Quan hệ thương mại hàng hóa trung gian giữa nhật bản – trung quốc trong hai thập niên đầu thế kỷ XXI và một số kiến nghị chính sách cho việt nam tt tiếng anh

Therefore, studying the trade relation of intermediate goods between Japan and China will give practical implications, experiences and useful lessons for Vietnam to promote trade in inte

VIETNAM ACADEMY OF SOCIAL SCIENCE

GRADUATE ACADEMY OF SOCIAL SCIENCE

NGUYEN TUAN TU

TRADE RELATION IN INTERMEDIATE GOODS BETWEEN JAPAN – CHINA IN THE FIRST TWO

DECADES OF XXI AND

A NUMBER OF POLICY RECOMMENDATIONS

The thesis is completed at:

GRADUATE ACADEMY OF SOCIAL SCIENCE

Supervisors: 1: Dr Nguyen Binh Giang

2: Assos Prof Dr Nguyen Xuan Trung

Referre 1: Prof Dr Do Duc Binh

Referre 2: Assos Prof Dr Do Huong Lan

Referre 3: Assos Prof Dr Chu Duc Dung

The thesis will be examined by an examination board of the

Academy at at……… … …………,

The thesis can be found at:

- National library

- Library of graduate academy of social sciences

INTRODUCTION

1 The necessity of subject

Intermediate goods trade has always accounted for a significant proportion in developing countries and is very important in trade connection and vertical production in East Asia Over the years, Vietnam has always been seeking answers to the question: Where is Vietnam now in the global value chain and how can it engage deeply in the long-term value chain, which implies the increase of the share of intermediate goods export

According to assessments of domestic and international experts, trade in intermediate goods between Vietnam and Japan; Vietnam and China is creating many disadvantages for Vietnam Up to now, Vietnam has been mainly involved

in short-term value chains, focusing on mining, raw and preliminary processing industries, but has not firmly participated in long-term value chains (deep-processing products, components, manufacturing products, RD, satellite) Meanwhile, China, after several decades of economic reform, has emerged as the most important trading partner of Japan and some ASEAN countries, joining significantly the East Asian production network The bilateral trade relationship between Japan and China is both complementary and competitive, in which intermediate goods play a very important role Vietnam has still struggled to build export strategies for intermediate goods to join the global value chain, so that Vietnamese enterprises are still far behind many other countries’ enterprises in the region Moreover, in trade relations with Japan and China, intermediate goods of Vietnam remain in a very low position, sometimes only as a one-way import, leading to large trade deficits and unfavorable to the economy

The bilateral trade in intermediate goods between Japan and China is not only

a typical example of trade in intermediate goods but also a typical example of trade between a developed country and a developing country In addition, China has the same level of development as Vietnam and Japan and China are important trading partners of Vietnam Therefore, studying the trade relation of intermediate goods between Japan and China will give practical implications, experiences and useful lessons for Vietnam to promote trade in intermediate goods of Vietnam with other countries and improve bilateral trade relations between Vietnam and Japan; Vietnam and China in the direction of increasing benefits for Vietnam By participating more actively in the trade of intermediate goods in East Asia and in the world, Vietnam has the opportunity to participate more deeply in the global supply chain For this reason, the topic: “Trade relation in intermediate goods between Japan and China in the first two decades of XXI and a number of policy recommendations for Vietnam” is necessary in both theory and practice, supporting us to understand the nature of trade relation of intermediate goods between Japan and China, factors affecting this relation, its impacts and some lessons for Vietnam in promoting its trade relations with Japan, China and other countries in East Asia

2 Research goals and tasks of the thesis:

2.1 Research goals:

This thesis examines the trade relation in intermediate goods between Japan and China from 2001 to 2017 By assessing factors that affect this relation, the thesis will present experience lessons and policy implications for Vietnam in boosting trade relations of intermediate goods with countries in the world in

general and with Japan and China in particular

2.2.Research tasks of the thesis:

The thesis will address three following basis tasks:

- Clarifying the implications related to the trade in intermediate goods between Japan and China Based on that, analyse and evaluate the current state of trade relations between Japan and China since 2001

- Studying factors that affect the trade relation in intermediate goods between Japan and China in order to provide successes, shortcomings and causes in this relation in recent years

- Presenting experience lessons from trade in intermediate goods between Japan and China and seeking solutions to boosting trade relations of intermediate goods with countries in the world in general and with Japan and China in

particular

3 Research objects and scopes:

- Research objects: Trade relation in intermediate goods between Japan and China

- Research scopes: Japan-China bilateral trade policies, the status and characteristics of trade relation in intermediate goods between Japan and China, the factors affecting trade in intermediate goods between Japan and China, lessons and policy implications for Vietnam

+ Scope of space: The thesis studies trade relation in intermediate goods between Japan and China in East Asia

+ Scope of time: From 2001 to 2017

4 Methodology:

- Research approach: The thesis uses an interdisciplinary approach based on

trade theories, bilateral cooperation to evaluate and analyse Japan-China trade relation and factors such as: history, international relations, politics, and culture

to explain the nature of the relationship

- Methodology:

+ Methodology of systematic analysis

+ Methodology of comprehensive analysis

+ Methodology of comparison

+ Methodology of case-study

5 New contributions of the thesis on scientific theory and meaning

To systematise a number of theoretical issues on trade relation in intermediate goods and examine the factors affecting bilateral trade in intermediate goods to

clarify related issues This is an important content in modern international trade relations but has not been studied comprehensively and systematically in previous domestic and foreign studies

6 New contributions of the thesis on practice and practical implications

- The thesis concentrates on the context of East Asian where intermediate commodity trade has taken place vigorously since the last decades of the twentieth century, as a basis for studying the trade relations of intermediate goods between Japan and China

- Analysing the status of intermediate goods relation between Japan and China These are two important intermediary trade partners of Vietnam Japan-China intermediate goods relation shows the interdependence of East Asian trade links on the supply and value chain

- Analysing the status of the trade relations in intermediate goods between Vietnam and Japan, Vietnam and China, giving general assessments, drawing practical lessons from the experiences of China and Japan to provide policy recommendations for Vietnam in boosting trade relations in intermediate goods between Vietnam and Japan, Vietnam and China

- The thesis is meaningful in practice as studying the status of trade relation in intermediate goods between Japan and China clarifies the interdependence of the two countries in regional manufacturing network in East Asia, showing the different roles and positions of these countries in regional connection manufacturing network in East Asia Understanding the nature, causes and assessments on factors influencing this relation in the first two decades of XXI will help Vietnam define its position and tasks in the regional system of intermediate goods trade, from which it would be possible to upgrade domestic manufacturing industries to avoid dependence and promote its trade relation in intermediate goods with China and Japan

7 Structure of the thesis

Apart from the introduction, conclusion and reference, the thesis has 4

chapters:

Chapter 1: Literature review

Chương 2: Theoretical and practical basis on trade relation in intermediate

goods

Chương 3: Status and factors affecting the trade relation in intermediate goods

between Japan and China

Chương 4: Trade relations in intermediate goods between Vietnam and China, Vietnam and Japan: A number of lessons and policy recommendations for

Vietnam

CHAPTER 1 LITERATURE REVIEW

The objective of this chapter is to review the literature on issues related to the thesis in order to evaluate the results of the researches, from which the author will study the gaps of previous studies on the subject

1.1 Domestic researches

Regarding theoretical issues related to the thesis, in Vietnam, trade in intermediate goods is studied under few terms: semi-finished goods, vertical trade, intra-industry trade There is no complete concept of "intermediate goods trade" In several research studies, the concept, nature, characteristics and structure of the international production network are mentioned quite specificly However, intermediate goods trade has not been put into a complete concept, it has only been implied in some analysis as objecst and scope of research of these studies are relatively different from the research topic of this thesis

Regarding Japan and China 's foreign policy and economic cooperation with the region in the last two decades, research studies have shown that Japan and China have had changes in foreign policy and economic cooperation, which focus

on Asian countries by forming multilateral and bilateral cooperation mechanisms, signing FTAs and having diplomatic political views that compete against each other as two big countries in Asia

Regarding Japanese-Chinese intermediate goods relation, it is clear that the research studies on this issue are quite limited Along with the trend of forming FTAs in East Asia, the flow of intra-industry trades is increasing and mainly intermediate and semi-finished goods, in which trade relation between Japan and China are interdependent and China is gradually replacing Japan to become the largest trading partner of countries in East Asia However, intermediate goods relation is mentioned quite sporadically, unsystematicly and not following a separate topic Therefore, it is difficult to assess the role of intermediate goods in bilateral trade relation between Japan and China as well as the nature of this relation It is necessary to have inherited and specialised studies

Regarding the study of lessons for Vietnam from the trade relation in intermediate goods between Japan and China, domestic researches only focus on bilateral trade relations between Japan and Vietnam or China and Vietnam For the trade relations between Vietnam and China, a number of researches have evaluated generally the development process of Vietnam-China relations towards the impact of a rising China and analysing the situation of issues such as political belief in Vietnam-China relations; Vietnam's trade deficit from China; Chinese investment in Vietnam; Chinese cultural soft power; national defense and security in Vietnam-China relations; the South China Sea issue in the relationship between the two countries in order to provide policies for Vietnam-China relation

in the context of a China continuing to rise during the next decade of XXI In addition, other studies have described the current status of trade in Vietnam,

which is higly dependent on China, to provide several recommendations to limit import of Vietnam from China

Regarding Vietnam - Japan trade relations, some authors have analysed the current situation of Vietnam - Japan trade relations since the two countries established diplomatic relations According to those authors, friendly relations and multifaceted cooperation between Japan and Vietnam in many fields, especially the commercial economy, have developed rapidly and achieved many positive results The relations between the two countries have currently been in a new period with good prospects However, this positive situation is still not commensurate with the needs and development potentials of the two countries, so

it is necessary to propose feasible solutions to promote trade relations between the two countries

These studies have provided sufficient information on the situation and the cause of Vietnam's commercial status with China and Japan However, the connection between Japan-China trade relations in intermediate goods and its influence as well as lessons for Vietnam have not been mentioned by these works,

so it still needs to be researched

1.2 Oversea researches

In terms of trade relations in intermediate goods, the thesis has studied a number of works on the relationship between intermediate goods trade and international production segmentation Regarding these studies, if the production process can be divided into differnet stages, each stage can be implementd in a country with comparative advantages in producing products of that period Therefore, the more different resources countries have, the greater the share of intra-industry trade is Intermediate goods are exchanged based on the principle of comparative advantages Other studies have analysed the concepts and characteristics of intermediate goods trade, the methodology of approaching and evaluating trade in intermediate goods and services, the forms of trade in intermediate goods and its impacts on labour productivity

Regarding directly Japan-China trade relation in intermediate goods, there are only few studies focusing on this issue Some studies have mentioned the influence of Japan in trade relation in intermediate goods with China via an approach of flying geese model, supply chain and the role of Japanese transnational cooperation in developing intermediate goods trade in East Asia For Chinese intermediate goods, some studies have presented the influence of China’s policies in its intermediate goods over the past three decades Institutional change is the main factor behind the success

of China in the production system of East Asia

Regarding the study of lessons for Vietnam from Japan-China trade relation in intermediate goods, oversea studies mostly concentrate on bilateral trade between Japan and Vietnam or China and Vietnam

Regarding trade relations between Japan and Vietnam, some authors have studied trade relations between the two countries in the first decade of XXI

According to those authors, in the context of globalisation, the expansion of cooperation in general and economic cooperation in particular is an essential need

of each country However, each country based on its strengths has specific cooperation views for each of its partner Vietnam is on the process of modernisation and industrialisation which require a lot of capital and technology While Japan has capital and technology, it is facing an aging population and a lack of productive labor Participating in international cooperation, the needs of the two countries will be resolved Determining comparative advantages and characteristics of the two countries is essential to understand the need of promoting their economic and trade cooperation

Regarding trade relations between China - Vietnam, as well as domestic studies, foreign articles on trade relations between China - Vietnam also focus on analysing the commercial status between the two countries in import and export and trade in goods The works all claim that China is now one of Vietnam's most important trading partners With the steady growth of trade between the two countries in the last 10 years, it has proved favorable factors in the trade relations between the two countries such as the complementarity of economic structure and conveniently geographical position for goods transfer, diversification in the form

of trade exchange so that it effectively promoted and brought practical benefits to the two countries However, it is undeniable that Vietnam's trade is heavily dependent on China and is worried that trade deficit from China is on the rise

1.3 The values of domestic and foreign studies, researach gaps and new contributions of the thesis

1.3.1 The values of domestic and foreign studies

In theory, the above studies have partly clarified the concept of intermediate trade relations between two nations in various terms such as: semi-finished goods, component goods, vertical trade, intra-industry trade

The basic theories related to intermediate goods trade have clarified the problems regarding production segments, production networks, and the reason why a country participates in production networks, vertically and horizontally international labour assignment, comparative advantages in intermediate goods trade relations, the role of FDI in intermediate goods trade

In practical terms, previous studies have clarified the East Asian economic context, where China - Japan intermediate goods relations take place In this context, the authors have explained the geese model, the economic dependence among East Asian countries, and the role of China-Japan bilateral trade relations

in the East Asian context The status of bilateral trade relations between China and Japan then has been mentioned by many authors according to different aspects: policies and history of bilateral trade relations, the situation of import and export between the two countries from 2000 to 2017

1.3.2 Research gaps and new thesis’s contributions

First, previous studies have not clarified the content of evaluation criteria, characteristics and factors affecting intermediate goods trade relations among countries These issues are only mentioned in a small and scattered manner Therefore, the task and new points of the thesis are to clarify the analytical framework and criteria for evaluating intermediate goods trade among countries Second, the status of trade relations in intermediate goods between China and Japan has only been mentioned mainly in trade relations in general goods between these two countries or in the commercial relations of the intra-regional production network of East Asia Therefore, the research gap here is: there is no clarification

on the situation, characteristics and the nature of the intermediate goods trade relations between Japan and China, as well as the policy intentions of the two countries in exchanging intermediate goods and the factors affecting Japan-China intermediate goods trade, the impact of intermediate goods trade on Japan and China, on East Asia, and ASEAN

Third, most of previous studies have not provided experience lessons and policy proposals for developing countries (including Vietnam) in intermediate goods relations with other countries; or some research projects offer some very simple lessons by giving only recommendations in bilateral relations (Japan - Vietnam and China - Vietnam), but not focus deeply on recommendations in multidimensional relations (Vietnam in the relationship of intermediate goods trade with Japan and China)

Fourth, technically, most of the above researches have only analysed the trade relations in intermediate goods between China - Japan until 2010-2012 In a currently and rapidly changing world and the increasingly complicated geopolitical situation of North East Asia, regional connection of East Asia has been changing as the CPTPP goes into effect, the dynamics of the trade relations

in intermediate goods of Japan - China, Japan - China - America, or Japan - China

- ASEAN will likely have to change to suit the actual situation

CHAPTER 2 THEORETICAL AND PRACTICAL BASIS

IN TRADE RELATIONS IN INTERMEDIATE GOODS

2.1 Theoretical issues of trade relations in intermediate goods

2.1.1 A number of basis concepts:

- Intermediate goods: are the goods used at a certain time in the production process of other goods and not for final consumption

- Intermediate goods trade (or parts and components trade): is closely related

to vertical division of labor (assigning the internal production segments among countries) and international production networks, international supply chains

2.1.2 Theoretical basis of trade relations in intermediate goods

Since trade in intermediate goods is part of trade in general, the thesis presents some theories related to international trade:

2.1.2.1 Theory of comparative advantage

The basis of the theory of comparative advantage is the differences between countries, which are not only in natural and technical conditions but also in terms

of production conditions That means any country in principle can find these differences and specialise in producing certain products whether having natural and technical advantages In fact, the absolute advantage of each country is not much, moreover, most countries conduct trade with not only the goods with absolute advantage but also exchange goods based on relative advantage Therefore, every country can benefit from participating in international division of labor on the ground of exploiting relative advantages and foreign trade allows to expand a country's consumption capacity

In addition, some countries have comparative advantages in exporting some of their products as the production of those goods has used the factors of production that are favored for them than other countries It is the preference of natural advantages of these production factors (including capital, labor, natural resources, land, climate .) and countries’s technology are equivalent, leading to some countries having lower opportunity cost in producing certain products

2.1.2.2 National competitive theory

The comparative advantage theory based on production factors cannot fully explain commercial activities and does not give the answer why for different countries there are similarities in economic scale, technology, resources, labor, , but economic activities of one country is better than the other The assumptions, which are based on production factors to underlie comparative advantage, are considered more persuasive in the 18th and 19th centuries when industries were still fragmented, production mainly used workers and did not give prominence to skills, and trade reflected many differences in conditions of natural resource development and capital However, in many present industries, comparative advantages based on production factors cannot fully explain commercial activities This is particularly true in industries and industrial segments that involve complex technology and require skilled workers Those industries are the most important sectors for national productivity

Therefore, national competitive theory argues that success of a counrtry depends primarily on two basic charecteristics: (i) advantages of production costs (comparative advantages) and (ii) advantages of individual product manufacturing (competitive advantage) M Porter has built “national diamond“ model to analyse

a nation’s competetive capacity in international market Regarding this model, competetive advantages of a nation depends on four major factors:

- Production factor conditions include: basic factors and progressive factors Basic factors include natural resources, climate, geographic location, labor (unskilled and semi-skilled), loans Progressive factors include technology level, modern telecommunications infrastructure, highly qualified human resources

- Demand conditions

- Supporting and related industries

- Company strategy, structure and domestic competition

In addition to the four main factors, Porter stressed two variables that could affect a country's competitive advantage are: objective events and government

2.1.2.3 Theory of global production networks

- Production segment theory:

The production segmentation is considered an important basis to explain the development of international labor division, which are based on the production process (vertical division of labor) rather than based on labor division of a sector This is one of the basic theories analysing FDI movement to underdeveloped countries to create vertical economic connection and form an international production system

- Internalisation theory:

Internalisation theory explains the model of high-level internal transactions in international production and distribution networks A company never does all the steps in the process of creating a final product, from the production of basic materials to the retail of final product They often import materials or components from other companies, domestic or foreign suppliers They then sold their products to another company to continue the process of adding value to the product, forming a new product Moreover, even within the enterprise, the production stages are divided and placed in different areas to take advantage of each area in order to save production costs for the company

- Flying geese model:

The flying geese model explains the take-off of the nation’s industry in the region by assigning labor to international links The original model is a model of a country - a product Initially the country has to import products Then it developed its own capacity based on its domestic market and produced the product itself to replace imports In the process of manufacturing, the capacity of the country is further enhanced to the point that it can compete in the international market and become the exporter of that product

2.1.2.4 The inheritance of the thesis from the theories related to trade relations in intermediate goods

By studying theories related to trade relations in intermediate goods, it can be seen that trade relations in intermediate goods is primarily based on the traditional theories of international division of labor and comparative advantages between two nations

As science and technology grows, competition has becomed a top priority Therefore, since the 1990s, theories of international trade have made a lot of progress and changes, focusing largely on competitive advantages, linkages and global production network Trade relations in intermediate goods between Japan and China are largely based on international trade theory, which were found and developed from the 1990s to the present In a simple way of understanding,

international production network, it is a type of international branch division within the company created by multinational companies by foreign investment and international trade Through foreign investment, each part of production is located in different countries, depending on the different characteristics of each region (production segment theory) Most finalised products will be delivered to other countries, not in the above production areas (internalisation theory) This type of production network ensures the economic integration of East Asia and the development of an export-oriented economy as all countries benefit from the competitive advantage based on the division of labor lợi từ lợi thế cạnh tranh dựa trên phân công lao động

2.1.3 Classification of intermediate goods:

Trade in intermediate goods is classified in two categories as follows:

- Classifying goods categories according to the broad economic sector (BEC)

of the United Nations

- Classifying by following the input-output table for analysing bilateral trade models in intermediate goods

2.1.4 Criteria for evaluating trade relations in intermediate goods

- Import-export turnover

- The role of intermediate goods trade relations in the economy

- Internal trade structure in intermediate goods

- Quality of export (import) structure of intermediate goods

- Opening level of intermediate goods trade realtions

- Opening level of foreign investment

2.1.5 Characteristics of trade relations in intermediate goods

First, intermediate goods trade is an activity within the global supply chain and value chain

Second, intermediate goods trade appears due to the increasing level of international production segmentation as well as the emergence of vertical supply chains and global sourcing strategies of enterprises

Third, trade in intermediate goods through backward and forward linkages

2.1.6 Factors affecting intermediate trade relations

- Market size

- Technology

- Differences in national resource factors

- Distance: The distance between partners in intermediate goods trade includes economic, cultural distance and organisational distance between partners

- Economic development level

- Governmental institutions and policies

- Per capita income

2.2 Practical ground for trade relations in intermediate goods

2.2.1 Flying geese model in East Asia

The East Asian production network is mainly shaped according to the "flying

geese" model, which is based on international division of labor in the region This model initially describes a developed country's industrialisation model, but it then extends the scope of application to the industrialisation and development model of production and cooperation networks in the region

In this model, Japan is considered a leading goose, with more advanced technology, followed by NIEs and ASEAN4 countries, having a gradual decline

in technology levels With such a sequence, the industrial structure of countries is increasingly improved thanks to the strategy of pursuing technology through attracting intra-regional FDI and international trade, forming a separate production network in East Asia

2.2.2 East Asia intra-regional production network and the role of intermediate goods trade

East Asia intra-regional production network was formed quickly thanks to the role of international trade and investment Since the mid-1980s, due to different economic levels and scales, East Asian countries have implemented a deep

Asian countries witnessed an export-oriented industrialisation strategy, which benefits from the trend of globalization, deep economic liberalisation and economic cooperation with countries around the world Since 2000, East Asian countries have strengthened economic cooperation inside and outside the region, and by November 2010 East Asia has signed 43 FTAs with countries around the world, accounting for 20.9 % of total FTAs signed by WTO member countries In the matrix connection of manufacturing industry, we can see the important role of China, Malaysia and Thailand as major regional suppliers of component and intermediate goods and China gradually becomes a factory of East Asia

The internal production network of East Asia has the following basic characteristics:

- First, the East Asian production network is decentralised and trade in intermediate goods plays an increasingly important role

- Second, Japan and China play an important role in East Asia production network and trade in intermediate goods

- Third, the East Asian production network always suffers from the external shocks