Effects of Vietnam - Japan Economic Partnership Agreement on Vietnam’s economy.

Abstract

The Vietnam - Japan Economic Partnership Agreement (VJEPA) is the first bilateral FTA agreement of Vietnam. The VJEPA focuses on not only the liberalisation of trade in goods and services but also the cooperation agreement on investment and other economic cooperation between the two countries. The reduction of import tariff under the roadmap of VJEPA will directly or indirectly affect the production of the sectors in particular and of the economy in general. This paper applied the dynamic general equilibrium model (DGE) with the 2012 Social Accounting Matrix (SAM) for Vietnam to simulate the scheduled impact of reducing the import tariff of VJEPA on the Vietnamese economy. The simulation results exhibited that the reduction of import tariff under the VJEPA made positive economic growth in the long term, increased household welfare and reduced the gap between rich and poor; in particular, the industry groups grew strongly, especially the leather industry and the production of machinery and equipment. On the contrary, the impact of VJEPA reduced government revenue and caused a trade deficit.