The Vietnamese approach to agriculture in the ASEAN-China FTA

Vietnam, as a member of ASEAN, has negotiated a free trade agreement with China. ASEAN Member States can independently negotiate their tariff reductions. While generally aware of the opportunities access to the large Chinese market may present, Vietnam is concerned about being flooded with Chinese imports, including agricultural products. Hence, in the negotiated agreement there is a long list of exemptions for sensitive products. A global general equilibrium model, GTAP, is used to assess the potential impacts of the ASEAN-China Free Trade Agreement on the Vietnamese economy with a particular focus on agriculture. Tariff line data are aggregated to eight primary and four processed agricultural sectors. The simulated results following full implementation show estimated static annual national welfare gains of $1018 million if the agreement is implemented as negotiated and tariff cuts are effective, and this would rise to $1444 million if the exemptions were removed. In the agricultural sector, the most significant increases in exports would occur in vegetable oils, rice, vegetables and fruit, and processed agricultural products. These are also the sectors with the most notable increases in imports. The negotiated exemptions are limiting imports of beverages and tobacco products. Outside the agricultural sector, there is a projected increase of a wide range of manufactured imports, including fuel and textiles. Textiles are the major source of increasing exports.