Viet Nam WTO Accession and Viet Nam WTO Accession and - - PowerPoint PPT Presentation

Viet Nam WTO Accession and Viet Nam WTO Accession and Implications for Agriculture Implications for Agriculture

David Roland-Holst

UC Berkeley MARD Workshop on GLOBALIZATION AND AGRICULTURAL DEVELOPMENT IN VIETNAM 13-14 December 2005 Nha Trang – Viet Nam

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Outline Outline

• 1. Introduction and Overview
• 2. Economic Projections to 2020
• 3. Poverty and WTO Accession
• 4. Agricultural Services and WTO
• 5. Issues and Conclusions

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Introduction Introduction

Vietnam’s WTO accession is a watershed event for the economy. It will offer unprecedented external market

• pportunities,

But also unique opportunities for domestic reform. Our results indicate that external and domestic reform must go hand-in-hand if their full potential is to be realized.

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Trade and Economic Growth: Trade and Economic Growth: General Principles General Principles

Quantity of Growth can be influenced by trade opening. Quality of Growth depends on many other policies. Important qualitative growth characteristics:

• 1. Diversification
• 2. Modernization
• 3. Poverty alleviation

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Trade, Human Resources, and Income Trade, Human Resources, and Income

Vietnam is far from realizing its trade potential.

GDP Exports

Population

Indonesia Malaysia Philippines Singapore Thailand Vietnam

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Domestic and External Reform Domestic and External Reform

Examples of how domestic reform can facilitate readiness for WTO accession include, but are not limited to:

• 1. Harmonization of standards for commercial activity, including

licensing, contracts and other legal standards.

• 2. Uniform and transparent product quality standards, including SPS

and other health safety.

• 3. Removal of administered price systems and greater transparency

in fiscal mechanisms.

• 4. Clear delineation of property rights, including uniform standards for
• wnership and transferability.
• 5. Agriculture-oriented policies that promote productivity, including

consolidation, technology transfer/adoption, and credit markets.

• 6. Uniform and transparent labor standards and residential policies.
• 7. Public-private parity in credit acces and price.
• 8. Improved transparency and reporting of national economic data.
• 9. Private sector development (ISO and other business standards).

10.Financial sector reform and regulatory standardization, especially in commercial banking, insurance, and asset markets.

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Economic Projections to 2020: Economic Projections to 2020: Modeling Strategy Modeling Strategy

Policy makers need visibility. Economic models can make a lasting contribution to this under three conditions:

1. They incorporate advanced data and methods. 2. Their results are transparent. 3. They are locally implemented.

In order to achieve these three goals, we developed a modeling facility with a user-friendly interface and a sophisticated analytical kernel .

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Schematic Modeling Facility Schematic Modeling Facility

Social Accounting Matrix Econometric Parameter Estimates Policy Scenarios CGE Model Baseline Calibration Data Numerical Results Graphical Output

Development Simulation Analysis

Box Color Key to Software Implementation: Green – Microsoft Excel Yellow – GAMS

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Scenarios Scenarios

1.

Baseline: calibrated trends without reform or WTO.

2.

WTO: External reform only, via WTO accession.

3.

Reform-WTO: Combined external-domestic reform.

4.

Reform-UTL: Domestic reform with unilateral removal of all Vietnamese import protection.

5.

AgK: Reform, WTO accession, and 2% annual capital productivity growth in agriculture.

6.

AgTFP: Identical to AgK, except Total Factor productivity in Vietnamese agriculture grows by 2% annually.

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Trade and Economic Growth: Trade and Economic Growth: Real GDP to 2020 Real GDP to 2020

100 120 140 160 180 200 220 240 260 280 2000 2005 2010 2015 2020

Baseline WTO ReformWTO RefUTL AgK AgTFP

Indexed to year 2000=100.

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Real Agricultural Output Real Agricultural Output

(percentage changes from Baseline in 2020) (percentage changes from Baseline in 2020)

• 10

10 20 30 40 50 60 WTO ReformWTO RefUTL AgK AgTFP

Rice Raw Rubber Coffee Bean Sugar Cane Other Crops Pigs Poultry Livestock I rrigation Serv Other Ag Serv Forestry Fishery

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Dac Lac Gia Lai Son La Lai Chau Nghe An Lao Cai Kon Tum Song Be Thanh Hoa Lam Dong Cao Bang Lang Son Ha Giang Yen Bai Minh Hai Ha Tinh Bac Thai Binh Thuan Ha Bac Quang Binh Dong Nai Vinh Phu Binh Dinh Quang Nam-Da Nang Long An Hoa Binh Kien Giang Phu Yen Quang Tri Tuyen Quang Quang Ninh Quang Ngai Can Tho Khanh Hoa An Giang Ninh Thuan Soc Trang Nam Ha Dong Thap Ha Tay Thua Thien-Hue Hai Hung Ben Tre Tra Vinh Ninh Thuan Tien Giang Thai Binh Ninh Binh Ba Ria - Vung Tau Kien Giang Dac Lac Gia Lai Son La Lai Chau Nghe An Lao Cai Kon Tum Song Be Thanh Hoa Lam Dong Cao Bang Lang Son Ha Giang Yen Bai Minh Hai Ha Tinh Bac Thai Binh Thuan Ha Bac Quang Binh Dong Nai Vinh Phu Binh Dinh Quang Nam-Da Nang Long An Hoa Binh Kien Giang Phu Yen Quang Tri Tuyen Quang Quang Ninh Quang Ngai Can Tho Khanh Hoa An Giang Ninh Thuan Soc Trang Nam Ha Dong Thap Ha Tay Thua Thien-Hue Hai Hung Ben Tre Tra Vinh Ninh Thuan Tien Giang Thai Binh Ninh Binh Ba Ria - Vung Tau Kien Giang Dac Lac Gia Lai Son La Lai Chau Nghe An Lao Cai Kon Tum Song Be Thanh Hoa Lam Dong Cao Bang Lang Son Ha Giang Yen Bai Minh Hai Ha Tinh Bac Thai Binh Thuan Ha Bac Quang Binh Dong Nai Vinh Phu Binh Dinh Quang Nam-Da Nang Long An Hoa Binh Kien Giang Phu Yen Quang Tri Tuyen Quang Quang Ninh Quang Ngai Can Tho Khanh Hoa An Giang Ninh Thuan Soc Trang Nam Ha Dong Thap Ha Tay Thua Thien-Hue Hai Hung Ben Tre Tra Vinh Ninh Thuan Tien Giang Thai Binh Ninh Binh Ba Ria - Vung Tau Kien Giang Dac Lac Gia Lai Son La Lai Chau Nghe An Lao Cai Kon Tum Song Be Thanh Hoa Lam Dong Cao Bang Lang Son Ha Giang Yen Bai Minh Hai Ha Tinh Bac Thai Binh Thuan Ha Bac Quang Binh Dong Nai Vinh Phu Binh Dinh Quang Nam-Da Nang Long An Hoa Binh Kien Giang Phu Yen Quang Tri Tuyen Quang Quang Ninh Quang Ngai Can Tho Khanh Hoa An Giang Ninh Thuan Soc Trang Nam Ha Dong Thap Ha Tay Thua Thien-Hue Hai Hung Ben Tre Tra Vinh Ninh Thuan Tien Giang Thai Binh Ninh Binh Ba Ria - Vung Tau Kien Giang

Poverty Specialization

• Mkt. Distance

Ag TOT

Unfavorable Favorable

Poverty and Related Variables Poverty and Related Variables

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Poverty and Market Access 2: Poverty and Market Access 2: Dual Initial Conditions Dual Initial Conditions

Yet most of Vietnam’s poor live near markets. Poverty is more common in remote areas

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• 25.00
• 20.00
• 15.00
• 10.00
• 5.00

0.00 5.00 10.00 15.00 20.00 25.00 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Baseline Poverty Rate Percent Change in Poverty Rate

Doha Holds Little Potential for Doha Holds Little Potential for Vietnam without WTO Accession Vietnam without WTO Accession

Doha has a negligible but regressive effect, since there are few trade gains for a nonmember. (by province)

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• 40.00
• 35.00
• 30.00
• 25.00
• 20.00
• 15.00
• 10.00
• 5.00

0.00 5.00 10.00 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Baseline Poverty Rate Percent Change in Poverty Rate

Poverty Rates and WTO Accession Poverty Rates and WTO Accession

With global reciprocity, positive export terms-of-trade and ag demand growth lead to progressive effects (by province)

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Agricultural Services and WTO Agricultural Services and WTO

• Vietnam filed its application to join the WTO

in early 1995, and concluded its 11th round

• f negotiations in September 2005.
• Both SPS- and TRIPS-related issues have

proved to be obstacles in the negotiations.

• Vietnam has made great strides in

agriculture since domestic reforms began in 1982, but much remains to be accomplished.

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Priorities for Agriculture Priorities for Agriculture

• Tackling rural poverty
• Scale and services for smallholder

agriculture

• Adding value to agriculture
• Modernizing infrastructure
• Reforming state-owned enterprises

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Farm Scale and Poverty Farm Scale and Poverty

Population density per hectare of farmland is a serious constraint on actual and potential income growth. There are two ways to overcome this, higher crop value and migration.

500 1,000 1,500 2,000 2,500 3,000 3,500 40 50 60 70 Percent Urban Population Farm Revenue per Capita (2003 USD) Rice Fruit

Estimated Revenue per Capita for Vietnamese Crops at US Prices

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Farm Population and Poverty Farm Population and Poverty

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 10 20 30 40 50 60 70 80 Percent Reduction in Farm Population Farm Worker Value Added (2003 USD)

Per Worker Value Added at Different Levels of Farm Population

Farm populations in middle income countries are 15- 30%, in high income countries 1-15%.

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Adding Value to Agriculture Adding Value to Agriculture

• Continue to shift emphasis from quantitative

targets toward quality standards.

• Facilitate greater domestic and external market

participation.

• Invest in better infrastructure, research, and

extension activities.

• Use external negotiation and partnerships to

accelerate technology and standards adoption within Viet Nam’s farming sector.

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Modernizing Infrastructure Modernizing Infrastructure

Domestic private and public savings are a serious constraint.

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 10000 20000 30000 40000 50000 Normalized to Maximum Income per Capita Pavement/Area Elec/Cap Mobile

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Regional Public and Private Regional Public and Private Investment Investment (Asian inbound Aid and FDI, USD Billions)

(Asian inbound Aid and FDI, USD Billions)

20 40 60 80 100 120 140 160

1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 1 9 7 7 1 9 7 8 1 9 7 9 1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3

ODA-Asia FDI-Asia

In Asia, external private savings (FDI) does much of the work.

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Issues 1: Challenges and Opportunities Issues 1: Challenges and Opportunities for Viet Nam Agriculture for Viet Nam Agriculture

Challenges

• Institutional constraints

– Price transparency – Cost of capital – Trade and transport margins – Small scale

• Process constraints

– Technology – Diversification – Quality – Value-added

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Issues 1: Challenges and Opportunities Issues 1: Challenges and Opportunities for Viet Nam Agriculture for Viet Nam Agriculture

Opportunities

• Regional Cereals Demand

– China – Japan –

Korea

• OECD Fishery Demand

– Global marine stocks are being depleted – Dietary shifts in protein/fat content

• Significant potential for agricultural diversification

– Fruit – Salad vegetables – Horticulture

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Issues 2: Domestic Policy Considerations Issues 2: Domestic Policy Considerations

• Product markets – reduce barriers to market access/entry,

especially for domestic private interests

– Invest in infrastructure, transport, and communications – Reduce trade margins due to administration/regulation – Reduce direct and indirect financial bias favoring state enterprises

• Capital markets – greater recognition of market forces

– More equal private/public access to domestic and external savings – Promote a transparent relationship between risk and return

• Labor markets – increase investments in education/training
• Fiscal policy – nondistortionary standards for taxation,

uniformly applied

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Issues 3: External Policy Considerations Issues 3: External Policy Considerations

Fuller participation in the global economy will improve efficiency, leverage domestic production capacity and employment, and accelerate modernization. To facilitate this, the government can

• Minimize price distortions in tradable commodities
• Give more equal market access for domestic and international

participants

• Liberalize direct foreign investment in all sectors and harmonize

banking and financial market standards with international norms

• Share more of the burden of development risk with foreigners
• Promote Vietnamese enterprises abroad and negotiate balanced

market access with trading partners

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Issues 4: Human Resources, Trade, Issues 4: Human Resources, Trade, and Development and Development

To avoid economic marginalization with trade-induced economic growth, all factor productivity must be increased and the skill base of the economy must be diversified. This can be done 1. Publicly – extend and intensify public commitments to education, training, agricultural extension services, and standards. 2. Privately – let foreign and domestic private capital do the work. As the economy develops, so will a web of training opportunities for workers and farmers, particularly in emergent sectors with higher labor productivity and wages.

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Conclusion 1 Conclusion 1

• The gains Vietnam can enjoy from external

liberalization will be seriously limited unless they coincide with comprehensive and sustained domestic economic reform.

• The most important insight emerging from

this analysis is the essential complementarity between domestic and external economic reform.

• Both are necessary, but neither alone is

sufficient, to realize the great economic potential of Vietnam.

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Conclusion 2 Conclusion 2

• Our results indicate that the current WTO
• ffer reduces average protection levels

incompletely but substantially, and such a reduction could realize about 80% of the gains from complete removal of protection.

• Thus, this first phase of trade liberalization

is by far the most important for Vietnam. However, the need for complementary domestic reforms is even greater if external liberalization is incomplete.

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Conclusion 3 Conclusion 3

• In the absence of other policy measures, the
• ffer will lead to intensification of Vietnam’s

traditional comparative advantages.

• This would narrow the basis for development,

modernization, and productivity growth, and not be in Vietnam’s best long term interest.

• It can be avoided by policies that promote

economic diversification and negotiated external market access, especially intensifying bilateral and regional arrangements.

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Conclusion 4 Conclusion 4

• For agriculture, policies to promote quality

and productivity growth are essential.

• Without these, the agricultural sector will

fall behind the rest of the economy, food imports will rise dramatically, and food exports will be diverted back into the domestic market.

• The key to food security and rising rural

livelihoods is not protectionism, but promoting productivity, value added, and competitiveness.

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Discussion Discussion