Vietnam gears up to curb trade deficit with ASEAN

15:23 | 05/05/2018 Trade

(VEN) - The ASEAN Trade in Goods Agreement (ATIGA) took effect on January 1, 2018, reducing taxes on automobile imports between member countries to zero percent. Vietnam is concerned this could result in a higher deficit in its trade with the nine other ASEAN member economies and is gearing up to confront this challenge. 

vietnam gears up to curb trade deficit with asean
Iron and steel are among Vietnam’s major exports to ASEAN states

Ministry of Industry and Trade (MoIT) data show that in the first two months of 2018, Vietnam exported US$3.48 billion worth of goods to ASEAN, a rise of 11.2 percent compared with the same period last year, and imported US$4.4 billion worth of goods from ASEAN, up 13.2 percent, generating a trade deficit of about US$920 million.

In 2017, trade in goods between Vietnam and ASEAN reached US$49.53 billion, up 19.6 percent compared with 2016 and accounting for 11.7 percent of Vietnam’s trade with the rest of the world. This included US$21.51 billion worth of Vietnamese exports to ASEAN, up 23.9 percent, and US$28.02 billion worth of Vietnamese imports from ASEAN, up 16.4 percent. This left Vietnam with a deficit of US$6.51 billion in trade with ASEAN last year.

The growth of Vietnamese exports to ASEAN reflects Vietnam’s efforts to take advantage of free trade agreements. However, Vietnam has faced a trade deficit with ASEAN for a long time. Le Quoc Phuong, former deputy director of the MoIT’s Industry and Trade Information Center, attributed this continued deficit to the lower competitiveness of Vietnamese goods compared with products made by Thailand, Singapore and Malaysia.

Major Vietnamese exports to ASEAN in recent years included telephones and components, computers, electronic products and components, iron and steel, machinery, equipment, instruments and spare parts, transport means and spare parts, textiles and garments, crude oil, petroleum, and agricultural, forest and aquatic products. Its imports from ASEAN included materials, machinery and equipment for domestic production, such as petroleum, materials for textile, garment, leather and footwear production, plastic materials, chemicals, fully assembled autos, and agricultural, forest and aquatic products.

In the first two months of 2018, Vietnam’s trade deficit with Thailand amounted to US$843 million. Le Quoc Phuong said Vietnamese goods cannot compete with Thai products in terms of quality and price. Thai businesses are very adept at marketing and are carving out a niche in the Vietnamese retail market, he added. Auto imports from Thailand and Indonesia are also forecast to increase in 2018, putting further pressure on the trade deficit.

Deputy Prime Minister Trinh Dinh Dung recently provided guidance on tightening controls over auto imports from ASEAN. Accordingly, to prevent tax evasion, the zero percent rate will only be applied to the import of autos with at least 40 percent of components manufactured by ASEAN countries.

Le Quoc Phuong, former deputy director of the Industry and Trade Information Center: The only way to reduce the trade deficit is enhancing the competitiveness of export products in terms of quality and price.

Lan Phuong