VEPR

Dao Nguyen Thang

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Abstract

This study aims to evaluate the costs of trade protection in Vietnam and simulate the changes in consumption structure and the labor market in addition to changes in social welfare under the context of WTO membership. For these purposes, this research measures the costs of protection in 2003 for three highly-protected industries of Vietnam: steel, automobile and motorcycle. By deploying the Computable Partial Equilibrium Model (CPEM) and the elasticity approach, the costs of protection for these industries in 2003 were calculated of USD 1,093 million. The dead-weight loss was around USD 30 million, the domestic producer’s gain was USD 390 million and the Government’s gain in terms of tax revenue was USD 673.7 million. The paper also shows that trade liberalization, under given assumptions, would reduce employment in the steel, automobile and motorcycle industries by 5.3%, 6% and 3.5%, respectively.

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