Trade Liberalization, Distributional Coalitions and Economic Growth: A Case of Vietnam

Abstract

This paper examines the economic growth of Vietnam by focusing on trade liberalization and the strategies that the distributional coalitions have chosen in response to this reform. It analyses the tariff schedules annexed to six key free trade agreements that Vietnam signed. This paper finds that the distributional coalitions intentionally under-protect three groups of products to keep their benefits. Group 1 consists of products with high amounts of revealed comparative advantages (RCAs) and a strong presence in the state sector. Group 2 comprises products with low RCAs and a tenuous presence of the state sector. Group 3 represents products where the presence of the state sector is strong, but their production capacities cannot meet the massive domestic demand. The strategically administered under-protection has also allowed the distributional coalitions to preserve their privileges. While these strategies have been effective in achieving static efficiency, they have been considerably less effective in bringing about structural changes necessary for sustainable long-run economic growth. © 2023 by the author.