Minister of Industry and Trade Tran Tuan Anh said that the possibility of rising trade deficit is not a major concern as Vietnam has already signed free trade agreements with other ASEAN members, and with five non-ASEAN members of through the ASEAN+1 trade pacts.
This has meant that over the last two decades, a slow reduction of tariffs has been taking place, and there will be no abrupt import tariffs drop in Vietnam, he told reporters recently.
The RCEP will help link commitments of the five individual trade pacts between ASEAN and the five non-ASEAN members together, he said.
For example, without the RCEP, Vietnamese companies will have to follow a different set of regulations to benefit from incentives while exporting to each of the five non-ASEAN countries, but with the RCEP, there will only be one set of rules to abide by.
“The RCEP focuses more on creating opportunities for small and medium businesses to join the new supply chains,” and Vietnam should not be too concerned about the possibility of widening trade deficits widened, the minister reiterated.
Vietnam has been recording a trade deficit with most of the 14 other signatories to the Regional Comprehensive Economic Partnership (RCEP), data from Vietnam Customs shows.
In the first 10 months of this year, the trade deficit was $27.71 billion with China, $21.37 billion with South Korea and $5.58 billion with other ASEAN members.
Economist Ngo Tri Long said that there was a possibility that imports from China and South Korea will increase, but the door will also open wider for Vietnamese firms to export to these countries.
“Rising imports could be balanced out by increasing exports, and therefore, the trade deficit will remain mostly unchanged,” he told VnExpress International.
Vietnam has already recorded a high trade surplus with most other countries, with the total reaching a record high of $18.72 billion in the first 10 months this year, and a sudden rise in trade deficits is not imminent, he added.
However, Minister Anh said there are some valid concerns about rising competition between Vietnam and other countries with similar export categories, because the added value of Vietnamese products is still modest.
Vietnam’s manufacturing sector still relies on sourcing materials from other countries, and it will face difficulties in improving its place in the supply chain, he added.
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