through an auction process) and a list of sensitive<sup>items,all QRs on exportshavebeen already-</sup> eliminated. Importantly, the schedule to phase out<sup>QRswas announcedinthe Five-year</sup> Import-Export Program (2000-05), allowing<sup>theprivate sectortoanticipate andadjust to the</sup> new trade regime.

Tariffs: The 1988 _Law on Import and Export_<sup>_Duties_representedthefirst stepto puta trade</sup> tax system in place. This original tariff<sup>schedulewas rationalizedin1992andsimplifiedin</sup> 1999 following Vietnam's accession to AFTA<sup>andinpreparation fortheWTO.</sup> Duty exemptions and refunds for imports used<sup>to produceexports werea central partof this reform</sup> package and Vietnam currently has a well<sup>functioningduty drawbackssystem.7</sup> The current tariff structure has three sets of rates<sup>8</sup> : (i)<sup>Most FavoredNation (MFN) tariff ratesapplicable</sup> to imports from countries with which Vietnam<sup>enjoys MFNstatus (about75percentof</sup> imports in 2000); (ii) Common Effective<sup>PreferentialTariff(CEPT)ratesapplicable to</sup> imports from ASEAN countries (about<sup>25percentof importsin2000of whichabouthalf</sup> benefits from CEPT rates following the<sup>country-of-originrule);and(iii)Generalrates(50</sup> percent above MFN rates) applicable to<sup>importsfromcountriesthatdonotfallunderthe</sup> MFN and CEPT rates (imports from these<sup>countriesis negligible).The (unweighted)average</sup> MFN tariff rate has been increasing partially<sup>duetothe conversionofQRs into tariff-</sup> equivalent. However, both the number of tariff lines<sup>(13atbeginning2002) andthe</sup> maximum tariff rate (120 percent at<sup>beginning2002)havebeendecreasing.</sup> The (unweighted) CEPT tariff rate has declined<sup>to10.7percentin 2002.</sup>

**Table 2: Tariff Rates with Roadma for**<sup>**the Future**</sup>

|Years|1996|1997|1998|1999|2000|2001|2002|2003|2004|2005|2006|
|---|---|---|---|---|---|---|---|---|---|---|---|
|MFNTanffRate(%)1/||||||||||||
|Average(unweighted)|12.3|13.4|136|na|na|151|157|||||
|Range||0-200|||||0-120|||||
|CEPTImplementation2/||||||||||||
|NumberofItems||||||||||||
|InclusionList|856|1,496|1,996|3,590|4,230|4,830|5,430|6,030|6,030|6,030|6,030|
|TemporaryExclusionList|2,123|1,483|983|2,440|1,800|1,200|600|0|0|0<br>|0<br>|
|SensitiveList|26|26|26|51|51|51|51|51|51|51|51|
|GeneralExceptions List|213|213|213|202|202|202|202<br>|202<br>|202<br>|202<br>|202<br>|
|Total|3,218|3,218|3,218|6,283|6,283|6,283|6,283|6,283|6,283|6,283|6,283|
|TanffRate(%)||||||||||||
|Average(unweighted)||||||||||||
|InclusionList|70|6.8|5.8|5.6|47|3.9|38|2.8|2.6|2.5|2.3|
|TemporaryExclusionList|19.9|19.9|19.9|199|19.8|19.6|19.4|175|13.4|89|3.9|
|Average|12.7|12.6|12.1|11.9|11.4|109|10.7|93|7.4|5.3|3.0|
|USBTA3/|||||____|||___<br>_|__<br>___|<br>__||

1/ MFN rates imposed on goods imported<sup>from countries having MFNstatusintrade relation with Vietnam</sup> 2/ Common Effective Preferential tanff(CEPT)<sup>imposed on goodsimportedfrom ASEANcountnes.</sup> 3/ USBTA agreed to reduce current tanff<sup>ratesonalimitedrangeof industnalandagnculturalitems(about250)by 30 to50</sup> percent by 2004.

Source Athukorala (2002); Kazi and Duc<sup>(2000),CIE (1997)</sup> Vietnam is not a member of WTO, it<sup>isexpectedtoretainbilateralquotas withvariouscountries.Textilequotas</sup> with the US have not yet been set.

7 For more on this issue, see lanchovichina,<sup>2001.</sup> 8 A third set of rates (50 percent above preferential<sup>rates) is appliedto countriesthat do notfallunder the</sup> preferential and special preferential tates.<sup>However, tradewiththesecountriesis negligible.</sup> 4