WTO membership strengthens Vietnam's outlook
| Author | Patrizia Tumbarello |
| Position | IMF Asia and Pacific Department |
| Pages | 17-23 |
Page 17
On January 11, Vietnam became the 150th member of the World Trade Organization (WTO). Leading up to its accession, it had already greatly increased its trade openness and more than tripled its export market share. WTO membership is likely to strengthen its economic performance and facilitate its integration into the global economy. Vietnam is also likely to benefit from reforms being introduced to meet WTO commitments.
Page 23
Vietnam became the 150th member of the World Trade Organization (WTO) on January 11, 2007. Before joining, Vietnam had made great strides toward integration with the global economy. Since 1993, the sum of exports and imports in relation to GDP has more than doubled, and its export market share has more than tripled. With exports becoming a leading engine of growth, GDP growth has averaged more than 7½ percent a year, and poverty has fallen sharply. Given this impressive performance, an obvious question is how the WTO will offer new opportunities and challenges for Vietnam's future.
WTO accession will facilitate Vietnam's further global integration. Vietnamese exporters' access to foreign markets should improve as other WTO members are expected to remove remaining quantitative restrictions on imports of Vietnamese textiles and footwear. To be sure, Vietnam will also face greater competition from foreign producers in its domestic market for garments and footwear because its import tariffs and subsidies will be substantially reduced upon accession. However, with improving access to imports of cheaper raw materials and semiprocessed inputs, these sectors are broadly expected to preserve their comparative advantage. The realized benefits for export performance, however, could be tempered by the 12 years it will take Vietnam to gain full "market economy" status.
Import barriers in most other sectors would also decline. As shown in the table, Vietnam has committed to bound tariff rates (or legal ceilings) on most products ranging from zero to 35 percent, although tariffs on cars and motorbikes are to remain somewhat higher, and certain sensitive products (such as eggs, tobacco, sugar, and salt) will be subject to tariff quotas (higher duties for quantities outside the quotas). Reductions in most bound rates-from 17.4 percent on average in 2007 to 13.6 percent by...
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