TRADING RELATION (COMMERCIAL

RELATION) BETWEEN VIET NAM AND

OTHER COUNTRY

1. Definition of trading relation (commercial relation)

Trading relation (commercial relation) refers to the economic and business
connections between two or more countries, regions, or entities based on the
exchange of goods, services, and investments. It involves the mutual activities of
importing, exporting, and other forms of business transactions that aim to meet
the economic needs and interests of the parties involved. These relations are
typically governed by trade agreements, policies, tariffs, and regulations that
facilitate or restrict the flow of trade.

Key elements of trading relations include:

 Exports and Imports: The movement of goods and services between

countries or entities.
 Trade Agreements: Formal agreements that outline the terms and
conditions under which trade is conducted.
 Foreign Direct Investment (FDI): Investment made by a country or entity
in the businesses or assets of another country.
 Economic Cooperation: Collaboration between countries to improve trade,
technology, and resources.

2. Overview of Vietnam’s trade landscape

Vietnam is situated in Southeast Asia, with a coastline of over 3,200 kilometers
along the East Sea. This strategic position links it to major global shipping routes,
making it a critical hub for trade in the Asia-Pacific region. The proximity to key
economies like China, Japan, and ASEAN nations further strengthens its trade
potential.

2.1 Key Exports

Vietnam is primarily an export-driven economy, with its exports reaching over

$300 billion annually. The main products Vietnam exports include:
  Electronics and Electrical Equipment:
o Smartphones: Vietnam has become a major exporter of smartphones,
particularly with Samsung and other global manufacturers operating
in the country.
o Computers and Peripherals: The manufacturing of computers,
laptops, and components is a major contributor to Vietnam’s export
earnings.
 Textiles and Apparel:
o Vietnam is one of the world's leading textile exporters. Its garment
sector is highly competitive, supplying clothing, footwear, and textiles
to markets in the United States, the European Union, and Japan.
 Agricultural Products:
o Coffee: Vietnam is the world’s second-largest exporter of coffee,
particularly robusta coffee, after Brazil.
o Seafood: Vietnam is a major exporter of seafood products, especially
shrimp, pangasius (catfish), and tuna.
o Rice: Although not the largest, Vietnam is one of the top rice
exporters, particularly to countries in Asia and Africa.
 Footwear and Leather Goods:
o Vietnam is a leading exporter of footwear, particularly to markets in
the U.S. and EU.
 Furniture:
o Wood products and furniture are among Vietnam's top exports, with
the U.S. being a significant importer.

2.2 Key Imports

Vietnam relies heavily on imports to fuel its industrial development and support its
growing economy. Key imports include:

 Machinery and Equipment:

o Vietnam imports a variety of machinery, industrial equipment, and
technology from countries like Japan, China, and South Korea to
support its manufacturing and infrastructure sectors.
 Raw Materials:
o Steel: Vietnam imports steel for its construction and manufacturing
industries.
o Chemicals and Plastics: These materials are essential for various
industries, including electronics, textiles, and packaging.
 Petroleum Products:
o Vietnam has limited domestic oil production and imports a significant
portion of its petroleum needs, primarily from countries like
Singapore and the Middle East.
 Consumer Goods:
 o Vietnam imports a wide range of consumer products, such as
automobiles, electronic devices, and high-end goods, from countries
like Japan, South Korea, and the EU.

3. Major trade partners

3.1. China: Vietnam’s Largest Trade Partner

Trade Overview:

 Imports from China: China is Vietnam’s largest trade partner, both in

terms of imports and exports. Vietnam imports a wide range of goods from
China, including raw materials, machinery, electronics, and consumer
goods. This includes items such as steel, chemicals, plastics, electronics, and
textiles.
 Exports to China: Vietnam exports a significant amount of agricultural
products to China, including seafood (especially shrimp), rice, coffee, and
fruit. Electronics and textiles are also key exports to China.

Key Points:

 China is Vietnam's largest source of imports, contributing to the trade

imbalance with Vietnam importing more than it exports to China.
 Despite the trade imbalance, China is a critical market for Vietnamese
goods, especially agricultural exports.
 China’s Belt and Road Initiative (BRI) has further enhanced trade relations,
particularly in infrastructure development and logistics.

3.2. United States: A Major Export Market

Trade Overview:

 Exports to the United States: The U.S. is one of Vietnam’s largest export
destinations. Key exports include textiles, apparel, electronics (especially
mobile phones), footwear, seafood (shrimp, tuna, etc.), coffee, and furniture.
 Imports from the United States: Vietnam imports high-tech machinery,
chemicals, aircraft, and agricultural products (such as soybeans and wheat)
from the United States.

Key Points:

 The United States is the second-largest export market for Vietnam, with
goods like electronics and textiles being major contributors.
  The U.S.-Vietnam trade relationship has grown significantly, particularly
after the normalization of trade relations in the 1990s and the signing of the
U.S.-Vietnam Bilateral Trade Agreement (BTA) in 2001.
 The U.S. is a key investor in Vietnam, with U.S. companies investing in
sectors like retail, consumer goods, and technology.

Opportunities:

 Vietnam has benefited from the Generalized System of Preferences (GSP),

which allows for reduced tariffs on certain goods.
 Ongoing trade tensions between the U.S. and China could provide Vietnam
with opportunities to become an alternative manufacturing base for U.S.
companies seeking to diversify their supply chains.

3.3 European Union (EU): A Key Partner in Trade and Investment

Trade Overview:

 Exports to the EU: The European Union is one of Vietnam’s largest trade
partners, particularly for agricultural products, textiles, coffee, seafood, and
electronics. Vietnam is also a major exporter of footwear and furniture to the
EU.
 Imports from the EU: Vietnam imports machinery, pharmaceuticals,
chemicals, and high-tech products, including automobiles and industrial
machinery.

Key Points:

 EU-Vietnam Free Trade Agreement (EVFTA): The EVFTA, which came

into effect in 2020, has significantly boosted trade between the two regions.
The agreement reduces tariffs, opening the EU market to more Vietnamese
products, particularly coffee, seafood, and textiles.
 The EU represents a significant market for Vietnam’s high-value exports,
such as electronics and agricultural products.

Opportunities:

 Increased Market Access: The EVFTA provides Vietnam with tariff

reductions and expanded market access to European countries, particularly
for agricultural products and manufactured goods.
 Sustainability and Green Trade: The EU places a significant focus on
environmental sustainability, providing opportunities for Vietnam to
improve its export offerings in line with EU environmental standards.
4. Conclusion
Vietnam has become a significant player in global trade due to its strategic
location, competitive workforce, and participation in international trade
agreements. The country’s major trade partners include China, the United States,
the European Union, and other ASEAN countries. Each of these partners plays a
key role in shaping Vietnam's trade landscape by contributing to both exports and
imports, with Vietnam benefiting from partnerships in agriculture, electronics,
textiles, and manufacturing.

However, Vietnam faces challenges such as trade imbalances, particularly with

China and the U.S., and dependency on low-cost manufacturing. Additionally,
geopolitical tensions and changes in global trade policies could affect its trade
dynamics.

Opportunities lie in diversifying export markets, moving up the value chain into
higher-value products, and strengthening regional integration through agreements.
With its continued focus on trade agreements, infrastructure development, and
innovation, Vietnam is well-positioned to expand its role in the global economy,
despite the challenges it faces.

*Question:

Question 1:

Q: What are some of the main challenges Vietnam faces in its trade relations with
China?

A:
One of the primary challenges Vietnam faces in its trade with China is the trade
imbalance, where imports from China often exceed exports to China. This results
in a significant trade deficit for Vietnam. Additionally, there are concerns over
competition in industries like electronics and textiles, where China is a dominant
global player. Vietnam also faces occasional geopolitical tensions and trade
barriers that can disrupt trade flows, especially in sensitive sectors.

Question 2:
Q: How has the EU-Vietnam Free Trade Agreement (EVFTA) benefited both
Vietnam and the European Union?

A:
The EVFTA, which came into effect in 2020, has been beneficial to both parties by
reducing tariffs and easing trade restrictions. For Vietnam, it opens up access to the
EU’s lucrative market, particularly for products like seafood, coffee, textiles, and
electronics. For the EU, it provides a gateway to Southeast Asia and access to
Vietnam’s growing economy, allowing for better opportunities to export
machinery, automobiles, and chemicals. Both regions benefit from more favorable
trade terms, leading to increased trade volume and deeper economic cooperation.

Question 3:

Q: What role does Vietnam play in global supply chains, and why is this
important?

A:
Vietnam plays an essential role in global supply chains, particularly in
manufacturing electronics, textiles, footwear, and consumer goods. It serves as a
key assembly point for multinational corporations like Apple, Samsung, and Nike.
The country benefits from a skilled, cost-effective workforce, which has attracted
foreign direct investment (FDI). As global supply chains evolve, Vietnam’s
strategic location, free trade agreements, and competitive advantages make it an
attractive destination for companies looking to diversify their manufacturing bases.