<!-- Start of picture text --> Box 3: Impact of China's WTO Accession on Vietnam<br><!-- End of picture text -->

|China'saccessiontoWTOpresentsbothopportunitiesand challengesforEastAsianeconomiesand<sup>Vietnam</sup><sup>**in**</sup><br>particular.Itsimpactswill befelt throughanumberofchannels:|
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|1.Increasedoverallwelfare.Adecline**in**China'sprotectionwouldpushtheproduction<sup>possibilityfrontier</sup><br>outward leadingtoanoverall gain**in**welfare.However,China'slarge sizemayalsoshift thetenmsoftrade<br>withpossiblynegativeimpactonthird countries includingVietnam.Also,factorpnceequalizationis<br>expected toputadownwardpressureonunskilledwages**in**thirdcountriesincluding<sup>Vietnamwhichmay</sup><br>increaseinequality.|
|2.InsignificantimpactonVietnam'saggregate exportlevel.<br>China'commitmentstoabolishnon-tanff<br>barriersand reduce tariffs(fromanaverageof13.3percentmi2001to 6.8percentatthe endof<sup>the</sup><br>irnplementationpenod)willfueltrade withtherestofthe world.However,China'saccessiontoWTOis<br>expectedtohaveaninsignificantoverallimpactonVietnam'sexports:the increaseinVietnam's<sup>exportsto</sup><br>Chinaisexpectedtobemore than offsetbysubstitutionofthird-countryimportsawayfromVietnam.|
|3.SignificantimpactonVietnam'sexportlevelandcompositiontoChina. Increased accesstoChina'smarket<br>isexpectedtostimulate exports fromVietnamacrossmost industriesincludingriceproduction,<sup>food</sup><br>processingindustry,lightmanufacturing,metals and petrochemicals, andelectronics.|
|4.<br>SignificantimpactonVietnam'sexportcompositiontothirdmarkets.Competition withChina'sexportsin<br>thirdmarketswillintensifyasaresultofChina'saccessiontotheWTO.Thiswillhold especially<sup>for</sup><br>countneslikeVietnamthathavesimilar comparativeadvantageinlaborintensiveproducts.<sup>Vietnam</sup><br>exportsleveltothirdcountriesisexpectedto decline.Forexample,Vietnam'stextile<sup>andgarmentindustry</sup><br>(16percentoftotalexports)wllbedirectedaffectedby the abolitionofquotasonChinesetextilesand<br>apparelexportstotheUSandthe EUstarting**in**2005,whichleavesVietnam withonly3yearstoestablish<br>itselfintheUSmarketforapparel.China'sWTO accessionisexpectedtoleadtoasubstantial declinein<br>Vietnam'sapparel exportsand productionby 2010(themost significantdeclineisexpectedtooccuraround<br>2005when quotasonChineseapparel areremoved).|
|5.Increased transparencyandpredictabilityofChina'strade policy.AsgeneralWTOpolicyrulesrequire<br>membercountriestopublishtraderulesand regulations,China'stradingpartnerswillbenefitfrom<sup>the</sup><br>increased transparencyandpredictabilityofChina's,trade policy.<br>Thespecificcommitments involve<br>uniform applicationofthetraderegime,independentjudicialreviewandamechanismtobringproblems<sup>of</sup><br>localprotectionism totheattentionofthecentralgovemment.AccesstoChina'smarket willbe<sup>more</sup><br>securedanddisputeswillbe resolved followinginternationalstandards,<sup>an</sup>important<sup>benefittoChina's</sup><br>trading partnersincluding Vietnam.|
|6.IncreasedChina'sattractivenessasadestinationfor ForeignDirectInvestment(FDI).<sup>Theopeningofthe</sup><br>servicesector**including**telecommunication,distnbution,banking,insurance,asset<sup>management,and</sup><br>securitiesto foreigndirectinvestmentas wellastheprovisionofnationaltreatmenttoforeign<sup>funded</sup><br>enterprises may represent themostsigificantpartofChina'saccessiontoWTO.EntryintotheWTOwill<br>requireChinatoamend**its**laws,regulationsandpracticestoalignthemwithanumberof<sup>international</sup><br>investment-relatedrules.theGeneralAgreementofTradeinServices (GATS),the AgreementonTrade-<br>RelatedInvestmentMeasures(TRIMS), andtheAgreementon Trade-Related Intellectual PropertyRights<br>(TRIPS). TheGATS,forexample,requiresmemberstoprovide MFN treatmentand transparencyontrade<br>inservices.Chinawillalsoberequiredtoabideby intemational standardsinthe protectionofintellectual<br>propertyandincreasetransparency**in**legislationformulation andjusticepractice,whichshould encourage<br>furtherFDIinto China. AsChinaimproves**its**bustnessenvironment,FDI maybedivertedaway fromother<br>countriesincludingVietnam.ForeigninvestmenttoVietnammaydeclinebyasmuchas30percent by<br>2010astheresultofChina'saccessionwithnegativeimpacts oneconomicgrowth.|

7. Increased bargaining power of developing countries **in** the WTO. China's accession to<sup>theWTO will</sup> strengthen the voice of developing countnes and East Asian countnes **in** particular in<sup>this intemational</sup> forum. Also, Vietnam can leam from China's experience in accessing the WTO which could<sup>facilitateits</sup> own accession.

Source: Adapted from lanchovichina, Suthiwart-Narueput and Zhao (2002) 14