THE CHARACTERISTICS OF NON-TARIFF MEASURES IN VIETNAM FOREIGN TRADE

Non-tariff measures (NTMs) are the key instruments in the trade policy in recent years. The high rate of integration in the world market are required the high prevalence of NTMs imposed on products. In fact, developing countries have less concern about the vital role of NTMs than developed nations. Vietnam are the exporting-led economy with the highest rate of trade openness and the diversification of products and market structure. The aim of the paper identifies the characteristics of Vietnam’s non-tariff measures imposing on imports. The role of non-tariff measures in Vietnam parallel with the increasingly prevalence of these measures in the world economy.


Introduction
With the requirement of integration, tariff reduction are the fundamental requirements in the negotiation among countries, while non-tariff measures (NTMs) has becoming increasingly in the trade policy. The facts have witnessed that developed country has been aware of the role of NTMs early and has built the strong and so-phisticated NTMs for many purposes. In contrast with, developing and least developing countries have little concerns in the type of measures or have consider these measures when they confront to with exporting to developed nations. Thus, the aim of the paper is to demonstrate the proliferation of NTMs in developing countries, in case of Vietnam which is the most active economy in the integration process.
The very first research about NTMs was carried out by Baldwin (Baldwin, 1970) under the term of non-tariff barriers. Baldwin said: "Non-tariff barriers defines non-tariff distortion as any measure (public or private) that causes internationally traded goods and services, to be allocated in such a way as to reduce potential real-world income". The distortions have occurred since the differences between price-at-border and domestic price. The trade-distortions stems from protectionism purpose or the side effects from imposing other measures. In case of protecting domestic industry by restricting demand on imports, these measures consider as "trade barriers". However, understanding non-tariff barriers is not comply with the purpose of trade facilitation. Thus, UNCTAD improve a new term called Non-tariff measures, which are defined as "policy measures, other than ordinary customs tariffs, that can potentially have an economic effect on international trade in goods, changing quantities traded or prices or both" (UNCTAD, 2010). The definition focuses on the economic impact of NTMs and emphases on the government monitoring policy. Besides, there are many misunderstanding between the concept of NTMs and NTBs (non-tariff barriers) 1 . Until now, the term "measures", instead of "barriers" has become more popular in the literature due to the widely meaning in terms of trade facilitation and trade protectionism.
Many literatures show the proliferation of Non-tariff measures on international trade. The methodology to analyze NTM are varied from descriptive to the highly analytical. The descriptive analysis named the inventory approach is the most common approach that developed by Laird and Yeats (Laird, Yeats, 1988) The approach portrait the occurrence of NTMs at the country and the incidence of NTMs, which include their main indices as frequency, coverage ratio and prevalence ratio. Although, these indices have many drawbacks, but they are useful for overview the 1 NTMs are considered NTBs when they have clear protectionist intent or they affect trade more than necessary to address a domestic policy objective. NTMs often have legitimate non-trade-related policy objectives such as consumer health or food safety. NTMs may constitute trade barriers and increase trading costs but may also cause welfare improvements. role of NTMs across country. There is no doubt that non-tariff measures play an increasingly important role in trade policy. In the context of regional and multilateral at high rate, NTM can be used either trade-restricting measures or trade-facilitating measures. In the view of trade facilitation, NTM help world market or cross-country market more transparent to protecting public health and environment and preventing distorted-effects to the country market in the highly competitive global market. In the other view, NTM can diminish trade flows because of the higher fixed cost for meeting the strictly requirement imposed by importers. Until now, developing countries (especially the economy depends on exporting) have much concerns on the issue of accessing the importing markets (usually developed countries which set harsh non-tariff measures), while they neglect to prepare the solid non-tariff barriers. Vietnam is one of the typical example. Since the centrally planned economy, Vietnam successfully transformed to open market and marked the turning point on integration when joining in WTO. Since Vietnam became an official member, Vietnam has been required to commit regulations and standards or non-tariff measures. Thus, the paper demonstrates the practice of non-tariff measures in Vietnam in the context of deeply integration into the world market. Especially, the paper research NTMs of developing countries as the countries imposing, while most previous research focus on developing countries as the countries affected.

Materials and Methods
In the paper, author use inventory approach developed by Laird and Yeats (1988), which include two main indices as frequency and coverage ratio. Besides, author category by product into two group as agricultural and non-agricultural products to analysis the difference, relating to the trade policy. The statistical analysis is used database sourced from TRAINS/WITS in 2015 (World Bank, 2018). The data are covered on 5204 products with the 6-digit HS code (WCOOMB, 2018)

Results
To descriptive analysis to Vietnam's trade performance during the period of integration (the remark year of 2007), the paper used on 3 fundamental analytical indices including trade openness, sectoral share of total export/import and share in value of exporting/importing market. Based on the analysis of trade performance, it implies the effect trade on domestic economy as well as the policy objectives.

Trade openness
Based on the calculation of trade openness (WITS database) (World Bank, 2018), (table 1), Vietnam has the highest ratio of trade openness in the group of low-middle income country at 178,76%, which is 3 times more than the average of world (at 58.04%). The figure shows the degree of sharply increasingly integration and the impressive rise of total trade contributed to GDP. Since the year of 1986 when Vietnam officially opened the market and had foreign trading activities, the ratio of openness in trade range from 18.95% in 1988 to 178.76% in 2015, 184% in 2016 and the average of the 29-year period is 106,65%. Due to the high openness of economy, the process of reducing and removing tariff in Vietnam has been implemented dramatically. Average of MFN tariff and preferential tariffs are applied to all products at around 6-7% in 2017, amounting to a half of the year of 2000. Remarkably, when Vietnam became the official WTO member in 2007, Vietnam has committed to reduce 10.600 tariff lines. In details, 35,5% of the tariff lines are committed to reduce (focusing on textile, garment, aquatic products, furniture, manufacturing products, pork, beef), while 3.700 lines remain the tariff rate and 3170 lines are implemented the bound tariff (fuel, mineral, vehicles).

Sectoral orientation of trade
According to the statistic of the share in value in total exports (UNCOMTRADE, 2017), Vietnam has successfully transformed from the export of raw material, agricultural and aquatic products to the export of industrial products at the medium technological level. In 2016, Vietnam become the net exporter for electrical machinery and equipment (HS85), amounting to the highest value of exporting (29,2% in 2015; 36,21% in 2016), increase 5 times more than the share in 2007 (6%). Otherwise, agricultural products are illustrated by the downward trend over the 15-year period; especially mineral fuels (from 22,9% to 1,5%), fish and crustaceans (from 11,55% to 2,05%), cereals (from 4,18% to 0,8%). Clearly, the orientation in trade policy is increasing the industrial products and reducing the proportion of raw material and agricultural products. Relating to imports (Table 2), Vietnam has witnessed the sharp growth in import value over a 10-year period from 36,76 billion USD in 2005 to 174,978 billion USD in 2016, with the annual growth in value at 12%. Among top 20 import goods of Vietnam, the electrical machine and equipment (HS 85 and 84) rank the first with the highest share of above 30% for both. These products also have rose at the highest annual rate (20,07% and 13% respectively). The result shows the government's effort to encourage the import of high and advanced technologies from innovative nations to increase the productivity and the quality of goods in the manufacturing industry or other fields. Secondly, the intermediate goods, which are inputs for key exporting industries or light industries (such as textile, garments or agricultural) account for the second largest share, ranging from 3-4%. Furthermore, Vietnam has restricted to import domestically produced goods, luxury goods with the long-term goals of trade balance (or reducing the excess of import).

Market orientation of trade
In term of exporting and importing market, Asia countries have maintained the largest partners importing Vietnam's products (around 50%) in the period (Table 3). Understandingly, Vietnam take an advantage of geography in the region to access to the large importing markets such as ASEAN countries (at 16,99%; 14,34% and 11,23% respectively with three years illustrated), the neighbor -China at around 10%, following by Japan and Korea. Secondly, European countries are identified the potential market of exporting products. However, it is difficult for Vietnam's exporting firms to cater for strictly regulations and standards in the region at the border and beyond the border; so that the market share only makes up around 20%. The noticeable partner is USA, which suffer the significant growth over the period. The main reason is that the diplomatic relation between Vietnam and USA was normalized since 1995 (Bilateral trade agreement signed in the year). Consequently, the exporting market structure indicate the equally and appropriately distribution. In contrast, the importing market structure is significantly distributed at uneven rate. Over a quarter of total value is imported from Asian partners. In details, there is an upward trend in China importing products from 9,9% to 29,83% during the 15-year period. The excess of import from China has showed remarkably since 2010. Otherwise, Although ASEAN enhance the strongly cooperation among countries by reducing and removing many tariff lines, the market share of importing products originated by ASEAN countries has decline from 25,72% in 2000 to 19,35% in 2010 to 14,35% in 2015. Japan/Korea and Vietnam has the similarities and the high index of trade complementarily so that the two markets set ranking the third and fourth among top 10 largest importers. Sum up, Vietnam government has followed the strategy of market diversification and integrated deeply into the world economy. Although Vietnam utilizes the geographical opportunities to enhance the regional cooperation, in some case, it leads to the side effect on the larger dependency on some main partners, especially China. Besides, Vietnam's trade policy takes much attention on exporting strategy, but lack of the importing orientation, while the deficit in trade balance can be seen over the period.

The practice of Non-tariff measures (NTMs) in Vietnam's trade policy
With the spectacular integration, Vietnam has been high awareness of non-tariff measures as the substitution of tariff. The rise in NTM in Vietnam mainly stems from the number of SPS and TBT measures. Although non-tariff measures have been improved, they have still conflicted and overlapped and been lack of transparency and stability.

Main components of Non-tariff measures in Vietnam Sanitary and Phytosanitary (SPS)
The number of SPS measures imposing by Vietnam is average at 121 measures, which covers all types of agricultural products including animal and animal products (HS 01-05), vegetable products (HS 06-15), and foodstuffs  with the aim to protect the consumers' health, food safety and sanitary. Besides, Vietnam has imposed SPS measures as trade-restricting instruments to protect the domestic industry because agricultural products are the comparative advantage of Vietnam in exporting. In spite of the strictly regulations in agricultural products, non-agricultural products are the exception for SPS measures. By contrast with EU, they also impose SPS measures to a variety of products (such as chemical products, wood products, textiles, metals, machinery). These measures are only related to materials and articles intended to come into contact directly or indirectly foodstuff. It shows that developed nations are not only control the products, but also the production process of them, in contrast to developing countries as Vietnam.
Technical barriers to trade TBT measures make up 36,99% in total Non-tariff measures of Vietnam. The regulations imposing on the largest number of products include B14 (Authorization requirement), B31 (Labelling requirement), B82 (Testing requirement), B83 (Certification requirement), B42 (Transportation and storage requirement). 78% of total TBT measures cover non-agricultural products, while 26 in total of TBT (118 measures) cover agricultural products (22% respectively). The noticeable point is that 33 regulations are not applied for same products in the domestic market, focusing on motor vehicles, motorcycle, salt, cigarette. These products are also controlled strictly by government due to the infant industry (motor vehicles, motorcycle) or the monopoly (salt, cigarette).

Export-related measures
Due to the export-led country, Vietnam has much concerned export-related measures in order to meet the world's demand and to protect environment and ecosystem, as well as military affairs. Until now, Vietnam prohibit or require licenses for international trading activities, agent, selling and buying, processing and transiting 356 agro-forestry-fishery products at HS -6 digits, chemicals for producing explosives and some rare plants. Besides, fishery products such as catfish need to meet the export technical requirement before exporting. Furthermore, two impor-tant export products of Vietnam, namely rice and fishery products are covered the highest number of export-related measures.
Quantity and price control measures Vietnam has been used quantity control measures since the 1990s, which are categorized into 3 groups above: i) goods subject to line management measures, ii) goods subject to conditional import, iii) goods banned from importation. These groups of products are controlled under the special control of government according to Decree 187/2013/ND-CP. Under WTO commitments, the number of products in the control of quantity restrictions has decreased. The quantity control measures cover only 7 measures, including: E112 and E113 (licensing for specific use and local production) with the aim of trading activities with scrap materials; E129 (licensing requirement on trading explosives for non-economic reasons) with the aim of security and national defense; E611 (this measure adds the tariff rate out of quota for tobacco materials. In terms of price control measures, the type of NTM aim to impose specific cost such as custom inspection, processing fee, evaluation fee for sensitive products category (cosmetic, salt, seeds of vegetable, publication and cultural products, finished pharmaceutical products).

Discussion
In terms of coverage ratio and frequency ratio, the remarkable point is that both the frequency ratio and the coverage ratio of NTMs in Vietnam have made up 100% until 2015. It means that all imports are covered by at least one measure and more. In ASEAN region, there are only 3 countries with 100% of the coverage ratio, namely Singapore, Philippines, and Vietnam; while other countries such as Indonesia or Malaysia applied these instruments on a half of total products at 57,05% and 54,44% respectively (Yan, 2011). Among the non-tariff measures, SPS and TBT are the most common measures to manage the trade flow, which amount to 37,9% and 36,99% respectively (nearly 75% of total measures). At the first period of integration, Vietnam has been aware of the vital role of NTMs in trade policy.
In terms of the prevalence of NTMs (Table 5), the average number of NTMs applied to a given product is 7.5 (WITS, 2015). Each product line is covered by average 7 to 8 measures. Specifically, 78% of product lines (at 4084 in total of 5204 products 6-digits HS 2012) are applied by one to ten types of NTMs. Over 10 NTMs imposed on a given product account for over 22% in total. While Up to 90% of non-agricultural products are covered by NTMs ranging from group 1 (1 to 10 NTMs), agricultural products are imposed mainly by group 2 or 3 (between 11 and 30 NTMs). It can be seen that agricultural products are the most sensitive products so that they are controlled strongly by non-tariff measures, mainly SPS and TBT measures. Especially, Vietnam has restricted imports which can be produced domestically or imports which are the exporting-oriented product, for example: sugar, fish or aqua-product, vegetables, agricultural-processed products. The main reason is that Vietnam has rich natural resources (land, tropical climate, the variety type of geology for planting) and the abundant of labor force due to the size and age of population. As a result, the prevalence of NTMs in agricultural products importing to Vietnam is higher than non-agricultural products with the purpose of controlling the domestic market or partial protectionism the most sensitive sector; besides, it can ensure the public health and the environment, which are the non-trading purpose in trade policy.

Conclusions
The paper demonstrates the prevalence of NTMs in Vietnam by the descriptive analysis. As the market with the high trade openness, the product and market diversification in the structural change of trade, Vietnam are aware of the role of NTMs effecting to trade flow. 100% of both the frequency and coverage indices shows the positive response of Vietnam's trade policy and the conformity with international regulations. However, all products are simultaneously applied by multiple NTMs measures (at least 3 types of measures), focusing mainly on SPS and TBT (chapter A and B in UNCTAD classification). The most sensitive products regulated by up to 10 or more NTM are agricultural products, chemical products, minerals and light manufacturing products, tobacco, wine and alcohol drink, explosives, and other domestically-produced products. It means that NTMs demonstrate the government's efforts not only for the non-trade purpose as protecting public health, food safety, but also for the trade-impeding purpose as protecting the sensitive industry or least competitive industry. However, the implement of NTMs has some drawbacks including being out of date notification to WTO, lacking transparency, intervening trade facilitation and hiding the behaviour of trade protectionism. Sum up, Vietnam should enhance the effectiveness of implementing existing NTMs and consolidating the measures appropriately with commitments since joining international or regional integration.