Relationship between sectoral exports and economic growth A time series analysis for Vietnamese fishery sector 1997-2008.pdf

UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM
INSTITUTE OF SOCIAL STUDIES
THE HAGUE
THE NETHERLANDS
VIETNAM- THE NETHERLANDS
PROJECT FOR M.A. ON DEVELOPMENT ECONOMICS
RELATIONSHIP BETWEEN SECTORAL
EXPORTS AND ECONOMIC GROWTH-
A TIME SERIES ANALYSIS FOR
.VIETNAMESE FISHERY SECTOR
1997 - 2008 .BQ GIAO DVC £JAO TAO
TRlJONG D~l HQC KINH r{rP.HCM
THU
9
VIEN
.
By
NGUYEN ANH TRAM
SUPERVISOR: DR. NGUYEN MINH DUC
l13
MASTER OF ARTS IN ECONOMICS OF DEVELOPMENT
HO CHI MINH CITY, DECEMBER 2009

CERTIFICATION
"I certify that the substance of this thesis has not already been submitted for any
degree and has not been currently submitted for any other degree.
I certify that the best of my knowledge and help received in preparing this thesis and
all sources used have been acknowledged in this thesis."
NGUYEN ANH TRAM
Date: 16/12/2009
ii

ACKNOWLEDGMENTS
No man is an island, entire ofitself- John Donne
The work of this thesis represents the concerted efforts of many individuals.
One of the features is collaboration and certainly it required many acts of
collaboration by quite a few people in order to come to fruition.
Firstly, I am heartily thankful to my supervisor, Dr. Nguyen Minh Due, whose
encouragement, supervision, and support from the preliminary to the concluding level
enabled me to develop an understanding ofthe subject.
Secondly, I would like to thank Prof. Karen Jansen, Dr. Nguyen Trong Hoai,
and Dr. Tran Tien Khai for serving on my thesis committee, valuable suggestions,
invaluable encouragement, insightful comments, and hard questions.
I thank my friends, thirdly, for the stimulating discussions, and for all the help
and fun we have had during the master course. Besides, I also give many thanks to all
project teachers and staffs in Ho Chi Minh City.
Further, I would like to express my sincere gratitude to my parents for
patiently putting up with a daughter who could never get enough of school.
Lastly, I offer my regards and blessings to all of those who supported me in
any respect during the completion ofthe project.
111

ABSTRACT
Numerous studies in literature have tried to test the relationship between exports,
especially sectoral exports, and economic growth. This paper examines the
relationship with evidence from fisheries exports of Vietnam during 1997 to 2008.
The contribution of fishery sector in Vietnamese Gross Domestic Products (GDP)
may be mathematically calculated with statistical figures. However, the effects of
fishery exports on the economic growth are yet to be thoroughly studied in an
econometric approach. Descriptive and time series analyses in this thesis present
positive effect offishery exports on the Vietnamese economic growth in long run. The
modern econometric approach with stationary and co-integration tests and vector error
correction models used in this study also allows forecasting a persistence of the
effects of fishery exports on Vietnamese GDP despite of different seasonal phase
business. For the long run estimation, a double increase in its fishery exports value
would raise the GDP by 7%; This has a great economic meaning in developing
process of the economy. In reverse side, Vietnamese fishery exports would increase
by 5.2% with 10% increase in its GDP. Confirming the· role of fishery exports in
economic growth, it is necessary for the sector to improve its competitive capacity.
Firstly, it should continue to obey international standards, keep negotiating to get
benefits from existing regulations, improve domestic institutional management to
attract more foreign investment. Particularly, the stakeholders of Vietnamese fishery
exports should concern some main problems such as product's quality, marketing
strategy, production cost, trade barrier and tariffas well.
IV

ADF
APEC
APFIC
BTA
CPI
EU
FAO
FISTENET
GDP
GNP
GSO
ICT
OLS
SBV
USD
VECM
WTO
ACRONYMS AND INITIALS
Augmented Dickey-Fuller
Asia-Pacific Economic Corporation
Asia-Pacific Fishery Commission
Bilateral Trade Agreement
Consumer Price Index
European Union
Food and Agriculture Organization
Fisheries Scientific Technological Economic Information
Gross Domestic Product
Gross National Product
General Statistical Office
Information & Communication Technology
Ordinary Least Squares
States Bank ofVietnam
The United States Dollars
Vector Error Correction Modeling
World Trade Organization
v

TABLE OF CONTENTS
LIST OF TABLES.................................................................~................................... vii
LIST OF FIGURES............................................................~·····································viii
Chapter 1. INTRODUCTION····················································o••·····························1
1.1. PROBLEM STATEMENT.........................................•............................•.....................•.................... 1
1.2. SCOPE OF THE STUDY................................................................................................................... 3
1.3. RESEARCH OBJECTIVES............................................................................................................... 3
1.4. RESEARCH QUESTIONS ..........................•....................•.•.•..............•.......•...................•................. 4
1.5. RESEARCH HYPOTHESIS .............................................................................................................. 4
1.6. METHODOLOGY AND DATA COLLECTION ................................................................................... 4
1.7. THE STRUCTURE OF THE THESIS ................................................................................................. 5
Chapter 2. LITERATURE REVIEW........................................................................ 6
2.1. THE RELATIONSHIP BETWEEN ECONOMIC GROWTH AND TRADE .............................................. 6
2.2. THEORETICAL AND EMPIRICAL BACKGROUNDS OF SECTORAL EXPORTS.................................. 8
2.3. WHY FISHERY SECTOR WAS CHOSEN FOR THIS STUDY?........................................................... 11
2.4. AN OVERVIEW OF VIETNAM FISHERY SECTOR ......................................................................... 15
2.5. BILATERAL TRADE AGREEMENT, THE UNITED STATES ANTI-DUMPING MEASURES AND
VIETNAM FISHERY EXPORTS IN THE PERIOD 1997-2008............................................................... 18
2.6. THE EXCHANGE RATE REGIME AND VIETNAM FISHERY EXPORTS 1997-2008 ...................... 19
2.7. CPI (CONSUMER PRICE INDEX) AND VIETNAM FISHERY EXPORTS 1997-2008..................... 20
2.8. DEFINITIONS ...•.•.•.................;.....•.•......................•.•..•.•.•.•......................•..•.....................•.......... 21
2.8.1. Fishery production ................................................................:........................................... 21
2.8.2. Export................................................................................................................................. 21
2.8.3. Export growth .................................................................................................................... 21
2.8.4. Economic Growth .............................................................................................................. 21
2.8.5. Consumer Price Index- CPI............................................................................................ 22
2.8.6. Antidumping measurement............................................................................................... 23
2.8~7. Bilateral Trade Agreement (BTA)..................................................................................... 24
2.9. EMPIRICAL ESTIMATION RELATED TO EFFECTS OF FISHERY EXPORTS ON ECONOMIC GROWTH
........................................................................................................................................................... 26
2.9.1. Dependent variable............................................................................................................ 26
2.9.2. Independent variables........................................................................................................ 26
2.9.2.1. Fishery Exports ..........................................................................................................................26
2.9.2.2. Labor ..........................................................................................................................................27
2.9.2.3. Exchange rate.............................................................................................................................27
2.9.2.4. Consumer Price Index ...............................................................................................................28
Chapter 3. METHODOLOGY................................................................................. 29
3.1. MODEL SPECIFICATIONS ....•...•..•..•.............................•.•.•......•.................•..•.•..•.•..•.••...•............. 29
3.2. DATA DESCRIPTION .................................................;................................................................. 31
3.3. DATA FOR VARIABLES ............................................................................................................... 31
3.4. DUMMY VARIABLES ................................................................................................................... 32
Chapter 4. RESULTS AND DISCUSSION............................................................. 33
4.1 DESCRIPTIVE ANALYSIS........................•................................•.••.•...,....................•.....•.....•.......... 33
4.2. ECONOMETRIC ANALYSIS.•.....•.•.......................•....•.•..•.......................••.•.••................................ 37
4.2.1. Stationary testing ofreal variables.................................................................................... 37
4.2.1.1. Unit root tests for log(YGNP) ..............................................:.....................................................37
4.2.1.2. Unit root tests for log (REXR)...................................................................................................38
4.2.1.3. Unit root test for log (XGNP) ....................................................................................................39
4.2.2. Two stage least square regression ..................................................................................... 39
Chapter 5. CONCLUSIONS AND SUGGESTIONS ............................................. 47
REFERENCES .......................................................................................................... 49
Vl

LIST OF TABLES
Table 1.1 Total Imports And Exports Of Vietnam In U.S Dollars ......................... 1
Table 2.1 Estimate Of Overseas Filipino Workers (December 2004)••••••••.....•.•••••• 9
Table 2.2 Vietnam Exports Of Tra And Basa Fish (Tons) .................................... 24
Table 4.1 Descriptive Statistical Spreadsheet OfAll Variables ............................ 36
Table 4.2 Covariance Matrix Spreadsheet OfAll Variables................................. 36
Table 4.3 Correlation Matrix Spreadsheet OfAll Variables ................................ 36
TABLE 4.4A DF-GLS UNIT ROOT TEST FORLOG (YGNP)........................................................ 38
TABLE 4.4B ADF UNIT ROOT TEST FORLOG (YGNP) .............................................................. 38
TABLE4.5ADF-GLS UNITROOTTESTFORLOG(REXR) ........................................................ 38
TABLE 4.5B ADF UNIT ROOT TEST ON LOG (REXR) ............................................................... 38
TABLE 4.6A DF-GLS UNIT ROOT TEST FORLOG (XGNP) .................................................;·;.... 39
TABLE 4.6B ADF UNIT ROOT TEST FORLOG (XGNP) ............................................................. 39
Table 4.7 OLS ofLog(YGNP) ................................................................................... 40
Table 4.8 The Regression Result For Equation 8 In The Second Stage••••••••••••••• 41
Table 4.9 First Difference Regression For Log(YGNP)•••••••••••••••••••••••••••••••••••••••••• 42
Table 4.10 First Difference Regression For Log(XGNP) ....................................... 42
Table 4.11 Johansen Cointegration Test Summary ............................................... 43
Table 4.12 Vector Error Correction Estimates •••••••••••••••••••••••••••••••••••••••••••••••••••••• 44
Vll

LIST OF FIGURES
Figure 2.1 Reported Aquaculture Production In China (From 1950)•••••••.•.•••••••• 10
Figure 2.2 Vietnam's Oil Production And Consumption, 1998- 2008* •...••••.•••••• 11
Figure 2.3 Top Asia - Pacific Oil Producers, 2006* ............................................... 12
Figure 2.4 Vietnam's Primary Fishery Export Products In 2006 (Value Basis) .14
Figure 2.5 Vietnam's Fishery Products Export Market, 2006 (Value Basis)••••••• 17
Figure 2.6 Time Line Of Standard US Antidumping Investigation ••••••••••••••••••••• 23
Figure 2.7 Monthly Exports Of Frozen Fish Fillets To The US,•••..•..•.••••••..•...••••• 24
Figure 2.8 Values (US$ Millions), Rates Of Growth (Percentages), And Shares
In Total Exports (Percentages) Of Vietnam's Exports To The U.S, 2000-2006.• 25
Figure 4.1 GDP In Vietnam, 1997 - 2008 (Quarterly) ........................................... 33
Figure 4.2 Fishery Exports In Vietnam, 1997 - 2008 (Quarterly) ........................ 34
Figure 4.3 Exchange Rate VND/USD, 1997 - 2008 (Quarterly)•••••••••••••••.•.•••••••••• 34
Figure 4.4 Vietnam Consumer Price Index, 1997 - 2008 (Quarterly) •••••••••••••••••• 35
Figure 4.5 Us Consumer Price Index, 1997- 2008 (Quarterly) ............................ 35
viii

Chapter 1. INTRODUCTION
1.1. Problem statement
World trade has been expanded more and more, with global exports growing
from $84 billion USD in 1953 to $6,272 billion USD in 2002 (HM Treasury, 2004).
The figures demonstrate an increasing economical interdependence in the world
nowadays relative to fifty years ago. However, the most prominent role in the increase
is of developing countries and emerging markets; exports from developing countries
as a whole accounted for 29 percent ofworld trade in 2001.
Economic theory and empirical evidence also showed that economies with
trade more tend to grow faster. Therefore, the fact that international trade or exports
are always promoted by the Vietnam government is not an exception. Prior to the
collapse of the Soviet Union, most of Vietnam's trade was with the former Soviet
Union and Eastern European countries. Since 1991, the country's trade has diversified
significantly. It has also expanded dramatically, reflecting a globalization process of
the Vietnamese economy. In 1999, its openness (exports plus imports divided by
GDP) reached the level of 84.5 percent and now (2009) about 170 percent, a useful
indicator for an increasing global integration ofa country..
Table 1.1 Total imports and exports of Vietnam in U.S dollars
Trade (expressed in millions of US$) : Vietnam Exports Imports
1994 4,054 5,825
1995 5,448 8,155
1996 7,255 11,144
1997 9,184 11,592
1998 9,360 11,494
Source: United Nations. Monthly Bulletin of Statistics (September, 2000)
Although Vietnam has consistently had trade deficits, the amount has
narrowed with the boom in Vietnamese exports. For example, in 1989 exports were
only 73.7 percent of imports. In 1999, exports had risen to be 98.9 percent of imports.
In the period from 1997 to 2007, Vietnamese economy is prosperous in the context of
global integration; especially Vietnam joined APEC at the .end of 1998 and signed the
bilateral trade agreement with the United States in 2001. Since the milestones,
1

Vietnam's exports has continuously grown, leading to a remarkable increase in its
international trade and openness.
However, the global economy began to have the indicators of a crisis from the
early months of 2008. It was caused by regression of the real estate market in
America, and created a serious financial crisis in the United States. The crisis spread
out over the world, from Europe, Latin America, Middle East, Russia, to Asia and
Vietnam as well. Although Vietnam has been affected by the crisis later than the
others, it stills has faced some problems because ofits wide economic openness.
An obvious effect of the global crisis is speedy decline of the world's import
demand. That means Vietnam's exports in coming years will be suffer because
Vietnam's economy is likely to follow an export-oriented growth. In Vietnam's
export structure, although crude oil still stand on the first position in export revenues,
labor intensive products such as agricultural and fishery products are very important
exported products of the country. In these products, fisheries are prominent because
fish resources represent natural capital and are a potential source of sustainable wealth
for Vietnam. This wealth provides the opportunity for such resources to make an
ongoing contribution to economic growth, poverty alleviation and people livelihoods
as well (Due, 2008a, 2009a). Fishery exports also make significant contributions to
the national economy through the generation of foreign exchange derived from
international trade. Exports of fishery products have grown rapidly during last ten
years. In fact, the aquatic products once contributed approximate 10% of whole
national export revenues (Due, 2009a).
Otherwise, income multiplier effects can potentially "trickle up" to the
national economy ensuring that fisheries can support national economic growth
through contributions to GDP. Although the Vietnamese fishery sector contributes to
national GDP typically varied by 2.5-4.0 percent, it also generates a wide range oftax
revenues, contributing to the national budget. Moreover, the major share of fishery
exports have strong backward linkages with the other sectors both in terms ofprimary
and value added commodities.
Unfortunately, with high fluctuation of prices and the 2008 global crisis,
global demand for fishery products may decline, and in its tum fishery exports may
affect Vietnamese GDP growth rate because the country relies much upon exports for
economic growth.
2

Therefore, there exist some questions to study such as how fishery exports
effect Vietnam's economic growth in recent yeats and whether the effect is positive.
To get answers, the research will start by estimating an econometric model in which
fishery exports revenue is the interested explanatory variable and real GDP is the
dependent variable. Some other controlling variables are included, such as exchange
rate, CPI, CPI of the US, labor force, and dummy variables representing for annual
quarters, 2001 Bilateral Trade Agreement between the US and Vietnam, 2003 anti-
dumping tariff levied on Vietnamese catfish exported to the US. Furthermore, this
study will employ the econometric results to figure out some suggesting for national
economic development policies. The authorities may also use these results to refine,
buttress, or in some ·cases, change their qualitative and subjective judgments in
planning policies and strategies ofdevelopment.
1.2. Scope of the study
The first part ofthe study provides a briefand clear statement ofthe status and
trends in the fishery exports in Vietnam, the major issues and challenges, focusing on
fishery export data of a period 1997 - 2008 alongside with a short review ofprevious
studies, investigation and the expectations.
The second part and also the main part ofthe study will be devoted to examine
the relationship between fishery exports and economic growth ofVietnam. It will also
suggest priorities and projected resource requirements, and the ways in which the
suggestion might be practicized as Vietnam continues its journey in the future.
1.3. Research objectives
Although there is lack of empirical studies on a clear relationship between
fishery exports and economic growth, Vietnamese government has tried in practice to
promote fishery export growth to boost up its economy. This thesis, therefore,
examines the fishery export patterns ofVietnam's economy to figure out its effects on
the economic growth based on time series data in the period 1997 to 2008 to give
some recommendations to improve and adjust fishery export policies in particular and
trade policies in general. Through these adjusted and improved policies, the
government can help the economy overcomes the global crisis in short run as well as
stimulates stability economic growth in long run in Vietnam. In short, specific
objectives of this thesis are to examine: (1) the relationship between fishery exports
and economic growth, and (2) the persistence ofthe effects of exports during different
phases ofthe seasonal business
3

1.4. Research questions
With the mentioned objectives, this thesis would provide evidence to answer
two following questions:
1. Has Vietnam's economic growth been affected by fishery exports?
2. Has the persistence of the effects of fishery exports duri~g different phases of the
seasonal business?
Obviously, fishery exports and economic groWth have a relationship.
However, it is not clear that how Vietnam's economic growth over the decade had
been affected by sectoral exports like fisheries. In literature, effect of sectoral exports
on economic growth had been documented by Awokuse (2003) for Canada case, Anh
(2008) for Vietnam case, and Thompson (2009) for Greece case.
1.5. Research hypothesis
The hypotheses for this research, therefore, include:
1. A causality relationship between the fishery export and economic growth.
2. Effects offishery exports on the economic growth in the duration of 1997-2008
1.6. Methodology and data collection
Because time series data ofsocio economic data is usually non-stationary in its
level value, it is necessary for the research to check the stationarity of the variables in
the first step. The aim ofthis step is to verify whether the series had a stationary trend,
and if it is non-stationary, orders of integration need to be established. To check the
stationarity, all the variables are firstly examined through graphical inspection oftheir
time series plots. All the series are then transformed into logarithms and rates of
growth of all the variables are approximated by first differences of the logarithms of
the corresponding variable value of quarters of years in the period. The Dickey-Fuller
(DF) and the augmented Dickey-Fuller (ADF) tests are applied for testing the level of
integration of the variables. These tests are to determine whether the variables follow
a stationary trend. If the series are non-stationary, the research can not go further in
the use of classical methods of estimation such as OLS because it causes the spurious
relationships and thus the results would be meaningless. In case the series are non-
stationary around their averages, the traditional suggestion was to differentiate the
series because this transformation may lead to stationary in the series. Thus, the
research can apply conventional econometrics (Granger and Newbold, 1974).
Cointegration test is applied in the fifth step. The test is used to estimate the long-run
relationship between the two variables, such as GDP and fishery exports, it is
4

necessary only to estimate a dynamic model, and check whether the residuals from the
regression are stationary. Lastly, the research estimates an error correction model after
using two-step OLS procedure, which provides information about the short-term
dynamic responses of the variables. The method is straightforward and involves
regressions using stationary time series.
The data used in this study is quarterly and cover the period of 1997:1 to 2008:4. It is
obtained from Vietnamese General Statistics Office for values of its GDP, CPI, and
labor force. Data of exchange rate, fishery exports is collected from websites of
www.oanda.com and www.fistenet.gov.vn, respectively, while CPI values of the US
are collected from the website of U.S. Department of Labor, Bureau of Labor
Statistics, Washington, D.C. 20212(ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt).
The Eviews software will be used for econometric regression in this research. This
software is a widely used econometrics program, so it can provide more efficient and
reliable results.
1.7. The structure of the thesis
The thesis includes five chapters:
Chapter 1 - Introduction
Chapter 2- Literature review
Chapter 3 - Methodology
Chapter 4 - Results and discussions
Chapter 5 - Conclusions and suggestions
Chapter two reviews some theoretical frameworks of growth and trade. Throughout
these this paper will clarify why sectoral export is very important for economic
growth, especially, fishery exports. In addition, the chapter also analyzes some related
empirical research extracting the relationship between sectoral export and economic
growth.
Chapter three introduces models based on these the model specifications of this study
will be built, together with data sources and some treatments as well as calculations of
data.
Chapter four is the most important part, in which empirical results will be presented
through descriptive analysis and econometric analysis
Chapter five concerns conclusions and from these try to point out suggestions that
will help fishery exports grow in quantity and quality sides;
5

Chapter 2. LITERATURE REVIEW
2.1. The relationship between economic growth and trade
The relationship between economic growth and trade was focused by many
economists when trade comes into being. With the development of trade, it has been
the debate of academic economic research because of its impact on economic growth.
The emergence of trade and its development, to a certain extent, were closely related
with economic growth. In a way, trade indeed promotes economic growth of a
country:
According to theory, there are links between trade and economic growth and
these were discussed for over two centuries. But, controversy still persists regarding
their real effects. Adam Smith with the classical school thought can be traced as the
initial wave of favorable arguments with respect to trade. Next, this work was
subsequently enriched by David Ricardo with comparative advantage, Torrens, James
Mill and John Stuart Mill in the first part ofthe nineteenth century. They believed that
trade promoted economic growth in two ways or trade improved the optimal
distribution of resources and productivity consequentially and then stimulated the
economic growth; on the other hand, one country could gain raw materials and
equipments which it could not produce. Those provided the material basis for
economic development. These theories interpreted the relationship in some respects
but ignored that the international environment is complex and ruleless. Since then, the
justification for free trade and the various and indisputable benefits that international
specialization brings to the productivity ofnations have been widely discussed and are
well documented in the economic literature (Bhagwati, 1978; Krueger, 1978).
Next, Lewis as the representative of the structural school developed the dual
economy model theory. For this theory, a developing economy is parted into capitalist
part (the industry sector) and non-capitalist part (the traditional agricultural sector).
The capitalist sector was bound to promote the growth of the economy through
absorbing and accumulating surplus labor from non-capitalist sector. If the capitalist
part produced the exporting goods and the traditional part produced the importing
goods, trade would undoubtedly expand the market and demand of products in
capitalist part and reduce the wages of labor. Then it would further increase the profit
and accumulation ofthe part and promote economic growth (Chen, 2009).
6

In addition, Corden (1972) with his theory of trade protection represented for
the effect school. Corden recognized that trade of a country would affect
macroeconomic side from 5 aspects: the revenue effect, the effect of capital
accumulation, the substitution effect, the income distribution effect and the effect of
the weighted elements. This means that the impact of trade on economic growth was
strengthened gradually as the development of economy with cumulation of the above
effects.
Lastly, the work of Romer (1986) and Lucas (1988) began a new wave of
research on economic growth, and it was called endogenous growth theory. The
endogenous growth theory proposed a variety channels through which steady-state
growth is reached endogenously. This theory pointed out that the growth ofdeveloped
countries would be attributed to the improvement of productivity. Based on this fact,
the theory made a series ofmodels to study the relationship among international trade,
technological progress and economic growth. These models have focused on different
variables, such as degree of openness, real exchange rate, tariffs, terms of trade and
export performance, to verify the hypothesis that open economies grow more rapidly
than those are closed (Edwards, 1998). They viewed that trade could promote
economic growth through technology spillover and external stimulation. The owners
of advanced technologies, whether they had intention or no intention, would gradually
make other countries learn these technologies through trade. Trade gives more
frequent exchange of information and increased competition, which forced every
country to develop new technologies and products. The mutual promotion relations
between trade and technical change could ensure a long-term economic growth.
Moreover, although the theoretical literature has frequently focused on the
relationship between trade and economic growth, the interesting phenomenon is that
'empirical examinations have typically examined the relationship between exports
and growth' (Levine and Renelt, 1992, p.953). Besides, the role of export
performance in the economic growth process was examined in studies in the late
1960s. In these studies, total exports were pointed out that there are direct or indirect
effects to output via some elements. Definitely, these studies were based on things
which trade theorists originally conceived of a national economy and national
markets.
7

2.2. Theoretical and empirical backgrounds of sectoral exports
In reality, somewhere on the periphery of things, there were also some
industries enjoying an international comparative advantage, recently. That sector
could produce world class commodities for a modest export sector. This sector
communicated and traded with buyers in other countries. Now the national economy
has gone far down the path of integration with other countries through trade markets.
There is no single, peripheral trade sector. Trade sectors intermingle extensively with
all the other sectors of the national economy. Markets are not national, they are
global. The modem theory of trade has been designed as well as proponed by Paul
Krugman, the leader in this school. Therefore, trade trend of countries, today, are try
to develop key industry for export in order to get gain or economic growth. In other
hand, this trend is also called sectoral export.
Obviously, sectoral exporting is economic development strategy of many
countries. Tourism service exports in Greece are an example. Greece, with its
thousands-year culture and birthplace of philosophy, is famous tourist hotspots
include the capital Athens, the northern Chalkidiki peninsula, the Ionian island of
Corfu and the island resorts of Myconos, Santorini, Paros and Crete. For these
reasons, Greece is one ofthe best places in tourism and an important percentage ofthe
country's income comes from tourism. Thompson (2009) studied effects of the
exchange rate and Euro switch on tourism revenue in Greece. This paper indicated the
Euro switch had a large positive impact on Greek tourism revenue, and tourism
revenue should increase as more countries adopt the Euro currency. In addition,
strategic devaluation of a fixed exchange rate is ill advised, and appreciation of a
flexible exchange rate may raise tourism revenue as in Greece.
Otherwise, the Philippines is the paradigmatic example ofa state that deliberat
ely constructed state policy for its exports ofworkers abroad. Yang (2004), in an
important household survey, has demonstrated that Philippine families with migrant
members abroad fared considerably better than family member without migrants.
8

Table 2.1 Estimate of Overseas Filipino Workers (December 2004)
Region Permanent Temporary Irregular Total
Africa 318 58,369 17,141 75,828
South and East 91,901 1,005,609 443,343 1,540,853
Asia
Middle East 2,312 1,449,031 112,750 1,564,093
Europe 174,387 506,997 143,035 824,419
Americas 2,689,722 292,892 549,725 3,532,339
Oceania 228,946 57,357 30,978 317,281
Sea-based 229,002 229,002
World total .3,187,586 3,599,257 1,296,972 8,083,815
Source: Yang (2004)
According to data from Commission on Filipinos Overseas, Philippine
Department of Foreign Affairs and Central Bank of the Philippines, there are some
figures as follows:
-Population ofPhilippines (2004): 84.6 million
-Value ofRemittances (2004): $ 8.6 Billion
- GDP ofthe Philippines (2004): $85.1 Billion
The numbers here are striking. Out of a total population of 84 million,
approximately 8.1 million are working abroad roughly one in ten Filipinos. The other
striking figure is the seven billion dollars of remittance income generated by these
workers, or roughly 10% of the Gross Domestic Product (GDP) of the Philippines.
This means that the Philippines have succeeded in developing a large scale labor
export regime that provides significant level of remittances to the Philippine
economy. In addition to the unrequited nature of remittance transfers, remittances are
seen as a particularly stable form of external finance (Ratha, 2003; Kapur, 2004), and
can even increase during a crisis. The logic is simple enough so that the Philippines
try to keep labor exports as more as possible.
Besides, China is a giant in fishery exports as well as the largest Asian fish
harvester, landing over 41 million tones from capture fisheries and aquaculture in
9

2000.
Years
Source: FAO Fishery Statistics, Aquaculture production
Figure 2.1 Reported aquaculture production in China (from 1950)
In 2003, China registered a total amount of 30.28 million tones of farmed fish,
accounting for 64.34 percent of national fishery production (FAO, China fishery).
Exports of farmed shrimp, eel, tilapia, shellfish and seaweed have also formed the
backbone of Chinese seafood exports, accounting for about 50 percent of national
seafood exports in terms of value. The rapid development of aquaculture in China has
not only contributed to improved food supply, but has also generated employment and
income to the Chinese people. About 4.3 million rural workers are directly employed
in aquaculture with an annual per capita net income of 8,667 Yuan from 1985 to 2003
(FAO, China fishery)
As the result, sectoral export is very important for developing countries, it can
help these countries to grow and develop. Vietnam is a developing country and also
one of members of WTO. Then, sectoral export is focused as strategy. Thus, this
thesis similarly chose fishery exports as sectoral exports in Vietnam for study.
10

2.3. Why fishery sector was chosen for this study?
Over the course of two decades, Vietnam has emerged as an important
regional producer of oil and natural gas in Southeast Asia. The country has boosted
exploration activities, allowed greater foreign company involvement in the oil and
natural gas sectors, and introduced market reforms aimed at strengthening Vietnam's
energy industry. While these efforts have helped Vietnam expand production of oil
and natural gas, domestic consumption of these resources has also increased as a
result of rapid economic growth. Half of Vietnam's domestic energy consumption
comes from oil, with hydropower (20 percent), coal (18 percent), and natural gas (12
percent) supplying the remainder. Therefore, net exports of crude oil in Vietnam are
not much in future. The below graph is demonstrated this thing.
Vietnam's Oil Production and Consum1)tion, 1998-2008*
450
400
;:.,
~ 350
£ 300
VI
~ 250
(';
=200
.,
~ 150
0 100
..c
1- 50
Production
0+-~~~-r~~~--~~~~~-r~~~--~+-~
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Source: EIA International Energy Annual 2004;
Short-Term Energy Outlook (June 2007)
Year
*2006 is estimate;
2007-2008 are forecasts
Figure 2.2 Vietnam's Oil Production and Consumption, 1998- 2008*
In addition, crude oil, though, is the first important export sector in Vietnam
and its contribution percentage or· rate on GDP is largest. Crude oil is a primary
product, and is exploited from natural resources. Crude oil will be rapid exhaustion
time by time, so it is not potential export sector in further future. Further, crude oil
export does not impulse development of processing technology as well as employs
products from other industries, and does not create more employment. Last, crude oil
production of Vietnam is not much, the production level is low than that of other
countries in the zone.
11

TOl) Asia-P,lcific Oil Producers, 2006'·
China 1---------------··-·"''...;.;."'r:...;:.;''•:"""W'.=.""'
,...,........~--'''? ~ -
-·-;
~....~--'" '--"' '~ 3,836
Indonesia 1--------
..-=..1,100
India t----"""'"'"""._, 847
Malaysia 1----__;,:-<l'::::'1111 723 :
Australia
Vietnam
Thailand
Brunei
Thousml<l Barrels Per D<lY
Source: EIA Short-Term Energy Outlook (June 2007) *estimate
Figure 2.3 Top Asia - Pacific Oil Producers, 2006*
The above graph indicated that Vietnam is small oil producer in her zone, so
crude oil export is not competitive advantage sector compared with that of other
countries in Southeast Asia such as Indonesia and Malaysia.
For textile and garment industry, the second large export sector, has been
existed in Vietnam for at least a century, while traditional handicraft activities such as
embroidery, silk weaving have existed for much longer. The industry started to export
to countries of the Comecon economic block in 1976 until the end of the 1989s;
Former Soviet Union and East European states were Vietnam's main trading partners
which accounted for about 90% of total export value of textile and garment. The
collapse of the socialist system impelled Vietnam to find new markets. With its new
policy of diversifying foreign economic relations, Vietnam's textile and garment
industry carries trade ties with over 30 countries throughout the world, and its
businesses have relations with hundreds of overseas companies. As the result, from
1993 garment and textile export to EU countries continuously has increased by 23%
in average annually. In 1993, Vietnam exported USD 250 million. In 1994 Vietnam
exported USD 285 million. In 1995 and 1996 garment and textile export value is USD
350 and USD 420 million respectively. In 1997, export turnover is USD 450 million
and so on. As above presented Vietnam's textile and garment has achieved a notable
success recently. However, the industry is facing a number of difficulties, which need
12

to be surmounted to ensure its continued rapid growth. The industry's most pressing
problem is its equipment and machinery. The out-dated technology has contributed to
low production capacity and bad quality product, thereby, deteriorating Vietnamese
manufacturers' competitiveness in the international market. That is why,
unsurprisingly many enterprises enjoying exports quotas, to the EU and other
countries do not export the goods directly, but intermediaries. This has caused losses.
In addition, textile and garment in Vietnam are not much special. It is just reprocess
work for oversea companies. Obviously, products from textile and garment can be
made by other countries, not only Vietnam, so this has to stand big pressure from
competitiveness of other countries in the similar conditions. In addition, profit from
garment is not much, and instability because garment faces many challenges such as
quotas, tariffbarriers, tastes ofconsumers, and so on.
According to the above reasons, crude oil and garment have not advantages to
become industries as comparative advantage for Vietnam economy and need to be
promoted by the government.
Together with crude oil, textile and garments, fishery products are the most
important exports in Viet Nam(FAO, 2007). Since 1990s, fishery products have been
the third biggest exported commodity. According to GSO (2006), its contribution to
GDP is approximately equal to that of education and training. National accounts,
however, do not relay the sector's full importance, as fisheries also make a significant
contribution to national food security in a number of APFIC states, although there are
concerns that current patterns of production and trade are compromising this
contribution. Fisheries and aquaculture industries have also absorbed millions labors
of Vietnamese growing population. Only in the tra fish aquaculture industry, more
than 500,000 labors and 50,000 farming households had been involved in 2003 (Due,
2007). Furthermore, Vietnam, with a coastline of over 3,260 kilometers (km) and
more than 3,000 islands and islets scattered offshore, plus up to 2,860 rivers (Report,
2007) and estuaries, has been geographically endowed with ideal conditions for the
thriving fishery sector which currently exists. For centuries, the Mekong River Delta
in the south and the Red River Delta in the north have been used for wild catch
fishing as well as extensive fish farming. The Mekong River Delta, one of the most
productive fishery zones, covers an area of about 40,000 square km (Report, 2007). In
addition, there are about 4,200 square km of rivers, lakes and other natural bodies of
13

water further inland, which swell to an additional 6,000 square km during periods of
seasonal flooding.
Consequently, the fishery sector plays an important role in the national
economy, accounting for about 6.1 percent of Gross Domestic Product (GDP) in 2006
and earning almost $3.4 billion in export revenues. Production in the fishery sector
grew at an average rate of 10.51% from 1991 to 2000, and 12.14% from 2001 to 2005
(Report, 2007). Much of this growth in production can be attributed to continued
expansion in aquaculture, which increased from a 26 percent share of the sector in
2000 to 46 percent in 2006. A strong export market is the· driving force behind the
growth in aquaculture, but there is also a growing domestic market as incomes
improve and local demand increases. The bulk ofVietnam's fishery exports are bound
for Japan, Taiwan, South Korea, Hong Kong, the United States and the European
Union. With a sixteen-fold increase in fishery exports since the 1990's, Vietnam now
ranks among the top ten seafood exporters in the world.
In fact, Vietnam's fishery product exports have increased considerably since
2000 to become a major income earner and one of Vietnam's major export
commodities. Aquatic exports earned over $1 billion in 2000, $ 2.2 billion in 2003
and $3.36 billion in 2006. Total export volume for 2006 was 811.5 thousand metric
tons, a 29.4% increase over 2005. Catfish and shrimp are by far the largest share of
aquatic exports, accounting for over 22% and 44%, respectively, of total export
earnings in 2006. Currently Vietnamese fishery products have reached more than 120
countries and territories on five continents. Japan and the United States are the two
largest export destinations, by country, while European Union nations, as a group, had
the largest share of exports by volume and the second largest share by value in 2006.
Exports are projected to reach more than $4.0 billion in 2008.
Chilled/Frozen
Fish
34.20%
Source: Report from the Ministry ofFisheries
Frozen Shrimp
43.60%
Figure 2.4 Vietnam's Primary Fishery Export Products in 2006 (value basis)
14

According to statistics, nearly 10% of the population derives their main income
from fishery. The fishery sector is significant contributor to the economy of Vietnam.
Vietnam's fisheries sector contributed some 3% to the GDP in 2015 and generated 9-
10% of the total Vietnamese export revenues. Otherwise, the importance of fish to
human populations around the world is undeniable. Throughout history, different
cultures have used fish protein as a food source, with wild-caught fish providing the
bulk of fish-derived protein. Further, fishery industry has played an integral role in the
economic development ofmany economies. For example, the American colonies were
able to develop financial independence with the abundance of cod, and the Vikings of
Iceland made a fortune from the wealth offish in·the region. Now, centuries later, fish
are still key players in the global economy. As developing countries have grown and
consumers are becoming richer, the demand for fish is shaping the markets for
seafood across the globe. Global consumption of fish has doubled in the past thirty
years, with more than 90% of the developing world contributing to that increase. As
more countries become dependent on this new staple, more economies have become
based around the fisheries as well. Thus, world demand of fishery products always
exists; this thing is good indicator for promoting fishery industry development
strategy in Vietnam. Besides, growth in fishery exports helped to use products from
backward and forward linkage industries. If fishery exports more and more increase,
more commodities will be used to serve for this and also to create more jobs, more
income. Then, this cycle will make increasing in GDP; it means that there is the
growth in economy.
2.4. An overview of Vietnam fishery sector
The aim of this part is to present some characteristics of fishery sector in
Vietnam and to sketch out a dynamic picture of the sector. It puts forward some
preliminary assessments on comparative advantages of Vietnam fishery sector, on its
competitiveness, on production system and marketing channel in general and their
operations in the period.
Generally, the fishery sector, including marine capture, aquaculture,
processing, trade and services, has been defined as one of the national spearhead
sectors. An increasingly concerted coordination has been established between fishery
trade with production and processing. It is a safe bet that trade, for the most part in the
form of export as in the case of Vietnam, constitutes the final and also vital stage in
creating the much-needed margin in the value chain, serving the purpose of
15

maintaining and expanding the markets for the whole fishery sector. The recent
impressive record of achievements accruing from fishery exports has largely
contributed to the national export growth, which can be demonstrated in a number of
statistical figures.
Though fluctuations on the world market, the total export value in Vietnam
has constantly experienced a marked upturn, increasing from $1.351 billion in 1997 to
greater than $2 billion in 2002 and reaching $2.74 billion in 2005 (Anh et al, 2006),
and so on. For the development process, Vietnamese fishery sector have a long-
standing history, from the spontaneity in earning a living such as collecting crabs and
shellfish, then together with the socio-economic development, boat building appeared;
swimming and rowing skills were the basics of fishing. The ancient Vietnam moved
step by step from inland waters to the sea. However, up to the 1950s, the Vietnam
fisheries had still been backward and non-mechanical not became a production
industry corresponding to the national natural condition and not met the demand of
social development. During the past 20 years (1986 - 2005) ofthe renovation process,
the fisheries sector showed a continuous annual growth, in 5-year plans. In 2006, the
total fisheries production was 3,695, 927 metric tons (MT),. of which 1,694,276 MT
came from aqua cultivation; the fisheries export value gained more than US $ 3
billion, and about 4 million laborers were involved in the fisheries sector. The sector
has become an agri-industrial economy with high rate of growth, increasing scale,
thus contributing to stabilization and development ofthe country.
Actually, fishery sector is small and not bulky industry relative to other
industries. However, annual export value of this industry has increasing trend and
exceed 10% (nearly 12%) of Vietnam exports in 2001. Thus, fishery industry can
count as real strong point of Vietnam economy as its markets are diverse globally
(Figure 2.5). According to statistical figures from Fistenet, fishery industry created
approximately 7,100 employments per year from 1997 up to now, this contributed in
unemployment rate decrease in Vietnam.
Nevertheless, Vietnam's strategy of increasing its fishery exports faced a
number of constraints and deficiencies. Some of these .were common to other
commodities from Vietnam. The geography and topography of Vietnam makes the
country highly vulnerable to natural hazards. Each year, natural disasters such as
typhoons, storms, floods or drought have severe effects on fishery industry. The lack
16

of awareness and control on the marine fishery capture significantly impacted coastal
fishery resources and aquatic biodiversity.
Others
14.50%
-----~·
USA
'19.80%
Source: Report from the Ministry ofFisheries
2'1.60%
Figure 2.5 Vietnam's Fishery Products Export Market, 2006 (value basis)
In addition, deficiencies in management seriously affected the improvement of
actions: in 1993 the Vietnamese Government had an insufficient knowledge of the
biologic resources available in the marine and aquaculture sectors. This had a
negative impact on national disease control as well as on its product quality
development plans. Also, the ban on fishing practices having a negative impact on
aquatic resources and the environment was hard to enforce.
Moreover, a number of facilities were lacking: the fleet of vessels for the
various types of fisheries was insufficient and inefficient, transportation and retailing
facilities (i.e., storage, depuration establishments, or "cold chain" facilities, etc.) were
underdeveloped, access to credit was difficult, extension services and marketing
channels were lacking, and there was low awareness among farmers and processors
with respect to hygienic standards, quality tools and chemical monitoring.
All these constraints or shortcomings led to very low added value products, which
were not competitive on the international markets. Furthermore, high levels of food-
borne pathogens, with poor water quality and deficient production, processing,
marketing and retailing technologies, in particular of meat and vegetable products,
caused high levels of food-borne di$eases. Next, high levels of toxic residues and the
exceeding of maximum residue levels for pesticides were common problems. In the
early 1990s, no information was available from producers on the quantity of
antibiotics used in meat and fish production. Specific concerns of the fisheries sector
17

with respect to their products and their marketability were: maximum residue levels,
histamine, heavy metals, including mercury, microbiological requirements and
parasites.
2.5. Bilateral Trade Agreement, the United States Anti-Dumping Measures and
Vietnam fishery exports in the period 1997 - 2008
Since 1986, Vietnam has embarked on a gradual process of transformation
from a centrally-planned system into a market-oriented economy with a socialist
orientation ("Doi Moi"). Reforms are being pursued at the institutional and economic
level. Legal and regulatory policy frameworks for energy, water, and forestry, as well
as for investment and enterprises, were adopted. Vietnam also succeeded in becoming
an integral part of international production and distribution chains. Accession to the
World Trade Organization in January 2007 deepened the connection between
Vietnamese farms and firms and international markets.· Thus, the fishery is a
successful sector in capturing significant parts ofthe high-end markets, despite market
defense interventions and other trade remedies such as the antidumping measures
introduced by the US.
Since 1994, when the U.S. lifted the trade embargo against Vietnam,
Vietnamese seafood has been exported to the U.S. From 1994 to July 2000, even
before the Bilateral Trade Agreement (BTA) was issued, the export value of
Vietnamese seafood was rising steadily. The Vietnam Association of Seafood
Exporters and Producers (VASEP) and individual seafood exporters such as
Seaprodex, Agrifish, etc. have been among those involved in the U.S. market since
that time. In the year 2000, Vietnam's seafood exports to the U.S. increased
dramatically, mainly due to the ratification of the U.S.-Vietnam BTA. Among
Vietnam's seafood export to the U.S., shrimp was the main component and accounted
for 74% of the overall value. With the ratification of the BTA between the U.S. and
Vietnam, Vietnamese seafood producers had an opportunity to increase their share in
this remarkable market. After the BTA, Vietnam's seafood export value increased
dramatically to over US$ 2 billion in 2002 and 2003. In 2003, Vietnam's fishery
exports to the United States soared to $730.7 million, increasing 18.4 percent over the
previous year. Fishery exports to the United States in 2006 were valued at $651.8
million, a 3.7 percent increase over the previous year. Shrimp exports of 35,414
metric tons accounted for over 65.9% ofthis amount.
18

Therefore, the United States is considered to be Vietnam's most important
market in the future offering new opportunities to exporters in the next ten years as
stated in the Vietnamese government strategy on export development during the
period 2001-2010. The bilateral share of the U.S. in Vietnam's total exports is
expected to increase to 15-20% by 2010. Vietnam's tra and basa fish have gained a
considerable share of overall U.S. seafood imports for these commodities, and
American consumers are becoming familiar with them. This provides further
motivation for Vietnamese producers to boost their exports to the U.S. Unfortunately,
the decision of the U.S. Department of Commerce on June 16, 2003 to place punitive
import duties on tra and basa fish entering the U.S. market at the rates of 36.84% and
63.88%, respectively, constitute a very serious trade barrier for Vietnamese seafood
products.
2.6. The exchange rate regime and Vietnam fishery exports 1997 - 2008
From 1997 to 1998, Vietnam had to cope with the impact of the Asian
financial crisis. While Vietnam was not directly attacked by speculators, VND
became overvalued relative to the regional currencies which fell sharply. In February
1998, the official central rate itself was devalued from 11,175 to 11,800 VND/USD.
These adjustments brought the actual exchange rate to 12,980, at the most depreciated
end of the revised band. In addition, the government of Viet Nam has also
implemented foreign exchange controls, export-import controls and controls of
commercial credit for imports, in order to avoid debt shocks. The government has also
controlled more strictly foreign borrowings, including government borrowings and
private borrowings, be.cause it relates to debt service capacity ofthe economy.
In February 1999, the SBV (State Bank of Vietnam) introduced a new
exchange rate mechanism. The central rate was now set daily at the average of
Interbank exchange rates on the previous transaction day with a very narrow band of
±0.1%. With this mechanism, VND (Vietnam dop.g) started to crawl (depreciate) very
slowly towards the present level ofaround 15,600 (December 2003).
In January 2005, an announcement from the State Bank of Vietnam pointed
out that exchange rate depreciation would be limited to 1 percent in 2005 encouraged
sustained growth in foreign-currency borrowing. Next, in January 2007 the range is
widened to plus and minus 0.5%.
During these years, the State Bank maintains an artificially high dollar-dong
exchange rate. The exchange rate is allowed to fluctuate within a daily margin of 0.1
19

percent. As currencies in surrounding countries have started appreciating again, the
Vietnamese Dong in comparison is less overvalued than it was. As a result exports are
harmed less by the artificial high value ofthe VND than before.
In the end of 2008, the US financial crisis has happened, it caused the US
economy is in decline status. The economic decline ofAmerica has led to a long term
devaluation of the dollar. If the US enters recession, interest rates will fall and there
will be a bigger fall in the dollar. This may cause a rise in the Vietnam currency
making its exports to US less competitive. Otherwise, the widening of the dollar
trading band, which was thought would depreciate the· VND and help export
companies, has had quite a different effect. In principle, a weakened local currency
helps exporters as it makes a country's products cheaper and more competitive in the
world's market. However, things have been going the other way; exporters have to
face many problems in their works.
2.7. CPI (Consumer Price Index) and Vietnam fishery exports 1997-2008
Consumer Price Index relates to inflation, and inflation relates to the value of
Vietnamese currency, dong. In addition, export sectors also need import machinery
and raw materials in order to serve their production. Therefore, a question is
mentioned that whether the increased value of the dong will benefit the economy and
imports will be cheaper when bought in dong and, as a result, lower the Consumer
Price Index. The answer may be not.
In fact, an increase in the value ofthe dong helps reduce the price for imported
machinery and raw materials. But with exports, when we· exchange US dollar for
dong, the price falls. The increase in the value of the dong will impose new risks on
farmers and exporters. They may lose both profits and market share. Thus, farmers
and enterprises carry the burden of high interest rates and expenditures. This is now
exacerbated by the risk that may be incurred from the increased value ofthe dong.
In brief, the increase of CPI is not good for exports in general and fishery
exports in particular because fishery exports use many primary products or materials
from import sources. According to Vietnam statistical sources, CPI in 1997, 1998 are
relatively higher than that in 2000, 2001, 2002, and 2003. From 2004 to 2008, CPI
continuously increased, and CPI value in 2008 is highest value during period from
1997 to 2008. These fluctuations of CPI, perhaps, can be explained by some reasons
such as Asian financial crisis in 1997, the BTA was signed in 2001, the consequence
ofthe US antidumping measurements, the financial crisis in 2008 and so on.
20

2.8. Definitions
2.8.1. Fishery production
According to GSO (2006), production of fishery refers to total production
volume of one or a group of aquatic species harvested or caught in a given period,
comprising production offishery caught and production ofaquaculture:
• Production of fishery caught includes production of catches from the sea,
and from rivers, streams, lagoons, or ponds.
• Production ofaquaculture includes all aquatic production from aquaculture.
2.8.2. Export
According to Blanchard (1997), export is the purchases of domestic goods and
services by foreigners. The export of one country is, by definition, the import of
another. In thinking about what determines Vietnam exports, equivalently, what
determines foreign imports? Foreign imports are likely to depend on foreign activity,
and on the relative of foreign goods. Thus, exports can be written as X = X(Y*, C),
where Y* is income in the rest of the word, or simply foreign income (equivalent
foreign output). An increase in foreign income leads to an increase in the foreign
demand for all goods, some of which falls on Vietnamese goods, leading to higher
Vietnam exports. An increase in epsilon - an increase in the relative price of foreign
goods in terms of Vietnam goods - makes Vietnamese goods relatively more
attractive, leading to an increase in exports.
2.8.3. Export growth
Following Krueger (2000), a definition of export growth is 'export growth is
defined as the long term trend in a country's foreign exchange earnings from goods
and non-factor services' (Krueger, 2000).
2.8.4. Economic Growth
According to World Bank (ICT at a Glance Definitions and Sources), GDP
growth shows the annual percentage rate of growth of gross domestic product (GDP)
at market prices based on constant local currency. Aggregates are based on constant
2000 U~S. dollars. GDP is the sum of gross value added by all resident producers in
the economy plus any product taxes and minus any subsidies not included in the value
of the products. It is calculated without deductions for depreciation of fabricated
assets or for depletion and degradation ofnatural resources.
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2.8.5. Consumer Price Index - CPI
Consumer price index (CPI) is indicator reflecting the tendency and change in
the price of "basket" of selected consumer goods and services in a certain period of
time. Price of basket of goods and services in base period is set at 100, and in other
periods is calculated in percentage as compared to that of base period. Basket of
goods and services used to measure CPI are popular ones bought by consumers. They
are revised and updated every 5 years.
In addition, weight to calculate CPI is expenditure proportion of each
commodity group as compared to total annual expenditures of households. It is
gathered from the household living standard survey and used for 5 years.
Laspeyres formula is utilized to calculate CPI:
Ofwhich:
lp: Consumer price index
Po: Price in base period
qo: Volume ofgoods and services in base period
Pt: Price in reported period
do: Fixed weight ofbase period
t: Reported period; 0: Base year
D
_ qoPo
o-
LqoPo
In fact, CPI is measured monthly, with 4 bases: base year, previous month, same
month of previous year, and previous December for separated province, city, and the
whole country (including index of urban and rural areas, composite index of each
province, city, region and the whole country) (GSO, 2006).
Furthermore, the Consumer Price Index uses time-series data to measure
changes in comprehensive prices of goods and services purchased by households
throughout the country. It reflects changes of the cost of purchasing goods and
services in a fixed "market basket." It is not designed to measure changes in the living
expenses arising from changes in the types, qualities or quantities of the goods and
services purchased.
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2.8.6. Antidumping measurement
What does "dumping" mean? According to Knetter and Prusa (2000), there are
two criteria in WTO regulations to define a dumping import as follows:
-First, there must be evidence that the domestic industry has materially injured (e.g.,
a loss or decline in profitability) by foreign imports
- Second, the foreign suppliers must be found to be selling their products at dumping
pnces
In addition, a dumping price is a price "less than fair value" (LTFV). The
LTFV criterion can be determined in either oftwo ways:
(1) By showing that the price charged in the domestic market by the foreign suppliers
is below the price charged for the same product in other markets (i.e., the "price-
based" method)
(2) By showing that the price charged in the domestic market is below an estimate of
cost plus a normal return (i.e., the "constructed-value" method).
In US, the Department of Commerce (DOC) and the International Trade Commission
(lTC) administrate the antidumping laws. Each has distinct roles in the antidumping
investigation process.
Blonigen and Haynes (2002, cited by Due, 2009b) suspect that exporters react
to avoid or reduce the duty by raising their price prior to and during the long process
of investigation (Figure 2.6)
Petition Preliminary
filed lJSITC
First
Preliminary Final Final administrative
USDOC USDOC· LISJTC review
I· ....... ·1----+-------+----+----t·............,
-U!O 0 45 160 235 280 645
Source: Blonigen and Heynes, 2002
Figure 2.6 Time line of standard US Antidumping Investigation
These duties were applied to frozen fish fillets in January 2003, when the U.S.
Department of Commerce made a preliminary affirmative determination of dumping.
The final affirmative determination was made in June 2003, with antidumping duty
rates set at essentially the same rate as announced in the preliminary determination
(31 to 64 percent). As the below figure shows, the imposition ofantidumping duties in
January 2003 had a significant negative impact on exports of frozen fish fillets to the
United States-the monthly export level fell from over US$10 million to below US$2
23
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