Assessing the impacts of deeper trade reform in Vietnam in a general equilibrium framework

Vietnam is currently undertaking deeper trade liberalization, both by reducing tariffs and introducing reforms in other trade-related areas. In this paper, the impact of Vietnam’s trade reforms on its economic welfare and sectoral adjustments are assessed using a dynamic computable general equilibrium (CGE) model. We consider the effects of goods and services trade liberalization, an increase in foreign direct investment inflows, a reduction in administrative and technical barriers to trade, and a reduction in trade and transport margins. When all effects are combined, Vietnam’s economic welfare is projected to increase by 8.4 per cent in 2020 compared to the baseline. Many manufacturing sectors would expand, whereas agricultural, minerals and fuel sectors would contract. The output expansion is most significant in the textiles and wearing apparel sector.