The views expressed in this paper are those of the authors and should not be attributed to the World Bank. Since the lifting of the U.S. embargo in 1994, trade between Vietnam and the United States has grown rapidly. The large U.S. market offers substantial potential for Vietnam to expand its exports, following the lead of the export-oriented economies of its region. The general tariff schedule involves much higher tariff rates than the MFN schedule on most commodities. Use of these tariffs clearly imposes costs on both Vietnam and the United States.
Vietnamese exporters are unable to access the best markets for some of their products.
U.S. imports are diverted from lower cost suppliers in Vietnam to higher cost sources elsewhere. The objective of this paper is to assess the economic effects of the U.S. granting MFN status to Vietnam. We first assess the size of the trade distortions involved, and then analyze their consequences. Section II deals with the pattern of exports from Vietnam to the United States and the nature of the barriers imposed by use of the general tariffs. Section III describes the analytical framework and presents results and interpretation.