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The entry of Vietnam into the Association of Southeast Asian Nations (ASEAN) and its participation in the ASEAN Free Trade Area (AFTA) present challenges not only for the country's economy but also for the environment. Because Vietnam is currently transforming itself from a centrally planned to a market economy, it may experience some difficulty adjusting to the pace of liberalization in AFTA and to the environmental policy-making process. When looking ahead to Vietnam's future, important questions to ask are the following: (a) What are the possible socioeconomic and environmental impacts of Vietnam's participation in AFTA? (b) How will the government of Vietnam respond to these impacts? This article summarizes economic perspectives for Vietnam and describes the main environmental problems that will likely be associated with Vietnam's entry into AFTA.
In July 1995, Vietnam became the seventh member of the Association of Southeast Asian Nations (ASEAN) and committed itself to participating in the ASEAN Free Trade Area (AFTA) by the year 2003. Vietnam was granted 3 additional years to prepare for AFTA due to its late entry into the Common Effective Preferential Tariff Scheme (CEPT) and because Vietnam is the least economically developed country within ASEAN. The CEPT allows each ASEAN member country to formulate its own schedule for tariff reduction and the total elimination of nontariff barriers (NTBs) in preparation for AFTA. In so doing, member countries are able to ensure that the trade liberalization process will be compatible with their own national development strategies.
By committing itself to AFTA, Vietnam has taken on a number of obligations, such as ending at a 0% to 5% tariff rate, totally eliminating NTBs by January 1,2006, and granting most favored nation (MFN) status to ASEAN countries. Although its tariffs are currently much higher than other ASEAN countries, Vietnam also plans to reduce most of its tariffs on imports from ASEAN countries to below 60% and has promised to clarify its complex trade rules and provide relevant information to create a more transparent trading environment.
Thus, by the year 2006, Vietnam is expected to have effectively liberalized its intra-ASEAN trade. However, along with undoubted economic growth, the principles of free trade may conflict with international and domestic efforts to protect the environment. This means that Vietnam must adjust its policy-making process to handle potential socioeconomic and environmental changes caused by free trade.
AFTA and Its Socioeconomic Implications for Vietnam(1)
Free trade involves eliminating trade barriers and reducing tariffs among the member countries, and the process of implementing these changes in Vietnam will have far-reaching effects. For example, free trade will alter the import-export balance. Although there is some fear that a wide open economy will cause imported goods to flood the domestic market, the entry of imports should not pose a threat if Vietnamese producers are competitive. In fact, lowering trade barriers will result in greater availability of cheaper supplies, which will in turn result in the increased efficiency of domestic producers.
On the export side, Vietnam will have a much larger market. AFRA countries currently have a combined population of 330 million, and with the entry of Vietnam, AFTA's market will expand to more than 400 million. A more open and dynamic market will promote trade between Vietnam and ASEAN countries and will allow local enterprises and employment to expand more rapidly than if focused only on the …