Deep Preferential Trade Agreements and Upgrading in Global Value Chains the Case of Vietnam

Deep Preferential Trade Agreements and Upgrading in Global Value Chains: The Case of Vietnam

Vietnam has emerged as a major player in the global value chain, thanks to its strategic location, abundant natural resources, and a favorable business environment. However, to remain competitive and sustain its growth momentum, Vietnam needs to engage in deep preferential trade agreements and upgrade its position in the global value chain.

Deep preferential trade agreements (DPTAs) are a new generation of trade agreements that go beyond the traditional tariff reduction and focus on non-tariff measures such as investment, intellectual property, and regulatory standards. DPTAs are designed to promote trade in goods and services, attract foreign investment, and facilitate technology transfer, thus providing an impetus to economic growth and development.

Vietnam has been actively engaging in DPTAs, with a focus on the Trans-Pacific Partnership (TPP), the European Union-Vietnam Free Trade Agreement (EVFTA), and the Regional Comprehensive Economic Partnership (RCEP). These agreements offer Vietnam greater market access, reduced transaction costs, and increased regulatory transparency, thus enabling Vietnam to attract more foreign investment and participate more fully in the global value chain.

Upgrading in the global value chain (GVC) refers to moving up the value-added ladder by increasing the complexity and sophistication of production processes. Upgrading enables firms to generate more value, increase productivity, and improve competitiveness. In Vietnam, upgrading has been associated with the shift from low-cost labor-intensive assembly to higher value-added activities such as research and development, design, and marketing.

To upgrade in the GVC, firms need to develop their human capital, invest in research and development, adopt new technologies, and improve their business networks. In Vietnam, upgrading has been facilitated by government policies that promote innovation and entrepreneurship, such as the National Innovation Center, Startup Law, and the Vietnam Silicon Valley project. In addition, Vietnam`s strategic location, low labor costs, and proximity to major markets such as China and Japan, provide a competitive advantage for firms seeking to upgrade.

In conclusion, deep preferential trade agreements and upgrading in the global value chain are crucial for Vietnam`s economic growth and development. Vietnam needs to continue engaging in DPTAs and upgrading to remain competitive, attract more foreign investment, and generate more value-added activities. By doing so, Vietnam can become a major player in the global value chain and achieve sustainable economic growth.