Vietnams Regional Trade Performance after its Completion of ASEAN Free Trade Commitments

Abstract

ASEAN Free Trade Area came into existence in 1992 with target of further facilitating intra-ASEAN trade. Afterwards, Vietnam joined AFTA in 1996 and completed its AFTA commitments in 2006. This study aims to analyze the changes that AFTA participation may cause to Vietnam‟s intra-ASEAN trade after its completion of AFTA commitments. The data from 1999 to 2010 along with a number of trade indicators indicate that AFTA integration brings substantial changes to Vietnam‟s regional trade performance. With aggregated trade data, the study finds that AFTA integration causes trade diversion of Vietnam and, to some little extent, brings relatively small trade creation. After 2006, Vietnam was trading less with AFTA members and more with outside-bloc partners, which was an unexpected scenario of AFTA integration. Vietnam also ran huge trade deficit with AFTA members during the post-integration period. However, in some product categories, Vietnam‟s intra-ASEAN trade did bring trade surplus. AFTA market in post-integration was also easily accessible to Vietnam‟s comparative disadvantage products.

Key words: Integration, Trade