Effects of Trade Agreements and Foreign Direct Investment on Trade: Evidence From Vietnam

Abstract

In recent years, Vietnam has embarked on trade liberalisation leading to increased trade flows, as well as benefiting from increased foreign direct investment (FDI) inflows. This paper analyses the impacts of a range of trade agreements and FDI inflows on Vietnamese trade flows. We offer new insights through considering which of the key trade agreements have been more efficient in expanding Vietnamese trade, and how the sensitivity of trade to FDI has changed as a result. The estimation of gravity models over a 1996-2014 study period indicates that the bilateral trade agreements with the United States (US) and Japan have resulted in the most notable expansion of Vietnamese exports and imports, while the impacts from other regional trade agreements involving Vietnam are more mixed. We also find evidence of Vietnamese trade and FDI being complementary, with the positive relationship between FDI and exports becoming stronger following the bilateral trade agreements with the US and Japan.

The impact of opening the export promotion agencies on Indonesia's non-oil and gas exports

“…The effect of FDI on Indonesia's non-oil and gas exports in the global value model and developing countries are in line with previous studies ( Sun and Parikh, 2001 ; Rahmaddi and Ichihashi, 2013 ; Mijiyawa, 2015 ; Chiappini, 2016 ; Duong et al., 2019 ). FDI in both models has a significant effect on Indonesia's non-oil and gas exports, however, the FDI coefficient is relatively small compared to the coefficient on other independent variables.…”

“…Appleyard et al (2011) stated a similar thing that in the long run, the depreciation will cause an increase in exports. The estimation results of this study for the nominal exchange rate in both models support previous research which concluded that the exchange rate has a positive impact on export value (Sun and Parikh, 2001;Kang, 2011;Rahmaddi and Ichihashi, 2013;Mijiyawa, 2015;Duong et al, 2019).…”

An Integrated Approach to Analyze the Progress of Developing Economies in Asia toward the Sustainable Development Goals

“…In the year 2001, Vietnam's MI showed a sharp increase of 39% and 34% on the production and consumption sides, respectively. The main reason for this massive expansion in material consumption was found to be the signing of the Bilateral Trade Agreement (BTA) between the United States and Vietnam in 2000, granting the Normal Trade Relations (NTR) status, opening up access to the US market and facilitating foreign investment, driving Vietnam's shift into an export-oriented economy [73]. This trade liberalization in Vietnam, coupled with a 10-year economic plan promoting the private sector [74], contributed to the annual GDP growth, averaging 7.1% from 2000 to 2004, reaching 8.4% in 2005, and attracting global attention for its rapid economic expansion [75].…”