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FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS ====== GRADUATION THESIS Major: International Business Economics COMPARATIVE ADVANTAGE IN VIETNAM- JAPAN TRADING RELATION AND MEASURES TO PROMOTE EXPORT OF VIETNAM TO JAPAN Student’s name : Nguyn Quý Tun Student ID : 0951050170 Class : English 5 – High Quality Class Intake : Course 48 Supervisor : Đào Ngọc Tiến, PhD Ha Noi, May 2013

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FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL

BUSINESS ======

GRADUATION THESIS Major: International Business Economics

COMPARATIVE ADVANTAGE IN VIETNAM-JAPAN TRADING RELATION AND MEASURES TO

PROMOTE EXPORT OF VIETNAM TO JAPAN

Student’s name : Nguyễn Quý Tuấn

Student ID : 0951050170

Class : English 5 – High Quality Class

Intake : Course 48

Supervisor : Đào Ngọc Tiến, PhD

Ha Noi, May 2013

i

TABLE OF CONTENT

LIST OF ABBREVIATION................................................................................. iv

LIST OF TABLES ................................................................................................ vi

LIST OF FIGURES .............................................................................................vii

ACKNOWLEDGEMENT.................................................................................... ix

INTRODUCTION ................................................................................................. 1

1. Rationale of thesis ........................................................................................... 1

2. Objectives of study ........................................................................................... 2

3. Object and scope of the study .......................................................................... 3

4. Methodology .................................................................................................... 3

5. Structure of thesis ............................................................................................ 4

CHAPTER 1: THEORETICAL FRAMEWORK ............................................... 5

1.1. Comparative advantage by David Ricardo.................................................... 5

1.2. Revealed comparative advantage by Balassa .............................................. 10

1.3. Supplement of gravity model to comparative advantage theory for trade

explanation ........................................................................................................ 12

CHAPTER 2: LITERATURE REVIEW ........................................................... 15

2.1. Literature review of comparative advantage............................................... 15

2.2. Literature review of revealed comparative advantage ................................ 16

2.3. Literature review of supplement of gravity model to comparative advantage

for trade explanation ......................................................................................... 18

CHAPTER 3: ANALYSIS OF COMPARATIVE ADVANTAGES OF

VIETNAM AND JAPAN .................................................................................... 21

3.1. Overview of trading relation between Vietnam and Japan from 2001 to

2012 ................................................................................................................... 21

ii

3.1.1. Trade flow between Vietnam and Japan from 2001 to 2012 .................. 21

3.1.2. Structure of commodities flow between Vietnam and Japan from 2001 to

2012 ................................................................................................................ 27

3.1.2.1. Commodities structure of Vietnam in export to Japan ..................... 27

3.1.2.2. Commodities structure of Japan in export to Vietnam ..................... 37

3.2. Pattern of comparative advantage of Vietnam and Japan.......................... 46

3.2.1. Pattern of Vietnam’s revealed comparative advantage in bilateral trade

with Japan ...................................................................................................... 46

3.2.2. Pattern of Japan’s revealed comparative advantage in bilateral trade

with Vietnam ................................................................................................... 53

3.3. Role of comparative advantages in Vietnam-Japan trading relation between

2001 and 2011 ................................................................................................... 61

3.3.1. Model estimation ................................................................................... 61

3.3.2. Data analysis and findings .................................................................... 64

CHAPTER 4: MEASURES TO PROMOTE VIETNAM’S EXPORT TO

JAPAN ................................................................................................................. 71

4.1. Scenarios of trading relations between Vietnam and Japan ...................... 71

4.2. Government’s measures to promote Vietnam’s export to Japan ................ 72

4.2.1. Encouraging investment in supporting industries .................................. 72

4.2.2. Encouraging the import of capital goods ............................................... 74

4.2.3. Assisting enterprises in enquiring Japanese market’s demand............... 75

4.3. Enterprise’s measures to promote Vietnam’s export to Japan ................... 76

4.3.1. Enhancing the competitiveness of Vietnamese commodities in Japanese

market ............................................................................................................. 76

4.3.2. Enhancing human resources quality ...................................................... 77

4.3.3. Organizing trade promotion activities ................................................... 77

iii

CONCLUSIONS .................................................................................................. 79

BIBLIOGRAPHY ............................................................................................... 82

APPENDIX I........................................................................................................ 87

APPENDIX II ...................................................................................................... 90

APPENDIX III .................................................................................................... 92

APPENDIX IV ..................................................................................................... 94

APPENDIX V ...................................................................................................... 96

APPENDIX VI ..................................................................................................... 98

APPENDIX VII ................................................................................................. 106

APPENDIX VIIII .............................................................................................. 113

APPENDIX IX ................................................................................................... 120

iv

LIST OF ABBREVIATION

AJCEP ASEAN - Japan Comprehensive Economic Partnership

ASEAN Association of South East Asian Nations

CEP Comparative Export Performance

FDI Foreign Direct Investment

FTA Free Trade Agreements

GDP Gross Domestic Products

GLS Random Effect

GSP Generalized System of Preferences

HS Harmonized System

ISIC International Standard Industrial Classification

ITC International Trade Centre

M&A Merger and Acquisition

MFN Most Favored Nations

NAFTA North American Free Trade Agreement

ODA Official Development Assistance

PPF Possibility Production Frontier

PPP Purchasing Power Parity

R&D Research and Development

v

RCA Revealed Comparative Advantage

RCAb Bilateral Revealed Comparative Advantage

SITC Standard International Trade Classification

TSC Trade Special Coefficient

UN United Nations

UNCTAD United Nations Conference on Trade and Development

U.S United State of America

VJEPA Vietnam - Japan Economic Partnership Agreement

WTO World Trade Organization

vi

LIST OF TABLES

Table 1.1: The productivity of country A and country B in producing rice and

coffee ...................................................................................................................... 7

Table 1.2: The consuming-producing point in case of closed economies ................. 7

Table 1.3: The consuming point and producing point in case of open-economies .... 8

Table 3.1: Japan’s share and Vietnam’s share in total import of Vietnam and Japan

.............................................................................................................................. 24

Table 3.2: Two-digit HS code commodities that Vietnam has comparative

advantage in both 2001 and 2011........................................................................... 51

Table 3.3: Two-digit HS code commodities that Vietnam had comparative

advantage in 2011 but did not have comparative advantage in 2001 ...................... 52

Table 3.4: Two-digit HS code commodities that Vietnam has comparative

advantage in 2001 but did not have comparative advantage in 2011 ...................... 53

Table 3.5: Two-digit HS code commodities that Japan has comparative advantage in

both 2001 and 2011 ............................................................................................... 57

Table 3.6: Two-digit HS code commodities that Japan had comparative advantage

in 2011 but did not have comparative advantage in 2001 ....................................... 59

Table 3.7: Two-digit HS code commodities that Vietnam has comparative

advantage in 2001 but did not have comparative advantage in 2011 ...................... 60

Table 3.8: Result of model (1) ............................................................................... 65

Table 3.9: Result of model (2) ............................................................................... 66

Table 3.10: Result of model (3) ............................................................................. 68

Table 3.11: Result of model (4) ............................................................................. 69

vii

LIST OF FIGURES

Figure 1.1: David Ricardo model in case of closed and open economy .................... 9

Figure 3.1: The import, export, total trade and trade balance between Vietnam and

Japan from 2001 to 2012 ....................................................................................... 21

Figure 3.2: The growth rate of import, export and total trade from Vietnam to Japan

from 2001 to 2012 ................................................................................................. 22

Figure 3.3: Top 5 export markets of Vietnam commodities in 2001 and 2012 ....... 25

Figure 3.4: Top 5 exporters to Vietnamese market between 2001 and 2012. .......... 26

Figure 3.5: Commodity structure of Vietnam in export to Japan by value .............. 28

Figure 3.6: Growth rate of Vietnam’s four broad commodities groups in export to

Japan between 2002 and 2012 ............................................................................... 29

Figure 3.7: Commodity structure of Vietnam in export to Japan by proportion ...... 30

Figure 3.8: Commodity structure of scale-intensive commodities group of Vietnam

in export to Japan by proportion ............................................................................ 31

Figure 3.9: Commodity structure of differentiated commodities group of Vietnam in

export to Japan by proportion ................................................................................ 33

Figure 3.10: Commodity structure of resource-based commodities group of

Vietnam in export to Japan by proportion .............................................................. 35

Figure 3.11: Commodity structure of labour-intensive commodities group of

Vietnam in export to Japan by proportion .............................................................. 36

Figure 3.12: Commodity structure of Japan in export to Vietnam by value ............ 38

Figure 3.13: Growth rate of Japan’s four broad commodities groups in export to

Vietnam between 2002 and 2012 ........................................................................... 39

Figure 3.14: Commodity structure of Japan in export to Vietnam by proportion .... 40

Figure 3.15: Commodity structure of scale-intensive commodities group of Japan in

export to Vietnam by proportion ............................................................................ 41

viii

Figure 3.16: Commodity structure of differentiated commodities group of Japan in

export to Vietnam by proportion ............................................................................ 42

Figure 3.17: Commodity structure of labour-intensive commodities group of Japan

in export to Vietnam by proportion ........................................................................ 43

Figure 3.18: Commodity structure of resource-based commodities group of Japan in

export to Vietnam by proportion ............................................................................ 44

Figure 3.19: Vietnam’ revealed comparative advantage in bilateral trade with Japan

in four broad categories of commodities between 2001 and 2011 .......................... 46

Figure 3.20: Vietnam’ revealed comparative advantage in bilateral trade with Japan

in resource-based commodities group between 2001 and 2011 .............................. 47

Figure 3.21: Vietnam’ revealed comparative advantage in bilateral trade with Japan

in labour-intensive commodities group between 2001 and 2011 ............................ 48

Figure 3.22: Vietnam’ revealed comparative advantage in bilateral trade with Japan

in scale-intensive commodities group between 2001 and 2011 .............................. 49

Figure 3.23: Vietnam’ revealed comparative advantage in bilateral trade with Japan

in differentiated commodities group between 2001 and 2011 ................................ 50

Figure 3.24: Japan’ revealed comparative advantage in bilateral trade with Vietnam

of four broad categories of commodities between 2001 and 2011 .......................... 54

Figure 3.25: Japan’ revealed comparative advantage in bilateral trade with Vietnam

in resource-based commodities group between 2001 and 2011 .............................. 55

Figure 3.26: Japan’ revealed comparative advantage in bilateral trade with Vietnam

in labor-intensive commodities group between 2001 and 2011 .............................. 55

Figure 3.27: Japan’ revealed comparative advantage in bilateral trade with Vietnam

in scale intensive commodities group between 2001 and 2011............................... 56

Figure 3.28: Japan’ revealed comparative advantage in bilateral trade with Vietnam

in differentiated commodities group between 2001 and 2011 ................................ 57

ix

ACKNOWLEDGEMENT

The author would like to express the deep gratitude to Mr. Dao Ngoc Tien (PhD),

who is the author’s supervisor, for his considerable assistance for the author in

completion of the graduation thesis. Additionally, the author also would like to say

thank you to all teachers at foreign trade university, who has provided the author

with a fundamental source of knowledge in the author‘s four years of study at the

university. Furthermore, the author is thankful for the assistance of staffs at national

library of Vietnam, and staffs at foreign trade university’ library in searching for

reference documents.

Due to the restriction of the scope of a graduation thesis as well as the limited

knowledge of the author, defects in this graduation thesis are unavoidable. The

author would like to receive comments of teachers and friends for the perfection of

the graduation thesis.

Hanoi, May, 2013

1

INTRODUCTION

1. Rationale of thesis

In international trade area, the theory of comparative advantage is very famous

and quite successful in explanation of trading relationships. The classical

comparative advantage originated from the absolute advantage theory introduced by

Adam Smith in 18th century. Then, this theory was then developed by a lot of

economists such as David Ricardo, Eli Heckescher, Bertil Ohlin, Samuelson,

Stolper, etc and contributed significantly to explanation of modern trade. The

simplest form of comparative advantage theory which was stated by Ricardo is: “A

nation will benefit from trade by exporting commodities and services which the

country produces with largest comparative advantage and importing commodities

which the country produces with lowest comparative advantage” (Từ Thúy Anh

2010, p. 44). However, the underlying comparative advantage theory also contains

some paradoxes in explaining modern trade, for example, it cannot give a

reasonable explanation of trade in some industries between developed countries,

such as in automobile industry with the intense exchange between United States of

America (U.S) and Japan. A natural question arises from this issue, that is whether

comparative advantage theory can successfully explain the Vietnam-Japan bilateral

trade.

To a country, the exchange of goods and services with other nations is critical in

developing domestic production as well as reserving a huge volume of foreign

currencies for domestic use. With the trend of globalization, no country can develop

without trading relation with other countries. This interdependence among countries

in turn set the demand for negotiations to lower trade barriers among countries,

thereby benefits for all of them. As a result, the foundation of free trade agreements

(FTA) among countries was essential to adapt to the requirement of reality. To

developing countries, when the quality and the diversity in appearance of their

products are still low, the negotiation of FTA with other countries to cut the tariff

barrier for their products in penetration to other markets is even more important.

2

Vietnamese’s government has prioritized the signature of agreements to reinforce

the trading relation with other nations, paced the way for the appearance of

Vietnamese brands in abroad markets. Recently, in 2009, Vietnam and Japan agreed

Vietnam-Japan economic partnership agreement (VJEPA). Together with the

previous ASEAN-Japan comprehensive economic partnership (AJCEP) signed in

2008 which Vietnam is member of this agreement, Vietnam and Japan trading

relation has developed into a new benchmark. From 2009 to 2012, the export of

Vietnam to Japan dramatically increased, reached the high annual rate of growth

between 22% and 41%. Japan was the second largest trading partner of Vietnam,

which fell only behind China in term of trading volume and U.S in term of

Vietnam’s export. In reverse, after the global financial crisis causing the decline in

total export of Japan in 2009, Japan also increased her export to Vietnam, with the

high annual rate of growth falling between 11% and 25% from 2010 to 2012. The

development of trading relation between Vietnam and Japan tremendously

benefited both countries not only in term of economy, but also culture, society.

Therefore, the measures to enhance Vietnam’s export to Japanese market, proposed

by the analysis of the trade flow structure between two countries and current

comparative advantage patterns of these two countries, are worth consideration.

Due to these above reasons, the author decides to choose the topic: “Comparative

advantage in Vietnam-Japan trading relation and measures to promote export of

Vietnam to Japan”. In this graduation thesis, the author will give an insight into

trade between Vietnam and Japan based on comparative advantage framework from

the commodity viewpoint. At the end of the thesis, the author provides some

implications for improving the export from Vietnam to Japan.

2. Objectives of study

In this thesis, firstly, the author gives an insight into the theories correlated with

the comparative advantage, with the aim of creating a strong theoretical base for the

study of these theories into trading relation between Vietnam and Japan. From

which, the following questions will be clearly analysed:

3

- What are commodities structures of Vietnam and Japan in bilateral trade

between Vietnam and Japan?

- What are commodities that Vietnam and Japan have comparative advantage

in Vietnam-Japan bilateral trade?

- Do the patterns of comparative advantage of Vietnam and Japan change

between 2001 and 2011?

- What is the role of comparative advantage in explaining trade between

Vietnam and Japan?

- What are measures to promote export of Vietnam to Japan?

3. Object and scope of the study

The object of study of the thesis is comparative advantages of Vietnam and

Japan in Vietnam-Japan bilateral trading relation. The scope of the study

concentrates on only analysing the flow of commodities between Vietnam and

Japan. In the section of introducing the goods flow between Vietnam and Japan, the

time period used is from 2001 to 2012. In the section of finding the commodities

having bilateral comparative advantage and test the application of comparative

advantage in Vietnam and Japan bilateral trading relation, due to the constrain of

data availability, the time period used is from 2001 to 2011.

4. Methodology

The methodology of the graduation thesis consists of analysis, grouping,

comparison, graphics, modelling base on trustworthy statistics. To give a broad look

for the situation of the bilateral trade between Vietnam and Japan, the author uses

the grouping method to divide the structure of the flow of commodities between

Vietnam and Japan into different categories, and then analyse and compare among

years. Additionally, the author prioritizes the representation of raw statistics by the

graph, thereby it is easy to identify any trend and give arguments for the fluctuation

in the statistics over the period. Furthermore, for the test of correlation between

different economic variables, the author uses modeling method and run the

econometric regression. The sources of statistics that author uses in this graduation

4

thesis mainly come from website of international trade centre (ITC) at:

http://www.trademap.org/. In addition, the author also uses statistics of Japan

customs at http://www.customs.go.jp and General department of Vietnam customs

at www.customs.gov.vn/.

5. Structure of thesis

Apart from acknowledgement, introduction, conclusion, appendix, bibliography,

the content of thesis is divided into 4 chapters as follows:

- Chapter 1: Theoretical framework

- Chapter 2: Literature review

- Chapter 3: Analysis of comparative advantages of Vietnam and Japan in

Vietnam- Japan bilateral trade

- Chapter 4: Measures to promote Vietnam’s export to Japan

5

CHAPTER 1: THEORETICAL FRAMEWORK

1.1. Comparative advantage by David Ricardo

The origin of comparative advantage derived from the theory of absolute

advantage by Adam Smith. Adam Smith (1776) gave the following arguments for

the growth in wealth of a nation: the increase in trade with other nations is

proportional to the increase in wealth of a nation, the origin of the wealth does not

result from international trade but result from the industrial production, the

restriction of import will decrease the advantage of specialization and make a

country poorer, trading relation between partners results from the voluntariness and

are beneficial for both parties. Above all, the most important contribution of Adam

Smith was the finding that the basics for trade among countries are the differences

in absolute advantage. The arguments of Adam Smith were based on the

fundamental assumptions of the model of two countries and two commodities, with

fixed land endowment and constant productivity of each country in production of

both two commodities. He stated that the main factor for the flow of commodities

between two countries is the absolute advantage of producing each of two

commodities of each country over another country. These absolute advantages

originated from the difference in the productivity of labour production. For

example, country A has productivity of producing rice of 6 tons per hectare, but

only has productivity of producing coffee of 2 tons per hectare. In reverse, country

B has productivity of producing rice of 2 tons per hectare, but has productivity of

producing coffee of 6 tons per hectare. Adam Smith argued that country A should

produce only rice and country B should produce only coffee. To ensure domestic

demand, country A should use part of her production of rice in exchange for coffee,

and in reverse for country B. Adam Smith concluded that both country A and

country B are better off by doing the exchange, and reach the consumption points

above the restricting line of possible production frontier (PPF). However, the theory

of Adam Smith counteracted with many paradoxes, for example, the trend of

industrialization in Europe in the beginning of the ninthteenth century. With the

6

boom in industrial process in England, England had absolute advantage in

producing almost every industrial product, but still traded with other countries in

Europe which had only recently started industrial process. The absolute advantage

theory of Adam Smith seemed to be outdated in reflection of reality in Europe.

Thus, the foundation of comparative advantage theory of David Ricardo in 1817

was inevitable. Based on absolute advantage theory by Adam Smith, David Ricardo

built up the comparative advantage theory, which also emphasized the difference in

the productivity of labour is the origin of comparative advantage among different

countries. To illustrate for Ricardo theory, firstly we assume that the total area of

land in country A and country B for producing rice and coffee is 100 hectare, and

the change in productivity of labour do not cause the expansion in the total area of

land for production of 2 items: rice and coffee. Additionally, we assume that: (1)

factors of production are completely mobile between alternatives uses within a

country and completely immobile externally,(2) market value or the price of

product are determined by labor cost (in other word, the amount of time needed for

producing this kind of goods),(3) the level of technology and unit cost of production

are fixed for each country,(4) there is no unemployment and perfect competition in

market,(5) No obstacles imposed by government of both countries,(6) internal and

external transportation cost are zero,(7) for simple analysis of only two countries

and two goods (Appleyard & Field 2001). Together with the above assumptions, the

productivity of producing rice and coffee of two countries are also different, for

example:

7

Table 1.1: The productivity of country A and country B in producing rice and

coffee

Unit: tons/hectare

Country A Country B

Rice 6 1

Coffee 6 3

Source: Từ Thúy Anh 2010, Kinh tế học quốc tể, Nhà xuất bản tài chính, Hà Nội,

page 45

It is clear that country A has absolute advantage in producing two items: rice and

coffee. However, the opportunities cost of producing one more ton of rice in

country A is only one ton of coffee. Meanwhile the opportunity cost of producing

one more ton of rice for country B is 3 tons of coffee. Therefore, country A has

comparative advantage in producing rice, and country B has comparative advantage

in producing coffee.

With the assumption that the demand of these two countries for consuming rice

and coffee is equal, we can withdraw the consuming - producing point for two

countries in case that these two countries do not exchange rice and coffee with other

countries (closed economies) are as follows:

Table 1.2: The consuming-producing point in case of closed economies

Unit: tons

Country A Country B

Rice 300 75

Coffee 300 75

Source: Từ Thúy Anh 2010, Kinh tế học quốc tể, Nhà xuất bản tài chính, Hà Nội,

page 46

8

In case of specialization and free trade, the producing point and consuming

points are different from each other. Assuming that the exchange rate in

international market is 1 ton of rice for 2 tons of coffee, we can calculate the

optimal consuming point and producing point as follows:

Table 1.3: The consuming point and producing point in case of open-economies

Unit: tons

Producing point Consuming point

Country A Country B Country A Country B

Rice 450 0 350 100

Coffee 150 300 350 100

Source: Từ Thúy Anh 2010, Kinh tế học quốc tể, Nhà xuất bản tài chính, Hà Nội,

page 46

In this example, country A exchanges 100 tons of rice for 200 tons of coffee of

country B. It is easy to see that free trade create opportunities for two countries to

overcome the restriction of natural endowment and productivity. Both countries can

consume at the points that are above the restricted line of the productivity.

9

Figure 1.1: David Ricardo model in case of closed and open economy

Source: Từ Thúy Anh 2010, Kinh tế học quốc tể, Nhà xuất bản tài chính, Hà Nội,

page 47

As can be seen from the above figure, by concentrating on producing the item

that has highest comparative advantage (coffee) and exporting a part of amount of

this item to country A for the needed item (rice), country B can have more amount

of rice and coffee than without participating in trading relation with country A. A

striking feature is that country B does not have absolute advantage in producing

both items in comparison with country A. This summarizes by the theory of

comparative advantage which is proposed by David Ricardo: “A country, as a

person, gains from trade by exporting commodities or services which this country

can produce with highest comparative advantage and import commodities which

this countries produce which lowest comparative advantage” (Từ Thúy Anh 2010,

p. 44).

Nowadays, in analysis of trading relation among countries, the application of

comparative theory by David Ricardo seems to become fashionable and prevalent.

Despite simplicity, the comparative advantage was powerful tool in trace out of the

B (350; 350)

B’ (100; 100)

A (450; 150)

A’ (0, 300)

C (300; 300)

Rice

C’ (75, 75)

Coffee Coffee

Rice

10

origin of trading relation between different countries from commodity viewpoint,

especially trade between developing countries and developed countries in the

twentieth century. However, in the twentieth first century, with the integration of

global economy and the growing trend of technical trade barriers, some assumptions

under comparative advantage theory seemed to be unrealistic. For example, the

intensity of raw material export of any developing countries makes the assumption

of no mobility of factor production become inefficient. Additionally, it is hard for

the existence of perfect competition due to the strong discrimination between

domestic good and importing good in many countries.

1.2. Revealed comparative advantage by Balassa

Theory of comparative advantage of David Ricardo points the gain from trade

based on exchanging the goods with the highest comparative for the goods with

lowest comparative advantage, and states the way to define the comparative

advantage of a commodity of a nation is based on productivity. However, it is hard

to calculate exactly the productivity of producing different commodities of a nation.

Additionally, it is impossible to find accurately the elements which can affect

productivity among many commodities. Another predominant model which can be

to define the commodities has comparative advantage is based on the theory of

Heckscher-Ohlin model of the factor of production. The concise content of the

theory is that: “Countries will export products using intensively abundant factors of

production and import products using intensively scarce factors of production.” (Từ

Thúy Anh 2010, p. 68). Three factors of production illustrated under Heckscher-

Ohlin model were land, labor and capital. However, the application of this model

also causes troublesome as there it is hard for measure the amount of scare factors

and abundant factors of production in a country as well as relative price in case of

closed economy (Balassa 1965). For example, it is hard to define exactly the

amount of available capital in a country. In search for the way to define whether a

commodity that a nation has comparative advantage in international market, Balassa

(1965) has gave one feasible approach to this issue by utilization of the export of

this commodity of this country and the world, as comparison to total country export

11

and world export. The formula for this approach is defined as follows, which called

as reveal comparative advantage index (RCA index), formulated by Balassa (1965):

푹푪푨 =푿풊풋푿풊풕

×푿풏풕푿풏풋

In which: 푋 is export, 푖 is a country, 푗 is a commodity or an industry, 푡 is a group

of commodities or industries, 푛 is a group of countries. In the general case, 푛 is all

countries in the world, 푡 is all commodities. 푋 represents the export of commodity

푗 of country 푖. 푋 represents the export of group of commodity 푡 from country 푖.

푋 represents the export of group of commodity 푡 from group of country 푛. 푋

represents the export of commodity 푗 from group of countries 푛. Obviously, for the

meaningfulness of 푅퐶퐴, both 푋 and 푋 are under assumption of to be larger than

0. After this formula had been formulated, there were some adjustments to this

formula for specific cases. For bilateral trade, there was a formula used in some

papers, such as in U.S-Korea FTA: The economic impact of establishing a free

trade agreement (FTA) between the United States and the Republic of Korea

(Koplan et al. 2001):

푹푪푨풃 = 푿풊풕푿풊풋

×푿풘풋푿풘풕

In which: 푋 is export, 푖 is exporting country, 푗 is importing country, 푡 is a

commodity, 푤 is world. 푋 is the export of commodity 푡 from country 푖to 푗, 푋 is

the total export of country 푖 to 푗. 푋 is total import of country 푗 from world (or the

export of world to country 푗) and 푋 is the import of commodity푡 from world of

country 푗(or the export of commodity 푡 from world to country푗). Obviously, for the

meaningfulness of 푅퐶퐴 , both 푋 and 푋 are assumed to be larger than 0.

A commodity of a country is said to have comparative advantage if 푅퐶퐴 (or

푅퐶퐴 ) ≥ 1.If 푅퐶퐴 (or 푅퐶퐴 ) < 1, this commodity is said to have comparative

disadvantage.

It is easy to see that the revealed comparative advantage (푅퐶퐴 and 푅퐶퐴 )

cannot speak of the comparative advantage (or comparative disadvantage) of a

12

commodity of a country arise from which. However, it gives the overall pattern of

change in comparative advantage of a commodity over the time, and can be

beneficial for withdrawing policy implications (Từ Thúy Anh 2010, p. 88).

Combining with the comparative advantage of Ricardo, it is possible to withdraw

that the bigger 푅퐶퐴 of a commodity of a country, the higher comparative advantage

that the country has in producing it and vice versa.

1.3. Supplement of gravity model to comparative advantage theory for trade

explanation

The revealed comparative advantage index by Balassa has provided the pattern

of comparative advantage of different goods of a nation. However, it is impossible

for withdrawing the reason behind the remarkable change in comparative advantage

pattern of some commodities in some countries. To solve this problem, Jan

Timbergen (1962) proposed the traditional gravity model of trade originating from

the physical theory of universal gravitation of Newton, in which point out

significant elements affecting total trade volume in general, and trade volume of a

commodity (or an industry) in particular between two countries. The traditional

model assumes that two countries 푖 and 푗 trade with each other, and there exists

distance (or trade barrier) between two countries. The formula of this model is as

follows:

푻푩풊풋 = 푮 ×푬풊 × 푬풋 × 푵풊 × 푵풋

푫풊풋

In which: In general, 푇퐵 is the total trade turnover between country i and

country j (or total export of country i to country j and vice versa,). In particular,

푇퐵 can be total trade turnover of a commodity between two countries 푖 and 푗 (or

total export of a commodity from country i to country j and vice versa,). 퐸 and 퐸

are variables representing the economic masses of two countries i and j,

respectively. In many papers, economic mass of a country is considered as gross

domestic product (GDP). 푁 and 푁 are variables which represent the population of

country i and country j, respectively. 퐷 is the distance, or barrier of trade between

two countries i and j. 퐺 is a constant.

13

Explanation for the gravity model is quite simple. The history of development of

many countries has proved that: The larger the economy size of a nation is, the

bigger the turnover of trade of this country with other nations is. For example, gross

domestic products (GDP) of U.S was at US $ 15.6097 trillion, export value at US $

1.546 trillion and import value at US $ 2.335 trillion in 2012. Meanwhile, in 2001,

GDP of USA was only US$ 10.2862 trillion, export valued at US $ 0.731 trillion

and import valued at US $ 1.18 trillion1. Therefore, it is obvious that the economic

masses of two countries positively affect trade volume between two countries.

Additionally, the larger the population of a country is, the higher demand is. This

leads to the much more intensity of trade among different countries. In other world,

trade between two countries is positively correlation with the size of population of

each country. 퐷 represents the barrier of trade between two countries and is

obviously negatively correlated with total trade between two countries.

In econometric form, usually traditional gravity model is written in logarithm

form as follows:

푻푩풊풋 = 휷 × 푬풊풂 × 푬풋풃 × 푵풊풄 × 푵풋

풅 × 푫풊풋풆 . (휷is a constant).

Taking logarithm of both sides, we can rewrite this formula as follows:

풍풏푻푩풊풋 = 풍풏휷 + 풂풍풏푬풊 + 풃풍풏푬풋 + 풄풍풏푵풊 + 풅풍풏푵풋 + 풆풍풏푫풊풋.

Due to the form of traditional gravity model, we can expect that coefficients a, b,

c, d are positive and coefficient e is negative. This linear form of traditional gravity

model is usually used to run econometric regression, which 푙푛푇퐵 is dependent

variable and 푙푛퐸 , 푙푛퐸 , 푙푛푁 , 푙푛푁 , 푙푛퐷 are five independent variables. This form

allows the calculation of accurate effects of variables 푙푛퐸 , 푙푛퐸 , 푙푛푁 , 푙푛푁 , 푙푛퐷 on

variable 푙푛푇퐵 . In case one of the coefficients a, b, c, d, e is statistically significant

(or all coefficient are statistically significant), for example a, we interpret the result

as follows: a 1% change in economic mass of country i is associated with a %

change in total trade between two countries i and j, so that a is the elasticity of total

1 Statistics from International Trade Centre website: www.trademap.org.

14

trade with respect to economic mass of country i, all other factors are being equal

(ceteris paribus) (H.Stock & W.Watson 2008).

From the time traditional gravity model had been introduced, despite the

simplicity, it has exhibited considerable robustness and explanatory power for

describing trade flow, especially in econometric form (Bergstrand 1985). However,

the application of the econometric traditional gravity model has drawbacks of the

difficulties in forecast precisely due to the difficulties in measuring accurately

independent variables and the lack of strong theoretical framework.

15

CHAPTER 2: LITERATURE REVIEW

2.1. Literature review of comparative advantage

The U.S and Japan: Comparative advantage between automobiles and

aircraft

Kamery (2004) examined the real-world comparative advantage components,

which are varying price-level, productivity and labour cost, in production of two

expertised items: automobiles and aircraft of each country Japan and U.S,

respectively, that takes into account the fluctuation of purchasing power parity

(PPP). The research showed that both countries are beneficial from the expertise of

each other country in producing each goods. The efficiency in production of each

country comes from the country-specific factors, which are under the forms of

monetary, human and natural resources, that leaded to the country’s

competitiveness in certain industry or sector (Kamery 2004).

Classical Ricardian Theory of Comparative Advantage Revisited

Stephen S. Golub and Chang-Tai Hsieh (2000) used econometric model to assess

the relevance of Ricardian model to the U.S modern trade. In vast number of cases,

relative productivity and unit labor cost was quite efficient in the explanation of U.S

bilateral trade pattern, especially when sector-specific purchasing-power-parity

exchange rates are concerned (Golub & Hsieh 2000). This strongly supports the

classical theory of trade by Ricardo.

Comparative advantage: Theory, empirical measures and case studies

Tri WIDODO (2009) used an analytical tool named “product mapping” to

analyse the ASEAN countries’ comparative advantage in export to the world in

1985 and 2005. The research found that there is a positive relationship between

trade balance and comparative advantage. Additionally, the research showed that

the higher the comparative advantage of a specific product, the higher the

probability of the export country to become a net exporter (WIDODO 2009).

16

Comparative Advantage and Competitive Advantage: An Economics

Perspective and a Synthesis

Satya Dev Gupta (2009) identified major forces that had impacts on both

competitive advantage and comparative advantage under the form of two separate

“diamonds”, and found the linkage between comparative advantage and competitive

advantage. The research showed that forces in the competitive diamond seemed to

affect forces in forces in comparative diamonds and vice versa. The research

viewed that comparative advantage and competitive advantage are supplement

rather than substitute for each other in the determination and sustenance of a

nation’s advantage in international trade. Additionally, the research also stated that

it is possible for forces of competitive advantage to further consolidate the operation

of forces of comparative advantage, thereby the comparative advantage of goods

and services can be created based on the competitive advantage (Gupta 2009).

2.2. Literature review of revealed comparative advantage

Revealed Comparative Advantage Revisited: An Analysis of Relative

Export Shares of the Industrial Countries, 1953-1971

Balassa (1977) conducted a research to analyze the pattern of comparative

advantage of industrial countries between 1953 and 1971. The research findings of

this paper are quite compatible with the available evidences on trade in research-

intensive products. Specifically, the research found the continuous renewal of the

product cycle, with the leading position of U.S in technology during the period.

Balassa showed that there was a correlation between size and diversification of

exports by the calculation of the standard deviation of 푅퐶퐴 indices for different

countries. Balassa also identified that meanwhile the extent of export diversification

seemed to be compatible with the increase in the level of technology, a reversal

hold at higher levels (Balassa 1977).

Revealed comparative advantage: Chaotic or coherent patterns across

time and sector and U.S trading partner

J. David Richardson and Chi Zhang (1999) has used 푅퐶퐴indices by Balassa to

map and interpret U.S comparative advantage and comparative disadvantage

17

patterns across time, trading partner and sectors at increasing level of commodity

details. The research found the variation of U.S comparative advantage pattern

among different regions as well as different level of aggregation over the period

from 1980 to 1995. For example, sectors in which U.S export are strong often

include disaggregated sub-products which they are not, or conversely (Richardson

& Zhang 1999). The U.S comparative advantage pattern also varied with different

trading partners in term of geographical location as well as level of economic

development. For example, U.S’ comparative advantage as well as comparative

disadvantage patterns seemed to be quantitatively sharper in export to developing

and less developed countries rather than to rich Western countries (Richardson &

Zhang 1999).

In term of commodities, the research finding stated that U.S comparative

advantage pattern was quite similar in differentiated goods in all market- despite the

fact that the less developed market is, the sharper the comparative advantages

pattern of U.S was. Additionally, U.S revealed comparative disadvantage for

products groups which need labour-intensities of factor of production; such as in

standardized producer goods and all kinds of consumer goods (except for chemical).

For producer goods, the comparative disadvantage pattern of U.S was quite static

over time with in both cases of aggregation and disaggregation of data (Richardson

& Zhang 1999).

Evaluating Vietnam’s changing comparative advantage patterns

Quoc Phuong Le (2010) used 푅퐶퐴 with the SITC (standard international trade

classification) classification of commodities to analyze the change in comparative

advantage pattern of Vietnam between 1991 and 2005. The research found in 1991,

Vietnam’s comparative advantage structure were mainly based on primary

products; in 1996, the comparative advantage structure of Vietnam dramatically

changed to include some labour- intensive products such as clothes and footwear,

but since this moment until 2005, the pace of change slowed down. Other notable

findings of the research are the facts the share of comparative advantage products in

total export of Vietnam to the world was very high. Additionally, the number of

18

primary products that Vietnam had comparative advantage decreased meanwhile

the number of manufactured products Vietnam had comparative advantage

increased between 1991 and 2005 (Le 2010).

Literature review of Revealed Comparative Advantage and

Competitiveness: A Case Study for Turkey towards the EU

Vildan Serin and Abdulkadir Civan (2008) has used revealed comparative

advantage (RCA) and comparative export performance (CEP) index to analyse the

comparative advantage pattern of Turkey’ s agricultural products in export to EU

market from 1995 to 2004. The finding was that Turkey has comparative advantage

over its main rivals such as Italy, Greece and Spain in fruit juice and olive oil

sectors, but has comparative disadvantage in tomato sector. A striking feature is that

the comparative advantage pattern of Turkey has slightly declined from 2000 (Serin

& Civan 2008). Therefore, the broadness of Europe in some first years of 21th

century has negative effects on the competitiveness of Turkey in these sectors.

However, as the revealed comparative advantage index and comparative export

performance can only estimate these effects based on trade data only and cannot

figure out the reason for this change. Therefore, it may be distortion effects from

the enlargement of European Union was the origin of the problem (Serin & Civan

2008).

2.3. Literature review of supplement of gravity model to comparative advantage

for trade explanation

Comparative advantage and Australia- China bilateral trade

Song, Yu Sheng and Ligang (2008) gave an analysis of bilateral trade between

Australia and China based on gravity model and revealed comparative advantage,

from commodity viewpoint. This research used SITC at two-digit level for

commodity classification. Additionally, this research also exploited various

regressions to test the dependency of total trade on many elements such as GDP,

distance between China and Australia, RCA, link between upstream industry and

downstream industry and China’s accession to world trade organization (WTO). In

this paper, GDPs of two countries China and Australia is represented by the total

19

import of commodity at SITC two-digit level; the distance between these two

countries is measured by the tariff barrier. The findings are quite satisfactory.

Firstly, the bilateral trade was derived by respective demand for each other

country’s goods. Secondly, some efforts to reducing trade barriers between two

countries were taken. Thirdly, the pattern of trade between China and Australia

were driven by factor of production endowments. Fourthly, trading relation between

China and Australia was complementary but not competitive with each other

country. Finally, the trade pattern between two countries tended to promote welfare

of both countries in term of value-added generation and by this measure Australia

seemed to be more beneficial from bilateral trading than China (Sheng & Song

2008).

Application of Gravity Model: Measurement of International

Competitiveness of Trade in Services

Wang Lei (2011) integrated the revealed comparative advantage (RCA) and

Trade Special Coefficient (TSC) to the gravity model to test the international

competitiveness of trade in services among 30 countries. The finding of the research

is that among 30 countries under this study, U.S and HongKong was at the first and

second place in term of the strongest countries in international competition in trade

in services. Additionally, China had a strong competitive position as well as

comparative advantage in tradition trade in services, but remained to be weak and

comparative disadvantage in modern trade in service. Between 1997 and 2007,

three major tradition trade in service industries is gradually enhancing the growth

development, which are Transportation, Travel and Construction; meanwhile, three

major modern trade in services industries are slowly improving, which are Finance,

Insurance Consult, Patent License. China is also at weak position in growth

development in trade in services (Wang 2011).

Augmented gravity model: an empirical application to Mecosur-

European Union trade flows

Martinez-Zarzoro and Nowak-Lehmann (2003) used gravity trade model to

analyse the key determinants that leaded to the Mercosur-European Union trade

20

flows as well as forecast the potentiality of trade between this two blocs. The result

showed that exporter and importer incomes had positive effects on bilateral trade

flows; meanwhile bigger country in term of the population size imported more than

smaller countries. Additionally, the infrastructure, income difference and exchange

rate also played essential roles in explaining bilateral trade flow. Furthermore, the

research pointed out that the belonging to one of the two preferential arrangements

intensified trade. The research also forecasted the further liberalization

arrangements between two blocs.

Evaluating China’s integration in world trade with a gravity model

benchmark

Matthieu Bussière and Bernd Schnatz (2006) used gravity model test the

integration of China into world economy in from 1995 to 2005 and run regression to

find out which elements play the key role in this integration process. The finding is

that among different elements, distances and cultural similarity were the key factors

that determine the intensity of trade between China and other countries. Moreover,

by using trade intensity index, the research proves that China was overall very well

integrated in the world market (Bussière & Schnatz 2006). Specifically, the research

found that North America Free Trade Area (NAFTA) was the area having the

largest import-export value with China. On account of countries, the research found

that U.S, Peru and Canada had highest bilateral trade intensity with China. Among

euro area countries, the research found that Germany, France, the Netherlands were

three countries which had the most closely linkage with China in terms of

international trade. In Asia, Indonesia, Malaysia and Philippines were three

countries having highest trade intensity index with China (Bussière & Schnatz

2006).

21

CHAPTER 3: ANALYSIS OF COMPARATIVE

ADVANTAGES OF VIETNAM AND JAPAN

3.1. Overview of trading relation between Vietnam and Japan from 2001 to

2012

3.1.1. Trade flow between Vietnam and Japan from 2001 to 2012

In the period between 2001 and 2012, in general the export, import and total

bilateral trade between Vietnam and Japan soared.

Figure 3.1: The import, export, total trade and trade balance between Vietnam

and Japan from 2001 to 2012

Unit: thousand US$

Sources: Statistics from 2001 to 2010 is from international trade centre2 (data

reported by Vietnam), statistics between 2011 and 2012 is from General department

of Vietnam customs.

2 www.trademap.org

-5,000,000

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Export

Import

Total trade

Tradebalance

22

Figure 3.2: The growth rate of import, export and total trade from Vietnam to

Japan from 2001 to 2012

Unit: percent

Sources: Author’s calculation from statistics of international trade centre (data

reported by Vietnam) and General department of Vietnam customs

In the beginning of the period (2001), the growth rate of import, export and total

trade were negative due to effects of Asian financial crisis in 1998 as well as the

deflation of Japanese economy. Vietnam was still the net exporter to Japan, with the

value of net export of US$ 326.7 million. However, in 2002, despite the fact that the

export of Vietnam to Japan declined, the import of Vietnam from Japan slightly

increased (14.73%) and made the total import and export value from Vietnam to

Japan rise. In 2003, both the import and export of Vietnam to Japan increased about

19%, this made by the import US$ 2,908.6 million of Japan from Vietnam and the

export US$ 2,982.059 million of Japan to Vietnam. In 2004, the export and import

value of Vietnam to Japan were roughly the same, with the figure of US$ 3.54

billion and US$ 3.55 billion respectively, equivalent to the export growth rate of

21.78% and the import growth rate of 19.13%. The dramatic growth in export from

Vietnam to Japan in 2003 and 2004 attributed to the new trend of FDI from Japan to

Vietnam, with implemented FDI of US$ 124.325 million and US$ 176.368 million

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Export

Import

Total trade

23

these years, more than 2 and 3 times compared to 2002, respectively. In the period

between 2002 and 2004, Vietnam experienced trade deficit with Japan. However,

the figures were just only US$ 67.694 million in 2002, US$ 73.459 million in 2003

and US$ 10.463 million in 2004. These figures were very low compared to the

export of Vietnam to Japan.

In 2005 and 2006, export of Vietnam to Japan stably rose at around 20%, with

the export of US$ 4,340 million and US$ 5,249 million. The growth rate of import

of Vietnam from Japan in these two years were at around 15%, which were lower

than export growth rate. In 2007, the export growth rate of Vietnam to Japan was

16.22%, which slightly decreased compared to 2006. However, import of Vietnam

from Japan leaped to US$ 6,188 million, equivalent to the growth rate of 31.62%.

This growth attributed to the increase in FDI flow from Japan to Vietnam, which

caused the intensity of import of machineries, equipment originated from Japan. In

2007, Vietnam for the first time in period from 2005 to 2007 experienced trade

deficit with Japan, with the value of US$ 98.929 million. In 2008, export and import

growth rate of Vietnam to Japan reached the period peak (period between 2001 and

2008) of 39.04% and 33.15%, respectively. The export growth rate increased

mainly came from the increasing export of machinery, nuclear reactors, boilers, etc

(HS84), electric transformer, static converter (for example rectifiers) (HS8504) and

crude petroleum oils (HS2709) to Japan. The import growth rate came from the

increasing import of petroleum oils, not crude (HS2710), iron and steel (HS72),

electronic integrated circuits and microassemblies (HS8542) and also machinery,

nuclear reactors, boilers, etc (HS 84). In 2009, due to the effects the global financial

crisis originated from U.S in October 2008, the export and import of Vietnam to

Japan declined 25.18% and 9.37% respectively, which was equivalent to the drop

rate of 17.38% in total import and export. In the following year (2010), the growth

rate of export and import of Vietnam with Japan were roughly the same at around

21%. This triggered from the effectiveness of ASEAN and Japan economic

partnership agreement (ACEPA), in which Vietnam played a role as a member of

ASEAN.

24

Years 2009 and 2010 were two consecutive years Vietnam suffered large trade

deficit with the Japan at the value of more than US$ 1 billion, accounted for 8% of

total import and export between Vietnam and Japan. This was the result from the

increase in import of machineries and equipment that triggered from the increase in

FDI from Japan to Vietnam (Bộ Công thương 2012). In 2011, total export and

import between Vietnam and Japan for the first time exceeded US$ 10 billion, and

export from Vietnam to Japan also reached the period-peak of 39.51% (period

between 2001 and 2012), which was higher than previous peak in 2008. The reason

for this increase was from the consequences of earthquake and tsunami on 11,

March, 2011, which damaged many industries in Japan and shot up Japan’s demand

for crude petroleum oils (HS2709) from Vietnam. Additionally, the export of

Vietnam to Japan also increased due to the abolition of many tariff lines for

Vietnamese’s industrial products as a result from the commitment of Japan in two

agreements AJCEP and VJEPA. Vietnam was also a net exporter to Japan with the

value of US$ 380.478 million. Japanese economy went in crisis in quarter 3 and

quarter 4 of 2012, this leaded the slowdown in the export growth rate and import

growth rate from Vietnam compared to previous years, with the value of 21.14%

and 11.56%, respectively. Japan suffered trade deficit with Vietnam, with the value

of US $1.457 billion, equivalent to 6 % total Vietnam-Japan import and export.

Table 3.1: Japan’s share and Vietnam’s share in total import of Vietnam and

Japan

Unit: percent

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Vietnam 13.5 12.7 11.8 11.1 11.1 10.5 9.9 10.2 10.7 10.6 9.7 8

Japan 0.75 0.75 0.81 0.85 0.88 0.91 0.98 1.19 1.26 1.18 1.4 1.7

Source: Author’s own calculation from statistics of international trade centre

(ITC)

25

As can be seen from the table 3.1, Vietnam’s export accounted for very small

portion of total import of Japan from the world. However, Vietnam export share in

total import of Japan stably increased in this period. In 2001, the figure was only

0.75% but in 2012, the figure was about 1.7%, which was more than two times in

comparison to 2001. In reverse, Japan was also the third largest export market of

Vietnamese commodities, which was only behind U.S and China in 2012. Japan’

export share in Vietnam import fluctuated between 2001 and 2012, but in general

these figures were on downward trend, with the figure of 13.5% in 2001 and 8% in

2012.

Figure 3.3: Top 5 export markets of Vietnam commodities in 2001 and 2012

Unit: percent

a) In 2001 b) In 2012

Source: Author’s own calculation from statistics of international trade centre

(ITC)

As can be seen from the figure 3.3, Japan was the largest export market of

Vietnamese commodities in 2001, accounted for 18% of total Vietnam export. U.S

was the second largest export of Vietnam, which accounted for only 7% of total

Vietnam export. However, in 2012, Japan market only accounted for only 13%

18%

7%

7%

7%7%

54%

Japan

U.S

Germany

Australia

China

Others

18%

14%

13%4%4%

47%

U.S

China

Japan

Republic ofKorea

Germany

Other

26

percent of total export from Vietnam, fell behind U.S (18%) and China (14%).

Thus, Japanese market’s share in Vietnam’s export declined between 2001 and

2012.

Figure 3.4: Top 5 exporters to Vietnamese market between 2001 and 2012.

Unit: percent

a) In 2001 b) In 2012

Source: Author’s own calculation from statistics of international trade centre

(ITC).

As can be seen from the figure 3.4, in 2001, Japan was the second largest

exporter to Vietnam, accounted for about 13.5% of total Vietnam’s import, fell only

behind Singapore (15.3%). In 2012, Japan ranked number three in largest exporters

to Vietnamese market, with the occupying market share of 8%, fell behind Republic

of Korea (12%) and China (27%). Thus, it can be concluded that the market share of

Japan’s export in Vietnamese market declined in the period from 2001 to 2012.

In summary, despite that fact that the total export and import between Vietnam

and Japan stably increased in recent years; however, Japan are losing her dominant

position in trade with Vietnam compared to other countries such as China and

Republic of Korea in the period between 2001 and 2012

15.3%

13.5%

12.4%

11.6%9.9%

37.3%

Singapore

Japan

ChineseTaipei

Republicof Korea

China

Others

27%

12%

8%8%6%

39%

China

Republic ofKorea

Japan

Singgapre

ChineseTeipei

Others

27

3.1.2. Structure of commodities flow between Vietnam and Japan from 2001 to

2012

Data classification

The classification of commodities in this thesis will base on harmonized

commodity and coding system (HS). In this thesis, the author will break down

commodities into different groups, namely: resources-based commodities, labour-

intensive commodities, scale-intensive commodities and differentiated

commodities. This breakdown base on the factor production and added value of

each commodity and was used in the 2005-bachelor thesis of Isabelle Ahlström,

Camilla Stålros and then published by Lund University, School of economics and

management in Lund, Sweden (Ahlström & Stålros 2005). Obviously, this grouping

is not absolute as it is very hard to define exactly the factor of production used most

intensively in production of a commodity among nations. However, in formulating

these commodity groups, the author referred to international standard industrial

classification (ISIC) which was developed United Nations (UN) to classify

commodities according to “the similarities in the character of the goods and services

produced, the uses to which the goods and services are put, and the inputs, process

and technology of production” (United Nations 2011) and standard international

trade classification (SITC) which breaks down commodities into various stage of

product development and economic functions. Additionally, the author also

considered the correspondence between ISIC, SITC and HS as well as the

conversion table between SITC and HS, published by UN. The classification

systems are fairly similar and the harmonization program between ISIC and HS has

declared to be successful (Papageorgiou et al. 2001). The detail classification of

four groups is in Appendix I.

3.1.2.1. Commodities structure of Vietnam in export to Japan

28

Figure 3.5: Commodity structure of Vietnam in export to Japan by value

Unit: thousand US $

Source: Statistics of international trade centre (ITC)3

As can be seen from the figure 3.5, resource-based commodities in almost years

between 2001 and 2012 were main export of Vietnam to Japan. The most obvious

feature of export of Vietnam to Japan between 2001 and 2012 is that export of all

four broad groups of commodities was on upward trend. For export of resource-

based commodities, a striking feature is that from 2001 and 2008, 2011 and 2012,

resource- based commodities group ranked number one in export of total four broad

groups of commodities of Vietnam to Japan, but in 2009 and 2010, export of

resource-based commodities group fell behind export of differentiated commodities

group. This can be explained by the fact that the price of raw materials in 2008 was

very high, but then rapidly declined in 2009 and 2010 (Bộ Công thương 2012). The

fluctuation of price affected the Vietnam’s export of resource-based commodities

more than differentiated commodities due to the fact that the value of raw materials

largely accounted for the price of resource-based commodities. In 2011 and 2012,

the export of resource-based commodities dramatically rose. This reason was the

fact that in these two years, due to the consequences of the earthquake and tsunami

in Japan on 11th, March 2011, the demand for foreign resource-based commodities 3 Statistics from 2001 to 2010 is from www.trademap.org/, statistics in 2011 and 2012 is author’s estimation from the data report by Japan (import by Japan)

0

1000000

2000000

3000000

4000000

5000000

6000000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Resource-basedcommodities

Labour-intensivecommodities

Scale-intensivecommodities

Differentiatedcommodities

29

surged. In reverse, in the same period, export of scale-intensive commodities group

was lowest compared to other three broad groups of commodities. Between 2010

and 2012, due to commitment of AJCEP, 95% tariff lines accounting for 94.5%

export of industrial products from Vietnam to Japan abolished; therefore, export of

not only scale-intensive commodities, but also differentiated commodities surged

with the increasing value of 27% and 55% in 2012 compared to 2010, respectively.

Additionally, in the period between 2004 and 2010, export of differentiated

commodities group exceeded the export of labour-intensive commodities group.

This proved that Vietnamese government has been changing its commodities export

structure from concentrating on resources-based commodities and labour-intensive

commodities to industrial products.

Figure 3.6: Growth rate of Vietnam’s four broad commodities groups in export

to Japan between 2002 and 2012

Unit: percent

Source: Author’s calculation from statistics of international trade centre (ITC)

As can be seen from the figure 3.6, the export growth rate of Vietnam’s four

broad commodities groups to Japan wildly fluctuated between 2002 and 2012, and

it is hard to identify any trend. A striking feature of the figure is that in 2009, the

export growth rate of Vietnam’s three broad commodities groups were negative due

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Resource-basedcommodities

Labour-intensivecommodities

Scale-intensivecoomodities

Differentiatedcommodities

30

to effects of global financial crisis beginning in October 2008 in U.S and spread

over the world. In three broad commodities groups, export of resource-based

commodities experienced the biggest drop of 51.5% due to the dip in price of

Japan’s import raw materials for industries. The following was scale-intensive

commodities with the drop of 19.6% and then differentiated commodities with the

figure of 4.4% compared to 2008. In 2011 and 2012, due to the surge in demand for

foods and substitute energies, the export turnover of resource-based commodities

leaped with the figures of 93.8% and 55% compared to previous years, respectively.

Figure 3.7: Commodity structure of Vietnam in export to Japan by proportion

Unit: percent

Source: Author’s calculation from statistics of international trade centre (ITC)

As can be seen from figure 3.7, the proportion of scale-intensive commodities,

differentiated commodities rose between 2001 and 2012. This was the result of

Vietnamese government’s policies to intensify export of high value-added products,

especially industrial products, to gain more benefits from trade and lessen the

proportion of export of low value-added products such as agricultural products and

textile products in total export. However, the total proportion of scale-intensive

commodities, differentiated commodities group was only 22.8% in 2001 and 37%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Resource-basedcommodities

Labour-intensivecommodities

Scale-intensivecommodities

Differentiatedcommodities

31

in 2012, which was lower than export proportion of resource-based commodities

and labour-intensive commodities groups.

In 2001, the export proportion of scale-intensive commodities group accounted

for only 5.5%. In following years, the figure increased to reach the peak in 2010

with the value of 17.9%, and decreased in the following years 2011 and 2012. In

2012, the export proportion of scale-intensive commodities group accounted up to

around 15% in total export of Vietnam to Japan, which was about nearly three times

compared to 2001. Despite rapid increase between 2001 and 2012, the export

proportion of scale-intensive commodities group was lower than other three

remaining commodities groups in total export from Vietnam to Japan in every year

between 2001 and 2012. This triggered from the fact that the production of scale-

intensive commodities requires advanced technology and huge capital in general.

As a result, these commodities were the dominant export of developed countries,

not developing countries like Vietnam.

Figure 3.8: Commodity structure of scale-intensive commodities group of

Vietnam in export to Japan by proportion

Unit: percent

Source: Author’s calculation from statistics of international trade centre (ITC)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

28->38Chemicals

39->40Plastics

47->49 Pulpand paper

68->70Stone/Cement/Ceramics72->83 Basemetal andmetal articles86->89Vehicles

32

In export structure of scale-intensive commodities group, as can be seen from the

figure 3.8, export of plastics accounted for largest proportion of total export of

scale-intensive group for almost years between 2001 and 2012 , with the value of

27.9% in 2001 and 33.9% in 2012, equivalent to the increasing rate of 21%.

However, the raw materials for the production of plastics in Vietnam imported up to

80%-85% from abroad, which restricted the production of plastics due to the

passivity of possessing raw materials (Báo Đại đoàn kết 2011). Additionally, plastic

enterprises had difficulties in the production, especially small and medium

enterprises due to the decline in domestic demand as well as the rise in input costs

such as electricity, coal, petroleum and materials and the inability to access capital

from bank in 2012 (Vietnam Business News 2013). Therefore, despite the fact that

Vietnam’s export of plastics increased between 2001 and 2012, it was modest

compared to the potentiality. Export of base metal and metal articles accounted for

around 15-25% in total export of scale–intensive commodities, with the turnover of

export increased about 13 times between 2001 and 2012; however, the proportion

was on downward trend between 2001 and 2012. Base metal and metal articles are

products of heavy industries which recently rapidly developed in Vietnam due to

the policy of industrialization and modernization of Vietnamese government.

Nevertheless, the production of heavy industries in Vietnam mainly based on

outdated technology, with raw materials largely imported from China (Vietnam

Economic Forum 2011). Comparative advantage of Vietnam was only abundance of

unskilled laborers with low labour wage. Hence, the added value for production of

these commodities is not considerable; meanwhile the production process triggered

environmental pollution. The export turnover of vehicles from Vietnam to Japan

leaped between 2005 and 2007, then rapidly declined in 2007 and 2009, which

leaded to the wild fluctuation in proportion of this items in export to Japan. The

exports of stone/cement/ceramics and pulp and paper were limited due to the little

diversification and low quality of Vietnam products. Therefore, the export of these

items accounted for small proportion in total export of scale-intensive commodities.

33

Figure 3.9: Commodity structure of differentiated commodities group of

Vietnam in export to Japan by proportion

Unit: percent

Source: Author’s calculation from statistics of international trade centre (ITC)

In total export of Vietnam to Japan, the proportion of differentiated commodities

group export started the period between 2001 and 2012 with the figure of 17.3%,

reached the peak in 2010 with the figure of 32% (in the same year export of

differentiated commodities group became dominant compared to other three

commodities groups), and then declined in the two following years with the

respective figures of 24.1% and 22%. In export of differentiated commodities from

Vietnam to Japan, export of machinery and electrical appliances (HS84 and HS85)

accounted for around 90%. However, Vietnam mainly export finished products,

which almost all complex accessories and components imported from abroad;

therefore, in reality Vietnam only carried out the assembly and process stages.

Meanwhile, in the price of electronic and electric products, the components and

accessories accounted for up to from 70% and 90% of price of finished products

(Vũ Hoàng Dương 2011). Therefore, although Vietnam exported a large proportion

of machinery and electrical appliances in total export of differentiated commodities,

the profits gaining was not considerable.

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

84->85 Machinery and electrical appliances

90->92 Optical, precision& musical instruments

97->98 Antiques and artworks

34

In summary, the increase in the export proportion of scale-intensive commodities

and differentiated commodities between 2001 and 2012 was a positive sign for

export of Vietnam. Nevertheless, Vietnam needs a better direction for intensifying

export of these commodities groups in future.

The proportions of resource-based commodities and labour-intensive

commodities in total export from Vietnam to Japan fluctuated wildly between 2001

and 2012, but in general were on downward trend. Resource-based commodities

group was the highest export value group in almost every year between 2001 and

2012, except for two years 2009 and 2010. This can be explained by the fact that

Japan was a nation with a few natural resources and bumpy terrain so there was

narrow land as for agriculture. Japan had comparative advantage in science,

technology and services. A large amount of Japanese labour forces is in services

and industry sectors, which leaves the small amount of labourers in agriculture. As

a result, to meet the domestic demand, Japan was very active in import mineral

fuels as well as agricultural products not only from Vietnam but also from other

developing countries. The export proportion of resource-based commodities group

accounted up to 42.9% in 2001, and then reached the peak of 44.2% in 2008 due to

the high price of fossil fuels in the same year. The price of fossil fuels in Japan

dramatically decreased thereafter in 2009 leading to the decline in the export

proportion of resource-based commodities group. After that, the export proportion

of resource-based commodities group continued to decrease to hit a low in 2010

with the figure of 23.5% and then recovered in the next two years 2011 and 2012

with the export occupancy of 38.3% in 2012. The increase in Vietnam’s export of

resource-based commodities group was due to the fact that 48 out of 50 nuclear

reactors in Japan were closed in 2012, which pushed the demand for foreign fossil

fuels, including Vietnam (The Wall Street journal 2013). In summary, the export of

resource-based commodities group accounted for large proportion in total export of

Vietnam.

35

Figure 3.10: Commodity structure of resource-based commodities group of

Vietnam in export to Japan by proportion

Unit: percent

Source: Author’s calculation from statistics of international trade centre (ITC)

Looking at figure 3.10, export proportions of live animals and mineral products

in total export of resource-based commodities group wildly fluctuated between

2001 and 2012, but ranked first and second by export proportion in total export of

resource-based commodities, respectively. It is easy to see that export proportion of

live animal was on downward trend and export proportion of mineral products was

on upward trend. From 2001 to 2012, it is noticeable that meanwhile the export

proportion of mineral products surged 67.6%, the export proportion of Vietnam’s

live animals in total export of resource-based commodities group rapidly declined

69.6%, with the value of 44.8% and 13.6% in 2001 and 2012, respectively. In term

of turnover, export of live animals increased 53.8% between 2001 and 2012. In

structure of resource-based commodities, export of fish, crustaceans, molluscs,

aquatic invertebrates nes (HS03) dominated, accounted for up to 18.4% in total

export of Vietnam to Japan in 2001; however, this proportion rapidly declined to

5.2% in 2012. This originated from the policy of Vietnamese government to lower

the export proportion of natural resources, and increase the export of industrial

products to abroad. Additionally, the diversification of the export of fisheries from

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

01->05 Liveanimals

06->14 Vegetableproducts

15 Fats and oils

16->24 Preparedfoodstuffs

25->27 Mineralproducts

44->46 Wood andWood articles

36

Vietnam to Japan was limited. The export of processed fisheries only accounted for

28% of total export of fisheries as the Vietnam’s products did not adapt to the

demand of Japanese consumers and the fisheries’ processing technology of Vietnam

was outdated (Bùi Ngọc Sơn et al. 2012, p.68). Despite the fact that Vietnam had

comparative advantage in producing vegetables products, export of vegetables

products accounted for only from 4% to 8% of total export of Japan. This attributed

to the Japan’s high protection for vegetables products. In this commodities group,

the export of coffee, tea, mate and spices (HS09) played the dominant role.

Although Japan was one of the largest market importing Wood and wood articles

(HS44, HS45, HS46) of Vietnam, the export proportion of these items was small,

accounted for only around 5-10% of total export of resource-based commodities.

Similarly, fats and oil, prepared foodstuffs accounted for less than 15% of total

export of resource-based commodities group for all years in periods. In this period,

these proportions did not experienced noticeable change.

Figure 3.11: Commodity structure of labor-intensive commodities group of

Vietnam in export to Japan by proportion

Unit: percent

Source: Author’s calculation from statistics of international trade centre (ITC)

As can be seen from the figure 3.11, it is noticeable that export of textiles and

apparel accounted for large proportion of total export of labour- based commodities.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

41->43 Hides andleather

50->63 Textiles andapparel

64->67 Footwear

71 Gems

93 Arms

94->96 MiscellaneousManufactured articles

37

This can be explained by the fact that for many years, textiles and apparel has been

key commodities, as the production of these commodities does not require huge

capital and skilled labour forces. However, the main disadvantage in Vietnam’s

production of textiles and apparel for export was that Vietnam also imported up to

70% raw materials from China due to low quality and high price of Vietnam’s

products. As a result, the value-creation is low. In other word, Vietnam only carries

out the processing stage in value chain of these items. Therefore, in export structure

of textiles and apparel to Japan, Vietnam mainly exported finished products, such as

articles of apparel, accessories, knit or crochet (HS61) and articles of apparel,

accessories, not knit or crochet (HS62). The total export turnover of these two items

(HS61& HS62) accounted for up to 12%-22% total export of Vietnam to Japan.

Nevertheless, the occupancy rate of these items in total export from Vietnam to

Japan declined between 2001 and 2012, with the proportion rate of 22.4% in 2001

and 12.6% in 2012, in spite of the increase of 219.8% in turnover. The exports of

hides and leathers products ( inputs for textiles and apparels) to Japan only ranged

from 3% to 6% due to the fact that the quality of these items was low in comparison

with the Japanese requirement. Miscellaneous manufactured articles accounted for

between 10% and 20% of total export of labour-intensive commodities, and

between 2001 and 2012, this rate was on upward trend in general. Export proportion

of footwear in total export of labour-intensive commodities only accounted for

around 10%, partly due to the low quality and little diversification of these items

compared other countries’ export to Japan. Export proportion of gems was low,

only ranged from 0.5% to 2.5% between 2001 and 2012. Export proportion of arm

was nearly zero due to the fact that arm industry was underdeveloped in Vietnam.

Vietnam also imported huge value of arms from Russia.

3.1.2.2. Commodities structure of Japan in export to Vietnam

38

Figure 3.12: Commodity structure of Japan in export to Vietnam by value

Unit: thousand US $

Source: Statistics of international trade centre (ITC)

As can be seen from the figure 3.12, exports of all four broad groups of

commodities of Japan to Vietnam were on upward trend between 2001 and 2012.

Exports of resource-based commodities and labour-intensive commodities were

much lower than export of scale-intensive commodities and differentiated

commodities in every year between 2001 and 2012. This originated from the fact

that Japan was a nation with the strength in export of products that required huge

capital, high technology and skilled labour forces. A noticeable point in this figure

was that in 2009, export of three broad categories of commodities, namely resource-

based commodities, scale-intensive commodities and differentiated commodities

declined compared to 2008 due to the effects of global financial crisis. However,

export of labour-intensive commodities still increased. This can be explained by the

slight increase in Vietnam’s demand for textile and gems from Japan. Another

striking feature of the figure 3.12 is that the Japanese export turnover of resources-

based commodities wildly fluctuated between 2006 and 2009, although from 2001

to 2006 and from 2009 to 2012, the figure experienced a little change. The reason

was the surge in Vietnam import turnover of petroleum oils (not crude) (HS2710) in

2007 and 2008, and then the import declined in 2009.

0

1000000

2000000

3000000

4000000

5000000

6000000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Resource-basedcommodities

Labour-intensivecommodities

Scale-intensivecoomodities

Differentiatedcommodities

39

Figure 3.13: Growth rate of Japan’s four broad commodities groups in export

to Vietnam between 2002 and 2012

Unit: percent

Source: Author’s calculation from Statistics of international trade centre (ITC)

As can be seen from the figure 3.13, the export growth rate of four broad groups

of commodities from Japan in export to Vietnam did not experience noticeable

change between 2002 and 2006 and from 2010 to 2012, with the range of

fluctuation from -25 % to 50%. However, due to the considerable fluctuation in the

price of petroleum oil in world market, export turnover growth rate of resource-

based commodities of Japan to Vietnam showed enormous variation. In 2007, 2008,

the growth rate was 260.6% and 144.2%, respectively. The price of crude oil

reached the peak in July 2008 of US$ 147 per barrel and then declined to about U.S

$40 per barrel in January, 2009 in the aftermath of global financial crisis in October

2008. This made the export turnover of Japan’s resource-based commodities to

Vietnam dropped 67.6% in 2009. In 2010, the price of crude oil increased to around

US $80 per barrel due to the recovery of global economy, which made an increase

of 65.1% in total export of resource-based commodities of Japan to Vietnam.

-100.0%

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Resource-basedcommodities

Labour-intensivecommodities

Scale-intensivecoomodities

Differentiatedcommodities

40

Figure 3.14: Commodity structure of Japan in export to Vietnam by

proportion

Unit: percent

Source: Author’s calculation from Statistics of international trade centre (ITC)

As can be seen from the figure 3.14, the export proportion of four broad

categories of commodities seemed to experience no noticeable change in

comparison between year 2001 and year 2012. The export of resource-based

commodities accounted for the lowest proportion in total export from Japan to

Vietnam. This can be explained by the fact that Japan was a country with a few

natural resources and narrow land for agricultural production, therefore, the

domestic production mainly served for domestic demand. In Japan, only 13% of

land was used for cultivation, and agricultural production only accounted for about

2% of total Japanese GDP in 2008 (Encyclopedia of the Nations 2008). Labor-

intensive commodities group accounted for a larger proportion of total export of

Japan’s export to Vietnam; however, the rate ranged only from 7% to 15% between

2001 and 2012. Moreover, export of this commodities group to Vietnam had

tendency to decline in this period. Scale-intensive commodities and differentiated

commodities were two broad groups of commodities with the large proportion in

total export from Japan to Vietnam. In total, these two groups of commodities

accounted for around 80% of total export from Japan to Vietnam. This is quite

obvious as these are two groups of commodities that Japan can exploit her

0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Resource-basedcommodities

Labour-intensivecommoditiesScale-intensivecoomodities

Differentiatedcommodities

41

advantages of advanced technology, huge capitals. The advanced technology of

Japan can attributed to the fact that Japan spent a huge amount of capital in research

and development (R&D). In 2011, the R&D spending of Japan was US $160.3

billion, accounted for up to 3.67% total Japanese GDP, ranked number three in the

world in term of value of spending for R&D.

Figure 3.15: Commodity structure of scale-intensive commodities group of

Japan in export to Vietnam by proportion

Unit: percent

Source: Author’s calculation from Statistics of international trade centre (ITC)

In structure of export of scale-intensive commodities, it can be seen from figure

3.15 that export of based metal and metal articles accounted for a large proportion,

ranged from 40% to 53% of export of scale-intensive commodities. In the export of

base metal and metal articles, iron and steel (HS72) was one of main export

commodities from Japan to Vietnam, accounted for 28.7% and 38.1% of total

export of scale-intensive commodities in 2001 and in 2012, respectively.

Additionally, this item accounted for up to 10.6% in 2001 and 14.6% in 2012 of

total export of Japan to Vietnam. Export of plastics, vehicles and chemicals

accounted for around 10-25% of total export of scale-intensive commodities. It is

noticeable from the figure 3.15 that export turnover of vehicles from Japan to

Vietnam was on upward trend, however, the export proportion of vehicles decreased

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

28->38Chemicals

39->40 Plastics

47->49 Pulpand paper

68->70Stone/Cement/Ceramics72->83 Basemetal andmetal articles86->89Vehicles

42

66.2% from 2001 to 2012 in total export of scale-intensive commodities. The reason

can be attributed to the decree 1380/QĐ-BCT in 2011 of Vietnam’s ministry of

trade and commerce, which included most of products of HS87 into the list of

Vietnam’ restricted import from foreign. Additionally, it can be seen from the figure

that export of vehicles from Japan to Vietnam rapidly increased between 2006 and

2008, with the increase rate of 168%. This can be explained by the dramatic

increase in FDI into Vietnam between 2006 and 2008, which leaded to the increase

in demand for equipment and vehicles for constructing activities; after that, due to

the global financial crisis, FDI declined which slowdown the demand for items in

this group in 2009 (Nguyễn Đăng Bình 2011). In reverse, it can be seen that the

export proportion of plastics stably increased between 2001 and 2012, with the rate

of 52.9%. In import of commodities in this group, Vietnam mainly imported raw

materials, which were later used as inputs for other industries. Total export

proportion of pulp and paper, stone/cement/ceramics was not considerable,

accounted for only 4%-6% total export of scale-intensive commodities. This can be

explained by the fact that Vietnam can produce these items domestically.

Figure 3.16: Commodity structure of differentiated commodities group of

Japan in export to Vietnam by proportion

Unit: percent

Source: Author’s calculation from Statistics of international trade centre (ITC)

As can be seen from the figure 3.16, export proportion of machinery and

electrical appliances accounted for around 90% of total export of differentiated

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

84->85Machinery andelectricalappliances

90->92 Optical,precision&musicalinstruments

97->98Antiques andartworks

43

commodities group, and accounted for around 40% of total export from Japan to

Vietnam. In which, export of electrical, electronic equipment (HS85) accounted for

up to one fifth total export of Japan to Vietnam. Although the export growth rate of

machinery and electrical appliances is quite unstable, there were years which this

rate was outstandingly high, such as between 2006 and 2008, with the growth rate

of between 29% and 44%. This attributed to the growing trend of FDI flow from

Japan to Vietnam. In export of machinery and electrical appliances, contrary to

Vietnam export to Japan, export of Japan to Vietnam were mainly advanced

components and high value-added accessories, for example electronic integrated

circuits and microassemblies (HS8542), electrical appliances for switchg (ex

fuse,switche, etc) not exceed 1000 volt (HS8536), part suitable for use solely/princ

with boards, panels, fuses, switche (HS8538) and advanced finished product such as

machines & mechanical appliances nes having individual functions (HS847989),

printing machinery; machines for uses ancillary to printing (HS8443). Export of

optical, precision &musical instruments accounted up to around 10% of total export

of differentiated commodities group; even though a large proportion of products in

this group were in list of Vietnam’s restricted import from foreign.

Figure 3.17: Commodity structure of labour-intensive commodities group of

Japan in export to Vietnam by proportion

Unit: percent

Source: Author’s calculation from Statistics of international trade centre (ITC)

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

200120022003200420052006200720082009201020112012

41->43 Hides and leather

50->63 Textiles and apparel

64->67 Footwear

71 Gems

93 Arms

94->96 Miscellaneous Manufactured articles

44

As can be seen from figure 3.17, export of textile and apparel accounted for up to

80%-90% total export of labour-intensive commodities, and accounted for about

7%-12% total export of Japan to Vietnam. Despite the decline in the export

proportion of this commodity in total export of Japan to Vietnam, the export

turnover increased 269% between 2001 and 2012. Contrary to export of textiles and

apparel from Vietnam to Japan, total export of textiles and apparel from Japan to

Vietnam only accounted for 12.4% in 2001 and 7.6% in 2012 of total export of

Japan to Vietnam, which was lower than Vietnam’s. Moreover, in export structure

of Japan to Vietnam, export of finished products (HS61&HS62) accounted for

around 0.1%-0.2% of total export of Japan to Vietnam. Japan’s export of hide and

leather mainly were raw materials (from HS50 to HS60 and HS63). This proved the

fact trade between Vietnam and Japan in textile and apparel industry between 2001

and 2012 was vertical intra-industry trade. The export of miscellaneous

manufactured articles accounted for around 10% of total export of labour-intensive

commodities, and export turnover of this commodity has increased 511% between

2001 and 2012. Export of four other commodities, namely footwear, gems, arms,

hide and leather accounted for only small proportion of total export of labour-

intensive commodities.

Figure 3.18: Commodity structure of resource-based commodities group of

Japan in export to Vietnam by proportion

Unit: percent

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

01->05 Live animals

06->14 Vegetableproducts

15 Fats and oils

16->24 Preparedfoodstuffs

25->27 Mineralproducts

44->46 Wood andwood articles

45

Source: Author’s calculation from Statistics of international trade centre (ITC)

In export structure of resource-based commodities from Japan to Vietnam, it is

easy to identify that of six small groups of commodities, no group played the

dominant role. It can be seen from the figure 3.18 that the export proportions of

vegetable products, mineral products, wood and wood articles; prepared foodstuff in

total export of resource-based commodities were on downward trend; meanwhile

the export proportion of live animals was on upward trend. The export proportion of

total six groups wildly fluctuated between 2001 and 2012. It is noticeable that

export proportion of mineral products accounted for 20%-30% between 2001 and

2006, but in 2008 and 2009, the proportion shop up to 68.4% in 2007 and 78.2% in

2008, then rapidly declined in the following years. This attributed to the increase in

price of fossil fuels in 2007 and 2008, then the price declined due to the slowdown

of global economy in 2009. A noticeable point is that between 2001 and 2012, the

export turnover of live animals from Japan to Vietnam increased 150.4 times,

meanwhile total export turnover of total resource-based commodities increased only

8.8 times. The increase in export turnover of live animals came from the surge in

Japan export of moluscs (HS0307) and fish, frozen, whole (HS0303). Additionally,

export of wood and wood articles increased only 37% in the same period. In export

structure of wood and wood articles, export of wood sawn/chipped lengthwise,

sliced/peeled (HS4407) and wood in the rough (HS4403) accounted for large

proportion. Export of vegetable products accounted for up to 43.5% in 2001, but

declined stably to only 2.6% of total export of resource-based commodities group in

2006, and then recovered until 2010. Export of prepared foodstuff accounted for up

to 20.2% in total export of resource-based commodities in 2005 and 2006; however,

from 2010 to 2012, export turnover of prepared foodstuff declined which leaded to

the decrease in export proportion to 7.9% in 2012 in total export of resource-based

commodities. The reason is that a large amount of items in this group were added to

list of restricted imported items by the decrees 1899/QĐ-BCT in April, 2010 and

1380/QĐ-BCT in March, 2011 of Vietnam’s ministry of trade and commerce.

These decrees also applied to a large number of products in fats and oil

46

commodities group, which forced the export proportion of these items to around 1%

of total export of resource-based commodities between 2001 and 2012.

3.2. Pattern of comparative advantage of Vietnam and Japan

In this part, the author uses the same commodities grouping method as

introduced in the previous part. To be more specific, the author divides the

exchanged commodities between Vietnam and Japan into four categories: resource-

based commodities, labour-intensive commodities, scale-intensive commodities and

differentiated commodities. In each of four broad categories of commodities, the

author uses a smaller grouping method; for example, groups total commodities from

code HS01 to HS05 into live animals group. The process in this part is as follows.

Firstly, the author gives some comments for the changes in overall patterns of

bilateral comparative advantage of the four broad and numerous narrow categories

of commodities of Vietnam and Japan, by the calculation of bilateral revealed

comparative advantage (푅퐶퐴 ) for Vietnam and Japan in Vietnam–Japan bilateral

trade over the period from 2001 to 2011. The formula to define 푅퐶퐴 is in session

1.3. Secondly, the author goes into detail to find out two-digit HS commodities that

Vietnam and Japan had bilateral comparative advantage in Vietnam-Japan bilateral

trade in 2001 and 2011, based on the calculation of 푅퐶퐴 and compare with 1.

3.2.1. Pattern of Vietnam’s revealed comparative advantage in bilateral trade

with Japan

Figure 3.19: Vietnam’ revealed comparative advantage in bilateral trade with

Japan in four broad categories of commodities between 2001 and 2011

0

0.5

1

1.5

2

2.5

3

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Resource-basedcommoditiesLabour-intensivecommoditiesScale-intensivecommoditiesDifferentiatedcommodities

47

Source: Author’s calculation from Statistics of international trade centre (ITC)

As can be seen from figure 3.19, Vietnam had comparative advantage in the

groups of labour-intensive commodities and differentiated commodities, and had

comparative disadvantage in the groups of scale-intensive and resource-based

commodities in bilateral trade with Japan in 2011. Between 2001 and 2011,

Vietnam lost comparative advantage in resource-based commodities group. This

can be explained by the fact that the export proportion of resource-based

commodities group has declined from 42.9% in 2001 to 32.2% in 2011 in total

export from Vietnam to Japan. The comparative advantage in labour-intensive

commodities group was quite high and static over the period. Despite the fact that

Vietnam did not have comparative advantage in producing scale-intensive

commodities group, the increase of 푅퐶퐴 of this group over this period was a

positive signal for the export of this group from Vietnam to Japan. Notably,

Vietnam has changed from a country with comparative disadvantage with Japan to a

country with comparative advantage with Japan in producing differentiated

commodities group over the same period.

Figure 3.20: Vietnam’ revealed comparative advantage in bilateral trade with

Japan in resource-based commodities group between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

01->05 Liveanimals06->14 Vegetableproducts15 Fats and oils

16->24 Preparedfoodstuffs25->27 Mineralproducts44->46 Wood andwood articles

48

In group of resource-based commodities group, it can be seen from the figure

3.20 that Vietnam changed from the countries without comparative advantage to a

country with comparative advantage in producing wood and woods article and

prepared foodstuff over the period. The comparative advantage of live animals

during the period was high but tented to decline. Although Vietnam’s export

turnover to Japan of mineral products was very high in total export of Vietnam to

Japan, Vietnam did not have comparative advantage in export of this commodity to

Japan. This can be explained by the fact that Japan also import huge turnover of

mineral products from other countries. Additionally, Vietnam did not have

comparative advantage in the export of vegetable products, fats and oils until 2011.

Despite the fact that the export of prepared foodstuff only accounted for around

11% in total export of resource-based commodities group, Vietnam had

comparative advantage in export this kind of products to Japan until 2011.

Figure 3.21: Vietnam’ revealed comparative advantage in bilateral trade with

Japan in labour-intensive commodities group between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

In the group of labour-intensive commodities, as can be seen from figure 3.21,

Vietnam had high and static comparative advantage with Japan in export of textile

and apparel as well as footwear commodities over the period. This attributed to the

high proportion in total export these kinds of commodities from Vietnam to Japan.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

41->43 Hides andleather

50->63 Textiles andapparel

64->67 Footwear

71 Gems

93 Arms

94->96 MiscellaneousManufactured articles

49

With the high growth in export of miscellaneous manufactured articles to Japan,

Vietnam maintained the high comparative advantage in export this kind of

commodity over the period. The 푅퐶퐴 of Vietnam in producing hides and leather

commodities fluctuated around 1 between 2001 and 2011, but was still greater than

1 in 2011, proving that Vietnam had comparative advantage in export this kind of

products in 2011. Additionally, Vietnam did not have comparative advantages in

export gem, arm due to limited export of these commodities to Japan over the

period.

Figure 3.22: Vietnam’ revealed comparative advantage in bilateral trade with

Japan in scale-intensive commodities group between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

In group of scale- intensive commodities, as can be seen from figure 3.22,

Vietnam has changed from having comparative disadvantage in export of all

commodities in this group in 2001 to having comparative advantage in export of

plastics and stone/cement/ceramics in 2011. This proved the development of light

industries in Vietnam in this period. Meanwhile, in some industries requiring high

level of technology such as base metal and metal articles as well as chemicals,

Vietnam increased the 푅퐶퐴 indices but remained comparative disadvantage in

export these kinds of commodities to Japan. 푅퐶퐴 indices of vehicles and pulp and

paper fluctuated around 1 over the period but are smaller than 1 in 2011, proving

0

0.5

1

1.5

2

2.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

28->38Chemicals

39->40Plastics

47->49 Pulpand paper

68->70Stone/Cement/Ceramics72->83 Basemetal andmetal articles86->89Vehicles

50

the fact that Vietnam still had comparative disadvantage in export these items to

Japan.

Figure 3.23: Vietnam’ revealed comparative advantage in bilateral trade with

Japan in differentiated commodities group between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

In group of differentiated commodities, as can be seen from the figure 3.23,

Vietnam also did not have comparative advantage in export of any commodities in

this group in 2001 but had comparative advantage in export of machinery and

electrical appliances in 2011. This can be explained by the high turnover of export

finished products of machinery and electrical appliances from Vietnam to Japan in

recent years. Additionally, 푅퐶퐴 of optical, precision& musical instruments rapidly

increased between 2001 and 2009 but then declined in two following years, which

leaded to Vietnam‘s comparative disadvantage in export this commodity to Japan in

2011.

Two-digit HS commodities that Vietnam had comparative advantage in

bilateral trade with Japan in 2001 and in 2011

Based on the calculation of 푅퐶퐴 , by comparison with 1, we find out the

following two-digit HS commodities that Vietnam had comparative advantage in

bilateral trade with Japan in both 2001 and 2011; in 2001 but 2011; in 2011 but

2001.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

84->85Machinery andelectricalappliances

90->92 Optical,precision&musicalinstruments

97->98Antiques andartworks

51

Table 3.2: Two-digit HS code commodities that Vietnam had comparative

advantage in both 2001 and 2011

HS code Commodities

03 Fish and crustaceans, molluscs and other aquatic invertebrates

09 Coffee, tea, mate and spices

19 Preparations of cereals, flour, starch or milk; pastrycooks' products

34 Soaps, lubricants, waxes, candles, modelling pastes

42 Articles of leather, animal gut, harness, travel goods

46 Manufactures of plaiting material, basketwork, etc.

50 Silk

55 Manmade staple fibres

56 Wadding, felt, nonwovens, yarns, twine, cordage, etc

57 Carpets and other textile floor coverings

58 Special woven or tufted fabric, lace, tapestry etc

61 Articles of apparel, accessories, knit or crochet

62 Articles of apparel, accessories, not knit or crochet

63 Other made textile articles, sets, worn clothing etc

64 Footwear, gaiters and the like, parts thereof

65 Headgear and parts thereof

67 Bird skin, feathers, artificial flowers, human hair

52

HS code Commodities

69 Ceramic products

73 Articles of iron or steel

94 Furniture, lighting, signs, prefabricated buildings

Source: Author’s own estimation from statistics of international trade centre (ITC)

Table 3.3: Two-digit HS code commodities that Vietnam had comparative

advantage in 2011 but did not have comparative advantage in 2001

HS code Commodities

06 Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage

16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates

35 Albuminoids, modified starches, glues, enzymes

39 Plastics and articles thereof

40 Rubber and articles thereof

44 Wood and articles of wood, wood charcoal

48 Paper and paperboard, articles of pulp, paper and board

59 Impregnated, coated or laminated textile fabric

67 Bird skin, feathers, artificial flowers, human hair

70 Glass and glassware

78 Lead and articles thereof

79 Zinc and articles thereof

80 Tin and articles thereof

81 Other base metals, cermets, articles thereof

83 Miscellaneous articles of base metal

53

HS code Commodities

85 Electrical, electronic equipment

89 Ships, boats and other floating structures

92 Musical instruments, parts and accessories

Source: Author’s own estimation from statistics of international trade centre (ITC)

Table 3.4: Two-digit HS code commodities that Vietnam has comparative

advantage in 2001 but did not have comparative advantage in 2011

HS code Commodities

04 Dairy products, eggs, honey, edible animal product nes

21 Miscellaneous edible preparations

43 Furskins and artificial fur, manufactures thereof

Source: Author’s own estimation from statistics of international trade centre (ITC)

As can be seen from three tables 3.2, 3.3, 3.4, in 2001, Vietnam only had

comparative advantage with Japan in 23 kinds of commodities, but in 2011, the

figure increased to 38. Thus, it can be said that overall Vietnam’s comparative

advantage structure in bilateral trade with Japan improved between 2001 and 2011.

In total 18 commodities that Vietnam had comparative advantage in 2011 but had

not had comparative advantage in 2001 in bilateral trade with Japan, most of them

were products of heavy industries. Meanwhile, three commodities that Vietnam had

comparative advantage in 2001 but had not had comparative advantage in 2011

were products originated from agriculture. This proved the fact that Vietnam’s

overall comparative advantage structure gradually shifted from concentrating on

only agricultural products and products of light industry to including products of

heavy industries. This proved the effectiveness of government policies of

developing heavy industries in period between 2001 and 2011.

3.2.2. Pattern of Japan’s revealed comparative advantage in bilateral trade with

Vietnam

54

As can be seen from figure 3.24, Japan had comparative advantage in scale

intensive commodities group and differentiated commodities group, but did not

have comparative advantage in resources-based commodities group and labour-

intensive commodities group in bilateral trade with Vietnam in almost years

between 2001 and 2011. Moreover, 푅퐶퐴 indices of four broad categories of

commodities are quite stable over the period, this proved the fact that there was no

notable change in comparative advantage structure of Japan in export to Vietnam.

Figure 3.24: Japan’ revealed comparative advantage in bilateral trade with

Vietnam of four broad categories of commodities between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

In group of resources- based commodities, as can be seen from the figure 3.25,

Japan did not have comparative advantage in any kinds of commodities in bilateral

trade with Vietnam between 2001 and 2011. 푅퐶퐴 index of Wood and wood articles,

prepared foodstuffs and fats and oils were quite stable. However, this ratio for live

animals, mineral products and vegetable products seemed to be varied. This was the

result of the change in the export turnover of Japan to Vietnam due to the wild

fluctuation in the price of mineral products in 2008 and 2009, and the consequence

of tsunami and earthquake in Japan in March, 2011.

0

0.5

1

1.5

2

2.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Resource-basedcommodities

Labour-intensivecommodities

Scale-intensivecoomodities

Differentiatedcommodities

55

Figure 3.25: Japan’ revealed comparative advantage in bilateral trade with

Vietnam in resource-based commodities group between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

Figure 3.26: Japan’ revealed comparative advantage in bilateral trade with

Vietnam in labor-intensive commodities group between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

In group of labour-intensive commodities, as can be seen from figure 3.26,

although Japan had comparative advantage in bilateral trade with Vietnam in export

of miscellaneous manufactured articles as well as textile and apparel in 2001, Japan

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

01->05 Liveanimals

06->14Vegetableproducts15 Fats and oils

16->24 Preparedfoodstuffs

25->27 Mineralproducts

44->46 Woodand wood articles

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

41->43 Hides andleather

50->63 Textiles andapparel

64->67 Footwear

71 Gems

93 Arms

94->96MiscellaneousManufacturedarticles

56

did not have comparative advantage in export any kinds of commodities in labour-

intensive commodities group until 2011. The comparative advantage patterns of

miscellaneous manufactured articles as well as textile and apparel seemed to follow

a quite similar shape over the period from 2001 to 2011. Additionally, due to the

limited export turnover of footwear, arms, and hides and leathers, 푅퐶퐴 indices of

these three kinds of commodities was very low, proving that Japan suffered great

comparative disadvantage in export to Vietnam. Meanwhile, the comparative

advantage patterns of gems wildly fluctuated over the period.

Figure 3.27: Japan’ revealed comparative advantage in bilateral trade with

Vietnam in scale intensive commodities group between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

In the group of scale-intensive commodities, as can be seen from figure 3.27,

Japan had comparative advantage in the production of base metal and metal articles,

stone/cement/ceramics and plastics until 2011. The comparative advantage of base

metal and metal articles maintained over the period between 2001 and 2011.

Meanwhile, the comparative advantage of plastics fluctuated over the period

between 2001 and 2011. In this group, Japan also has comparative advantage in

producing stone/cement/ceramics, but it only emerged from 2006 only.

Furthermore, Japan also had comparative advantage with Vietnam in vehicles sector

from 2001 to 2010, but in 2011, the revealed comparative advantage declined which

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

28->38Chemicals

39->40 Plastics

47->49 Pulpand paper

68->70Stone/Cement/Ceramics72->83 Basemetal and metalarticles86->89Vehicles

57

leaded to the comparative disadvantage of Japan’s vehicles sector in bilateral trade

with Vietnam in 2011. This originated from the consequence of the earthquake and

tsunami in Japan in March, 2011, which damaged the Japanese’s auto industry

(CNN Money 2012) and lower export of vehicles from japan to Vietnam.

Furthermore, Japan did not have comparative advantage with Vietnam in export of

pulp and paper, as well as chemicals in any year over the period.

Figure 3.28: Japan’ revealed comparative advantage in bilateral trade with

Vietnam in differentiated commodities group between 2001 and 2011

Source: Author’s calculation from Statistics of international trade centre (ITC)

In the group of differentiated commodities, as can be seen from the figure 3.28,

Japan had comparative advantage in producing machinery and electrical appliances

and optical, precision& musical instruments. The reason is that Japan was a nation

with high-level science and technology. Moreover, 푅퐶퐴 of Japan in export of

optical, precision& musical instruments to Vietnam was quite high, which again

proved the strength of Japan in production of advanced technology products.

Two-digit HS commodities that Japan had comparative advantage in

bilateral trade with Vietnam in 2001 and in 2011

Based on the calculation of 푅퐶퐴 , by comparison with 1, we find out the

following two-digit HS commodities that Japan had comparative advantage in

0

2

4

6

8

10

12

14

16

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

84->85Machinery andelectricalappliances90->92 Optical,precision&musicalinstruments97->98 Antiquesand artworks

58

bilateral trade with Vietnam in both 2001 and 2011; in 2001 but 2011; in 2011 but

2001.

Table 3.5: Two-digit HS code commodities that Japan had comparative

advantage in both 2001 and 2011

HS code Commodities

37 Photographic or cinematographic goods

40 Rubber and articles thereof

50 Silk

51 Wool, animal hair, horsehair yarn and fabric thereof

56 Wadding, felt, nonwovens, yarns, twine, cordage, etc

57 Carpets and other textile floor coverings

58 Special woven or tufted fabric, lace, tapestry etc

63 Other made textile articles, sets, worn clothing etc

68 Stone, plaster, cement, asbestos, mica, etc articles

72 Iron and steel

73 Articles of iron or steel

74 Copper and articles thereof

82 Tools, implements, cutlery, etc of base metal

84 Machinery, nuclear reactors, boilers, etc

85 Electrical, electronic equipment

87 Vehicles other than railway, tramway

59

HS code Commodities

90 Optical, photo, technical, medical, etc apparatus

92 Musical instruments, parts and accessories

96 Miscellaneous manufactured articles

Source: Author’s own estimation from statistics of international trade centre (ITC)

Table 3.6: Two-digit HS code commodities that Japan had comparative

advantage in 2011 but did not have comparative advantage in 2001

HS code Commodities

06 Live trees, plants, bulbs, roots, cut flowers etc

28 Inorganic chemicals, precious metal compound, isotopes

32 Tanning, dyeing extracts, tannins, derivs, pigments etc

34 Soaps, lubricants, waxes, candles, modelling pastes

39 Plastics and articles thereof

47 Pulp of wood, fibrous cellulosic material, waste etc

70 Glass and glassware

75 Nickel and articles thereof

79 Zinc and articles thereof

80 Tin and articles thereof

81 Other base metals, cermets, articles thereof

Source: Author’s own estimation from statistics of international trade centre (ITC)

60

Table 3.7: Two-digit HS code commodities that Vietnam had comparative

advantage in 2001 but did not have comparative advantage in 2011

HS code Commodities

11 Milling products, malt, starches, inulin, wheat gluten

16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic

Invertebrates

29 Organic chemicals

49 Printed books, newspapers, pictures etc

53 Vegetable textile fibres nes, paper yarn, woven fabric

54 Manmade filaments

60 Knitted or crocheted fabrics

69 Ceramic products

91 Clocks and watches and parts thereof

95 Toys, games, sports requisites

Source: Author’s own estimation from statistics of international trade centre (ITC)

As can be seen from table 3.5, 3.6, 3.7, there were 19 two-digit HS code

commodities that Vietnam had comparative advantage in both 2001 and 2011. In

total 11 two-digit-HS-code commodities that Japan had comparative advantage in

2011 but did not have comparative advantage in 2001, most of them were raw

materials or products of heavy industries. In total 10 two-digit-HS-code

commodities that Japan had comparative advantage in 2001 but did not have in

2011, most of them were raw materials and products of light industries. Thus, it can

be concluded that the comparative advantage of Japan in bilateral trade with

Vietnam has shifted from the inclusion of both raw materials and products of lights

61

and heavy industries to mainly raw materials or products of heavy industries

between 2001 and 2011. The explanation for the shift in Japan comparative

advantage structure in bilateral trade with Vietnam between 2001 and 2011

originated from the fact that Vietnam want to exploit the trading relation with Japan

to import necessary machineries and raw materials for the industrialization, as well

as the result of FDI flow from Japan to Vietnam in recent years.

3.3. Role of comparative advantages in Vietnam-Japan trading relation

between 2001 and 2011

In previous section, we studied the commodities structure and the overall

comparative advantage structure of Japan and Vietnam in Vietnam-Japan bilateral

trade. However, we still do not know whether there was a correlation between these

two issues. In other word, we do not know whether comparative advantage was the

key derivation of trading relation between Vietnam and Japan. This section will

investigate this problem, by the exploitation of gravity model in econometric form.

The data for running regression are in Appendix II, III, VI, VII, VIII, IX.

3.3.1. Model estimation

As introduced in the chapter 1, the traditional form of gravity model in

econometric form was as follows:

풍풏푻푩풊풋 = 풍풏휷 + 풂풍풏푬풊 + 풃풍풏푬풋 + 풄풍풏푵풊 + 풅풍풏푵풋 + 풆풍풏푫풊풋.

In this section, we will run an econometric model in log-log form to test the

dependence of bilateral revealed comparative advantage (푅퐶퐴 ) on total trade of

each two-digit-HS-code commodity of Vietnam and Japan in Vietnam-Japan

bilateral trading relation. Firstly, we assign the variable 푇퐵 as the total trade

between Vietnam and Japan of each two-digit-HS commodity. In the traditional

form of gravity model, 퐸 and 퐸 were usually the gross domestic products (GDP) of

countries i and country j. However, in this case, due to the fact that we do not know

how much money which was spent on purchasing each two-digit-HS-code

commodity in Vietnam and Japan, we will use the total import of each two-digit-

HS-code commodity of Vietnam and Japan from the world as a replacement.

62

Secondly, we will omit the variable population sizes (푁 and 푁 ) since its effects on

total trade of each two-digit-HS-code commodity is negligible. Thirdly, since the

physical distance between Vietnam and Japan was a constant, and its effect may be

included in the intercept of equation, the physical distance 퐷 is not reasonable to

become a dependent variable. Therefore, trade distance may worth consideration.

Nevertheless, the trade distance in reality by using trade cost between Vietnam and

Japan were very difficult to measure over time. Consequently, we will use ad

valorem tariffs of Vietnam and Japan for the import as a substitute. Finally, we will

include 푅퐶퐴 of Vietnam and Japan to consider the impacts of comparative

advantage of two countries on total trade. The data used here was panel data, which

the time series was the period between 2001 and 2011.

The equation in log-log form is established as follows:

풍풏푻푩풊풋푽푵 푱푷 = 휷ퟎ + 휷ퟏ풍풏푰푴풊풋

푽푵 + 휷ퟐ풍풏푰푴풊풋푱푷 + 휷ퟑ풍풏푻푨풊풋푽푵 + 휷ퟒ풍풏푻푨풊풋

푱푷 +

휷ퟓ풍풏푹푪푨풊풋푽푵 + 휷ퟔ풍풏푹푪푨풊풋푱푷. (1)

In which: 푇퐵 is the total trade between Vietnam and Japan of two-digit-HS

commodity 푖 in year 푗. 훽 is the intercept of the equation. 퐼푀 is the total import

of two-digit-HS commodity 푖 in year 푗 of Vietnam from the world. 퐼푀 is the total

import of two-digit-HS commodity 푖 in year 푗 of Japan from the world. 푇퐴 is the

ad valorem tariff of two-digit-HS commodity 푖 in year 푗 of Vietnam for Japan.푇퐴

is the ad valorem tariff of two-digit-HS commodity 푖 in year 푗 of Japan for Vietnam.

푅퐶퐴 is the bilateral revealed comparative advantage (푅퐶퐴 ) of two-digit-HS

commodity 푖 in year 푗 of Vietnam in export to Japan. Similarly, 푅퐶퐴 is the

bilateral revealed comparative advantage (푅퐶퐴 ) of two-digit-HS commodity 푖 in

year 푗 of Japan in export to Vietnam. We expect that the coefficients

훽 ,훽 ,훽 ,훽 are positive, and coefficients 훽 ,훽 are negative. A similar equation

was also used in the paper “Comparative advantage and Australia-China bilateral

63

trade”, published by Economic papers, Volume 27, Number 1, March 2008 by Yu

Sheng and Ligang Song4.

Additionally, if Vietnam or Japan had comparative advantage in a commodity,

the total trade between Vietnam and Japan of this commodity in this case would be

more than the situation which both countries had comparative advantage or both

countries did not had comparative advantage in producing this commodity. As a

result, the total trade between Vietnam and Japan is positively correlated with the

difference of comparative advantage between Vietnam and Japan of this

commodity. In other word, we can expect a more explanatory equation as follows:

풍풏푻푩풊풋푽푵 푱푷 = 휷ퟎ + 휷ퟏ풍풏푰푴풊풋

푽푵 + 휷ퟐ풍풏푰푴풊풋푱푷 + 휷ퟑ풍풏푻푨풊풋푽푵 + 휷ퟒ풍풏푻푨풊풋

푱푷 +

휷ퟓ풍풏 푹푪푨풊풋푽푵 − 푹푪푨풊풋푱푷 . (2)

In which the following independent variables 푇퐵 , 퐼푀 , 퐼푀 , 푙푛푇퐴 ,

푙푛푇퐴 in equation (2) have the same meanings as equation (1). Variable 푅퐶퐴 −

푅퐶퐴 is defined as the absolute value of difference between 푅퐶퐴 and 푅퐶퐴 .

We expect that coefficient 훽 of variable 푅퐶퐴 − 푅퐶퐴 is positive, as

independent variable 푅퐶퐴 − 푅퐶퐴 is positively correlated with 푇퐵 .

To calculate the single effects of overall structure of comparative advantage of

Vietnam and Japan with the world on the export of Vietnam to Japan and in reverse,

we formulate the following equation:

풍풏푬푿풊풋푽푵 푱푷 = 휷ퟎ + 휷ퟏ풍풏푰푴풊풋

푽푵 + 휷ퟐ풍풏푰푴풊풋푱푷 + 휷ퟑ풍풏푻푨풊풋푽푵 + 휷ퟒ풍풏푻푨풊풋

푱푷 +

휷ퟓ풍풏푹푪푨풊풋푽푵 + 휷ퟔ풍풏푹푪푨풊풋푱푷. (3)

푙풏푬푿풊풋푱푷 푽푵 = 휷ퟎ + 휷ퟏ풍풏푰푴풊풋

푽푵 + 휷ퟐ풍풏푰푴풊풋푱푷 + 휷ퟑ풍풏푻푨풊풋푽푵 + 휷ퟒ풍풏푻푨풊풋

푱푷 +

휷ퟓ풍풏푹푪푨풊풋푽푵 + 휷ퟔ풍풏푹푪푨풊풋푱푷 . (4)

4 This paper can be downloaded from website https://crawford.anu.edu.au/research_units/china/pdf/2010/Comparative_Advantage_and_Australia-China_Bilateral_Trade.pdf

64

In these above two equations (3) and (4), 퐸푋 is the export of Vietnam to

Japan and 퐸푋 is the export of Japan to Vietnam of commodity i in years j.

Additionally, 푅퐶퐴 and 푅퐶퐴 were the revealed comparative advantage (푅퐶퐴,

not 푅퐶퐴 ) of Vietnam and Japan with the world of commodity i in year j. The

remaining variables, namely 퐼푀 , 퐼푀 , 푇퐴 ,푇퐴 in equations (3), (4) have

the same meanings as in equation (1) and (2). In equation (3), we expect that

훽 ,훽 ,훽 are positive and 훽 ,훽 ,훽 are negative, and in equation (4), we expect

that 훽 , 훽 ,훽 are positive and 훽 , 훽 ,훽 are negative. These equations resulted

from theoretical framework of gravity model as well as the fact that Vietnam

usually exports commodities that Vietnam has comparative advantage in producing

it and Japan usually import commodities that Japan does not have comparative

advantage in producing it and in reverse. By equations (1), (2), (3) and (4), we will

check the application of comparative advantage theories with reality.

3.3.2. Data analysis and findings

The econometric models used in equations (1), (2), (3), (4) were panel data

models which the time series was from 2001 to 2011. In raw statistics used for

running regressions, there was a lot of data which the value was 0. For example, for

many commodities which were traded between Vietnam and Japan, the ad valorem

tariffs were 0. Therefore, in running log-log econometric regressions, these values

(푙푛0) are meaningless and are simple omitted by econometric software. As lim푙푛푥

when 푥 → 0 is −∞; therefore with values 푙푛0 of independent variables, we can

assume that 푙푛0 ≈ -10 without effects on the results of model. The number -10

was randomly selected to ensure that lim푙푛푥 when 푥 → 0 is −∞. The econometric

software used to run econometric regression is gretl.

65

Table 3.8: Result of model (1)

Fixed effects Random effects(GLS)

Coefficients p-value Coefficients p-value

휷ퟎ −2.41푒 0.4032 휷ퟎ −4.166푒 0.873

휷ퟏ −0.055 (***) 0.0004 휷ퟏ −0.042 (***) 0.002

휷ퟐ −0.005 0.5509 휷ퟐ 0.0014 0.828

휷ퟑ 0.275 (***) 1.6푒 휷ퟑ 0.268 (***) 6.81푒

휷ퟒ 1.74푒 0.3844 휷ퟒ 5.158푒 0.776

휷ퟓ 0.189 (***) 1.20푒 휷ퟓ 0.186 (***) 4.13푒

휷ퟔ 0.088 (***) 2.07푒 휷ퟔ 0.094 (***) 1.59푒

푹ퟐ 0.326788

Source: Author’s own estimation from statistics of international trade centre (ITC)

The Hausman test for the model (1):

Null hypothesis: GLS estimates are consistent. Asymptotic test statistic: Chi-

square (6) = 7.88839 with p-value = 0.246395. p- value > 0.1 so the null hypothesis

is inconsistent. Thus, the fixed-effect specification is preferred to random effect

specification.

As can be seen from the table 3.8, p-values of coefficients

퐼푀 ,푇퐴 ,푅퐶퐴 ,푅퐶퐴 are very small, and p-values of intercept,퐼푀 , 푇퐴

are larger than 0.1. Thus, it is concluded that 훽 , 훽 , 훽 ,훽 are statistically

significant, and 훽 ,훽 , 훽 are statistically insignificant. From the result of model

(1), we conclude that 1% increase in bilateral revealed comparative advantage of

Vietnam (푅퐶퐴 ) will cause a 0.189% increase in total trade between Vietnam and

Japan, other variables remains the same (ceteris paribus). Additionally, a 1%

66

increase in bilateral revealed comparative advantage of Japan (푅퐶퐴 ) caused a

0.088% increase in total trade between Vietnam and Japan, other variables remained

the same (ceteris paribus). Moreover, it can be seen from the result of model (1) that

import of Vietnam from the world played the significant role in total trade between

Vietnam and Japan but import of Japan from world did not play the significant role

in total trade between Vietnam and Japan. The reason is that although Japan was a

large trading partner of Vietnam and the import of Vietnam from Japan accounted

for large proportion of total import of Vietnam with the world, the reverse is not

true. Additionally, the variable 푇퐴 is statistical significant; meanwhile, the

variable 푇퐴 is statistically insignificant; therefore, it is true that trade barrier of

Japan to Vietnam had little effect on total trade between Vietnam and Japan but the

reversion is true. Moreover, 푅 is low (equal to only 32.6788%) proved the fact that

the model (1) cannot capture all necessary explanatory variables and the explanation

capability is not high.

Table 3.9: Result of model (2)

Fixed effects Random effects(GLS)

Coefficients p-value Coefficients p-value

휷ퟎ −1.53푒 0.9381 휷ퟎ −2.375푒 0.890

휷ퟏ −0.0018 0.8628 휷ퟏ −0.003 0.739

휷ퟐ 0.0046 0.4612 휷ퟐ 0.0029 0.510

휷ퟑ −0.094(**) 0.0136 휷ퟑ −0.108(***) 0.002

휷ퟒ 3.999푒 0.9768 휷ퟒ 7.199푒 0.952

휷ퟓ 0.791(***) 9.55푒 휷ퟓ 0.806(***) 1.04푒

푹ퟐ 0.6717

Source: Author’s own estimation from statistics of international trade centre (ITC)

67

The Hausman test for the model (2):

Null hypothesis: GLS estimates are consistent. Asymptotic test statistic: Chi-

square (5) = 7.67471 with p-value = 0.175097. p- value > 0.1 so the null hypothesis

is inconsistent. Thus, the fixed-effect specification is preferred to random effect

specification.

As can be seen from the table 3.9, in case of fixed effect specification, the p-

value of variable 푇퐴 was between 0.01 and 0.05, and the p-value of variable

푅퐶퐴 − 푅퐶퐴 was much smaller than 0.01, this proved the significance of

variable 푇퐴 at 5% significant level and variable 푅퐶퐴 − 푅퐶퐴 at 1% level.

Meanwhile, the p-value of intercept, 퐼푀 ,퐼푀 ,푇퐴 are larger than 0.1, thus

these variables are statistically insignificant. From the result of model (2), we can

conclude that 1% increase in the absolute difference between bilateral revealed

comparative advantage of Vietnam (푅퐶퐴 ) and revealed comparative advantage

of Japan (푅퐶퐴 ) will cause a 0.791% increase in total trade between Vietnam and

Japan, other variables remains the same (ceteris paribus). 푅 of the model (2) is

67.2%, which is higher than model (1). This proved the better explanation

capability of model (2). P-value of variable 푅퐶퐴 − 푅퐶퐴 is very low

(9.55푒 ) proved the significance of this variable.

In summary, from the model (1) and (2), we can jump to conclusion that the

comparative advantage of Vietnam and Japan played the key role in determination

of total trade between Vietnam and Japan.

68

Table 3.10: Result of model (3)

Fixed effects Random effects(GLS)

Coefficients p-value Coefficients p-value

휷ퟎ −1.353푒 (**) 0.0155 휷ퟎ −1.74푒 (***) 0.0005

휷ퟏ 0.0419 0.6970 휷ퟏ 0.0088 0.9313

휷ퟐ 8.836푒 (**) 0.0212 휷ퟐ 1.142푒 (***) 0.0010

휷ퟑ 0.1584(***) 1.25푒 휷ퟑ 0.1403(***) 1.08푒

휷ퟒ 0.0488(***) 0.0057 휷ퟒ 0.0449(***) 0.0006

휷ퟓ 0.9278 (***) 6.58푒 휷ퟓ 0.910070(***) 1.59푒

휷ퟔ 2.941푒 0.4728 휷ퟔ 2.718푒 0.4215

푹ퟐ 0.321049

Source: Author’s own estimation from statistics of international trade centre (ITC)

The Hausman test for the model (3):

Null hypothesis: GLS estimates are consistent. Asymptotic test statistic: Chi-

square (6) = 6.8653 with p-value = 0.333484. p-value > 0.1 so the null hypothesis is

inconsistent. Thus, the fixed-effect specification is preferred to random effect

specification.

As can be seen from the table 3.10, the p-value of variables 푙푛퐼푀 , 푙푛푇퐴 ,

푙푛푇퐴 , 푙푛푅퐶퐴 are lower than 0.05 and p-value of 푙푛퐼푀 and 푙푛푅퐶퐴 are

larger than 0.1. Therefore, variables 퐼푀 , 푇퐴 , 푇퐴 , 푅퐶퐴 are statistically

significant and variables 퐼푀 and 푅퐶퐴 are statistically insignificant. Thus, it can

be concluded that the overall comparative advantage structure of Vietnam, total

import of Japan from world, the ad valorem tariffs of Vietnam and Japan had

69

impacts on total export of Vietnam to Japan. Additionally, p-value of variable

푙푛푅퐶퐴 is very low (p-value = 6.58푒 ), this proved the key role of overall

comparative advantage structure of Vietnam in export of Vietnam to Japan.

However, 푅 of model (3) is only 32.1%, this demonstrated the fact that the model

(3) did not capture necessary variables.

Table 3.11: Result of model (4)

Fixed effects Random effects(GLS)

Coefficients p-value Coefficients p-value

휷ퟎ −3.99푒 (***) 4.63푒 휷ퟎ −3.50푒 (***) 1.62푒

휷ퟏ 0.143 0.3047 휷ퟏ 0.215454 0.1099

휷ퟐ 2.855푒 (***) 1.24푒 휷ퟐ 2.4943푒 (***) 6.08푒

휷ퟑ −0.0528 0.1713 휷ퟑ −0.015 0.6638

휷ퟒ −0.0157 0.4915 휷ퟒ −0.016 0.3356

휷ퟓ 0.1831(**) 0.0244 휷ퟓ 0.223(***) 0.0048

휷ퟔ 5.022푒 (***) 3.54푒 휷ퟔ 4.717푒 (***) 9.65푒

푹ퟐ 0.240289

Source: Author’s own estimation from statistics of international trade centre (ITC)

The Hausman test for model (4):

Null hypothesis: GLS estimates are consistent. Asymptotic test statistic: Chi-

square (6) = 12.862 with p-value = 0.0452809. As 0.01< p-value< 0.05, the null

hypothesis is consistent at 5% significant level. Thus, the random specification is

preferred to fixed-effect specification.

70

As can be seen from the table 3.11, p-value of variables 푙푛퐼푀 , 푙푛푅퐶퐴 ,

푙푛푅퐶퐴 are lower than 0.01, and p-value of 푙푛퐼푀 , 푙푛푇퐴 , 푙푛푇퐴 are larger

than 0.1. Therefore, variables푅퐶퐴 ,푅퐶퐴 , 퐼푀 are statistically significant and

퐼푀 , 푇퐴 , 푇퐴 are statistically insignificant. Thus, it can be concluded that

overall comparative advantage structure of Japan and Vietnam with the world, as

well as import of Japan from the world had impacts on total export of Japan to

Vietnam. Additionally, p-value of variable 푙푛푅퐶퐴 is very small (equal to

9.65푒 ), this demonstrated the key role of Japan’s overall comparative advantage

structure in explanation of Japan’s export to Vietnam.

In summary, from the model (3) and (4), it can be concluded that Vietnam’s and

Japan’s overall structure of comparative advantage is the main determinant of

export from Vietnam to Japan and export from Vietnam to Japan, respectively.

71

CHAPTER 4: MEASURES TO PROMOTE VIETNAM’S

EXPORT TO JAPAN

4.1. Scenarios of trading relations between Vietnam and Japan

Firstly, it can be seen that trading relation between Vietnam and Japan has

dramatically developed in the period from 2001 to 2012. As analysed in chapter 3,

in this period, the average growth in Vietnam’s export, Vietnam import and total

export and import of Vietnam was around 15% annually. Recently, Vietnam and

Japan signed two agreements, these were ASEAN-Japan comprehensive economic

partnership (AJCEP) in 2008 and Vietnam-Japan economic partnership agreement

(VJEPA) in 2009, which included a lot of clauses reducing trade barrier between

Vietnam and Japan. According to the commitment of AJCEP, Vietnam will abolish

tariff barrier with the value of 82% of import from Japan in 16 years and 69% of

import value in 10 years (Bộ Công thương 2012). In reverse, immediately after

AJCEP had come to effective in 2008, Japan abolished 7287 tariff lines, which was

equivalent to 80% total tariff lines. According to the commitment of VJEPA, 92%

of total tariff lines of both Vietnam and Japan will be abolished in 10 years. These

ratios are equivalent to 87.66% and 94.53% of total import of Vietnam and Japan

from each other in 10 years, respectively (Bộ Công thương 2012). From these two

agreements, it is clear that commodities of Vietnam and Japan will be given a more

favorable condition in penetration to each other’s markets. Thus, it is believed that

in the future, the trading relation between Vietnam and Japan will be further

developed.

Secondly, the participation of Vietnam into world trade organization (WTO) in

2007 was expected to give a more favorable condition to trading relation between

Vietnam and Japan. According to Japan’s commitment into WTO, Japan endowed

Vietnam with preferential treatment under WTO regulations such as the most

favored nations (MFN) and Generalized System of Preferences (GSP) between

developed countries and developing countries. In reverse, Vietnam will have to

gradually implement commitments to open the market, lower trade barrier, make

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transparent the judicial process. These commitments are expected to help trading

relation between Vietnam and Japan develop in the future.

Thirdly, Japanese market is considered as a large potential market in East Asia

with over 120 million people and has total import turnover ranked number four in

the world between 2001 and 2011. Moreover, for major export items of Vietnam,

such as crude oil, seafood, textiles, furniture, etc, the demand of Japanese market is

still very high. At the present, Vietnam only possessed a modest market share

compared to other countries in Japanese market. If Vietnam can gain Japanese’s

market share which is equivalent to that of other Southeast Asian nations such as

Singapore, Thailand, Indonesia and Malaysia (from 2% to 4%), export of Vietnam

to Japan will increase more than 3 or 4 times compared to current turnover.

Therefore, it can be said that the chances for the further development of trading

relations between Vietnam and Japan is still very large (Trần Quang Minh 2013).

Fourthly, in recent years, enterprises of both Vietnam and Japan have been active

in research for penetrating into each other market. Toward Japan, in 2012, 2

Japanese corporations penetrated into Vietnam by merger and acquisition (M&A).

Tokyo-Mitsubishi UFJ signed a contract to buy 20% stake of Vietinbank, one of

four largest banks in Vietnam, with the value of US$ 743 million. Sumimoto also

acquired 18% of stake of Bao Viet Corporation from Hong Kong and Shanghai

Banking Corporation. This contract was worth U.S $ 340 million (NDHMoney.vn

2013). Toward Vietnam, in recent years, Vietnam’s enterprises had many efforts to

penetrate into Japanese market through measures such as structural changes and

quality of exports, investigation of demand of Japan market, trade promotion, etc.

For example, from 17th to 24th, September, 2012, Vietnam organized activities to

promote Vietnam’s tourism in Tokyo and Osaka within the framework of the JATA

international tourist festival (Can Tho Promotion 2012). Although these activities

like these are still limited, these are first steps to create conditions for further

development of trading relations between the two countries in the coming years.

4.2. Government’s measures to promote Vietnam’s export to Japan

4.2.1. Encouraging investment in supporting industries

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As analysed in chapter 3, there are two shortcomings in export of Vietnam to

Japan. Firstly, the exports of Vietnam to Japan were mainly resources-based

commodities, labour-intensive commodities and finished differentiated

commodities with raw materials imported from abroad. These commodities have

low added value, create environmental pollution. Secondly, the export structure of

Vietnam to Japan, especially labour-intensive commodities, mainly based on

comparative advantage of low labour cost. This leaded to the fragility of export of

Vietnam in the future, when this comparative advantage vanishes due to the high

inflation in Vietnam and the rise of basic wage. In recent years, heavy industries

and textiles in Vietnam were two sectors which were heavily invested; however, the

obstacle was the passivity in possessing raw materials. This not only leaded to the

low value creation in export to Japan, but also the difficulties in production and

sales when the prices of raw materials fluctuated in the world market. Therefore, it

is necessary to develop supporting industries. Additionally, there need to improve

the linkage between the export industries and supporting industries on the basics of

determining the industry’s value-added chain to formulate export’s value-added

chain. The underdevelopment of Vietnam’s supporting industries creates the

difficulty for Vietnam to participate in global value chain, in other words, Vietnam

only carries the last process in production, which is the assembly of components;

therefore, the added value is low. The reason for this stems from two reasons.

Firstly, the quality of human resources in Vietnam is very low compared to other

South East Asian Nations; therefore, the creation of innovative products is limited.

Secondly, the investment in supporting industries requires huge capitals and is quite

risk, time for eviction of capital is long. Moreover, it is hard to predict Vietnam’s

demand in the future. Therefore, it is unsure to know whether the production of

supporting industries can achieve the economy of scale and scope to gain profit.

These two reasons cause disinclination of both Vietnam’s public sector and private

sectors. According to the experience of other South East Asian nations such as

Thailand, Malaysia, the only way for developing supporting industries was

attracting FDI from abroad into supporting industries (Nguyễn Thị Minh Hương

2012). This created the development of supporting industries in these countries

74

nowadays, and the development of supporting industries in return made

contribution for advanced production of heavy industries these countries. Vietnam

has many chances for simulate the way that these countries did in the past, not only

because of the abundant natural resources, but also huge abundant of human

resources. Thus, government should prioritize the development of supporting

industries, by solutions such as lower income tax for foreign enterprises as well as

domestic enterprises.

4.2.2. Encouraging the import of capital goods

Japan was a nation possessing one of the most advanced technologies in the

world. In the condition of the Japan’s low tariff barrier for Vietnamese’s enterprises

for importing commodities from Japan, Vietnam should exploit this opportunity to

import capital goods for the development of domestic production. The import of

capital goods creates the chances for improving domestic technology, by this way

the production capacity will be broadened and the quality of commodities will be

improved. Additionally, the import of capital goods will diversify kinds of items to

adjust to demand of Japanese market. This is necessary when the export of Vietnam

to Japan concentrates on a few main export items and the preferences of Japanese

consumers are getting wider and wider. However, Vietnam should not import

outdated production technologies, which were threw away by developed countries

as in the past. Most of these technologies have low productivity, and use more raw

materials such as electricity, etc, which is more costly for operation than the current

one. In the future, Vietnam should only intensify the transfer of new technologies

from Japan. Specifically, Vietnam’s government should instruct and issue policies

to encourage the import of advanced technology not only from Japan but from other

developed countries by lowering tariff barrier, assist the import expenditure. The

import of advanced technology should be prioritized into two main sectors, which

are light industries such as textile, leather, footwear, coffee, rubber, seafood, etc; as

well as heavy industries such as automobile, motorbike, iron and steel, coat, etc. It

is noticeable that in import advanced technology, these are two issues attracting

attention. Firstly, the new technology does not cause environmental pollution.

Secondly, the expenditure for new technology’s operation does not amount to a

75

very large, which can cause the financial burden for Vietnam. In long run, the new

technology can save expenditure by cutting labour cost and improve the

competitiveness of commodities. However, in short run, when the weakness of

technology and supporting industries still exist, Vietnam can import intermediate

commodities. Nevertheless, Vietnam cannot base on the temporary comparative

advantage of low labour cost forever. Therefore, the import of capital goods is

critical.

4.2.3. Assisting enterprises in enquiring Japanese market’s demand

To intensify the export to Japanese market, the most necessary issue that

Vietnamese enterprises have to do is to get a deep knowledge of Japanese market’s

demand and forecast the change of the demand in the future. Compared to other

countries in South East Asia such as Thailand, Singapore, Malaysia, the

investigation activities of Vietnamese enterprises of Japanese market’s demand

were limited. The investigation of Japanese market needs the attention of two

following issues. Firstly, Vietnamese enterprises had to get a deep understanding of

regulations which are related to the exporting commodity. For example, Vietnamese

enterprises exporting agricultural products to Japanese market need to know about

Japanese agricultural products (JAS), Japanese criterion for the safety of foods and

additives, plant protection laws, etc. Secondly, Vietnamese enterprises need to get

an understanding of preferences for each kind of products as well as consumption

trend and price trend in the future. For example, in the past, houses in Japan

commonly consisted of many separate rooms, such as living room, dinning room,

bedroom, etc. However, recently, Japanese houses has changed into a more

“Western style”, in which dinning room and living room have not been separated

due to the fact that the area of living square decline. The change in the design of

house largely has affected choices of furniture. Furniture such as dinning table,

cooking tools need not only to operate effectively but also need to be beautiful,

luxurious and act as ornaments (Bộ Công thương 2012). This issue has affected the

design and functionality of furniture of suppliers; therefore, the capture of this trend

to make adaptable products to consumers’ demand is necessary for the success of

business in Japanese market. This is one of many examples that illustrate the change

76

in the consuming trend largely impacting the demand for different commodities.

For Vietnam’s export, to assist enterprises in enquiring information about Japanese

market, government needs to organize workshops to disseminate requirements for

Japanese importing products, trade barrier and Japanese customs which can make

impact on consuming way of Japanese customers. Additionally, Vietnamese

government should assist Vietnamese enterprises with expenditure for the

participation in international trade fairs organized in Japan.

4.3. Enterprise’s measures to promote Vietnam’s export to Japan

4.3.1. Enhancing the competitiveness of Vietnamese commodities in Japanese

market

With the growing globalization and decline in trade barrier, commodities

nowadays can easily penetrate into almost foreign markets, especially markets in

developed countries. This enhances requirements of consumers for not only quality

but also appearance of commodities. Japan was one of markets considered to have

high requirement of the quality of products. Living in environment of high living

standard, Japanese consumers institute accurate criterion of quality, duration,

confidence and functionality of products. They are already for giving high price for

better quality of products. Their requirements also consists of after-sale services

such as the right-time distribution of products when they are out of order, the

capability and time for reparation. The tiny mistakes in transportation and

completion of products, for example, a small scratch, a piece of cotton yarn that

remains on the surface of products, boxes can lead to the difficulty in sales of

products (Bộ Công thương 2012). Additionally, the Japanese consumers are also

very sensitive to the price of products and brand of products. To Vietnam’ export,

the most critical way to enhance the competitiveness of products is to improve the

quality of products. Additionally, the improvement in the packaging of products

also needs the attention. Moreover, Vietnamese exporters have to emphasize to

develop distributing network in Japan to ensure the quality of after-sale services.

Furthermore, the broadcast of Vietnamese brands in international market has to be

77

put into priority, since this will enhance the position of Vietnamese brand in view of

foreign consumers.

4.3.2. Enhancing human resources quality

To every enterprise, the investment to improving the quality of human resources

is critical. In Vietnam today, there are abundance of unskilled labour resources with

low labour wage. However, Vietnam cannot base on these resources for the

development in 10 or 20 years due to the fact that labour wage in Vietnam is

increasing and the growth rate of Vietnam’s economy that originated from low

value-added commodities has been decreased in recent years. To ensure the quality

and the rate of growth in the future, Vietnam’s enterprises in general and exporting

enterprises to Japan in particular need to emphasize the development of skills for

laborers. The enterprises need to organize programs to enhance not only

specialization skills, but also soft skills such as language skill, negotiation skill,

group-work skill, etc. Soft skills are the major weakness of Vietnamese enterprises,

which negatively affected business in Japanese market in the past for many times.

Additionally, to enterprises export to Japanese in particular, it is should be focused

on improving Japanese language proficiency for staffs which are responsible for

investigating Japanese market. Thus, it is possible to understand regulations and

customs of Japan, from which suitable business strategies in Japanese market can be

proposed. Moreover, the enhancement of leadership and management skills of

mangers is also critical for the development of enterprises in the future.

4.3.3. Organizing trade promotion activities

In sale of commodities, the organization of trade promotion activities to enhance

the consumer’s awareness of these commodities is critical. This is more imperative

to Japanese market, as Japanese consumers are highly interested in brands of

products before deciding to buy these products. In spite of this fact, Vietnamese

enterprises nowadays have not concentrated on trade promotion activities for a long

time. This resulted from the following three reasons. Firstly, Vietnamese enterprises

have not been active in self-organizing trade promotion such as advertising

activities, activities to introducing products, organizing trade fair. They still keep

78

old thoughts of relying on the assistance of government. Secondly, the expenditure

of organizing trade promotion activities is large, especially advertisement on

newspaper or on television. In addition, the linkage among Vietnamese exporting

enterprises is low which leads to the limited mutual support to cut the trade

promotion expenditure by organizing trade promotion activities together. Thirdly,

due to the limitation of understanding of Japanese culture and consuming trends, the

organization of trade promotion activities faced with many difficulties. Moreover,

some Vietnamese enterprises are also not aware of the importance of trade

promotion activities. To solve the problem, Vietnamese enterprises need right

understanding of the importance of trade promotion activities. They should put a

sufficient fund aside for trade promotion in Japanese market only. Additionally,

they should actively participate in international trade fairs and congregate together

for mutual support in business in Japanese market. Moreover, they should

proactively keep contact with trade promotion organizations in Vietnam and Japan

to have necessary information about trade fairs or exhibitions or they can open

representative offices in Japan, through this they can successfully promote their

products in Japanese market. Furthermore, due to the expenditure for advertising

products on television or newspapers is high, Vietnamese enterprises can exploit

cheaper ways of advertisement such as leaflets, catalogs, posters in public places

such as bus stations, railway stations or set up website to introduce products to

Japanese partners. In addition to their own website, Vietnamese companies can

advertise on website of the Vietnam trade promotion organization such as the

Vietnam Chamber of Commerce Industry, Embassy of Vietnam. To advertise

effectively on website, it is noticeable to pay attention the graphics of website, as

well as the diversification of products in kinds and prices of products. Finally, there

are various types of trade promotion activities; therefore, Vietnamese enterprises

should select the most suitable form of promotion based on the business area, the

scale of enterprises and business strategy in Japanese market.

79

CONCLUSIONS

Together with the trend of globalization and the decline in trading barrier among

many countries, the bilateral trade between Vietnam and Japan has dramatically

developed between 2001 and 2012. The outstanding point of bilateral trade between

Vietnam and Japan in this period is the change in export proportion of four broad

categories of commodities in the structure of commodities flow between two

countries. Through the analysis of the flow of commodities from Vietnam to Japan,

it can be concluded that: The export proportion of differentiated commodities and

scale-intensive commodities stably increased, meanwhile, the export proportion of

resource-based and labour-intensive commodities declined over the same period.

Additionally, it is noticeable that in the same period, Vietnam still mainly exported

resource-based commodities and labour-intensive commodities. Moreover, Vietnam

mainly export finished commodities with raw materials imported from abroad, or

mineral fuels. Toward Japan, in the structure of commodities export to Vietnam, the

export of scale-intensive commodities and differentiated commodities accounted for

a large proportion; meanwhile, export of resource-based commodities and labour-

intensive commodities only accounted for a small proportion. Comparing export

proportion of four categories of commodities in 2001 and in 2012, the export

structure of Japan did not seem to experience a noticeable change; although over the

same period, these rates considerably fluctuated. In export of Japan to Vietnam, it is

striking that export of advanced components and high value-added accessories

accounted for a large proportion; meanwhile export of finished commodities

accounted for a low percentage in total export of Japan to Vietnam.

About pattern of comparative advantage structure of Vietnam in export to Japan,

Vietnam had comparative advantage in the groups of labour-intensive commodities

and differentiated commodities, and had comparative disadvantage in the groups of

scale-intensive and resource-based commodities in bilateral trade with Japan in

2011. Between 2001 and 2011, Vietnam lost comparative advantage in resource-

based commodities group and changed from a country with comparative

80

disadvantage with Japan to a country with comparative advantage with Japan in

producing differentiated commodities group. The comparative advantage in labour-

intensive commodities group was quite high and static over the period; meanwhile,

the comparative disadvantage of Vietnam’s scale-intensive commodities in bilateral

trade with Japan has declined over the same period. Vietnam’s overall comparative

advantage structure gradually shifted from concentrating on only agricultural

products and products of light industries to the inclusion of products of heavy

industries.

About pattern of comparative advantage structure of Japan in export to Vietnam,

Japan had comparative advantage in scale intensive commodities group and

differentiated commodities group, but Japan did not have comparative advantage in

resources-based commodities group and labour-intensive commodities group in

bilateral trade with Vietnam in almost year between 2001 and 2011. Moreover, the

comparative advantage of Japan in bilateral trade with Vietnam has shifted from the

inclusion of both raw materials and products of lights and heavy industries to

mainly raw materials or products of heavy industries over the period.

From the result of regression in which revealed comparative advantages (푅퐶퐴)

of Vietnam and Japan integrated were into gravity model, it is concluded that the

comparative advantages of Vietnam and Japan play the key role in explanation of

bilateral trading relation between Vietnam and Japan. In particular, the export of

Vietnam to Japan was influenced by overall comparative advantage structure of

Vietnam, the total import of Japan from world and the ad valorem tariffs of Vietnam

and Japan. In reverse, the export of Japan to Vietnam was impacted by overall

comparative advantage structure of Japan and Vietnam with the world, as well as

the import of Japan from the world.

To promote export of Vietnam to Japan, the following measures from

Vietnamese government are proposed: encouraging investment in supporting

industries, encouraging the import of capital goods, assisting enterprises in

enquiring Japanese market’s demand. Additionally, from Vietnamese enterprises’

viewpoint, the following measures are proposed: Enhancing the competitiveness of

81

Vietnamese commodities in Japanese market, enhancing human resources quality

and organizing trade promotion activities.

82

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87

APPENDIX I

Table A: Classification key, chapter-section

Section Chapter 01-05

Resource-based commodities Live Animals

01

Resource-based com. Live Animals

02 Meat & Edible Meat Offal 03 Fish 04 Dairy Produce 05 Other Animal Products 06-14 Vegetable Products 06 Live Trees

07 Edible Vegetables 08 Edible Fruit & Nuts 09 Coffee, Tea, Spices 10 Cereals 11 Malt & Wheat Gluten 12 Seeds 13 Lac, Gums & Resins 14 Other Vegetable Products 15 Fats and Oils 15 Fats & Oils 16-24 Prepared Foodstuffs 16 Preparations Meat/Fish

17 Sugars 18 Cocoa 19 Prep. Cereals/Flour/Milk 20 Prep. Vegetables/Fruit/Nuts 21 Misc. Edible Products 22 Beverages 23 Waste from Food Industry 24 Tobacco 25-27 Mineral Products 25 Salt/Sulphur/Lime/Cement

26 Ores 27 Lubricants/Fuels/Oil 44-46 Wood and Wood articles 44 Wood

45 Cork 46 Straw 41-43

Labour-intensive commodities Hides and Leather

41

Labour-intensive com. Raw Hides & Skins

42 Articles of Leather 43 Fur skins

88

Section Chapter 50-63 Textiles and apparel 50 Silk

51 Wool 52 Cotton 53 Paper Yarn 54 Man-made Filaments 55 Man-made Staple Fibres 56 Wadding 57 Carpets 58 Special Woven Fabrics 59 Laminated Textile Fabrics 60 Knitted Fabrics 61 Apparel, Knitted 62 Apparel, not Knitted 63 Other Textile Articles 64-67 Footwear 64 Footwear

65 Headgear 66 Umbrellas, Walking Sticks 67 Prepared Feathers 71 Gems 71 Jewellery 93 Arms 93 Arms & Ammunition 94-96 Miscellaneous Manufactured

articles 94 Furniture

95 Toys 96 Misc. Manufactured Articles 28-38

Scale-intensive commodities Chemicals

28

Scale-intensive com. Inorganic Chemicals

29 Organic Chemicals 30 Pharmaceutical Products 31 Fertilizers 32 Tanning/Dyeing

Extracts/Ink 33 Cosmetics 34 Soap, Waxes, Pastes 35 Glues 36 Explosives 37 Photographic Goods 38 Misc. Chemical Products 39-40 Plastics 39 Plastics

40 Rubber 47-49 Pulp and paper 47 Wood Pulp

48 Paper & Paper Board 49 Books, Newspapers 68-70 Stone/Cement/Ceramics 68 Stone/Plaster/Cement

69 Ceramic Products 70 Glass and Glassware 72-83 Base metal and Metal articles 72 Iron and Steel

73 Articles of Iron or Steel 74 Copper 75 Nickel

89

Section Chapter

76 Aluminium 78 Lead 79 Zinc 80 Tin 81 Other Base Metals 82 Tools 83 Miscellaneous Base Metal

86-89 Vehicles 86 Railway 87 Cars, Trucks, Autos 88 Aircraft, Spacecraft 89 Ships, Boats

Differentiated commodities Differentiated commodities

84-85 Machinery and Electrical Appliances 84 Computer/Machinery 85 Electrical Equipment 90-92 Optical, precision & musical instruments

90 Optical/Medical Instruments

91 Clocks 92 Musical Instruments

97-98 Antiques and works of art 97 Works of Art 98 Postal Packages & Special Transaction Source: Ahlström, I & Stålros, C 2005, 'Integration, Trade Pattern and Intra-

Industry Trade in ASEAN', Bachelor Thesis, Department of Economics, School

of Economics and Management, Lund University, Lund, page 66.

90

APPENDIX II

Table B: Viet Nam's export turnover to Japan in four broad categories of commodities between 2001 and 2012

Unit: million US$

HS Codes Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 01->05 Live animals 482 537 609 684 706 713 608 655 592 684 702 741 06->14 Vegetable products 48 47 55 74 125 127 138 190 143 142 202 304

15 Fats and oils 3 3 3 4 6 5 11 20 14 17 11 14 16->24 Prepared foodstuffs 56 72 76 120 161 187 197 238 234 298 373 396 25->27 Mineral products 433 335 389 482 693 909 1216 2478 708 481 1923 3678 44->46 wood and wood articles 55 68 71 78 102 118 141 180 132 194 310 325

Resource-based

commodities 1076 1062 1202 1441 1793 2059 2312 3762 1823 1816 3520 5458 41->43 Hides and leather 49 37 38 35 37 35 44 50 53 80 117 174 50->63 Textiles and apparel 649 535 518 585 682 727 822 956 1044 1297 1941 2308 64->67 Footwear 75 62 76 86 113 131 138 161 144 199 273 355

71 Gems 4 5 7 13 13 16 21 28 42 34 44 49 93 Arms 0 0 0 0 0 0 0 0 0 0 0 0

94->96 Miscellaneous

Manufactured articles 83 110 132 161 202 251 268 322 357 449 520 635 Labour-intensive

commodities 860 749 770 879 1048 1160 1292 1516 1640 2059 2895 3522

28->38 Chemicals 28 30 52 64 74 93 93 149 157 209 353

401

91

HS Codes Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 39->40 Plastics 39 49 62 87 150 183 209 318 302 447 610 725 47->49 Pulp and paper 10 6 4 5 10 30 39 38 51 88 80 105 68->70 Stone/Cement/Ceramics 13 18 24 29 31 72 101 127 93 110 126 162

72->83 Base metal and metal

articles 33 36 56 67 125 133 167 195 137 235 396 466 86->89 Vehicles 16 16 15 35 56 185 264 330 189 291 217 280 Scale-

intensive commodities 139 155 213 287 446 696 874 1156 929 1380 1782 2138

84->85 Machinery and

electrical appliances 404 436 680 880 984 1214 1424 1788 1681 2244 2354 2841

90->92 Optical, precision& musical instruments 30 33 40 54 69 111 186 246 262 229 283 304

97->98 Antiques and

artworks 0 0 0 0 0 0 0 0 0 0 0 0 Differentiated commodities 435 469 719 934 1053 1325 1611 2033 1943 2472 2637 3145

TOTAL 2510 2437 2909 3542 4340 5240 6090 8468 6336 7728 10930 14285

Source: Author’s own calculation from statistics of international trade centre (ITC

92

APPENDIX III

Table C: Japan’s export turnover to Vietnam in four broad categories of commodities between 2001 and 2012

Unit: million US $

HS Codes Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 01->05 Live animals 1 2 3 7 7 13 31 65 68 78 141 145 06->14 Vegetable products 12 14 14 14 12 11 12 12 20 52 47 64

15 Fats and oils 0 0 0 1 1 1 1 1 1 1 2 2 16->24 Prepared foodstuffs 4 6 7 9 9 11 13 21 26 34 31 22 25->27 Mineral products 8 11 8 9 12 14 131 367 33 83 126 37 44->46 Wood and wood articles 3 3 4 5 5 4 4 4 4 3 3 5

Resource-based commodities 28 35 36 44 46 53 192 469 152 251 351 275

41->43 Hides and leather 2 2 2 3 4 4 8 22 8 6 26 34 50->63 Textiles and apparel 221 208 242 284 327 346 386 444 468 532 745 815 64->67 Footwear 1 1 1 1 1 1 1 2 1 1 2 2

71 Gems 2 3 7 12 9 12 31 52 53 25 37 41 93 Arms 0 0 0 0 0 0 0 0 0 0 0 0

94->96 Miscellaneous

Manufactured articles 17 15 18 23 29 45 49 58 51 70 99 108 Labour-intensive

commodities 242 228 270 323 369 408 475 579 582 636 909 1000 28->38 Chemicals 107 128 138 160 194 249 270 337 297 426 563 536

93

HS Codes Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 39->40 Plastics 91 110 160 213 270 319 412 488 531 740 813 866 47->49 Pulp and paper 23 26 29 37 42 56 73 92 84 136 127 124 68->70 Stone/Cement/Ceramics 11 10 15 19 21 42 44 61 74 82 94 111

72->83 Base metal and metal

articles 275 434 486 632 661 714 1008 1442 1157 1697 2016 2144 86->89 Vehicles 154 193 242 273 271 187 314 502 390 369 373 324

Scale-intensive commodities 660 900 1069 1333 1459 1566 2120 2922 2532 3449 3987 4105

84->85 Machinery and electrical

appliances 751 825 958 1092 1319 1714 2465 3169 2633 3213 3621 4520

90->92 Optical, precision& musical instruments 60 74 88 103 132 171 196 300 252 308 391 479

97->98 Antiques and artworks 1 0 0 0 0 0 0 0 0 1 0 0 Differentiated commodities 812 899 1046 1196 1451 1885 2661 3468 2885 3522 4012 4999

TOTAL 1782 2130 2625 3180 3592 4138 5667 7814 6516 8173 9592 10732

Source: Author’s own calculation from statistics of international trade centre (ITC).

94

APPENDIX IV

Table D: Overall Vietnam’s revealed comparative advantage pattern between 2001 and 2011 in bilateral trade with Japan

Codes Product label 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 01->05 Live animals 3.32 3.88 4.09 4.16 3.92 4.09 3.25 2.65 2.60 2.74 2.07 06->14 Vegetable products 0.53 0.52 0.53 0.60 0.99 0.94 0.81 0.73 0.69 0.64 0.63

15 Fats and oils 0.79 0.84 0.59 0.55 0.79 0.64 1.02 1.14 1.05 1.17 0.50 16->24 Prepared foodstuffs 0.55 0.71 0.68 0.91 1.04 1.07 1.03 1.03 0.99 1.17 1.02 25->27 Mineral products 0.77 0.63 0.57 0.56 0.55 0.55 0.62 0.75 0.35 0.19 0.48 44->46 Wood and wood articles 0.75 0.98 0.91 0.84 1.08 1.07 1.18 1.41 1.28 1.62 1.87

Resource-based commodities 1.10 1.14 1.06 1.04 0.99 0.91 0.88 0.90 0.65 0.53 0.67

41->43 Hides and leather 1.59 1.35 1.21 0.96 0.88 0.74 0.81 0.78 0.90 1.28 1.47 50->63 Textiles and apparel 3.85 3.41 2.84 2.82 2.95 2.76 2.86 2.72 2.93 3.55 3.71 64->67 Footwear 2.88 2.45 2.68 2.80 3.11 3.16 2.90 2.68 2.36 3.12 3.27

71 Gems 0.10 0.12 0.16 0.22 0.18 0.16 0.18 0.18 0.45 0.26 0.25 93 Arms 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00

94->96 Miscellaneous

Manufactured articles 1.39 1.85 1.92 2.06 2.09 2.22 1.96 2.09 2.47 3.15 2.70 Labour-intensive

commodities 2.61 2.40 2.17 2.13 2.19 2.06 2.02 1.92 2.29 2.69 2.73 28->38 Chemicals 0.17 0.18 0.26 0.27 0.27 0.29 0.24 0.28 0.31 0.35 0.41 39->40 Plastics 0.76 0.93 0.95 1.08 1.51 1.49 1.48 1.63 1.98 2.22 2.09 47->49 Pulp and paper 0.35 0.21 0.11 0.14 0.25 0.69 0.83 0.65 0.84 1.31 0.89 68->70 Stone/Cement/Ceramics 0.62 0.87 0.98 0.96 0.90 1.75 2.26 2.26 1.98 2.04 1.76

95

Codes Product label 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

72->83 Base metal and metal

articles 0.34 0.39 0.46 0.38 0.58 0.48 0.45 0.43 0.55 0.64 0.76 86->89 Vehicles 0.18 0.16 0.12 0.25 0.35 1.04 1.24 1.31 1.01 1.34 0.77

Scale-intensive coomodities 0.31 0.33 0.37 0.41 0.54 0.71 0.72 0.75 0.78 0.92 0.84

84->85 Machinery and

electrical appliances 0.68 0.76 1.00 1.06 1.03 1.10 1.12 1.18 1.32 1.41 1.18

90->92 Optical, precision& musical instruments 0.27 0.30 0.30 0.34 0.37 0.48 0.80 0.90 1.12 0.82 0.79

97->98 Antiques and artworks 0.00 0.02 0.00 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.00 Differentiated commodities 0.61 0.68 0.89 0.94 0.92 0.99 1.07 1.13 1.29 1.32 1.12

Source: Author’s own calculation from statistics of international trade centre (ITC).

96

APPENDIX V

Table E: Overall Japan’s revealed comparative advantage pattern between 2001 and 2011 in bilateral trade with Vietnam

Codes Product label 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 01->05 Live animals 0.03 0.06 0.09 0.18 0.14 0.25 0.48 0.69 0.94 0.76 0.35 06->14 Vegetable products 0.38 0.35 0.31 0.29 0.19 0.17 0.13 0.09 0.14 0.24 0.12

15 Fats and oils 0.02 0.00 0.01 0.02 0.04 0.02 0.01 0.01 0.02 0.02 0.03 16->24 Prepared foodstuffs 0.09 0.10 0.10 0.11 0.09 0.09 0.08 0.08 0.10 0.10 0.07 25->27 Mineral products 0.04 0.04 0.03 0.02 0.02 0.02 0.16 0.29 0.04 0.10 0.13 44->46 Wood and wood articles 0.14 0.12 0.12 0.08 0.09 0.06 0.04 0.03 0.05 0.03 0.06

Resource-based commodities 0.08 0.08 0.07 0.07 0.05 0.05 0.15 0.25 0.11 0.15 0.15

41->43 Hides and leather 0.06 0.05 0.04 0.05 0.05 0.05 0.09 0.21 0.12 0.07 0.25 50->63 Textiles and apparel 1.00 0.74 0.77 0.77 0.81 0.81 0.73 0.69 0.79 0.65 0.63 64->67 Footwear 0.02 0.02 0.02 0.04 0.03 0.04 0.05 0.09 0.06 0.05 0.04

71 Gems 0.59 0.48 0.28 0.19 0.10 0.06 0.23 0.19 1.15 0.24 0.49 93 Arms 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

94->96 Miscellaneous

Manufactured articles 1.42 0.82 0.81 0.95 0.95 1.22 1.07 1.03 1.00 1.05 0.96 Labour-intensive

commodities 0.81 0.60 0.61 0.58 0.59 0.55 0.58 0.52 0.74 0.57 0.59 28->38 Chemicals 0.53 0.54 0.50 0.50 0.56 0.65 0.55 0.51 0.46 0.55 0.77 39->40 Plastics 0.91 0.88 1.03 1.02 1.08 1.03 1.06 0.96 1.15 1.16 1.28 47->49 Pulp and paper 0.55 0.56 0.50 0.56 0.58 0.68 0.74 0.71 0.66 0.87 0.84

97

Codes Product label 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 68->70 Stone/Cement/Ceramics 0.94 0.73 0.97 0.93 0.91 1.47 1.31 1.38 1.54 1.32 1.24

72->83 Base metal and metal

articles 1.47 1.78 1.62 1.51 1.42 1.30 1.19 1.26 1.26 1.41 1.87 86->89 Vehicles 1.05 1.37 1.18 1.33 1.70 1.69 1.19 1.42 1.19 1.20 0.77

Scale-intensive commodities 0.96 1.12 1.06 1.08 1.11 1.07 1.00 1.03 1.00 1.10 1.26

84->85 Machinery and

electrical appliances 1.95 1.76 1.54 1.68 1.80 1.97 1.85 1.75 1.55 1.55 1.52

90->92 Optical, precision& musical instruments 2.06 1.89 2.18 2.17 2.49 2.31 2.06 2.45 2.01 2.02 2.28

97->98 Antiques and artworks 0.00 0.00 1.59 2.12 0.00 3.08 0.58 0.00 0.39 13.38 0.11 Differentiated commodities 1.96 1.77 1.58 1.71 1.85 2.00 1.86 1.79 1.58 1.58 1.57

Source: Author’s own calculation from statistics of international trade centre (ITC)

98

APPENDIX VI

Table F: Detailed Vietnam’s revealed comparative advantage in bilateral trade with Japan

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '01 Live animals 0.36 0.32 0.68 0.56 0.39 0.34 0.23 0.30 0.35 0.22 0.19 '02 Meat and edible meat offal 0.00 0.02 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 '03 Fish, crustaceans, molluscs,

aquatic invertebrates nes 5.76 6.70 7.52 7.60 7.26 7.24 6.06 5.07 4.88 5.26 4.04

'04 Dairy products, eggs, honey, edible animal product nes

2.58 0.54 0.25 0.02 0.04 0.01 0.04 0.05 0.01 0.01 0.01

'05 Products of animal origin, nes

0.97 0.48 0.28 0.15 0.14 0.10 0.10 0.09 0.20 0.16 0.17

'06 Live trees, plants, bulbs, roots, cut flowers etc

0.13 0.17 0.16 0.97 1.23 1.34 1.32 1.38 2.04 2.43 2.49

'07 Edible vegetables and certain roots and tubers

0.76 0.81 0.62 0.92 1.32 0.93 0.89 1.07 0.85 0.53 0.39

'08 Edible fruit, nuts, peel of citrus fruit, melons

0.40 0.47 0.20 0.37 0.35 0.30 0.30 0.32 0.18 0.30 0.38

'09 Coffee, tea, mate and spices 3.06 3.32 3.53 2.92 2.84 3.96 5.96 7.25 5.71 4.66 4.36

'10 Cereals 0.17 0.05 0.26 0.41 1.37 1.01 0.29 0.06 0.03 0.00 0.00 '11 Milling products, malt,

starches, inulin, wheat gluten

0.96 1.11 2.34 0.97 1.07 1.07 0.67 0.68 0.32 0.38 0.31

'12 Oil seed, oleagic fruits, grain, seed, fruit, etc, nes

0.09 0.14 0.13 0.09 0.10 0.07 0.05 0.05 0.05 0.04 0.06

99

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'13 Lac, gums, resins, vegetable saps and extracts nes

0.50 0.23 0.03 0.07 0.00 0.04 0.01 0.00 0.01 0.00 0.00

'14 Vegetable plaiting materials, vegetable products nes

0.71 0.66 0.62 5.35 0.26 0.22 0.36 0.37 1.27 1.01 0.55

'15 Animal, vegetable fats and oils, cleavage products, etc

0.79 0.84 0.59 0.55 0.79 0.64 1.02 1.14 1.05 1.17 0.50

'16 Meat, fish and seafood food preparations nes

0.72 1.11 1.94 2.83 3.17 3.23 3.35 3.50 3.21 3.62 3.33

'17 Sugars and sugar confectionery

0.17 0.37 0.41 0.47 0.42 0.37 0.33 0.26 0.38 0.34 0.18

'18 Cocoa and cocoa preparations

0.00 0.00 0.00 0.00 0.02 0.00 0.00 0.00 0.04 0.04 0.03

'19 Cereal, flour, starch, milk preparations and products

1.63 1.17 0.83 1.15 1.63 2.04 1.52 1.42 1.44 1.57 1.51

'20 Vegetable, fruit, nut, etc food preparations

0.24 0.39 0.45 0.48 0.46 0.38 0.32 0.44 0.45 0.55 0.55

'21 Miscellaneous edible preparations

2.65 3.00 0.09 0.10 0.44 0.20 0.11 0.29 0.29 0.33 0.28

'22 Beverages, spirits and vinegar

0.38 0.44 0.37 0.38 0.36 0.33 0.30 0.27 0.27 0.41 0.42

'23 Residues, wastes of food industry, animal fodder

0.14 0.34 0.49 0.23 0.23 0.62 0.55 0.42 0.43 0.65 0.31

'24 Tobacco and manufactured tobacco substitutes

0.04 0.01 0.01 0.00 0.01 0.00 0.01 0.00 0.01 0.02 0.01

'25 Salt, sulphur, earth, stone, 0.12 0.28 0.17 0.25 0.21 0.24 0.28 0.40 0.44 0.40 0.42

100

plaster, lime and cement

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '26 Ores, slag and ash 0.22 0.14 0.14 0.16 0.10 0.07 0.07 0.08 0.01 0.02 0.02 '27 Mineral fuels, oils,

distillation products, etc 0.83 0.69 0.62 0.60 0.61 0.61 0.71 0.82 0.40 0.21 0.54

'28 Inorganic chemicals, precious metal compound,

isotopes

0.07 0.07 0.09 0.06 0.07 0.09 0.03 0.17 0.42 0.41 0.69

'29 Organic chemicals 0.06 0.12 0.35 0.34 0.35 0.39 0.32 0.37 0.33 0.33 0.30

'30 Pharmaceutical products 0.06 0.03 0.02 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.01

'31 Fertilizers 0.00 0.00 0.06 0.01 0.01 0.01 0.03 0.12 0.28 0.42 0.79 '32 Tanning, dyeing extracts,

tannins, derivs,pigments etc 0.11 0.05 0.19 0.05 0.09 0.10 0.26 0.19 0.27 0.27 0.21

'33 Essential oils, perfumes, cosmetics, toileteries

0.31 0.29 0.45 0.37 0.21 0.33 0.29 0.33 0.31 0.50 0.74

'34 Soaps, lubricants, waxes, candles, modelling pastes

2.86 2.81 2.58 2.85 3.13 2.58 2.20 2.27 2.73 2.88 3.00

'35 Albuminoids, modified starches, glues, enzymes

0.24 0.27 0.10 0.69 1.21 1.33 1.33 1.30 1.01 1.50 1.66

'36 Explosives, pyrotechnics, matches, pyrophorics, etc

0.76 1.18 0.81 0.96 0.62 0.66 0.36 0.46 0.49 0.38 0.28

'37 Photographic or cinematographic goods

0.91 0.87 0.74 0.32 0.14 0.01 0.00 0.01 0.00 0.00 0.00

'38 Miscellaneous chemical products

0.10 0.12 0.11 0.23 0.15 0.26 0.21 0.21 0.49 0.61 0.64

101

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'39 Plastics and articles thereof 0.74 0.78 0.88 1.08 1.69 1.60 1.57 1.80 2.18 2.34 2.18

'40 Rubber and articles thereof 0.81 1.38 1.15 1.07 1.04 1.26 1.27 1.27 1.42 1.94 1.90

'41 Raw hides and skins (other than furskins) and leather

0.23 0.13 0.26 0.04 0.09 0.25 0.74 0.43 0.23 0.26 0.10

'42 Articles of leather, animal gut, harness, travel goods

1.56 1.56 1.39 1.11 0.99 0.81 0.84 0.82 0.95 1.37 1.59

'43 Furskins and artificial fur, manufactures thereof

4.33 0.01 0.00 0.03 0.01 0.03 0.27 0.12 0.01 0.01 0.00

'44 Wood and articles of wood, wood charcoal

0.54 0.66 0.62 0.67 0.93 0.95 1.08 1.34 1.22 1.58 1.86

'45 Cork and articles of cork 0.00 0.00 0.00 0.00 0.04 0.01 0.05 0.31 0.37 0.47 0.00

'46 Manufactures of plaiting material, basketwork, etc.

7.52 10.67 10.68 7.56 6.73 6.00 5.11 3.98 3.24 3.40 2.36

'47 Pulp of wood, fibrous cellulosic material, waste etc

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

'48 Paper and paperboard, articles of pulp, paper and

board

0.63 0.36 0.18 0.20 0.42 1.26 1.60 1.15 1.34 2.24 1.46

'49 Printed books, newspapers, pictures etc

0.19 0.12 0.08 0.14 0.15 0.15 0.06 0.24 0.10 0.06 0.10

'50 Silk 8.02 8.56 7.99 8.88 8.79 8.54 7.85 7.40 8.78 8.49 9.74 '51 Wool, animal hair, horsehair

yarn and fabric thereof 0.11 0.00 0.00 0.00 0.00 0.00 0.00 0.02 0.06 0.11 0.03

'52 Cotton 0.44 0.45 0.11 0.03 0.14 0.05 0.06 0.15 0.19 0.28 0.33

102

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'53 Vegetable textile fibres nes, paper yarn, woven fabric

0.31 0.30 0.11 0.26 0.42 0.40 0.26 1.20 0.85 0.26 0.05

'54 Manmade filaments 0.60 0.64 1.64 1.75 1.45 1.73 1.76 1.33 1.17 0.72 0.54 '55 Manmade staple fibres 1.69 0.87 0.26 0.35 0.45 0.63 0.71 0.33 0.67 1.24 1.17 '56 Wadding, felt, nonwovens,

yarns, twine, cordage, etc 3.19 4.76 4.00 3.88 4.24 6.03 5.07 3.14 4.36 4.57 4.15

'57 Carpets and other textile floor coverings

2.54 1.52 1.28 2.22 2.74 1.84 1.77 2.89 2.68 2.54 1.71

'58 Special woven or tufted fabric, lace, tapestry etc

2.15 1.48 0.46 1.78 4.27 11.89 4.07 2.65 1.84 1.00 1.00

'59 Impregnated, coated or laminated textile fabric

0.16 0.37 0.05 0.04 0.14 0.45 10.07 10.54 1.54 8.82 6.82

'60 Knitted or crocheted fabric 0.25 0.87 4.02 0.18 0.89 0.50 0.19 0.10 0.32 0.48 0.57 '61 Articles of apparel,

accessories, knit or crochet 1.45 1.62 2.28 1.96 1.89 1.49 1.63 1.77 2.10 2.63 2.87

'62 Articles of apparel, accessories, not knit or

crochet

6.53 5.46 3.87 4.07 4.38 4.02 4.13 3.79 4.18 4.47 4.75

'63 Other made textile articles, sets, worn clothing etc

3.83 3.46 2.77 2.82 2.57 2.85 2.96 2.73 2.44 5.16 5.55

'64 Footwear, gaiters and the like, parts thereof

3.02 2.60 2.82 2.87 3.18 3.34 3.04 2.92 2.52 3.28 3.44

'65 Headgear and parts thereof 4.63 3.55 4.05 4.70 4.98 4.10 3.69 2.90 3.21 4.01 4.16

103

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'66 Umbrellas, walking-sticks, seat-sticks, whips, etc

0.12 0.02 0.01 0.01 0.01 0.00 0.01 0.00 0.00 0.00 0.00

'67 Bird skin, feathers, artificial flowers, human hair

0.92 0.42 0.69 1.06 2.03 1.71 1.86 0.78 0.75 1.87 1.97

'68 Stone, plaster, cement, asbestos, mica, etc articles

0.13 0.18 0.41 0.51 0.52 0.55 0.33 0.60 0.49 0.48 0.67

'69 Ceramic products 2.15 3.28 3.12 3.04 2.57 3.24 3.50 3.18 2.95 2.84 3.11 '70 Glass and glassware 0.24 0.20 0.26 0.23 0.29 1.73 2.82 2.73 2.37 2.48 1.72 '71 Pearls, precious stones,

metals, coins, etc 0.10 0.12 0.16 0.22 0.18 0.16 0.18 0.18 0.45 0.26 0.25

'72 Iron and steel 0.07 0.01 0.28 0.19 0.19 0.21 0.10 0.14 0.05 0.38 0.51 '73 Articles of iron or steel 1.48 1.15 0.80 0.94 2.11 1.52 1.66 1.30 1.32 1.57 1.46 '74 Copper and articles thereof 0.24 0.29 0.25 0.10 0.13 0.27 0.27 0.19 0.37 0.52 0.42

'75 Nickel and articles thereof 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

'76 Aluminium and articles thereof

0.07 0.25 0.49 0.39 0.40 0.28 0.27 0.27 0.32 0.26 0.28

'78 Lead and articles thereof 0.00 0.19 0.15 0.47 0.40 1.49 0.80 0.56 0.41 0.40 9.81

'79 Zinc and articles thereof 0.26 0.79 0.35 0.38 0.14 0.06 0.04 0.17 0.20 1.32 7.87

'80 Tin and articles thereof 0.26 0.16 0.03 0.00 0.04 0.92 1.48 1.91 0.58 1.64 2.32

'81 Other base metals, cermets, articles thereof

0.01 0.01 0.01 0.16 0.09 0.20 0.34 0.25 0.44 0.98 1.56

'82 Tools, implements, cutlery, 0.09 0.51 0.51 0.22 0.27 0.53 0.60 0.85 0.83 0.95 0.77

104

etc of base metal HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'83 Miscellaneous articles of base metal

0.55 0.76 1.51 1.40 1.27 1.20 0.82 1.03 1.25 1.14 1.24

'84 Machinery, nuclear reactors, boilers, etc

0.36 0.39 0.57 0.43 0.37 0.42 0.49 0.59 0.58 0.67 0.69

'85 Electrical, electronic equipment

0.95 1.08 1.38 1.59 1.59 1.64 1.60 1.62 1.85 1.89 1.52

'86 Railway, tramway locomotives, rolling stock,

equipment

0.00 0.00 0.05 0.00 0.00 0.15 0.06 0.06 0.02 0.08 0.03

'87 Vehicles other than railway, tramway

0.22 0.22 0.16 0.33 0.48 1.37 1.70 1.67 1.49 1.40 0.62

'88 Aircraft, spacecraft, and parts thereof

0.00 0.00 0.00 0.01 0.01 0.00 0.00 0.00 0.04 0.08 0.00

'89 Ships, boats and other floating structures

0.00 0.00 0.47 0.17 0.16 4.54 3.69 4.99 0.20 11.77 15.76

'90 Optical, photo, technical, medical, etc apparatus

0.29 0.33 0.33 0.37 0.40 0.52 0.89 1.01 1.22 0.87 0.85

'91 Clocks and watches and parts thereof

0.12 0.17 0.17 0.15 0.08 0.09 0.06 0.06 0.11 0.15 0.15

'92 Musical instruments, parts and accessories

0.02 0.03 0.05 0.08 0.10 0.15 0.48 0.62 0.92 1.30 1.15

'93 Arms and ammunition, parts and accessories thereof

0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00

105

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'94 Furniture, lighting, signs, prefabricated buildings

2.10 2.98 2.98 3.14 3.54 3.96 3.82 3.73 4.40 4.86 4.19

'95 Toys, games, sports requisites

0.51 0.41 0.35 0.35 0.29 0.31 0.37 0.50 0.75 1.29 1.04

'96 Miscellaneous manufactured articles

0.99 1.40 2.20 2.97 2.97 3.02 1.82 1.89 1.89 2.64 2.49

'97 Works of art, collectors pieces and antiques

0.00 0.02 0.00 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.00

Source: Author’s own calculation from statistics of international trade centre (ITC).

106

APPENDIX VII

Table G: Detailed Japan’s revealed comparative advantage in bilateral trade with Vietnam

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '01 Live animals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.01 '02 Meat and edible meat offal 0.06 0.00 0.00 0.18 1.93 0.79 1.52 1.50 3.52 2.27 0.00 '03 Fish, crustaceans, molluscs,

aquatic invertebrates nes 0.13 0.13 0.21 0.37 0.26 0.52 0.88 1.08 1.14 1.54 0.85

'04 Dairy products, eggs, honey, edible animal product nes

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

'05 Products of animal origin, nes 0.27 0.20 0.30 0.32 0.30 0.42 0.91 1.21 1.09 0.74 0.09 '06 Live trees, plants, bulbs, roots,

cut flowers etc 0.00 0.01 0.02 0.00 0.06 0.39 1.71 1.49 7.38 14.00 6.04

'07 Edible vegetables and certain roots and tubers

0.15 0.06 0.07 0.10 0.12 0.13 0.11 0.06 0.04 0.04 0.00

'08 Edible fruit, nuts, peel of citrus fruit, melons

0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

'09 Coffee, tea, mate and spices 0.01 0.01 0.01 0.01 0.02 0.01 0.02 0.03 0.04 0.03 0.02 '10 Cereals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 '11 Milling products, malt,

starches, inulin, wheat gluten 1.51 1.55 1.30 1.42 1.21 1.05 0.58 0.36 0.34 0.34 0.44

'12 Oil seed, oleagic fruits, grain, seed, fruit, etc, nes

0.55 0.57 0.66 0.66 0.76 0.78 0.49 0.21 0.19 0.18 0.03

'13 Lac, gums, resins, vegetable saps and extracts nes

0.05 0.15 0.10 0.19 0.13 0.10 0.11 0.08 0.14 0.15 0.25

'14 Vegetable plaiting materials, vegetable products nes

0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.10 0.00 0.00 0.02

107

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '15 Animal,vegetable fats and

oils, cleavage products, etc 0.02 0.00 0.01 0.02 0.04 0.02 0.01 0.01 0.02 0.02 0.03

'16 Meat, fish and seafood food preparations nes

4.28 2.05 2.10 1.08 0.79 4.43 1.96 3.74 4.35 6.34 0.35

'17 Sugars and sugar confectionery

0.01 0.00 0.01 0.01 0.00 0.01 0.01 0.01 0.01 0.01 0.01

'18 Cocoa and cocoa preparations 0.00 0.00 0.00 0.00 0.00 0.01 0.02 0.04 0.21 0.24 0.16 '19 Cereal, flour, starch, milk

preparations and products 0.36 0.25 0.16 0.14 0.11 0.07 0.04 0.10 0.09 0.15 0.15

'20 Vegetable, fruit, nut, etc food preparations

0.07 0.08 0.02 0.13 0.04 0.07 0.07 0.09 0.05 0.09 0.03

'21 Miscellaneous edible preparations

0.51 0.35 0.49 0.61 0.46 0.49 0.44 0.53 0.65 0.54 0.27

'22 Beverages, spirits and vinegar 0.05 0.44 0.51 0.24 0.18 0.15 0.20 0.19 0.35 0.76 0.09 '23 Residues, wastes of food

industry, animal fodder 0.06 0.09 0.06 0.07 0.05 0.05 0.04 0.03 0.03 0.02 0.01

'24 Tobacco and manufactured tobacco substitutes

0.00 0.01 0.03 0.06 0.15 0.16 0.10 0.06 0.04 0.00 0.00

'25 Salt, sulphur, earth, stone, plaster, lime and cement

0.05 0.15 0.14 0.15 0.14 0.25 0.17 0.13 0.19 0.07 0.16

'26 Ores, slag and ash 0.42 0.01 0.04 0.04 0.15 0.27 0.24 0.23 0.63 0.56 0.81 '27 Mineral fuels, oils, distillation

products, etc 0.04 0.04 0.02 0.02 0.02 0.01 0.16 0.30 0.03 0.10 0.13

'28 Inorganic chemicals, precious metal compound, isotopes

0.33 0.34 0.52 0.54 0.52 0.76 0.72 0.56 0.84 0.72 1.01

'29 Organic chemicals 1.11 0.94 0.73 0.65 0.64 1.14 0.82 0.88 0.64 0.73 0.86 '30 Pharmaceutical products 0.09 0.13 0.09 0.07 0.09 0.09 0.08 0.09 0.06 0.08 0.10

108

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '31 Fertilizers 0.30 0.31 0.22 0.22 0.38 0.29 0.27 0.30 0.14 0.20 0.48 '32 Tanning, dyeing extracts,

tannins, derivs,pigments etc 0.53 0.50 0.54 0.60 0.64 0.64 0.68 0.61 0.76 0.90 1.04

'33 Essential oils, perfumes, cosmetics, toileteries

0.30 0.27 0.19 0.26 0.26 0.23 0.31 0.25 0.23 0.29 0.32

'34 Soaps, lubricants, waxes, candles, modelling pastes

0.55 0.63 0.67 0.79 0.87 1.01 0.90 0.73 0.75 1.03 1.69

'35 Albuminoids, modified starches, glues, enzymes

0.23 0.24 0.36 0.49 0.61 0.67 0.75 0.74 0.77 0.76 0.89

'36 Explosives, pyrotechnics, matches, pyrophorics, etc

0.06 0.03 0.06 0.07 0.06 0.01 0.06 0.04 0.01 0.38 0.03

'37 Photographic or cinematographic goods

4.82 3.85 3.89 4.17 4.05 4.12 2.03 1.33 2.03 2.94 2.32

'38 Miscellaneous chemical products

0.55 0.65 0.68 0.66 0.73 0.61 0.59 0.56 0.62 0.65 1.00

'39 Plastics and articles thereof 0.86 0.81 1.02 1.02 1.08 1.05 1.04 0.95 1.10 1.13 1.27 '40 Rubber and articles thereof 1.22 1.24 1.09 1.02 1.09 0.96 1.13 1.01 1.37 1.29 1.32 '41 Raw hides and skins (other

than furskins) and leather 0.06 0.05 0.04 0.04 0.04 0.04 0.08 0.21 0.11 0.06 0.27

'42 Articles of leather, animal gut, harness, travel goods

0.10 0.06 0.17 0.32 0.48 0.72 0.62 0.36 0.44 0.27 0.20

'43 Furskins and artificial fur, manufactures thereof

0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.02 0.00 0.00 0.01

'44 Wood and articles of wood, wood charcoal

0.14 0.12 0.12 0.08 0.09 0.06 0.04 0.03 0.05 0.03 0.06

'45 Cork and articles of cork 0.00 0.53 0.00 0.16 0.09 0.18 1.14 0.31 0.04 0.81 0.05 '46 Manufactures of plaiting 0.00 0.00 0.00 0.00 0.03 0.02 0.00 0.00 0.00 0.00 0.01

109

material, basketwork, etc. HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '47 Pulp of wood, fibrous

cellulosic material, waste etc 0.49 1.37 1.01 1.29 1.31 1.79 1.89 1.21 1.05 1.96 2.43

'48 Paper and paperboard, articles of pulp, paper and board

0.55 0.48 0.44 0.43 0.48 0.53 0.59 0.63 0.63 0.74 0.67

'49 Printed books, newspapers, pictures etc

1.15 0.64 0.44 0.46 0.31 0.25 0.23 0.34 0.28 0.52 0.40

'50 Silk 19.91 18.22 18.54 18.21 13.50 8.59 11.27 16.99 18.71 10.95 6.97 '51 Wool, animal hair, horsehair

yarn and fabric thereof 11.93 10.97 9.46 5.92 6.11 7.88 5.57 3.71 3.95 3.15 2.00

'52 Cotton 0.97 0.52 0.50 0.63 0.65 0.65 0.53 0.37 0.37 0.27 0.32 '53 Vegetable textile fibres nes,

paper yarn, woven fabric 2.28 1.83 2.44 2.00 2.36 1.44 1.14 1.38 1.76 1.10 0.25

'54 Manmade filaments 1.75 1.20 1.09 0.96 0.91 1.18 1.02 0.95 1.09 1.07 0.99 '55 Manmade staple fibres 0.38 0.25 0.24 0.27 0.28 0.25 0.25 0.23 0.37 0.31 0.71 '56 Wadding, felt, nonwovens,

yarns, twine, cordage, etc 1.35 0.63 0.61 0.72 0.97 1.39 1.42 1.26 1.34 1.27 1.56

'57 Carpets and other textile floor coverings

1.26 1.00 1.06 2.56 2.77 3.20 3.11 3.78 3.86 3.31 2.45

'58 Special woven or tufted fabric, lace, tapestry etc

2.57 1.14 1.39 0.85 0.77 0.65 0.77 0.77 0.88 0.69 1.19

'59 Impregnated, coated or laminated textile fabric

0.34 0.47 0.48 0.55 0.72 0.70 0.73 0.79 0.87 0.87 0.79

'60 Knitted or crocheted fabric 4.29 1.68 1.29 1.18 1.04 0.93 0.65 0.64 0.59 0.42 0.38 '61 Articles of apparel,

accessories, knit or crochet 0.20 0.12 0.11 0.08 0.14 0.40 0.23 0.20 0.11 0.05 0.01

'62 Articles of apparel, 0.07 0.12 0.13 0.14 0.21 0.30 0.32 0.27 0.41 0.39 0.14

110

accessories, not knit or crochet HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '63 Other made textile articles,

sets, worn clothing etc 1.22 0.87 2.31 2.48 6.67 2.91 2.13 8.86 6.51 5.87 1.88

'64 Footwear, gaiters and the like, parts thereof

0.02 0.02 0.02 0.04 0.03 0.04 0.04 0.09 0.05 0.04 0.04

'65 Headgear and parts thereof 0.04 0.17 0.24 0.22 0.36 0.22 0.16 0.24 0.15 0.18 0.09 '66 Umbrellas, walking-sticks,

seat-sticks, whips, etc 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.05 0.10 0.00

'67 Bird skin, feathers, artificial flowers, human hair

0.00 0.00 0.00 0.05 0.00 0.04 0.07 0.06 0.16 0.07 0.07

'68 Stone, plaster, cement, asbestos, mica, etc articles

1.49 1.21 1.28 1.42 1.47 1.59 1.46 1.71 1.55 1.73 1.34

'69 Ceramic products 1.33 0.74 1.41 0.91 1.00 1.76 0.91 0.75 0.73 0.78 0.54 '70 Glass and glassware 0.62 0.46 0.58 0.64 0.54 1.28 1.35 1.50 1.91 1.31 1.67 '71 Pearls, precious stones,

metals, coins, etc 0.59 0.48 0.28 0.19 0.10 0.06 0.23 0.19 1.15 0.24 0.49

'72 Iron and steel 1.71 2.14 1.89 1.77 1.61 1.64 1.34 1.43 1.50 1.75 2.57 '73 Articles of iron or steel 1.34 1.37 1.41 1.46 1.54 1.22 1.22 1.19 0.90 1.09 1.33 '74 Copper and articles thereof 1.33 1.15 1.53 0.86 0.64 0.47 0.71 0.70 0.93 1.05 1.08 '75 Nickel and articles thereof 0.70 0.65 0.91 0.60 1.14 0.67 0.56 1.10 0.75 1.27 1.91 '76 Aluminium and articles

thereof 0.39 0.33 0.31 0.38 0.49 0.38 0.44 0.37 0.33 0.39 0.46

'78 Lead and articles thereof 0.03 0.06 0.03 0.07 0.08 0.09 0.23 0.63 0.36 0.26 0.47 '79 Zinc and articles thereof 0.76 2.71 2.20 1.53 1.21 2.11 1.50 1.08 1.55 1.15 1.48 '80 Tin and articles thereof 0.38 0.24 0.28 0.41 1.85 7.06 2.75 1.49 0.83 1.00 1.85 '81 Other base metals, cermets,

articles thereof 0.73 1.56 1.95 1.60 1.78 0.99 2.80 1.10 2.30 1.70 1.52

111

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '82 Tools, implements, cutlery,

etc of base metal 3.63 4.58 3.29 3.38 2.88 3.37 3.26 3.36 3.21 3.25 1.52

'83 Miscellaneous articles of base metal

0.96 0.86 0.89 0.76 0.75 0.67 0.70 0.62 0.67 0.60 0.51

'84 Machinery, nuclear reactors, boilers, etc

1.43 1.42 1.42 1.67 1.84 1.87 1.83 1.75 1.59 1.66 1.74

'85 Electrical, electronic equipment

2.83 2.46 1.75 1.68 1.75 2.13 1.87 1.75 1.49 1.42 1.30

'86 Railway, tramway locomotives, rolling stock,

equipment

0.04 0.00 0.01 0.51 0.02 0.01 0.04 0.04 0.05 0.01 0.16

'87 Vehicles other than railway, tramway

1.16 1.55 1.78 2.05 1.87 1.94 1.97 2.02 1.63 1.57 1.05

'88 Aircraft, spacecraft, and parts thereof

0.00 0.00 0.00 0.00 0.01 0.42 0.00 0.01 0.34 0.65 0.20

'89 Ships, boats and other floating structures

0.12 0.26 0.18 0.36 0.29 0.02 0.01 0.08 0.00 0.05 0.00

'90 Optical, photo, technical, medical, etc apparatus

1.93 1.86 2.16 2.12 2.46 2.28 2.02 2.40 1.99 2.00 2.44

'91 Clocks and watches and parts thereof

6.46 2.80 3.23 3.80 3.74 3.14 3.22 3.47 1.70 0.91 0.22

'92 Musical instruments, parts and accessories

1.76 1.65 1.59 2.35 1.98 3.05 3.38 3.75 4.41 4.69 4.79

'93 Arms and ammunition, parts and accessories thereof

0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

'94 Furniture, lighting, signs, prefabricated buildings

0.95 0.78 0.49 0.57 1.02 1.82 1.37 1.05 0.61 0.54 0.24

112

HS Product 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '95 Toys, games, sports requisites 1.14 0.87 0.82 0.99 0.81 1.25 1.59 1.71 2.10 1.98 0.90 '96 Miscellaneous manufactured

articles 1.63 0.82 0.90 1.04 0.94 1.00 0.88 0.92 1.02 1.18 1.70

'97 Works of art, collectors pieces and antiques

0.00 0.00 1.59 2.12 0.00 3.08 0.58 0.00 0.39 13.38 0.11

Source: Author’s own calculation from statistics of international trade centre (ITC).

113

APPENDIX VIIII

Table H: Total ad valorem tariff of Vietnam applied for Japan from 2001 to 2011.

Unit: percent

HS code All products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '01 Live animals 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.6% 3.2% 3.2% '02 Meat and edible meat offal 22.8% 22.8% 22.8% 22.8% 22.8% 22.8% 22.8% 18.6% 18.6% 17.1% 15.8% '03 Fish, crustaceans, molluscs,

aquatic invertebrates nes 29.6% 29.6% 29.8% 29.8% 29.8% 29.8% 29.8% 16.3% 16.1% 14.1% 12.1%

'04 Dairy products, eggs, honey, edible animal product nes

23.6% 23.2% 20.4% 11.8% 20.4% 20.4% 20.4% 9.8% 9.8% 8.4% 7.1%

'05 Products of animal origin, nes 4.6% 4.2% 4.2% 2.7% 4.2% 4.2% 4.2% 3.4% 2.9% 2.5% 2.5% '06 Live trees, plants, bulbs,

roots, cut flowers etc 20.2% 20.2% 20.5% 3.8% 20.5% 20.5% 20.5% 7.1% 1.3% 1.1% 0.9%

'07 Edible vegetables and certain roots and tubers

25.7% 25.7% 25.7% 25.7% 25.7% 25.7% 25.7% 15% 15% 13.6% 12.2%

'08 Edible fruit, nuts, peel of citrus fruit, melons

39.9% 39.9% 39.9% 39.9% 39.9% 39.9% 39.9% 25.6% 25.1% 22.8% 20.5%

'09 Coffee, tea, mate and spices 30.6% 30.6% 30.6% 30.6% 30.6% 30.6% 30.6% 22.8% 22.3% 20.3% 18.4% '10 Cereals 7.4% 9.5% 16.3% 16.3% 16.3% 16.3% 16.3% 13.8% 13.4% 12.2% 11.2% '11 Milling products, malt,

starches, inulin, wheat gluten 12.3% 12.3% 15.6% 15.6% 15.6% 15.6% 15.6% 13.8% 13.7% 12% 10.5%

'12 Oil seed, oleagic fruits, grain, seed, fruit, etc, nes

6.6% 8.2% 8.4% 8.4% 8.4% 8.4% 8.4% 2.5% 2.4% 1.8% 1.2%

'13 Lac, gums, resins, vegetable saps and extracts nes

4.9% 4.7% 4.9% 4.9% 4.9% 4.9% 4.9% 4.9% 4.4% 3.9% 3.9%

114

HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '14 Vegetable plaiting materials,

vegetable products nes 5% 5% 5% 5% 5% 5% 5% 5% 4.5% 4% 4%

'15 Animal,vegetable fats and oils, cleavage products, etc

19.2% 21.2% 21.8% 21.8% 21.8% 21.8% 21.8% 11.9% 11.5% 10% 8.8%

'16 Meat, fish and seafood food preparations nes

50% 47.5% 50% 50% 50% 50% 50% 34.1% 33.6% 31.1% 28.6%

'17 Sugars and sugar confectionery

33.6% 32.2% 31.5% 31.5% 31.5% 31.5% 31.5% 26.8% 26.7% 25.8% 25%

'18 Cocoa and cocoa preparations 30.3% 30.3% 30.3% 30.3% 30.3% 30.3% 30.3% 16% 16% 14.4% 12.4% '19 Cereal, flour, starch, milk

preparations and products 37% 38.8% 45.3% 45.3% 45.3% 45.3% 45.3% 26% 25.8% 23.3% 20.6%

'20 Vegetable, fruit, nut, etc food preparations

50% 50% 50% 50% 50% 50% 50% 31.8% 31.4% 29% 26.4%

'21 Miscellaneous edible preparations

35.3% 33.6% 34.5% 34.5% 34.5% 34.5% 34.5% 25.7% 25.2% 23.1% 21%

'22 Beverages, spirits and vinegar 84.4% 84.4% 87% 87% 87% 87% 87% 49.2% 49% 48.1% 47.1% '23 Residues, wastes of food

industry, animal fodder 10% 5% 4.8% 4.8% 4.8% 4.8% 4.8% 1.8% 1.7% 1.2% 0.5%

'24 Tobacco and manufactured tobacco substitutes

72.6% 72.6% 73.2% 73.2% 73.2% 73.2% 73.2% 91.2% 91.2% 91.2% 91.2%

'25 Salt, sulphur, earth, stone, plaster, lime and cement

10.2% 11.8% 11.5% 11.5% 11.5% 11.5% 11.5% 11% 10.8% 10.1% 9.5%

'26 Ores, slag and ash 0.4% 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.2% 0.1% '27 Mineral fuels, oils, distillation

products, etc 12.1% 13.4% 10.8% 10.8% 10.8% 10.8% 10.8% 3.9% 3.6% 3.3% 3.2%

'28 Inorganic chemicals, precious metal compound, isotopes

1.8% 2.3% 2% 2% 2% 2% 2% 1.5% 1.3% 1.2% 1.1%

115

HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '29 Organic chemicals 1.2% 1.4% 1.1% 1.1% 1.1% 1.1% 1.1% 0.8% 0.6% 0.5% 0.4% '30 Pharmaceutical products 3.9% 3.7% 4.9% 4.3% 4.9% 4.9% 4.9% 2.3% 2.1% 1.7% 1.4% '31 Fertilizers 0.8% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.4% 0.2% '32 Tanning, dyeing extracts,

tannins, derivs,pigments etc 7.4% 7.4% 7.8% 7.7% 7.8% 7.8% 7.8% 6% 5.9% 5% 4.2%

'33 Essential oils, perfumes, cosmetics, toileteries

39.3% 37.4% 36% 36% 36% 36% 36% 20.8% 20.3% 18.5% 16.6%

'34 Soaps, lubricants, waxes, candles, modelling pastes

21.5% 18.5% 19.4% 19.4% 19.4% 19.4% 19.4% 13.8% 13.3% 12.1% 10.8%

'35 Albuminoids, modified starches, glues, enzymes

10.6% 10.6% 10.6% 10.6% 10.6% 10.6% 10.6% 9% 9% 8% 7.1%

'36 Explosives, pyrotechnics, matches, pyrophorics, etc

11% 11% 11.2% 11.2% 11.2% 11.2% 11.2% 8.2% 8.2% 6.9% 5.6%

'37 Photographic or cinematographic goods

9.3% 8.9% 7% 7% 7% 7% 7% 4.7% 4.4% 3.7% 3.1%

'38 Miscellaneous chemical products

2.7% 2% 3.2% 3.2% 3.2% 3.2% 3.2% 2.2% 1.9% 1.5% 1.3%

'39 Plastics and articles thereof 10.6% 10.6% 11.5% 11.5% 11.5% 11.5% 11.5% 11.5% 7.8% 6.8% 5.8% '40 Rubber and articles thereof 13.2% 13.3% 17% 17% 17% 17% 17% 12.7% 12.4% 11.7% 11% '41 Raw hides and skins (other

than furskins) and leather 5.2% 5.2% 6.1% 6.1% 6.1% 6.1% 6.1% 4.8% 4.6% 4.2% 3.9%

'42 Articles of leather, animal gut, harness, travel goods

40% 40% 40% 40% 40% 40% 40% 29.3% 28.9% 26.6% 24.3%

'43 Furskins and artificial fur, manufactures thereof

11.9% 11.9% 12% 12% 12% 12% 12% 9.8% 9.5% 8.4% 7.2%

'44 Wood and articles of wood, wood charcoal

7.4% 7.4% 7.5% 7.5% 7.5% 7.5% 7.5% 5.8% 5.4% 4.7% 4%

116

HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '45 Cork and articles of cork 14.3% 14.3% 14.3% 14.3% 14.3% 14.3% 14.3% 13.1% 13% 12.1% 11.3% '46 Manufactures of plaiting

material, basketwork, etc. 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% 25.9% 25.9% 23.9% 21.9%

'47 Pulp of wood, fibrous cellulosic material, waste etc

1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1% 1.1% 1% 0.9%

'48 Paper and paperboard, articles of pulp, paper and board

21.5% 23.3% 24.7% 24.7% 24.7% 24.7% 24.7% 18.1% 17.5% 15.8% 14%

'49 Printed books, newspapers, pictures etc

11.2% 11.7% 10% 10% 10% 10% 10% 8.8% 8.5% 7.6% 6.7%

'50 Silk 31.2% 31.2% 31.2% 31.2% 31.2% 31.2% 31.2% 9.3% 8.8% 8.3% 7.6% '51 Wool, animal hair, horsehair

yarn and fabric thereof 18.6% 18.6% 18.6% 18.6% 18.6% 18.6% 18.6% 4.9% 4.4% 4% 3.4%

'52 Cotton 25.8% 25.8% 25.8% 25.8% 25.8% 25.8% 25.8% 7.1% 6.3% 5.3% 4.1% '53 Vegetable textile fibres nes,

paper yarn, woven fabric 24.9% 24.9% 24.9% 24.9% 24.9% 24.9% 24.9% 6.3% 6.1% 5.6% 5.2%

'54 Manmade filaments 20.4% 20.4% 20.4% 20.4% 20.4% 20.4% 20.4% 8.5% 5.5% 5% 4.5% '55 Manmade staple fibres 19.8% 19.8% 19.7% 19.7% 19.7% 19.7% 19.7% 8.1% 5.4% 4.7% 4.2% '56 Wadding, felt, nonwovens,

yarns, twine, cordage, etc 23% 20.1% 18.9% 18.9% 18.9% 18.9% 18.9% 10.4% 10.1% 9.3% 8.6%

'57 Carpets and other textile floor coverings

40% 40% 40% 40% 40% 40% 40% 11% 11% 10% 9%

'58 Special woven or tufted fabric, lace, tapestry etc

38.3% 38% 39% 39% 39% 39% 39% 11.3% 11.3% 10.4% 9.5%

'59 Impregnated, coated or laminated textile fabric

17.5% 17.5% 17.6% 17.6% 17.6% 17.6% 17.6% 6.5% 6.3% 5.7% 5.2%

'60 Knitted or crocheted fabric 40% 40% 40% 40% 40% 40% 40% 11.1% 11% 10% 9%

117

HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '61 Articles of apparel,

accessories, knit or crochet 49.7% 49.6% 49.7% 49.7% 49.7% 49.7% 49.7% 18.9% 17.9% 15.9% 14.4%

'62 Articles of apparel, accessories, not knit or

crochet

49.7% 49.1% 49.2% 49.2% 49.2% 49.2% 49.2% 18.5% 17.6% 15.7% 14.3%

'63 Other made textile articles, sets, worn clothing etc

45.8% 45.8% 46.4% 46.4% 46.4% 46.4% 46.4% 16.9% 16.7% 15.7% 14.7%

'64 Footwear, gaiters and the like, parts thereof

47.4% 47.6% 48.3% 48.3% 48.3% 48.3% 48.3% 35.3% 34.9% 32.7% 30.5%

'65 Headgear and parts thereof 36.6% 36.6% 34.8% 34.8% 34.8% 34.8% 34.8% 24.6% 24.1% 22.4% 20.5% '66 Umbrellas, walking-sticks,

seat-sticks, whips, etc 39% 39% 39% 39% 39% 39% 39% 33% 32.7% 30.4% 28.1%

'67 Bird skin, feathers, artificial flowers, human hair

37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 37.5% 28.7% 28.5% 26.4% 24.4%

'68 Stone, plaster, cement, asbestos, mica, etc articles

19.4% 19.4% 19.6% 19.6% 19.6% 19.6% 19.6% 14.3% 14% 12.7% 11.4%

'69 Ceramic products 39.5% 39.5% 40.9% 40.9% 40.9% 40.9% 40.9% 34.3% 34% 31.9% 29.8% '70 Glass and glassware 18.5% 18.4% 21.2% 21.3% 21.2% 21.2% 21.2% 18.1% 17.8% 16.8% 16.9% '71 Pearls, precious stones,

metals, coins, etc 7.8% 7.8% 7.7% 7.7% 7.7% 7.7% 7.7% 6.5% 6.3% 5% 4.2%

'72 Iron and steel 5.8% 6.2% 7% 7% 7% 7% 7% 5.5% 3.3% 2.6% 1.8% '73 Articles of iron or steel 12.9% 13% 12.3% 12.3% 12.3% 12.3% 12.3% 11% 8.8% 7.8% 7% '74 Copper and articles thereof 1.8% 1.8% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.6% 1.2% 0.8% '75 Nickel and articles thereof 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% '76 Aluminium and articles

thereof 5.2% 5.3% 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% 5.4% 4.5% 3.7%

118

HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '78 Lead and articles thereof 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% '79 Zinc and articles thereof 1% 1% 1% 1% 1% 1% 1% 0.6% 0.6% 0.4% 0.2% '80 Tin and articles thereof 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.4% 4.3% 3.6% 3% '81 Other base metals, cermets,

articles thereof 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'82 Tools, implements, cutlery, etc of base metal

9.4% 9.4% 11.1% 11.1% 11.1% 11.1% 11.1% 9.5% 9.4% 8.2% 7%

'83 Miscellaneous articles of base metal

25.8% 26.7% 26.8% 26.8% 26.8% 26.8% 26.8% 22.3% 21.9% 19.9% 18.1%

'84 Machinery, nuclear reactors, boilers, etc

6.7% 6.8% 7.2% 7.2% 7.2% 7.2% 7.2% 4.6% 4.2% 3.7% 3.3%

'85 Electrical, electronic equipment

11.7% 11.3% 10.3% 10.3% 10.3% 10.3% 10.3% 6.6% 6.3% 5.2% 4.2%

'86 Railway, tramway locomotives, rolling stock,

equipment

0% 0.6% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'87 Vehicles other than railway, tramway

53.7% 53.5% 45.7% 45.7% 45.7% 45.7% 45.7% 26.8% 26.6% 25.9% 25.3%

'88 Aircraft, spacecraft, and parts thereof

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'89 Ships, boats and other floating structures

4.2% 4.2% 8.3% 8.3% 8.3% 8.3% 8.3% 6.2% 5.9% 5.3% 4.8%

'90 Optical, photo, technical, medical, etc apparatus

0.9% 0.9% 1.1% 1.1% 1.1% 1.1% 1.1% 0.9% 0.8% 0.6% 0.4%

'91 Clocks and watches and parts thereof

36.8% 36.8% 36.8% 36.8% 36.8% 36.8% 36.8% 21.6% 21.1% 19.4% 17.6%

'92 Musical instruments, parts 3% 3% 3% 3% 3% 3% 3% 3% 3% 2.5% 2%

119

and accessories HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'93 Arms and ammunition, parts and accessories thereof

6% 6% 4.5% 4.5% 4.5% 4.5% 4.5% 3.5% 3.4% 3.4% 3.3%

'94 Furniture, lighting, signs, prefabricated buildings

31.2% 31.1% 33.4% 33.4% 33.4% 33.4% 33.4% 23.8% 23.6% 20.8% 18.8%

'95 Toys, games, sports requisites 32.1% 32.1% 32.1% 32.1% 32.1% 32.1% 32.1% 18.3% 17.7% 15.5% 13.5% '96 Miscellaneous manufactured

articles 29.6% 29.6% 30% 30% 30% 30% 30% 24.9% 24.4% 22.5% 20.4%

'97 Works of art, collectors pieces and antiques

3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.3% 2.8% 2.5%

Source: Statistics of international trade centre (ITC) (from 2005 to 2007 and 2010), UNCTAD (from 2001 to 2004) and author own’

calculation in 2008 and 2009 from Vietnam’s tariff reduction schedule according to ACEPA and VJEPA5

5 The methodology for the estimation of ad valorem tariff is as follows. The tariffs applied at the national tariff lines (NTL) are aggregated up to the HS 6-digit level by the calculation of the simple average of the lowest available tariff applied to the partner country. To aggregating tariffs from the HS 6-digit level up to the HS 4 and HS 2-digit level, the weighted average is used. The weight used here was the reference groups’ import pattern from the world. The weight 푀 (i= 1 to 10 reference group; j= 1 to n products at the HS6 level) refers to the value of product j imported from the world by the reference group i to which the importing country belongs to, taking into account the total import of the reference group i. The reference groups of the country are the groups of countries that are similar to the importing country in term of certain criteria. There are 10 reference groups which are classified based on 10 criterion in grouping countries, which are the human development index, population, GDP, GDP per capita, agricultural trade balance, industrial trade balance, share of agricultural products in imports, share of industrial products in imports, average of import tariffs for industrial products, average of import tariffs for agricultural products. The aggregation from HS 4-digit level to HS 2-digit level follows the similar process.

120

APPENDIX IX

Table I: Total ad valorem tariff of Japan applied for Vietnam from 2001 to 2011

Unit: percent

HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '01 Live animals 1.9% 1.9% 1.9% 1.9% 1.2% 1.2% 1.2% 1.2% 1.1% 1% 0.9% '02 Meat and edible meat offal 16.2% 16.2% 16.2% 16.2% 15.8% 15.8% 15.8% 15.8% 15.7% 15.6% 15.5% '03 Fish, crustaceans, molluscs,

aquatic invertebrates nes 4.7% 4.3% 4.7% 4.7% 4.7% 4.7% 4.4% 4.4% 4.2% 4% 3.9%

'04 Dairy products, eggs, honey, edible animal product nes

21.3% 21.3% 21.3% 21.3% 21.3% 21.3% 21.3% 21.3% 21.1% 20.6% 20%

'05 Products of animal origin, nes 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.2% 0% 0% 0% '06 Live trees, plants, bulbs, roots,

cut flowers etc 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0% 0% 0%

'07 Edible vegetables and certain roots and tubers

4.4% 4.5% 4.5% 4.5% 4.4% 4.4% 4.4% 4.4% 3.3% 2.5% 1.8%

'08 Edible fruit, nuts, peel of citrus fruit, melons

10.4% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 10.3% 9% 7.8% 6.6%

'09 Coffee, tea, mate and spices 4% 4% 4% 4% 4% 4% 4% 4% 3.6% 3.3% 3% '10 Cereals 2.3% 2.3% 2.3% 2.3% 2.4% 2.3% 2.3% 2.3% 3.7% 3.3% 2.9% '11 Milling products, malt, starches,

inulin, wheat gluten 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 13.2% 10.2% 7.2% 4.3%

'12 Oil seed, oleagic fruits, grain, seed, fruit, etc, nes

0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.2% 0.1% 0.1%

121

HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '13 Lac, gums, resins, vegetable saps

and extracts nes 1.8% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.5% 1.3% 1%

'14 Vegetable plaiting materials, vegetable products nes

3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 2.9% 2.9% 0.4% 0.3% 0.1%

'15 Animal,vegetable fats and oils, cleavage products, etc

2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.4% 2.4% 2.1% 1.5% 0.9%

'16 Meat, fish and seafood food preparations nes

10.1% 10.1% 10.1% 10.1% 10.1% 9.8% 9.8% 9.8% 9.2% 8.6% 8.1%

'17 Sugars and sugar confectionery 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 6.8% 7.1% 7.6% 7.5% 7.4% '18 Cocoa and cocoa preparations 12% 12% 12% 12% 12% 12% 12% 12% 11.7% 11.4% 11.1% '19 Cereal, flour, starch, milk

preparations and products 18% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 17.6% 16.8% 16% 15.2%

'20 Vegetable, fruit, nut, etc food preparations

15.9% 15.7% 15.9% 15.9% 15.9% 15.9% 15.9% 15.9% 13.2% 12.6% 12%

'21 Miscellaneous edible preparations

17.1% 17.2% 17.1% 17.1% 17.3% 17.1% 17.1% 17.1% 16.5% 15.9% 15.1%

'22 Beverages, spirits and vinegar 3.9% 2.7% 2.9% 2.9% 3.6% 3.1% 2.6% 2.6% 2.3% 2% 1.8% '23 Residues, wastes of food

industry, animal fodder 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.2% 0.2%

'24 Tobacco and manufactured tobacco substitutes

1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.9% 1.9% 1.9%

'25 Salt, sulphur, earth, stone, plaster, lime and cement

0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0% 0% 0%

'26 Ores, slag and ash 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% '27 Mineral fuels, oils, distillation

products, etc 1% 1% 1% 1% 1% 0.8% 0.8% 0.8% 0.2% 0% 0%

'28 Inorganic chemicals, precious 1.9% 1.9% 1.9% 1.9% 2% 1.9% 1.7% 1.7% 0% 0% 0%

122

metal compound, isotopes HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'29 Organic chemicals 2% 2% 2% 2% 2% 2% 1.8% 1.8% 0.1% 0.1% 0.1% '30 Pharmaceutical products 0% 0% 0% 0% 0% 0% 0.3% 0.3% 0% 0% 0% '31 Fertilizers 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% '32 Tanning, dyeing extracts,

tannins, derivs,pigments etc 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.3% 3.3% 0% 0% 0%

'33 Essential oils, perfumes, cosmetics, toileteries

0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.2% 0% 0%

'34 Soaps, lubricants, waxes, candles, modelling pastes

0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0% 0% 0%

'35 Albuminoids, modified starches, glues, enzymes

4.1% 4.1% 4.1% 4.1% 4.1% 4.1% 4% 4% 3.4% 2.9% 2.5%

'36 Explosives, pyrotechnics, matches, pyrophorics, etc

5.4% 5.4% 5.4% 5.4% 5.4% 4.4% 4.4% 4.4% 0% 0% 0%

'37 Photographic or cinematographic goods

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'38 Miscellaneous chemical products 1.7% 1.8% 1.8% 1.8% 1.8% 1.8% 2.1% 2.1% 0% 0% 0% '39 Plastics and articles thereof 3.2% 3.2% 3.2% 3.9% 3.9% 3.2% 2.9% 2.9% 0.3% 0.2% 0.1% '40 Rubber and articles thereof 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0% 0% 0% '41 Raw hides and skins (other than

furskins) and leather 16% 14.4% 14.4% 14.4% 14.4% 14.4% 14.4% 14.4% 11.8% 9.2% 6.6%

'42 Articles of leather, animal gut, harness, travel goods

10.6% 10.3% 10.3% 10.6% 10.6% 10.6% 10.6% 10.6% 8.9% 7.9% 6.9%

'43 Furskins and artificial fur, manufactures thereof

11.7% 11.7% 11.7% 11.7% 11.8% 11.7% 12% 12% 12% 11.7% 10.4%

'44 Wood and articles of wood, 2.6% 2.5% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 1.9% 1.5% 1.2%

123

wood charcoal HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

'45 Cork and articles of cork 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% '46 Manufactures of plaiting

material, basketwork, etc. 5.1% 5.1% 5.1% 5.1% 5.1% 5.1% 5.5% 5.5% 0.5% 0.3% 0.1%

'47 Pulp of wood, fibrous cellulosic material, waste etc

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'48 Paper and paperboard, articles of pulp, paper and board

1% 0.4% 0.2% 0% 0% 0% 0% 0% 0% 0% 0%

'49 Printed books, newspapers, pictures etc

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'50 Silk 7.6% 7.6% 7.6% 7.6% 8.1% 7.6% 7.6% 7.6% 0% 0% 0% '51 Wool, animal hair, horsehair yarn

and fabric thereof 3.2% 3% 2.9% 2.7% 2.7% 2.7% 2.7% 2.7% 0% 0% 0%

'52 Cotton 4.9% 4.7% 4.5% 4.3% 4.3% 4.3% 4.3% 4.3% 0% 0% 0% '53 Vegetable textile fibres nes,

paper yarn, woven fabric 7.4% 6.9% 6.4% 5.9% 5.9% 5.9% 5.9% 5.9% 0% 0% 0%

'54 Manmade filaments 6.8% 6.5% 6.2% 5.9% 5.9% 5.9% 5.9% 5.9% 0% 0% 0% '55 Manmade staple fibres 7.1% 6.8% 6.5% 6.2% 6.2% 6.2% 6.2% 6.2% 0% 0% 0% '56 Wadding, felt, nonwovens, yarns,

twine, cordage, etc 4.1% 3.9% 3.7% 3.5% 3.5% 3.5% 3.5% 3.5% 0% 0% 0%

'57 Carpets and other textile floor coverings

6.5% 6.2% 5.9% 5.6% 7.2% 5.6% 5.6% 5.6% 0% 0% 0%

'58 Special woven or tufted fabric, lace, tapestry etc

7.4% 7.1% 6.8% 6.5% 6.8% 6.3% 6.3% 6.3% 0% 0% 0%

'59 Impregnated, coated or laminated textile fabric

4.2% 4% 3.9% 3.7% 3.8% 3.7% 3.7% 3.7% 0% 0% 0%

124

HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '60 Knitted or crocheted fabric 8.8% 8.4% 7.9% 7.5% 7.5% 7.3% 7.3% 7.3% 0% 0% 0% '61 Articles of apparel, accessories,

knit or crochet 11% 10.6% 10.1% 9.7% 9.7% 9.6% 9.6% 9.6% 0% 0% 0%

'62 Articles of apparel, accessories, not knit or crochet

11.3% 10.7% 10.1% 9.5% 9.5% 9.5% 9.5% 9.5% 0% 0% 0%

'63 Other made textile articles, sets, worn clothing etc

6.3% 6.1% 5.9% 5.6% 5.6% 5.6% 5.6% 5.6% 0% 0% 0%

'64 Footwear, gaiters and the like, parts thereof

18.4% 18.1% 18.2% 18.3% 16.1% 16.1% 15.6% 15.6% 15.6% 15.5% 15.4%

'65 Headgear and parts thereof 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.3% 5.3% 0% 0% 0% '66 Umbrellas, walking-sticks, seat-

sticks, whips, etc 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 0% 0% 0%

'67 Bird skin, feathers, artificial flowers, human hair

2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 0% 0% 0%

'68 Stone, plaster, cement, asbestos, mica, etc articles

0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0% 0% 0%

'69 Ceramic products 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 0% 0% 0% '70 Glass and glassware 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% 0.2% 0.1% 0.1% '71 Pearls, precious stones, metals,

coins, etc 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0% 0% 0%

'72 Iron and steel 1.2% 0.9% 0.6% 0.3% 0.3% 0.3% 0.3% 0.2% 0% 0% 0% '73 Articles of iron or steel 0.9% 0.8% 0.6% 0.5% 0.5% 0.5% 0.5% 0.5% 0% 0% 0% '74 Copper and articles thereof 1.8% 1.7% 1.8% 1.8% 1.8% 1.2% 1.2% 1.2% 0% 0% 0% '75 Nickel and articles thereof 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0% 0% 0% '76 Aluminium and articles thereof 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 0% 0% 0% '78 Lead and articles thereof 0.8% 0.8% 0.8% 0.8% 0.7% 0.7% 0.7% 0.7% 0% 0% 0%

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HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '79 Zinc and articles thereof 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0% 0% 0% '80 Tin and articles thereof 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% 0% 0% 0% '81 Other base metals, cermets,

articles thereof 1.1% 1.1% 1.1% 1.1% 1.7% 1.1% 1.1% 1.1% 0% 0% 0%

'82 Tools, implements, cutlery, etc of base metal

0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0% 0% 0%

'83 Miscellaneous articles of base metal

2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 0% 0% 0%

'84 Machinery, nuclear reactors, boilers, etc

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'85 Electrical, electronic equipment 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0% 0% 0% '86 Railway, tramway locomotives,

rolling stock, equipment 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'87 Vehicles other than railway, tramway

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'88 Aircraft, spacecraft, and parts thereof

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'89 Ships, boats and other floating structures

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'90 Optical, photo, technical, medical, etc apparatus

0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0% 0% 0%

'91 Clocks and watches and parts thereof

0.1% 0.1% 0.1% 0.1% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

'92 Musical instruments, parts and accessories

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

'93 Arms and ammunition, parts and accessories thereof

7.3% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 0% 0% 0%

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HS code Products 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '94 Furniture, lighting, signs,

prefabricated buildings 0.4% 0.4% 0.4% 0.5% 0.5% 0.5% 0.5% 0.5% 0.4% 0.3% 0.2%

'95 Toys, games, sports requisites 1.5% 1.4% 1.4% 1.3% 1.3% 1.3% 0.7% 0.7% 0.1% 0% 0% '96 Miscellaneous manufactured

articles 3% 3% 3% 3% 3% 3% 3% 3% 0% 0% 0%

'97 Works of art, collectors pieces and antiques

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Source: Statistics of international trade centre (ITC) from 2005 to 2008 and 2011, UNCTAD from 2001 to 2004 and author own’

calculation from database of Japan Customs6 in 2009 and 2010.

6 http://www.customs.go.jp/english/tariff/index.htm

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