countries even the
one that is less efficient than the others. However, economists generally agree that trade
barriers are detrimental and decrease overall economic efficiency; this can be explained by the
theory of comparative advantage. Most trade barriers work on the same principle: the
imposition of some sort of cost (money, time, bureaucracy, quota) on trade that raises the price
or availability of the traded products. If two or more nations repeatedly use trade barriers
against each other, then a trade war results. Barriers take the form of tariffs (which impose a
financial burden on imports) and non-tariff barriers to trade (which uses other overt and covert
means to restrict imports and occasionally exports).


I.

INTRODUCTION

1.

Objective of the study

This paper has been prepared from the corner of some objectives as follows:
•

To give a concrete idea about International Trade Barriers and how it impacts on the
trade.

2.

•

To know the various terms of barriers and protectionism

•

To know the impact of barriers in the countries

•

To have a more specific view about the current trade war between US and China

Limitation of the study

Although the study has reached its aims, there were some unavoidable limitations and
shortcomings. First of all, I am an amateur researcher who is not even expert on the field of
study; therefore, it was a tough task to assess the objectives perfectly within short time-limit.
Secondly, all the data I used in this study is mostly self-reported that is limited by the fact that
it rarely can be independently verified.

3.

Methodology of the study

This study is generally a non-empirical analysis. The main sources of this study include
secondary sources like textbooks, reports, relevant national and international legislations, case
studies, some important daily newspapers, online documents and some publications.

2


II.

FINDINGS OF THE STUDY

1.

Theory of International trade barrier

1.1.

Definition

Definition: Trade barriers are government-induced restrictions on international trade, which
generally decrease overall economic efficiency.
1.2.

Characteristics:

Trade barriers cause a limited choice of products and, therefore, would force customers to pay
higher prices and accept inferior quality. Trade barriers generally favor rich countries because

these countries tend to set international trade policies and standards. Economists generally
agree that trade barriers are detrimental and decrease overall economic efficiency, which can
be explained by the theory of comparative advantage.
1.3.
•

Why trade barriers used?

Protect infant Industries: trade barriers and restrictions tend to protect young and
undeveloped industries that are not large enough to completive with more mature foreign
markets and products. With governments help these industries have not been grown enough
are given a chance to create recognition , a brand name and develop grove in a healthy
economical environment. With Trade barriers young industries will be protected from foreign
competition while they are developing.

•

Domestic Employment: Another major reason of trade barriers is protection of domestic
employment. By putting the trade barriers in front of the imported products governments are
promoting domestic produced product or services. While demand on domestic products
increases the domestic production and domestic employment increases along.

•

Unfair Trade: In some cases foreign products may be sold in the domestic economy at a price
actually below of its actual cost as a result of foreign governments subsidize their producers.
3


With This practice of dumping foreign products may take over the domestic market and give

less change to domestic products compete. That will allow increase of foreign products in the
domestic market.
•

National Security : trade barriers also needed for protection of industries and companies
those produce important products to the defense and security of the nations. The aim is to
prevent the country from depending on these vital products or services to another nation.
Trade barriers prevent foreign producers from unfairly gaining a competitive advantage in the
domestic economy and help to level the playing field. If it will be used fairly by the
governments they could be great tools for international trade and control the trade deficit of a
country.

•

Retaliation: Countries may also set tariffs as a retaliation technique if they think that a trading
partner has not played by the rules. For example, if France believes that the United States has
allowed its wine producers to call its domestically produced sparkling wines "Champagne" (a
name specific to the Champagne region of France) for too long, it may levy a tariff on
imported meat from the United States. If the U.S. agrees to crack down on the improper
labeling, France is likely to stop its retaliation. Retaliation can also be employed if a trading
partner goes against the government's foreign policy object.
1.4.

Types of Trade Barriers

1.4.1.

Tariffs and Tariff Rate Quotas

Tariffs, which are taxes on imports of commodities into a country or region, are among the

oldest forms of government intervention in economic activity.
They are implemented for two clear economic purposes. First, they provide revenue for the
government. Second, they improve economic returns to firms and suppliers of resources to
domestic industry that face competition from foreign imports. Tariffs are widely used to
protect domestic producers’ incomes from foreign competition. This protection comes at an
economic cost to domestic consumers who pay higher prices for import competing goods and
4


to the economy as a whole through the inefficient allocation of resources to the import
competing domestic industry. Therefore, since 1948, when average tariffs on manufactured
goods exceeded 30 percent in most developed economies, those economies have sought to
reduce tariffs on manufactured goods through several rounds of negotiations under the General
Agreement on Tariffs Trade (GATT). A tariff-rate quota (TRQ) combines the idea of a tariff
with that of a quota. The typical TRQ will set a low tariff for imports of a fixed quantity and a
higher tariff for any imports that exceed that initial quantity. In a legal sense and at the WTO,
countries are allowed to combine the use of two tariffs in the form of a TRQ, even when they
have agreed not to use strict import quotas. In the United States, important TRQ schedules are
set for beef, sugar, peanuts, and many dairy products. In each case, the initial tariff rate is quite
low, but the over-quota tariff is prohibitive or close to prohibitive for most normal trade.
Explicit import quotas used to be quite common in agricultural trade. They allowed
governments to strictly limit the amount of imports of a commodity and thus to plan on a
particular import quantity in setting domestic commodity programs. Another common nontariff barrier (NTB) was the so-called “voluntary export restraint” (VER) under which
exporting countries would agree to limit shipments of a commodity to the importing country,
although often only under threat of some even more restrictive or onerous activity. In some
cases, exporters were willing to comply with a VER because they were able to capture
economic benefits through higher prices for their exports in the exporting country’s market.
There are several types of tariffs:
•

Import tariff:

It is the custom duty imposed by the importing country i.e. the tax imposed on goods
imported. It is levied to raise revenue and protect domestic industries.
•

Export tariff:

It is the duty imposed on goods by the exporting country on its exports. Generally, certain
mineral and agricultural products are taxed.
5


•

Transit duties:

It is levied on commodities that originate in one country, cross another and are consigned to
another. Transit duties are levied by the country through which the goods pass. It results in
increased cost of products and reduction in amount of commodities traded.
•

Other tariff barriers:

Specific duty: It is based on (specific attribute) physical characteristics of goods. It is a fixed
or specific amount of money that is levied as tax keeping in view the weight (quantity)/
measurement (volume) of the commodity.
Ad valorem duty: These are duties that are imposed according to the value of commodities
traded between countries. It is generally a fixed percentage of the invoice value of the goods
traded.

Compound duty: It is a combination of specific duty and ad valorem duty on a single product.
It is partly based on quantity and partly on the value of goods.
1.4.2. Non-tariff barriers
Non-tariff barriers to trade includes:
•

Administrative and bureaucratic delays at the border

Among the methods of non-tariff regulation should be mentioned administrative and
bureaucratic delays at the border, which increase uncertainty and the cost of maintaining
inventory. For example, even though Turkey is in a (partial) customs union with the EU,
transport of Turkish goods to the European Union is subject to extensive administrative
overheads that Turkey estimates cost it three billion euros a year.
•

Embargoes

6


Embargoes are outright prohibition of trade in certain commodities. As well as quotas,
embargoes may be imposed on imports or exports of particular goods in respect of certain
goods supplied to or from specific countries, or in respect of all goods shipped to certain
countries. Although an embargo may be imposed for phytosanitary reasons, more often the
reasons are political (see economic sanctions and international sanctions). Embargoes are
generally considered legal barriers to trade, not to be confused with blockades, which are often
considered to be acts of war.
•

Foreign exchange restrictions and foreign exchange controls

Foreign exchange restrictions and foreign exchange controls occupy an important place among
the non-tariff regulatory instruments of foreign economic activity. Foreign exchange
restrictions constitute the management of transactions between national and foreign operators,
either by limiting the supply of foreign currency (to restrict imports) or by state manipulation
of exchange rates (to boost exports and limit imports).
•

Import deposits

Another example of foreign trade regulations is import deposits. Import deposits is a form of
deposit, which the importer must pay the central bank for a definite period of time (noninterest bearing deposit) in an amount equal to all or part of the cost of imported goods.
•

Administrative regulation of capital movements

At the national level, administrative regulation of capital movements between states is carried
out mainly within a framework of bilateral agreements, which include a clear definition of the
legal regime, the procedure for the admission of investments and investors. It is determined by
mode (fair and equitable, national, 'most favored nation'), order of nationalization and
compensation, transfer profits and capital repatriation and dispute resolution.
•

Licenses

7


The most common instruments of direct regulation of imports (and sometimes export) are
licenses and quotas. Almost all industrialized countries apply these non-tariff methods. The

license system requires that a state (through specially authorized office) issues permits for
foreign trade transactions of import and export commodities included in the lists of licensed
merchandises. Product licensing can take many forms and procedures. The main types of
licenses are general license that permits unrestricted importation or exportation of goods
included in the lists for a certain period of time; and one-time license for a certain product
importer (exporter) to import (or export). One-time license indicates a quantity of goods, its
cost, its country of origin (or destination), and in some cases also customs point through which
import (or export) of goods should be carried out. The use of licensing systems as an
instrument for foreign trade regulation is based on a number of international level standards
agreements. In particular, these agreements include some provisions of the General Agreement
on Tariffs and Trade (GATT) / World Trade Organization (WTO) such as the Agreement on
Import Licensing Procedures.
•

Localization requirement

An importing country may require the prospective exporter to include a degree of local
participation in the product or service. Options include a designated importer, a joint-venture
company with majority local control, requirement for complete local manufacture which may
imply transfer of intellectual property. The WTO has not reached a conclusion on the
legitimacy of these measures.[7]
•

Standards

Standards take a special place among non-tariff barriers. Countries usually impose standards
on classification, labelling and testing of products to ensure that domestic products meet
domestic standards, but also to restrict sales of products of foreign manufacture unless they
meet or exceed these same standards. These standards are sometimes entered to protect the
safety and health of local populations and the natural environment.

8


•

Quotas

Licensing of foreign trade is closely related to quantitative restrictions – quotas – on imports
and exports of certain goods. A quota is a limitation in value or in physical terms, imposed on
import and export of certain goods for a certain period of time. This category includes global
quotas with respect to specific countries, seasonal quotas, and so-called "voluntary export
restraints". Quantitative controls on foreign trade transactions are carried out through one-time
license.
Quantitative restrictions on imports and exports are direct administrative forms of government
regulation of foreign trade. Licenses and quotas limit the independence of enterprises with a
regard to entering foreign markets, narrowing the range of countries in which firms can
conduct trade for certain commodities. They regulate the range and number of goods permitted
for import and export.
However, the system of licensing and quota imports and exports, establishing firm control
over foreign trade in certain goods, in many cases turns out to be more flexible and effective
than economic instruments of foreign trade regulation. This can be explained by the fact that
licensing and quota systems are an important instrument of trade regulation of the vast
majority of the world.
This type of trade barrier normally leads to increased costs and limited selection of goods for
consumers and higher import prices for companies. Import quotas can be unilateral, levied by
the country without negotiations with exporting country; or bilateral or multilateral, when they
are imposed after negotiations and agreements.
An export quota is a limit on the amount of goods that can be exported from a country. There
are different reasons for imposing export quotas from a country. These reasons include

guaranteeing of the supply of the products that are in shortage in the domestic market,
manipulation of the prices on the international level, and the control of goods strategically
important for the country. In some cases, the importing countries request exporting countries
to impose voluntary export restraints.
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2.

Case Study in China

2.1.

Introduction

First, with the establishment of the WTO organization and the completion of eight rounds of
negotiations, trade liberalization has increasingly become a worldwide trend. As a result,
the level of tariffs has been significantly reduced, and the role of tariff barriers has also
dropped. Some countries or regions are looking for ways to protect their own trade
interests or prevent other countries from entering their domestic markets and seek alternative
trade barriers. New types of trade barriers rose quickly, various new types of trade barriers,
such as technical trade barriers, green trade barriers, etc., due to their own characteristics
of flexibility, concealment, etc., make them more easily used by some countries as tools
for trade barriers. In this environment, new trade barriers have gradually developed.
After China’s accession to the WTO, China’s participation in international trade has
become

more

and

more numerous, and it has become a world trade power. While

participating in international trade. China's export trade will inevitably face the threat of new
trade barriers.

2.2.

The concept of New Trade barriers in China

New trade barriers are relative to traditional trade barriers. Traditional trade barriers are the
general term for traditional tariff barriers and traditional non-tariff barriers. Including
tariffs, quotas, anti-dumping, anti-subsidy, permits, etc. The new trade barriers are
centered on technical trade barriers, including social barriers and green barriers.
Traditional trade barriers mainly restrict the free flow of goods in the international market
on the commercial interests such as the price and quantity of commodities. Compared with
traditional trade barriers, new trade barriers consider more non-commercial interests than
commodity prices and quantities. Factors such as social and environmental benefits. In these
aspects, the restrictions on the free flow of goods in the international community.
This is the most fundamental feature of new-type trade barriers relative to traditional trade
barriers. In addition, the new trade barriers also have the following characteristics: First of all,
both sides. Unlike the traditional trade barriers, which are simply aimed at restricting trade,
new trade barriers have the name of protecting human health and safety. On the one hand,
10


they have the benefit of the human society, and on the other, they are liable to cause
problems in some countries due to trade restrictions. Using it as a hidden trade barrier is not
conducive to the free development of international trade.
The main types of new trade barriers include technical barriers to trade, green trade barriers

and blue trade barriers:
•

Green trade barriers are barriers set in the name of protecting human health, resources, and
the environment.
Green trade barriers are introduced in order to attract public and corporate awareness as well
as to reduce environmental pollution.
These barriers are also considered as non-tariff ones and there is no international organization
or a common policy framework, which is powerful enough to enforce these barriers.
Moreover, the difficulty in monitoring environmental problems also creates many challenges
in applying green trade barriers. Despite the growing debates and controversies, the trend for
imposing green regulations as a non-tariff barrier is upward.

•

Blue barriers, also known as social trade barriers, which is the working time, rights, and
treatment of workers.
On the one hand, it will make some foreign trade companies difficult to manage, on the other
hand, it will help solve labor problems under the globalization and promote social
progress. Therefore, enterprises should enhance the value creativity and value-added products
of their companies and stimulate their operational vigor.
2.3.

The impact of Trade Barriers on China export’s Trade

As new types of trade barriers have increasingly become the main method of trade barriers
in international trade, China's export trade is also unavoidably affected. This kind of
influence is two-sided. On the one hand, it has a positive effect. On the other hand, it has a
negative effect. In the following, this article will introduce in detail the positive and
negative aspects of the impact of new trade barriers on China's export trade

2.3.1. Positive Effects of New Type of Trade Barriers on China's Export Trade
First of all, because TBT - (The WTO Agreement on Technical Barriers to Trade) sets
barriers through high standards and high requirements, for export companies in China, in
order to deal with TBT of developed countries, they have to improve technology, improve
11


packaging, etc. to improve the technical level of products. In addition, in order to be
invincible in the international competition, our export enterprises need to improve
production efficiency and product

quality, which will

help improve the international

competitiveness of our export products. As for those industries that cannot make
technological improvements, we will also be involved in international trade. Therefore,
objectively speaking, technical trade barriers are conducive to optimizing China's export
industrial structure.
Second, since TBT is mainly set up by developed countries or regions such as the United
States, Japan, and the European Union with their technological advantages, while TBT
suffers,

China’s export

enterprises are

also

inevitably

going to

understand

the

technological level and technical standards of developed countries. The government also
inevitably needs to understand the technical regulations, rules and regulations concerning
trade of developed countries and international organizations. This is of great significance
for Chinese enterprises and governments to increase their awareness of international technical
regulations and improve China’s own technical laws and regulations.
As mentioned earlier, green trade barriers are barriers set in the name of protecting human
health, resources, and the environment. Therefore, objectively, green trade barriers have a
positive effect on improving China's health, resources, and the environment. There are
several reasons why green trade barriers have a catalytic effect. First of all, like technical
barriers to trade, green trade barriers are also conducive to optimizing the structure of China's
export enterprises. Enterprises that cannot adapt to high environmental standards will lose
competitiveness and will eventually be eliminated by the market. They can improve
production processes and focus on products for humans.
Companies with health and environmental impacts can survive the competition. Second, green
trade barriers can increase the environmental awareness of our government and export
companies. Finally, green trade barriers are not exclusive to a country. Any country can
implement green trade barriers in a proper name. When China suffers from green trade
barriers, our country’s corporate governments and enterprises are also aware of improving
our environmental standards. The importance of resource standards.

12

Blue barriers, also known as social trade barriers, also have a positive impact on China's
export trade objectively. The main content of social trade barriers is the SA8000 standard,
which is the working time, rights, and treatment of workers. Guarantees and so on have set
minimum requirements. First of all, China's implementation of the SA8000 standard is
conducive to improving the working conditions and labor relations of workers. We know that
although there are clear regulations on the rights and interests of workers in the "Labor Law"
of China, some enterprises infringe on the rights and interests of workers. The
implementation of the
SA8000 standard obliges companies to respect the legitimate rights and interests of workers,
and at the same time, it also enables workers to feel the people-centered concept and
increase their enthusiasm for work. Second, blue trade barriers are conducive to improving
China’s labor laws and regulations.
While subjecting to blue trade barriers, some specific provisions in the SA8000 also
provide a basis and reference for the improvement of China’s labor laws. The Chinese
government will also see the gap between China’s laws and regulations and international
regulations and enhance the awareness of the improvement of the country’s labor laws.
Finally, social trade barriers are also conducive to the healthy development of enterprises. An
enterprise that does not respect the legitimate rights and interests of workers not only does
not have a good business image, but also cannot achieve long-term healthy development.
Even if it is fortunate to have short-term development, it must be deformed because it cannot
obtain employee loyalty and a good corporate image. . Therefore, objectively, the existence
of

blue

trade

barriers

to a

certain

extent

is conducive to the long-term healthy

development of China's export enterprises
2.3.2. The New Trade Barriers Have a Negative Impact on China's Export Trade
Technical barriers to trade will obviously reduce the export volume of exporting
countries and reduce their share of the world market.
When technical requirements increase, products with lower technological levels are forced to
exit the market because they cannot meet the technical requirements, so that the number
of exports of exporting countries will decrease. If the eliminated companies want to maintain
13


their share of the world market, they must improve their technologies and increase their
investment. Ultimately, they will increase costs, increase prices, and reduce international
competitiveness. The final result is not only to reduce the export volume of exporting
countries and to reduce market share, but also to increase the burden on domestic consumers
and the competitiveness of products in the domestic market. Therefore, the implementation
of TBT is not conducive to the development of China's export enterprises.
As a kind of technical trade barrier, green trade barriers have other influences besides
the adverse effects of technical trade barriers. China implements green trade barriers. It is
obviously unfair to

use high

standards applicable to developed countries to require

developing countries, because in the early stages of industrialization, developed countries
were also the accumulation of capital in return for

resource waste and environmental

pollution. Nowadays, developed countries have conditions for environmental governance and
scientific utilization of resources, and they have conditions for implementing high-standard
environmental requirements.
As the largest developing country, China cannot properly develop and utilize resources
when it suffers from green trade barriers, and it is difficult for primary products that have
advantages to gain advantages. High-tech and technological products are few and are
hindered by the technical trade barriers of developed countries. Therefore, the green trade
barriers will cause unfair pressure on the production and livelihood of Chinese enterprises,
and ultimately hinder China's export trade and economic development.
China is a country with abundant labor resources. The demographic dividend is a major
advantage of economic development, and the products exported by China are mostly laborintensive products. The blue standard with the SA8000 standard as the core is bound to hinder
the development of China's advantages. Excessive demands on the laborer's environment
will, on the one hand, result in the exclusion of China's labor-intensive export products. On
the other hand, companies must seek SA8000 certification in order to obtain foreign orders.
This requires a significant amount of certification costs for companies. In particular, small
and medium-sized enterprises lack sufficient financial resources, lose a lot of orders when
they fail to obtain certification, and increase expenditures in order to increase employees'
14


welfare through certification. This will increase the export costs of enterprises, and the
increase in costs will inevitably affect the Chinese enterprises.
Both technical trade barriers, green trade barriers, and blue trade barriers, as a type of new
trade barrier, have a profound impact on China's export trade. This kind of influence has both

positive and negative aspects. On the one hand, it is conducive to promoting China’s
technological upgrading and improving the social environment and the natural environment.
On the other hand, as a new type of flexible trade barrier, it will inevitably hinder China’s
export trade. For our country, both the government and the enterprise must pay attention to the
impact of new trade barriers. Not only for the three mentioned in the article, but also other
types of new trade barriers such as non-market economic status barriers, electronic waste
disposal barriers, etc. should also be given equal attention. We must take advantage of
positive influences, seize opportunities, and actively guide the positive role of new-type
trade barriers. We must actively respond to negative impacts and handle them with caution.
This part of the improvement should be open-minded to learn from advanced countries.
Malicious obstacles to trade should be good at using rules to argue against arguments,
protect our legitimate trade rights and interests, safeguard our country's market position, and
promote the long-term healthy development of China's economy. Only by facing up to the
impact of new-type trade barriers on China's export enterprises, seizing the opportunity to
improve the quality of economic development, and adopting a positive attitude to meet the
challenges, can China's export trade stand in the world market.

3.

Lessons for Vietnamese government

3.1.

Abstract

Although the issues of trade barriers have been discussed extensively in the existing economic
literature, little evidence has been documented regarding the structures, characteristics, and
trends of the trade barriers, including non-tariff barriers, in Vietnam and China from a
comparative perspective. This study analyzes how Vietnam and China balance their needs to
protect domestic industries and compliance with regional and multilateral commitments. This

study’s findings are summarized as follows: First, both Vietnam and China have similar tariff
structures based on products and their origins, although the tariff schedule of China is more
15


complex than that of Vietnam. Second, Vietnam’s tariffs are more dispersed across the items
than those of China, due to the higher maximum tariff rate and percentage of tariff lines,
ranging from 0-5 percent. Third, in terms of tariff escalation, the magnitude in Vietnam is
higher than in China. Fourth, the non-tariff structure of China is more complex than that in
Vietnam. Finally, when putting all the pieces of the complex web of trade distortions together,
it appears both countries give more protection to the agricultural sector than non-agricultural
sectors, but the intensity of protection in Vietnam is higher than in China.
3.2.

Overview

China became a member of the WTO in 2002, whereas Vietnam joined the WTO in 2007.
Although both countries are members of the ASEAN Free Trade Area, China is a founding
member and a high GDP country, while Vietnam is a low-income country. Therefore, it is
interesting to see how Vietnam and China balance their needs to protect domestic industries,
on the one hand, and their compliance with regional and multilateral commitments, on the
other hand.
This study is a comparative and comprehensive analysis of the tariffs and non- tariff barriers
(NTBs) in Vietnam and China. Although the issues of trade barriers have been discussed at
length in the existing economic literature, little evidence has been documented regarding the
structures, characteristics, and trends of the trade barriers of these two countries from a
comparative perspective. Admitting that the process of tariff reductions in these two countries
is not complete, its achievements to date could be regarded as successful. Along with the
successful reduction of tariffs, NTBs have emerged as the main obstacles to international trade
and investment. Studies have shown that NTBs impose a much greater welfare loss or termsof trade deterioration effect than tariffs. This study is guided by the following research

questions:
• How can we evaluate the trade barriers in these two countries from a comparative
perspective?
• What policy implications can we derive from our findings?
16


3.3.

Tariff and non-tariff barriers in Vietnam

- Regional liberalization:
Since July 1995, Vietnam has become a full member of the Association of Southeast Asian
Nations (ASEAN). Subsequently, it became a member of the ASEAN Free Trade Area
(AFTA), whose key target is to reduce tariff rates to 0-5 percent and remove all other nontariff barriers on virtually all commodities traded between ASEAN countries by the target
date. The tariff reduction and elimination targets are taken through the Common Effective
Preferential Tariff (CEPT) scheme, under which a tariff between 0-5 percent was A
Comparative Study of the Trade Barriers in Vietnam and China 241 to be achieved in 2003 for
the six original member countries, in 2006 for Vietnam, in 2008 for Lao PDR and Myanmar,
and in 2010 for Cambodia. In addition, the elimination of NTBs is necessary, as its second
pillar, in order to make AFTA an effective free trade area
-

Bilateral trade liberalization:
The United States and Vietnam began trade negotiations immediately after the normalization
of their relationship, and the first round of negotiations between the two countries was held in
Ha Noi in September 1996. Since Vietnam is a developing country and is in the process of
economic transition, the phase-in period is up to six years. Reciprocally, Vietnam’s exports to
the U.S. have been granted MFN status, resulting in an estimated drop in the average tariff
levied on Vietnamese imports into the US from some 40 percent to three to four percent. In the

area of NTBs, Vietnam agreed to eliminate all NTBs, including import and export restrictions2
, quotas3 , licensing requirements4 , and controls for all product and service categories over a
period of three to seven years, depending on the product.
- Multilateral trade liberalization:
Vietnam applied for accession to the World Trade Organization (WTO) in January 1995. The
“Initial Offer for Goods and for Services” prepared by Vietnam was submitted to the members
of the Working Party in December 2001. It included the binding of 96 percent of tariff lines
with an average of 27.8 percent, of which agricultural products receive a protection level of 32
17


percent on average, and non-agricultural products 27.1 percent. The initial services offered
included nine service sectors and 78 sub-sectors (Nguyen, 2002). Subsequently, the offers
were revised to 25.8 percent of the average tariff rate during the sixth Working Party in April
2003, and 21 percent of the average tariff rate during the seventh Working Party in December
2003. The offers were accompanied by wide access to the services market, an increase to 10
sectors and 88 sub-sectors.5 A Comparative Study of the Trade Barriers in Vietnam and China
242 In the area of non-tariff barriers, Vietnam provided the Working Party with information on
non-tariff measures, and action plans to implement a number of WTO agreements. So far,
Vietnam has taken different measures to implement nondiscrimination principles. The
remaining discrimination issues between domestic and foreign goods and domestic and
foreign enterprises will be eliminated upon or shortly after accession. Vietnam has also
committed to removing the obligatory export proportion requirement applied on FDI
enterprises upon accession, the ban on cigarette imports, the import quota, agricultural
subsidies upon accession, domestic content policy, as well as ensuring transparency in import
licensing and technical specifications on imported goods, and protecting intellectual property
rights. However, Vietnam has retained the rights to apply quotas to sugar, poultry egg, tobacco
leaf and salt.
3.4.

Policy implications learned from China

First, not only do efficiency losses associated with tariff structures depend on the average
applied tariff rates, but also on the dispersion in these rates across products. The higher the
dispersion in tariff rates, particularly within groups of similar and highly substitutable
products, the greater the likelihood that consumers’ and producers’ decisions are distorted by
the tariff structure. For Vietnam, areas such as beverages, spirits, tobacco and cigarettes, used
clothes, vehicles and vehicle parts are the broad categories of products most protected by
tariffs. For China, duties on many high value fresh and processed food products are especially
high. Thus, producers of meats, certain fresh and dried fruits, juices, and other packaged items
may still find it difficult to penetrate the China market. The magnitude of the dispersion
indicator suggests the continued existence of potentially high degrees of distortion in luxury
goods in Vietnam and the agricultural area caused by tariff schedules.
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Second, the tariff structures in Vietnam and China are ‘cascading’ in nature. This means
tariffs are generally higher for finished goods than for intermediate goods. The important
policy implication is that the nominal tariff rates do not provide an accurate picture of the
resource allocation effects of the overall tariff system. Under a cascading tariff structure, the
resource allocation effects of the overall tariff structure on a given product sector depend not
only on the tariff rate applicable to that sector, but also on tariffs on all other sectors which
provide intermediate and capital goods to the sector, both directly or indirectly. Such tariff
escalation means that the level of effective protection is likely to increase as goods undergo
processing, constituting a potential obstacle to processing primary A Comparative Study of the
Trade Barriers in Vietnam and China 260 commodities or intermediate goods in exporting
countries. Therefore, tariff escalation in these two countries potentially impedes the
industrialization of developing countries exporting to Vietnam and China. This reflects the
attempt to foster growth in domestic manufacturing through a regime of import substitution
industrialization. Again, the goal is to promote the domestic output of final goods by

escalating tariffs on inputs.
Third, despite significant progress in trade liberalization, Vietnam’s and China’s trade
regimes have continued to operate within a comprehensive framework of trade barriers with
efforts to promote exports as well as to protect import-substituting products. This kind of trade
regime has encountered some problems associated with the efficiency of resource allocation.
For example, given the current tariff structure, the level of manufacturing effective rates of
protection in Vietnam has been high. A natural question is the effectiveness of the instruments
used to redress or counteract anti-export bias. While various measures to counterbalance the
anti-export bias of the protectionist regime seem to have some effect, they are unlikely to
achieve the desired neutrality in the incentive structure. There is even a considerable bias
against exports in several sub-sectors where Vietnam and China have ample scope to achieve
export markets (e.g., garments, plastic products, leather goods, and other manufacturing).
Fourth, because of the inter-sectoral linkages in the economy, the indirect effects of tariffs and
NTBs should spread across all sectors in Vietnam and China. As a result, industries protected
by tariff structures and NTBs have imposed large costs on the whole economy. Domestic and
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foreign investment in Vietnam and China has been directed towards sectors with relatively
high levels of protection. In addition, tariffs in Vietnam and China had been used in ways that
are not consistent with WTO principles. Tariff peaks were applied to motor vehicles and a
wide range of mechanical, electric and electronic products. Therefore, the misallocation of
production factors, together with higher prices for inputs and relative prices of consumer
goods not in favor of agricultural products, has also imposed a substantial cost on farmers.

III. CONCLUSION
From what has been discussed above, it can be concluded that international trade can benefit
all countries even the one that is less efficient than the others. However the governments
usually use Trade barriers (Tariff and Non – Tariff barriers) as ways of protecting the domestic
economies, thus making international trade less attractive.

We can see this clearly through the case of China. They apply new types of trade barriers
such as technical trade barriers, green trade barriers, etc.. The application of those new
barriers has risen quickly. This trend, on one hand, has positive effects as they are set in the
name of protecting human health, resources, and the environment, therefore attract public
and corporate awareness as well as to reduce environmental pollution. On the other hand,
those barriers will obviously reduce the export volume of exporting countries and reduce
their share of the world market.
Vietnam can learn from the lesson of China to balance between environment sustainability and
economic efficiency.

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