The Impact of Trade Facilitation on Vietnam’s Trade Flows

Abstract

In today’s globalized economy, countries actively participate in Free Trade Agreements (FTAs) in order to bring their advantageous products to the global market through cross-border trade. The extent of the benefits of FTAs though is largely of function of the level of implementation of the trade facilitation (TF) measures contained in these agreements as simplified customs procedures and improved customs clearance efficiency can help traders substantially reduce their costs. This paper focuses on Vietnam which has been active in the last two decades expanding its trade linkages with various countries around the world. Due to these international trade arrangements, Hanoi has been committed to implementing TF measures agreed upon. The purpose of this paper is to determine the impact of TF measures on Vietnam‘s trade flows during the period 2007-2018 in two cases; in the presence of FTAs and with no FTA concluded. Vietnam's import and export data sets from that period ara analyzed using the gravity model and the Generalized Method of Moments (GMM). The results show that during that period TF had a positive impact on Vietnam's trade flows and that its affect was consistent with and without FTAs. Since TF implementation is still at a relatively early stage, when TF reforms really take place, reduced trade costs are likely to further increase trade volume. In short, TF has gradually become major factors of trade growth.