Trade creation or trade diversion in Asean and Asean+6 FTAs: Trade Indicators Approach

a principle for RCEP negotiations. As a broad-based, region-wide FTA to be formed by 16 East Asian countries, the RCEP is highly expected to help mitigate the harmful noodle bowl effects. However, the construc- tion of the RCEP may be difficult because of differences in patterns of tariff elimination and ROOs adopted ASEAN+1 agreements. Under tariff elimination, the RCEP is expected to min- imize the variation among the five ASEAN+1 FTAs and commit to eliminating more than 90–95 per cent of tariff lines. That commits all member countries to make substantial efforts. Moreover, the RCEP tariff elimination time period has to be consistent with that found in current ASEAN+1 FTAs. If tariff elimination Journal of Economics and Development Vol. 17, No.3, December 201530 for the RCEP takes a much longer time than the current ASEAN+1 FTAs, most users in partici- pating countries would not be able to enjoy the fruits of the RCEP until its completion. Regard- ing ROOs, there is substantial commonality in ROOs across ATIGA and ASEAN+1 FTAs covered (except AIFTA) although considerable variation still exists. The ideal scenario that would provide an enabling environment for the value chain in East Asia is harmonization of the ROOs of the ASEAN+1 FTAs. There- fore, harmonization of ROOs of the ASEAN+1 FTAs could be set as one of the ultimate goals of the RCEP construction and negotiation pro- cess. The direction of harmonization should be towards highly liberal ROOs and minimum costs of ROO compliance (Medalla, 2011, 26). 3. Theoretical impacts of an FTA The formal analysis of the economic impacts of integration began with the work of Jacob Viner in the 1950s (Viner, 1950). To understand the effect of economic integration on members, non-members and the world economy, we have to make use of the concepts of trade cre- ation and trade diversion developed by Viner (1950). The welfare effects of economic inte- gration are ambiguous and vary case by case because economic integration is simultaneous- ly a move toward freer trade (with members) and a policy of protection (against non-mem- bers). The trade-liberalization element of in- tegration is called trade creation. Integration reduces or eliminates protectionist measures among members and allows them to specialize and trade according to comparative advantage and to exploit potential economies of scale. Meanwhile, the trade-discrimination and pro- tectionist element of integration is called trade diversion. This refers to the diversion of trade from non-members to members caused by the built-in discrimination feature of economic in- tegration. If trade creation exceeds trade diver- sion, economic integration increases member countries’ welfare. If trade diversion dominates trade creation, members’ welfare falls because of economic integration. Figure 1 demonstrates welfare effects upon forming or participating, for example, a free trade area, from the perspective of a small coun- try. D and S represent the considered country’s domestic demand for and supply of good X, respectively. SM denotes the supply of exports of good X from other countries that would be members of the free trade area, SN denotes the supply of exports of good X from countries that would be non-members. Before integration, imports of good X from all countries are sub- ject to a tariff of t per unit. With the tariff, SM + t and SN + t represent the effective supply curves for imports from the two possible sources. In this case, it is assumed that non-members sup- ply the good X at a lower price than do mem- bers. Graphically, this is reflected by the fact that SN lies below SM, or equivalently, SN + t lies below SM + t. Initially, the price of good X in the domestic market of this small country is P0, at which residents of the country consume D0 units of good X, S0 are produced domestically and (D0 – S0) are imported from countries that would be non-members if the free trade area is created. After formation of a free trade area, the ef- fective supply curves are SM (because imports from member countries no longer are subject to the tariff) and SN + t (because imports from non-members remain subject to the tariff). The Journal of Economics and Development Vol. 17, No.3, December 201531 new equilibrium of the domestic market of this small country is at price P1. At this price, D1 units of good X are consumed domestically, do- mestic producers supply S1 units of good X, and (D1 – S1) are imported, but now from member countries. Domestic consumer surplus rises by area (a + b + c + d), while domestic producer sur- plus falls by area a. The government no longer collects any tariff revenue, since all imports now come from member countries of the free trade area without tariff. The total tariff reve- nue that belongs to the government before in- tegration is represented by area (c + e). Area c, which previously went to government as a part of tariff revenue, now goes to consumers in the form of a reduced price for good X. Area b is a net gain from increased efficiency, the units of X between S0 and S1 previously were produced domestically at relatively high costs (represented by the height of the domestic supply curve S) but now are imported at low- er costs (represented by the height of SM). This efficiency gain captures one part of economic integration’s trade creation effect. Area d de- notes the other trade creation effect. As the free trade area makes lower cost imports available, consumption increases from D0 to D1. For each additional unit of consumption, the value to consumers (represented by the height of the de- mand curve D) exceeds the opportunity costs of production (represented by the height of SM). The total trade creation effect of the free trade area equals the sum of triangle b and d. Figure 1: Welfare effects of a free trade area in Good X – A small country case P0 a b c d e P1 S1 S SN SM SN+ t + tSM S0 D0 D1 D Q P 0 Journal of Economics and Development Vol. 17, No.3, December 201532 Area e in Figure 1 illustrates the trade diver- sion effect of economic integration. Before in- tegration, all imports came from non-member countries, the low-cost producers of good X. After integration, all imports come from high- er-cost member country producers. The switch from low-cost to high-cost sources of imports represents trade diversion. Area e was a por- tion of the tariff revenue going to the domestic government before integration and it becomes a deadweight loss after integration. Each unit of imports between S0 and D0 now is being pro- duced at an opportunity cost represented by the height of SM rather than the lower opportunity cost given by the height of SN. The overall effect of the free trade area on the small member country’s welfare can be de- termined by comparing the trade creation and trade diversion effects. If trade creation dom- inates, formation of a free trade area enhances welfare; if trade diversion exceeds trade cre- ation, national welfare decreases. Economists estimate the overall impact of integration by calculating the effects represented by areas a, b, c, d and e in Figure 1 for each good traded. Note that there will be no trade diversion ef- fect if member countries include the low-cost producers of good X. And in this situation, in- tegration will unambiguously increase welfare (to see this, switch the labels of SM and SN to each other, and of SM + t and SN + t to each other in Figure 1). Note also that if the tariff is low enough to make the tariff–inclusive price of imports from non-member countries still lower than the price of tariff–free imports from member countries, the free trade area will have no trade creation or trade diversion effects – because no trade will occur with member coun- tries even if the group does form. 4. FTA impact assessment by trade indi- cators It is not an exaggeration to say that policy making in connection with free trade agree- ments (FTAs) should start and end with impact assessment (ADB, 2008, 109–134). Conduct- ing solid economic studies of FTA impact as- sessment is important for participating coun- tries, because they need to draw up the neces- sary adjustment policies to alleviate possible negative effects and maximize possible benefits from FTAs. There are various kinds of impact evaluation methods, which are usually com- plementary to each other. Some methods focus on effects at the macroeconomic level, while others focus on industry-level impacts. Some are simple indicators constructed from trade data or information obtainable at the customs office, while others are based on sophisticated econometric models. In general, impact evalu- ation can be divided into two broad categories: ex-ante and ex-post evaluation of an FTA. At the initial stages of creating an FTA, an assessment of the potential costs and benefits of the prospective FTA (an ex-ante evaluation of the FTA) is a prerequisite for shaping the FTA’s objectives, informing consultations with public and private stakeholders, and formulat- ing effective negotiating strategies. This paper makes use of trade indicators to draw specific inferences about the potential effects of joining an FTA. A trade indicator is an index or a ratio used to describe and assess the state of trade flows and trade patterns of a particular econo- my (Mikic and Gilbert, 2007). These indicators are easily constructed with a country’s trade statistics, which are readily available from na- Journal of Economics and Development Vol. 17, No.3, December 201533 tional statistical offices or international sourc- es. This paper employs the two trade indicators – revealed comparative advantage (RCA) and regional orientation (RO). 4.1. Revealed comparative advantage (RCA) International trade theory states that gains from trade come from specialization in a coun- try’s comparative advantage (i.e., sectors in which a country produces relatively more effi- ciently than in other sectors). The RCA index, introduced by Balassa (1965), can be used to discover the products in which a country has a comparative advantage. It is defined as the ratio of a country’s share of the commodity in the country’s total exports to the share of world ex- ports of the commodity in total world exports. A country is said to have a revealed compara- tive advantage if the value of the index exceeds one and a revealed comparative disadvantage if the index’s value is below one. The larger the difference between countries’ RCA indices, the more suitable they are as FTA partners. The formula for the RCA index is: RCAcg = (Xcg / Xc) / (XWg / XW) where Xcg = exports of good g by country c; Xc = total exports of country c; X Wg = world exports of good g; X W = total world exports. Measures of RCA have been used to help assess a country’s export potential. An RCA greater than unity suggests a revealed compar- ative advantage and less than unity suggests a revealed comparative disadvantage. 4.2. Regional orientation (RO) The regional orientation (RO) index tells us whether a country’s exports of a product are more oriented towards a particular region than to other destinations. It is defined as the ratio of two shares. The numerator is the share of the country’s exports of the product to the region of interest in the country’s total exports to the region. The denominator is the share of the country’s exports of the product to other countries in the country’s total exports to other countries. If the index has a value greater than 1, this implies that the country has a regional bias in exports of the product. Conversely, if the index is less than 1, then the country has no regional bias. The formula for the regional orientation index is: ROcgr= [Xcgr / Xcr] / [ Xcg-r / Xc-r] where Xcgr = exports of good g by country c to re- gion r; Xcr = total exports of country c to region r; Xcg-r = exports of good g by country c to countries outside region; Xc-r = total exports of good g to countries outside region r. 4.3. RCA, RO and impact assessment For each sector, the two indexes are com- bined in order to discover effects on the sec- tor (trade creation, trade diversion, etc.) after an FTA. The matrix of combination between the two indexes is presented in Figure 2. Each commodity sector will be in one of four quad- rants with different interpretation of the FTA effects as follows: - High potential welfare improvement - Quadrant I (RCA>1 and RO<1): If a country’s Journal of Economics and Development Vol. 17, No.3, December 201534 RCA index is more than 1 and its RO index is less than 1, there may be two possible ways of interpretation. (i) For a signed and implement- ing FTA (like the AFTA – ASEAN Free trade agreement), it is the case that the participating country can not utilize the FTA in order to di- rect its exports to the region even if it has com- parative advantage. This situation may reflect the weakness of the FTA in the sense of pro- moting intra-regional trade. (ii) For a proposed FTA (like RCEP), this category is the collec- tion of commodities that the country enjoys the comparative advantage of but have not been exported much to the region. The proposed FTA may change the situation so that the coun- try’s exports can be more regionally oriented by providing the country with more preferen- tial treatment. - Trade creation - Quadrant II (RCA>1 and RO>1): If a country’s RCA index is more than 1 and its RO index is more than 1, then an FTA between the country and the region should con- tinuously encourage the country’s export to the region. This country may enjoy the trade cre- ation meaning the expansion of its exports to the FTA member countries. - Trade diversion - Quadrant III (RCA<1 and RO>1): If a country’s RCA index is less than 1 and its RO index is more than 1, then an FTA between the country and the region may cause trade diversion. This country may replace non-member countries as the source of the region’s imports. - Possible potential welfare improvement - Quadrant IV (RCA<1 and RO<1): If a coun- try’s RCA index is less than 1 and its RO index is less than 1, there may be two possible ways of interpretation. (i) For a signed and imple- menting FTA, there is no hope for the sectors Figure 2: Matrix based on RCA and RO indexes Journal of Economics and Development Vol. 17, No.3, December 201535 in this category because they cannot export to the region, even though the country may enjoy trade preferential treatment of the FTA. (ii) For a proposed FTA, there may be still a hope for the commodities in this category to move to quadrant III by investing more in the sectors and negotiating for preferential trade condi- tions through the FTA. 5. Impacts of AFTA and RCEP on Viet- nam at sectoral level In this paper, the RCA and RO indexes are computed for Vietnamese commodities at the 2-digit level of aggregation during the 4-year period from 2010 to 2013. All data used in this paper is taken from Trade Map.6 Trade Map is an interactive online database on interna- tional trade statistics developed by the Inter- national Trade Centre UNCTAD/WTO (ITC). The yearly data in Trade Map for products at 2, 4, and 6-digit level of the Harmonized Sys- tem are mainly based on UN Comtrade,7 the world’s largest database of trade statistics, maintained by the United Nations Statistics Division (UNSD). This data is complemented by national sources when the information is not available in UN Comtrade. The quarterly and monthly data comes from national and regional sources. Data is available also for countries that do not report their national trade statistics to UN Comtrade. The trade of these countries has been reconstructed on the basis of data report- ed by partner countries. These data are called mirror data. Table 1 reports the industry RCA and RO indexes at the 2-digit product (HS) level for Vietnam. Based on the calculation result from Table 1, commodities are categorized into 4 quadrants. The matrix is presented in Figure 2. The matrix reflecting the combination between the RCA of Vietnam and the RO of Vietnam regarding the AFTA is shown in Figure 3. Trade creation effect As shown in Quadrant II of Figure 3, Viet- nam has comparative advantage in some ASE- Figure 3: Matrix of Vietnam’s HS 2-digit commodities based on Vietnam’s RCA and RO(AFTA) indexes Source: Authors’ calculation and compilation from Trade Map data Journal of Economics and Development Vol. 17, No.3, December 201536 Ta bl e 1: R C A in de x, R O in de x in A SE A N a nd R O in R C E P of V ie tn am fo r H S 2- di gi t c om m od ity se ct or s H S D es cr ip ti o n V IE T N A M 's R C A R O ( V N -A S E A N ) R O ( V N -R C E P ) 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 '0 1 L iv e a n im al s 0 .0 3 0 .0 2 0 .0 3 0 .0 3 0 .0 1 0 .2 5 0 .5 5 0 .3 7 0 .6 2 0 .8 9 0 .8 1 1 .0 4 '0 2 M ea t an d e d ib le m e at o ff al 0 .0 8 0 .0 9 0 .0 9 0 .0 5 0 .7 0 0 .9 8 0 .9 3 1 .0 1 0 .1 7 0 .1 8 0 .1 9 0 .2 5 '0 3 F is h , cr u st ac e an s, m o ll u sc s, a q u at ic i n v er te b ra te s N E S 1 0. 4 2 9 .6 0 8 .0 5 6 .7 9 0 .2 8 0 .3 4 0 .3 4 0 .3 9 0 .6 5 0 .6 3 0 .7 0 0 .8 3 '0 4 D ai ry p ro d u ct s, e g g s, h o n e y , ed ib le a n im al p ro d u ct N E S 0 .2 8 0 .3 3 0 .3 6 0 .3 2 2 .2 1 0 .9 1 2 .8 1 1 .5 0 0 .5 2 0 .2 7 0 .8 7 0 .5 9 '0 5 P ro d u ct s o f an im al o ri g in , N E S 0 .3 6 0 .3 9 0 .3 2 0 .2 9 2 .0 3 1 .9 5 0 .9 6 1 .1 0 5 .7 3 2 .8 4 5 .3 5 4 .4 4 '0 6 L iv e t re es , p la n ts , b u lb s, r o ot s, c u t fl o w er s et c 0 .2 8 0 .2 5 0 .2 8 0 .2 6 0 .3 4 0 .4 5 0 .7 0 0 .2 7 4 .3 9 3 .9 1 3 .9 7 4 .7 2 '0 7 E d ib le v eg e ta b le s an d c e rt ai n r o o ts a n d t u b er s 1 .0 8 1 .6 8 1 .9 0 1 .1 4 0 .8 2 0 .7 2 0 .4 8 1 .0 1 9 .8 6 1 1 .0 5 1 5 .9 4 1 3. 9 4 '0 8 E d ib le f ru it , n u ts , p ee l o f ci tr u s fr u it , m el o n s 3 .5 6 3 .6 8 3 .5 0 2 .9 2 0 .3 7 0 .3 0 0 .3 3 0 .3 3 0 .7 5 0 .7 9 0 .9 5 0 .9 2 '0 9 C o ff ee , te a, m at e an d s p ic es 1 4. 3 1 1 3 .7 8 1 5. 4 4 1 1 .8 1 0 .4 7 0 .4 4 0 .4 8 0 .4 5 0 .3 0 0 .2 6 0 .2 8 0 .3 4 '1 0 C er e al s 8 .0 6 5 .8 6 4 .8 8 3 .3 7 6 .6 3 7 .3 6 3 .7 6 2 .0 2 1 .4 5 1 .6 5 2 .1 6 1 .6 1 '1 1 M il li n g p ro d u ct s, m al t, s ta rc h es , in u li n , w h ea t g lu te n 5 .6 7 5 .9 7 7 .3 9 5 .7 6 0 .6 5 0 .7 7 0 .9 8 0 .9 0 1 7. 8 6 1 1 .4 9 1 4 .5 9 2 1. 9 9 '1 2 O il s ee d , o le ag ic f ru it s, g ra in , se e d , fr u it , et c, N E S 0 .2 6 0 .2 4 0 .0 8 0 .0 8 1 .9 1 0 .9 2 0 .7 7 1 .4 8 0 .7 9 0 .4 1 0 .8 0 2 .6 7 '1 3 L ac , g u m s, r es in s, v e g et ab le s ap s an d e x tr ac ts N E S 0 .0 3 0 .0 9 0 .0 4 0 .1 4 0 .2 3 0 .1 7 0 .1 8 0 .3 7 3 .4 7 4 .0 8 2 .8 3 4 1. 2 9 '1 4 V e ge ta b le p la it in g m at er ia ls , v eg et ab le p ro d u ct s N E S 2 .1 4 2 .0 1 2 .9 9 3 .0 7 0 .3 6 0 .3 4 0 .2 3 0 .2 1 5 .1 7 3 .9 0 1 1 .0 6 1 2. 0 2 '1 5 A n im al , v e ge ta b le f at s an d o il s, c le av ag e p ro d u ct s, e tc 0 .2 6 0 .3 6 0 .4 7 0 .3 6 4 .1 5 3 .9 8 4 .5 2 5 .7 2 4 .5 6 4 .6 2 5 .2 5 6 .9 4 '1 6 M ea t, f is h a n d s e af o o d f o o d p re p ar at io n s N E S 5 .0 5 4 .9 0 4 .1 1 4 .5 4 0 .2 1 0 .3 2 0 .3 1 0 .2 8 0 .9 1 0 .8 3 0 .9 5 0 .8 4 '1 7 S u g ar s an d s u g ar c o n fe ct io n er y 0 .5 5 1 .0 3 0 .4 6 0 .9 7 1 .9 1 0 .7 8 1 .8 5 1 .1 4 2 .7 8 7 .9 4 3 .2 4 9 .3 9 '1 8 C o co a an d c o co a p re p ar at io n s 0 .0 4 0 .0 5 0 .0 5 0 .0 5 1 1. 8 0 1 0. 3 5 9 .2 9 8 .1 8 3 .3 3 2 .6 1 2 .5 4 2 .3 4 '1 9 C er e al , fl o u r, s ta rc h , m il k p re p ar at io n s an d p ro d u ct s 1 .2 8 1 .2 3 1 .1 4 1 .0 5 1 .5 5 1 .8 3 2 .0 1 1 .6 9 0 .7 5 0 .7 7 0 .8 4 0 .8 4 '2 0 V e ge ta b le , fr u it , n u t, e tc f o o d p re p ar at io n s 0 .7 9 0 .6 6 0 .5 1 0 .6 6 0 .2 4 0 .2 8 0 .3 0 0 .2 8 0 .4 0 0 .5 8 0 .5 5 0 .5 7 '2 1 M is ce ll an eo u s ed ib le p re p ar at io n s 0 .4 4 0 .6 0 0 .6 4 1 .0 1 2 .2 7 2 .5 8 3 .4 1 3 .0 8 1 .9 9 2 .0 4 2 .5 0 2 .2 0 '2 2 B ev e ra ge s, s p ir it s an d v in e g ar 0 .2 9 0 .3 9 0 .4 5 0 .3 9 4 .8 7 4 .1 6 5 .2 5 4 .8 5 3 .3 0 3 .7 3 5 .3 6 5 .6 3 '2 3 R es id u es , w as te s o f fo o d i n d u st ry , an im al f o d d er 0 .4 9 0 .5 5 0 .6 2 0 .6 1 4 .8 5 7 .7 5 5 .8 4 4 .5 3 6 .7 7 7 .7 6 1 0 .9 1 1 3. 3 1 '2 4 T o b ac co a n d m an u fa ct u re d t o b ac co s u b st it u te s 1 .2 5 1 .0 5 1 .0 0 1 .0 1 2 .8 6 3 .2 1 3 .6 6 4 .6 8 1 .2 1 1 .3 5 1 .7 5 2 .8 7 '2 5 S al t, s u lp h u r, e ar th , st o n e, p la st er , li m e an d c em en t 1 .1 7 1 .9 0 2 .3 1 2 .9 7 1 .0 1 1 .4 4 2 .4 9 2 .8 2 2 .6 5 1 .0 7 0 .8 3 0 .9 9 '2 6 O re s, s la g a n d a sh 0 .1 4 0 .1 3 0 .1 2 0 .1 2 0 .0 3 0 .2 2 0 .3 3 0 .1 8 2 3. 4 3 1 1 .0 6 5 .3 9 1 2. 9 2 '2 7 M in er al f u el s, o il s, d is ti ll at io n p ro d u ct s, e tc 0 .7 1 0 .6 3 0 .5 3 0 .4 1 2 .8 2 1 .9 7 2 .0 6 2 .6 5 1 7. 5 0 1 8 .2 8 2 2 .8 1 1 7. 1 9 '2 8 In o rg an ic c h em ic al s, p re ci o u s m et al c o m p o u n d , is o to pe s 0 .2 0 0 .2 5 0 .3 1 0 .4 8 0 .2 1 0 .3 1 0 .2 3 0 .2 2 2 .2 2 1 .3 9 2 .9 6 3 .5 5 '2 9 O rg an ic c h em ic al s 0 .1 2 0 .0 8 0 .0 7 0 .0 6 2 .9 6 2 .2 4 4 .4 9 3 .4 4 6 .5 4 3 .9 4 1 0 .9 3 5 .3 8 '3 0 P h ar m ac e u ti ca l p ro d u ct s 0 .0 2 0 .0 3 0 .0 3 0 .0 3 3 .3 7 2 .6 2 2 .6 6 3 .5 6 1 .5 6 1 .6 3 1 .0 8 1 .2 2 '3 1 F er ti li ze rs 0 .5 8 1 .1 6 1 .1 6 0 .8 7 3 6. 6 8 1 2. 2 7 1 5 .7 9 1 6 .1 0 1 3. 3 6 4 .1 8 9 .2 0 7 .2 8 '3 2 T an n in g, d y ei n g e x tr ac ts , ta n n in s, d er iv at iv es , p ig m en ts e tc 0 .1 1 0 .1 0 0 .0 8 0 .0 9 5 .5 6 7 .7 8 5 .2 9 7 .5 6 2 .6 6 3 .2 5 2 .7 9 3 .9 1 '3 3 E ss en ti al o il s, p e rf u m es , co sm et ic s, t o il et ri es 0 .1 9 0 .2 5 0 .2 9 0 .3 1 3 .3 4 2 .9 4 3 .1 0 2 .7 4 3 .6 8 3 .6 8 4 .7 7 5 .6 0 '3 4 S o ap s, l u b ri ca n ts , w ax e s, c an d le s, m o d el li n g p as te s 1 .2 9 1 .0 5 1 .0 8 0 .8 8 1 .5 0 2 .0 3 1 .9 5 2 .1 6 0 .6 1 0 .9 2 0 .8 9 1 .0 5 '3 5 A lb u m in o id s, m o d if ie d s ta rc he s, g lu e s, e n z y m es 0 .5 9 0 .6 0 0 .4 8 0 .4 0 1 .3 1 1 .5 8 1 .5 4 1 .8 3 8 .7 0 6 .9 3 6 .8 3 7 .6 1 '3 6 E x p lo si v es , p y ro te ch ni cs , m at ch e s, p y ro p h o ri cs , et c 0 .0 9 0 .0 3 0 .0 4 0 .0 4 1 .1 4 3 .6 0 1 .4 8 1 .3 2 6 4 7 .2 1 - 1 1 3 .1 9 5 .0 5 '3 7 P h o to g ra p h ic o r ci n e m at o g ra p h ic g o o d s 0 .0 2 0 .0 3 0 .0 7 0 .1 1 7 .2 6 2 .3 4 0 .8 2 0 .4 3 1 .5 3 0 .5 7 0 .2 2 0 .2 0 '3 8 M is ce ll an eo u s ch e m ic al p ro d u ct s 0 .3 2 0 .3 7 0 .3 9 0 .3 6 2 .4 6 2 .6 1 2 .8 6 3 .9 3 3 .0 7 3 .8 2 3 .6 2 4 .1 3 '3 9 P la st ic s an d a rt ic le s th e re o f 0 .5 8 0 .5 7 0 .6 1 0 .5 8 1 .3 6 1 .7 0 1 .8 1 1 .8 0 1 .4 6 1 .3 1 1 .6 4 1 .9 1 '4 0 R u b be r an d a rt ic le s th er e o f 3 .6 2 3 .1 9 2 .6 2 2 .2 4 0 .6 3 0 .6 1 1 .3 8 1 .6 0 2 .9 3 2 .8 0 3 .0 1 3 .3 1 '4 1 R aw h id es a n d s k in s (o th e r th an f u rs k in s) a n d l e at h er 1 .7 0 1 .4 6 1 .2 7 1 .1 0 2 .7 9 2 .6 4 2 .0 2 1 .7 8 3 .0 6 2 .3 4 1 .6 7 1 .2 9 '4 2 A rt ic le s o f le at h e r, a n im al g u t, h ar n e ss , tr av el g o o d s 3 .4 4 3 .2 8 3 .2 0 3 .3 7 0 .0 8 0 .0 8 0 .0 7 0 .0 9 0 .2 6 0 .2 8 0 .2 7 0 .3 3 '4 3 F u rs k in s an d a rt if ic ia l fu r, m an u fa ct u re s th e re o f 0 .0 6 0 .0 5 0 .0 7 0 .0 8 0 .1 0 0 .0 1 0 .0 0 0 .0 1 0 .4 6 0 .1 3 0 .1 6 0 .5 7 '4 4 W o o d a n d a rt ic le s o f w o o d , w o o d c h ar co al 1 .7 0 1 .9 8 1 .9 6 2 .1 6 0 .2 4 0 .2 6 0 .2 5 0 .2 5 5 .0 3 6 .1 1 5 .7 1 7 .3 1 '4 5 C o rk a n d a rt ic le s o f co rk 0 .0 2 0 .0 2 0 .0 2 0 .0 1 0 .0 0 0 .0 0 0 .5 3 0 .1 0 - 6 .6 1 - - '4 6 M an u fa ct u re s o f p la it in g m at er ia l, b as k et w o rk , et c. 1 4. 2 2 1 1 .7 8 1 0. 3 9 1 0 .3 5 0 .1 1 0 .1 2 0 .1 0 0 .1 3 0 .2 8 0 .2 8 0 .3 0 0 .3 5 Journal of Economics and Development Vol. 17, No.3, December 201537 So ur ce : A ut ho rs ’ c al cu la ti on fr om T ra de M ap d at a '4 7 P u lp o f w o o d , fi b ro u s ce ll u lo si c m at e ri al , w as te e tc 0 .0 4 0 .0 0 0 .0 6 0 .1 0 0 .1 7 5 .4 9 1 .3 1 0 .7 0 1 4. 8 5 8 .4 4 1 3 .7 8 2 5 0 .6 8 '4 8 P ap er a n d p ap e rb o ar d , ar ti cl es o f p u lp , p ap e r an d b o ar d 0 .4 7 0 .4 2 0 .4 4 0 .4 0 1 .4 8 1 .8 3 2 .0 1 2 .1 7 1 .3 1 1 .1 8 1 .2 8 1 .3 9 '4 9 P ri n te d b o o k s, n e w sp ap er s, p ic tu re s et c 0 .0 3 0 .0 4 0 .0 6 0 .0 5 2 .4 6 3 .7 5 2 .7 1 2 .5 8 1 .0 1 1 .4 7 2 .6 1 2 .4 5 '5 0 S il k 2 .8 1 3 .1 1 2 .7 0 2 .9 5 0 .9 2 0 .9 8 0 .6 2 0 .9 7 6 .8 6 4 .3 8 3 .4 9 6 .1 4 '5 1 W o o l, a n im al h ai r, h o rs e h ai r y ar n a n d f ab ri c th e re o f 0 .0 9 0 .1 1 0 .0 6 0 .0 3 0 .2 8 0 .1 2 0 .2 5 1 .1 8 1 0. 3 8 4 .4 8 7 .3 3 1 2. 0 4 '5 2 C ot to n 2 .4 2 2 .0 7 1 .9 7 2 .2 9 0 .6 9 0 .8 1 0 .6 1 0 .4 7 7 .4 2 1 0 .7 0 1 4 .0 5 1 4. 5 3 '5 3 V e ge ta b le t ex ti le f ib re s N E S , p ap e r y ar n , w o v en f ab ri c 1 .9 5 1 .9 2 1 .6 0 1 .1 5 0 .1 1 0 .3 8 0 .5 9 0 .4 2 1 3. 1 1 2 0 .7 5 2 4 .4 0 2 2. 9 5 '5 4 M an m ad e fi la m e n ts 2 .5 1 2 .6 8 2 .3 8 2 .1 7 1 .9 3 1 .6 0 1 .7 0 1 .8 7 0 .7 4 0 .8 1 0 .9 4 1 .1 9 '5 5 M an m ad e st ap le f ib re s 2 .9 4 2 .9 3 2 .6 9 2 .0 6 1 .2 5 1 .2 4 0 .9 1 1 .0 9 0 .9 5 0 .8 1 0 .6 5 0 .7 0 '5 6 W ad d in g , fe lt , n o n w o v en s, y ar n s, t w in e, c o rd ag e, e tc 1 .2 8 1 .2 4 1 .2 3 1 .1 7 0 .9 3 0 .9 2 0 .8 1 0 .9 5 1 .7 4 1 .8 0 1 .6 2 1 .9 1 '5 7 C ar p et s an d o th er t ex ti le f lo o r co ve ri n gs 0 .3 2 0 .2 6 0 .2 7 0 .2 7 0 .1 3 0 .1 5 0 .1 3 0 .1 4 3 4. 2 8 1 4 .3 1 4 3 .2 8 3 7. 6 2 '5 8 S p e ci al w o ve n o r tu ft e d f ab ri c, l ac e, t ap es tr y e tc 0 .5 8 0 .5 1 0 .6 4 0 .5 8 1 .4 8 2 .4 1 1 .9 5 2 .2 8 1 .1 5 1 .5 2 1 .5 5 1 .7 3 '5 9 Im p re g n at ed , co at ed o r la m in at e d t e x ti le f ab ri c 2 .6 9 2 .9 9 2 .5 9 2 .5 2 1 .0 1 0 .7 3 0 .6 6 0 .9 3 1 .0 0 0 .9 5 0 .9 6 0 .8 3 '6 0 K n it te d o r cr o ch et e d f ab ri c 1 .2 3 1 .2 9 1 .1 8 1 .1 5 1 0. 1 0 8 .7 0 6 .8 7 1 0 .6 1 3 .7 8 2 .9 2 2 .0 1 3 .1 9 '6 1 A rt ic le s o f ap p ar el , ac ce ss o ri e s, k n it o r cr o ch et 5 .7 1 5 .3 0 4 .9 7 4 .7 9 0 .0 3 0 .0 3 0 .0 3 0 .0 4 0 .1 5 0 .1 9 0 .2 0 0 .2 9 '6 2 A rt ic le s o f ap p ar el , ac ce ss o ri e s, n o t k n it o r cr o ch et 6 .4 6 6 .5 5 6 .1 5 5 .9 5 0 .0 3 0 .0 4 0 .0 4 0 .0 4 0 .2 7 0 .3 7 0 .4 4 0 .5 7 '6 3 O th er m ad e te x ti le a rt ic le s, s et s, w o rn c lo th in g e tc 3 .5 0 2 .7 9 2 .5 3 2 .6 4 0 .3 0 0 .2 2 0 .2 2 0 .2 8 0 .8 0 0 .9 5 0 .8 9 0 .9 9 '6 4 F o o tw e ar , g ai te rs a n d t h e li k e, p ar ts t h e re o f 1 1. 3 0 1 1 .0 6 1 0. 3 1 9 .6 9 0 .1 1 0 .1 4 0 .1 4 0 .1 6 0 .1 6 0 .1 8 0 .2 0 0 .2 4 '6 5 H e ad ge ar a n d p ar ts t h e re o f 5 .2 1 4 .7 5 4 .1 3 3 .6 8 0 .0 5 0 .0 4 0 .0 4 0 .0 4 0 .2 4 0 .2 5 0 .3 0 0 .4 2 '6 6 U m b re ll as , w al k in g -s ti ck s, s e at -s ti ck s, w h ip s, e tc 0 .3 1 0 .3 4 0 .3 9 0 .3 8 0 .0 6 0 .0 5 0 .2 7 0 .2 5 0 .1 3 0 .4 7 1 .2 2 1 .3 3 '6 7 B ir d s k in , fe at h er s, a rt if ic ia l fl o w er s, h u m an h ai r 0 .7 0 0 .7 4 0 .4 9 0 .5 5 0 .0 2 0 .0 2 0 .1 0 0 .7 0 3 .0 3 4 .2 0 3 .3 9 4 .0 7 '6 8 S to n e, p la st er , ce m en t, a sb es to s, m ic a, e tc a rt ic le s 0 .8 2 0 .7 8 0 .7 5 0 .7 6 0 .5 4 0 .5 0 0 .5 9 0 .7 2 0 .4 8 0 .4 5 0 .5 5 0 .6 1 '6 9 C er am ic p ro d u ct s 1 .6 8 1 .4 9 1 .4 8 1 .2 9 1 .2 2 1 .6 8 1 .9 3 1 .9 5 0 .7 7 0 .9 7 1 .1 5 1 .2 1 '7 0 G la ss a n d g la ss w ar e 1 .2 1 0 .9 6 1 .2 2 1 .0 4 4 .8 0 6 .5 9 1 2 .1 7 8 .4 3 4 .9 6 4 .7 5 6 .4 4 5 .8 6 '7 1 P ea rl s, p re ci o u s st o n es , m et al s, c o in s, e tc 1 .3 5 0 .7 9 0 .1 4 0 .1 2 0 .0 1 0 .0 0 0 .0 2 0 .0 4 0 .0 2 0 .0 3 0 .1 6 0 .1 7 '7 2 Ir o n a n d s te el 0 .6 1 0 .7 3 0 .6 9 0 .7 2 6 .7 2 9 .7 3 1 5 .8 6 1 7 .5 8 4 .4 5 5 .0 9 7 .3 5 7 .5 3 '7 3 A rt ic le s o f ir o n o r st ee l 0 .7 0 0 .7 1 0 .7 2 0 .7 1 1 .5 2 1 .2 1 1 .1 2 1 .1 9 0 .8 2 0 .6 8 0 .6 5 0 .8 3 '7 4 C o p pe r an d a rt ic le s th er e o f 0 .4 3 0 .2 0 0 .1 6 0 .1 8 5 .5 6 1 .2 8 1 .0 8 0 .7 3 5 .0 4 0 .9 4 0 .9 5 1 .5 2 '7 5 N ic k el a n d a rt ic le s th er e o f 0 .0 0 0 .0 0 0 .0 0 0 .0 1 1 .3 8 5 .9 0 0 .0 2 0 .0 0 0 .2 8 1 .0 9 0 .0 5 0 .0 1 '7 6 A lu m in iu m a n d a rt ic le s th e re o f 0 .1 8 0 .2 2 0 .2 6 0 .3 0 1 .6 6 2 .0 1 1 .9 0 2 .4 5 3 .6 7 3 .0 8 3 .4 1 3 .6 0 '7 8 L e ad a n d a rt ic le s th e re o f 0 .5 6 0 .5 4 0 .9 0 0 .9 5 1 8. 4 8 0 .5 9 1 .1 1 2 .7 9 1 0 3 .7 0 1 2 .7 1 7 .3 8 3 7. 2 6 '7 9 Z in c an d a rt ic le s th e re o f 0 .3 1 0 .2 4 0 .2 2 0 .1 7 1 .5 6 2 .6 6 1 .4 2 1 .2 3 1 2. 2 7 4 4 .5 1 2 0 .9 1 5 .8 6 '8 0 T in a n d a rt ic le s th e re o f 0 .8 8 1 .2 0 0 .7 0 0 .8 5 4 .4 8 6 .3 4 2 .1 9 3 .5 2 1 0. 4 7 3 .6 2 4 .0 3 7 .8 2 '8 1 O th er b as e m e ta ls , ce rm et s, a rt ic le s th e re o f 0 .3 1 0 .3 7 0 .2 9 0 .2 8 0 .0 4 0 .0 1 0 .0 3 0 .6 2 7 .0 8 3 .7 3 5 .1 5 3 .0 1 '8 2 T o o ls , im p le m e n ts , cu tl e ry , et c o f b as e m et al 0 .6 4 0 .6 4 0 .6 2 0 .6 4 0 .1 5 0 .1 1 0 .1 9 0 .3 6 0 .2 4 0 .2 2 0 .2 6 0 .3 8 '8 3 M is ce ll an eo u s ar ti cl es o f b as e m et al 0 .4 7 0 .4 8 0 .4 5 0 .4 2 2 .0 3 2 .5 6 2 .6 2 2 .4 7 1 .2 1 1 .3 6 1 .2 6 1 .2 9 '8 4 M ac h in e ry , n u cl ea r re ac to rs , b o il e rs , et c 0 .3 6 0 .3 8 0 .4 5 0 .5 6 1 .1 4 1 .0 9 0 .9 1 0 .7 5 1 .0 0 0 .9 8 0 .6 9 0 .5 9 '8 5 E le ct ri ca l, e le ct ro n ic e q u ip m e n t 0 .7 5 1 .1 2 1 .6 4 1 .9 8 1 .0 0 0 .9 1 0 .9 7 1 .0 6 1 .7 4 0 .9 5 0 .7 9 0 .7 9 '8 6 R ai lw ay , tr am w ay l o co m o ti v e s, r o ll in g s to ck , e q u ip m en t 0 .1 8 0 .2 7 0 .0 1 0 .0 1 0 .3 2 0 .1 1 9 .6 5 8 .4 5 0 .3 4 0 .4 1 5 .0 6 2 .9 2 '8 7 V eh ic le s o th er t h an r ai lw ay , tr am w ay 0 .1 4 0 .1 4 0 .1 6 0 .1 7 2 .5 1 2 .3 4 2 .5 1 2 .8 7 3 .0 5 2 .4 5 2 .6 7 3 .0 6 '8 8 A ir cr af t, s p ac e cr af t, a n d p ar ts t h er e o f 0 .0 3 0 .0 3 0 .0 3 0 .0 3 0 .0 5 0 .0 2 0 .0 7 0 .0 3 0 .2 5 0 .1 1 0 .0 6 0 .0 6 '8 9 S h ip s, b o at s an d o th e r fl o at in g s tr u ct u re s 0 .6 1 0 .7 6 1 .0 3 0 .7 7 1 .3 6 2 .5 1 1 .0 0 2 .2 2 0 .6 7 1 .2 1 1 .6 4 3 .3 3 '9 0 O p ti ca l, p h o to , te ch n ic al , m ed ic al , et c ap p ar at u s 0 .3 6 0 .4 3 0 .7 0 0 .6 2 0 .9 2 0 .9 3 0 .4 3 0 .5 9 0 .9 1 0 .8 0 0 .3 7 0 .4 3 '9 1 C lo ck s an d w at ch es a n d p ar ts t h e re o f 0 .1 0 0 .0 9 0 .0 6 0 .0 8 3 .5 4 1 .1 0 0 .5 0 1 .3 4 1 .7 0 0 .6 8 0 .7 8 0 .8 4 '9 2 M u si ca l in st ru m e n ts , p ar ts a n d a cc es so ri es 0 .6 3 0 .5 6 0 .5 0 0 .4 2 0 .1 1 0 .1 9 0 .1 4 0 .1 1 0 .9 8 1 .2 4 1 .2 2 0 .9 9 '9 4 F u rn it u re , li g h ti n g , si g n s, p re fa b ri ca te d b u il d in g s 3 .8 3 3 .2 1 2 .8 8 2 .6 3 0 .1 6 0 .2 0 0 .2 0 0 .2 7 0 .3 3 0 .3 7 0 .3 8 0 .4 7 '9 5 T o ys , g am es , sp o rt s re q u is it e s 0 .7 8 0 .7 4 0 .7 7 0 .7 7 0 .1 4 0 .1 3 0 .1 2 0 .1 2 0 .5 9 0 .4 7 0 .5 4 0 .6 0 '9 6 M is ce ll an eo u s m an u fa ct u re d a rt ic le s 1 .3 5 1 .4 5 1 .1 5 1 .0 8 1 .2 8 1 .5 7 1 .6 3 2 .0 6 0 .8 3 0 .8 2 0 .9 8 1 .1 6 '9 7 W o rk s o f ar t, c o ll e ct o rs p ie ce s an d a n ti q u es 0 .0 1 0 .0 1 0 .0 1 0 .0 0 0 .2 9 0 .4 7 0 .4 8 0 .4 4 0 .3 9 0 .2 2 0 .3 1 0 .4 0 Journal of Economics and Development Vol. 17, No.3, December 201538 AN–oriented exporting sectors, such as Edible vegetables and certain roots and tubers (07), Cereals (10), Knitted or crocheted fabric (60). These sectors have exploited their compara- tive advantage and enjoyed trade creation from South East Asian integration, which means their export has increased, thanks to both their advantage and the participation of Vietnam in the AFTA. High potential welfare improvement However, a higher number of sectors having comparative advantage have not been benefited from the AFTA. This is reflected by their RCA indexes being higher than 1, but their RO in- dexes corresponding the AFTA are lower than 1. Examples of sectors falling into this category include Fish, crustaceans, molluscs, aquatic in- vertebrates not elsewhere specified (03), Cof- fee, tea, mate and spices (09), Footwear, gaiters and the like, parts thereof (64) – these sectors have very high RCA indexes. Commodities in these sectors seem to be directed to non–ASE- AN markets, rather than the regional market. Appearance of quite a number of sectors in Quadrant I somehow reflects the so–called weak economic integration of ASEAN. Trade diversion effect It is noticeable that Quadrant III has the highest density of commodity sectors among the four quadrants, which reflects the benefit of trade diversion brought by the regional inte- gration to Vietnamese commodities. Even these sectors have not had comparative advantage; their export is still directed to the South East Asian market, replacing commodities from non–ASEAN exporting countries, thanks to fa- vorable treatment from the AFTA Figure 4 illustrates the matrix of Vietnam’s HS 2-digit commodities based on the calcu- lation of Vietnam’s RCA index and RO index regarding the RCEP, in comparison with those calculated for the AFTA. In each quadrant of the matrix, the solid circle represents the cal- culation result for the AFTA and the dash circle represents the result calculated for the RCEP. Figure 4 demonstrates that the RCEP seems to be a better economic integration framework since indexes of several sectors are improved in a RCEP scenario, compared to those calcu- lated in an AFTA scenario. Quadrant II and III could be seen as better positions in the matrix, compared to Quadrant I and IV, respectively. The numbers of sectors in “better positions” (Quadrant II and III) in the RCEP scenario are higher than those in the AFTA, while there are fewer sectors in “worse positions” (Quadrant I and IV) in the RCEP scenario than those in the AFTA. It implies that Vietnam may enjoy larger trade creation and trade diversion effects from the RCEP than that from the AFTA. The RCEP is a larger market, thus Vietnam could promote exports more by utilizing its advan- tage and preferential treatments from a more comprehensive FTA. Also, more commodi- ties exported from Vietnam to RCEP member countries would replace those exported from non-RCEP countries. Dynamic impacts For the sectors that have reveal comparative advantage (RCA>1), quite a few will move from Quadrant I to Quadrant II, along with the switch from an AFTA to a RCEP scenario, which means that these sectors have not yet ex- ported their commodities to ASEAN countries much (ROAFTA<1) but might direct their exports to RCEP countries (RORCEP>1). It seems that Journal of Economics and Development Vol. 17, No.3, December 201539 the six FTA partners of ASEAN are potential markets for commodities in which Vietnam has comparative advantage. Examples of the case include Milling products, malt, starches, inulin, wheat gluten (11), Vegetable plaiting materials, vegetable products not elsewhere specified (14), Vegetable textile fibres not elsewhere specified, paper yarn, woven fabric (53), etc. That also means a larger number of Vietnamese sectors might be able to utilize the treatment from RCEP when the agreement is concluded by enjoying trade creation. These sectors should be notified and signaled the sta- tus of RCEP negotiations to make them ready for gaining the most from the RCEP. For the sectors that have revealed compar- ative disadvantage (RCA<1), several sectors that could be considered as “no hope” sectors in the AFTA may have a hope in the RCEP pro- posal. These sectors will move from Quadrant IV to Quadrant III, along with the switch from an AFTA to a RCEP scenario. Sectors, like Live trees, plants, bulbs, roots, cut flowers etc (06), Lac, gums, resins, vegetable saps and extracts not elsewhere specified (13), Carpets and other textile floor coverings (57), may enjoy a trade diversion effect from the RCEP, even though neither are efficient sectors nor AFTA-orient- ed exports. It is likely that the RCEP provides a freer trade condition and more preferential treatment so that Vietnam’s exported commod- ities may be more regionally oriented even though they have not had a comparative ad- vantage yet. In order to get more benefits from Figure 4: Matrix of Vietnam’s HS 2-digit commodities based on Vietnam’s RCA and RO indexes – A comparison between AFTA and RCEP Source: Authors’ calculation and compilation from Trade Map data. Journal of Economics and Development Vol. 17, No.3, December 201540 regional economic integration, Vietnam may want to consider the sectors in Quadrant III for further investment to upgrade their competi- tiveness. 6. Policy implications and conclusion re- marks The study has analyzed impacts of the AFTA and the RCEP on Vietnam. However, one notic- es that the AFTA has already existed for more than 20 years, while the RCEP is being nego- tiated. Therefore, policy analysis should focus on impacts of the RCEP only. The analysis has pointed out lists of commodities with which Vietnam experiences trade creation when par- ticipating in the RCEP only (not together with the AFTA), that is 11, 14, 44, 50 52, 53, 63. These commodities are the ones in which Viet- nam already has comparative advantage. Suc- cessful negotiation of the RCEP will realize this trade creation effect. Commodities such as 19 (Cereal, flour, starch, milk preparations and products) and 55 (Manmade staple fibres) are the ones in which Vietnam has comparative ad- vantage; however they are not well positioned in the RCEP market yet. If sufficient investment decisions and marketing strategies are applied to these commodities, they will well penetrate the RCEP market and bring trade creation and welfare improvement to Vietnam. Public and private investment should consid- er the above-mentioned commodities as targets to leapfrog the benefits of RCEP. Of course the development of these commodity related in- dustries is subject to multiple important trade commitments that are already or about to be in place, such as TPP, EVFTA, AEC, Therefore firms operating in these commodity related in- dustries should pay considerable attention to the negotiations of the RCEP and the perfor- mance of any newly signed trade agreement, and be well prepared to be proactive in order to actively export to the RCEP market to exploit the most the benefits of this FTA. The method of combining the RCA and RO to assess impacts of the FTAs is very handy, and easy to use, while implying a quite useful policy message. However, one of the weak- nesses of the proposed method is that the com- bination matrix above does not contain all HS 2-digit commodities. The absent commodities cannot be categorized since their RCA indexes fluctuate from a value lower than 1 to a value higher than 1, or vice versa, from time to time during the period from 2010 to 2013. Two of the most remarkable and interesting commod- ities among those absent are Lead and articles thereof (78) and Electrical, electronic equip- ment (85), which has RCA and RO indexes as in Table 2. For the case of Lead and articles thereof (78), this sector has not yet shown a strong re- vealed comparative advantage; however, it’s obvious that this sector is regionally oriented. It is likely that the sector has enjoyed the trade Table 2: RCA index, RO index in ASEAN and RO in RCEP of Vietnam for the sectors of 78 and 85 HS Description VIETNAM's RCA RO (VN-ASEAN) RO (VN-RCEP) 2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013 78 Lead and articles thereof 0.56 0.54 0.90 0.95 18.48 0.59 1.11 2.79 103.70 12.71 7.38 37.26 85 Electrical, electronic equipment 0.75 1.12 1.64 1.98 1.00 0.91 0.97 1.06 1.74 0.95 0.79 0.79 Journal of Economics and Development Vol. 17, No.3, December 201541 diversion effect from the AFTA and as well as the RCEP in the future. The RCA index of the sector is slightly increasing. Hopefully, by uti- lizing preferences from FTAs, the sector will enhance its competitiveness and show revealed comparative advantage in the near future. For the case of Electrical, electronic equip- ment (85), this commodity sector always has the highest value in the list of products export- ed by Viet Nam, at least for the 4 years from 2010 to 2013. This highly important exported product has an increasing RCA index and has started having a revealed comparative advan- tage since 2011. However, the RO index of this sector seems to remain low and lower than 1 in the case of the RCEP. It may be interpreted that this potentially competitive sector would not be RCEP-regionally oriented. In order to enjoy the revealed comparative advantage of the sector, Viet Nam should consider other regional trade agreements, rather than relying on the AFTA or RCEP. Acknowledgement: This research is funded by the Vietnam National Foundation for Science and Technology Development (NAFOSTED) under grant number II4.1-2013.15. Notes: 1. accessed on 9th September 2014. 2. In this paper, “East Asia” is also considered as “extended East Asia” that covers all FTA partners of ASEAN including China, South Korea, Japan, India, Australia and New Zealand. 3. ASEAN, ASEAN Economic Community Blueprint, section I, November 20, 2007. 4. Ibid, section II. 5. These were approved by Economic Ministers on 30 August 2012, and endorsed by Leaders, and provide a roadmap for negotiators. 6. 7. United Nations Commodity Trade Statistics Database. References B. Balassa (1965), Trade Liberalisation and Revealed Comparative Advantage, The Manchester School. Fukunari Kimura (2010), ‘Economic integration in extended East Asia: toward a new trade regime’, In: Noel Gaston and Ahmed M. Khalid (eds), Globalization and Economic Integration: Winners and Losers in the Asia-Pacific, United Kingdom: Edward Elgar Publishing Limited. Erlinda M. Medalla (2011), Taking Stock of the ROOs in the ASEAN+1 FTAs: Toward Deepening East Asia Integration, paper prepared for ERIA project “Comprehensive Mapping of FTAs in ASEAN and East Asia.” M. Mikic and J. Gilbert (2007), Trade Statistics In Policymaking—A Handbook Of Commonly Used Trade Indices And Indicators, Studies in Trade and Investment, Trade Policy Section, Trade and Investment Division, UNESCAP. Jacob Viner (1950), The Customs Union Issue, New York: Carnegie Endowment for International Peace. ADB (2008), How to Design, Negotiate, and Implement a Free Trade Agreement in Asia, Manila. WEF [World Economic Forum] (2014), Mega-regional Trade Agreements: Game-Changers or Costly Distractions for the World Trading System, A report from Global Agenda Council on Trade & Foreign Direct Investment.