II. Review of Related Literature
In an article by Alonzo L. Hamby states that the disapproval for Korea went up quickly than Vietnam in the involvement of the Americans in both wars. After a few months, the disapproval for Vietnam increased but it took more than a year for it to reach Korea’s peak point. The differences between Korea and Vietnam’s nature were vast. The protest against Korea was because they were against by what the country considered as administration bungling and they did not agree on the no-win policy and that they wanted more strong resistance against the American Foreign Policy. On the other hand, the protest against Vietnam was more centralized on a “political left” with regards to the moral depravation of the American foreign policy. Both the Korean and Vietnamese conflict played a role as a catalyst in helping change the direction of the American foreign stands since they believed, especially Korea, that the American foreign policy was flawed due to its belief on global communism as an unchanging entity. Ever since, the Americans were dominant of the United Nations. This went far til the World War II era and as a result of this war, Americans were now able to accept they had a vital role in the world affairs and this was not to manipulate other countries.
In another article by G. E. Makinen, production was the foundation of both of the countries and they trade was an open- market variety but not one of them had the necessary resources to attain economic stability. The economy’s agricultural sector had low rates of gross national products outside the country which made taxation quite difficult thus resulting to price inflation. First, there was a serious inflation in Korea that was because of the lack of budget for the country’s economy. The decrease of the country’s government insufficiency huge amounts of products were either sold at prices lower than those existing in the marketplace. In the middle of the years 1956 to 1965, there was a decrease of Vietnam’s economic stability which caused to the country’s mild inflation. As months past, the increasing of prices was consistent til the year 1966. It is because of the dominance of the government that Vietnam up to this day is considered as a poor country. Even though there were protests against the rule an authoritarian kind of government there were still people who continued this selfish act. Today, since Vietnam is considered as one of the poor countries in the world due to the government’s corruption, lack of education, lack of health care programs, work ethics and economic development. They knew they had to do something to try to keep up with the country’s ongoing development. The government had to find ways, options to keep the country and the country’s economy intact.
Free Trade Agreements (FTAs) have turned out to be more and more prevalent since the middle 1990s as a strong instrument to encourage exchange. In the year of 2016 the combined variety of physical FTAs in compel was more than 200. In order to promote global exchange, some of the Vietnamese authorities have progressively developed the quantity of FTAs with its other trading partners. As of the start of year 2017, Vietnam has been marked eleventh FTAs. Six out of eleven FTAs were countersigned as an individual from ASEAN Free Trade Area (AFTA).
International trade plays a very crucial role in the state basically because not any other state has everything that its people need and want. There would be a lesser need for trade if each country in the entire world had enough or had more than enough resources to meets its people’s need and wants. Buying and selling of goods, products and services affects the world economy. It enables the countries to get some things that we can’t produce. In addition, international trade can even have an effect in the life of the individual because it has an important aspect in living up to one’s standards and providing employment. The agreement covers change in service like finance and telecommunication, exchange in goods like removal of tax and tax reduction, investment and many more. The reduction of trade barriers and also the creation of a more stable, straightforward and transparent trading and investment environment make it easier and less expensive for companies to send out their products and services to trading partner markets.
Trade impacts of a Free Trade Agreements have widely been known and acknowledged amongst students to include static and dynamic results. Analysis of static impacts is frequently based totally in the concept of customs union and is influenced by way of Viner (1950), who furnished a conceptual framework for reading the change results of a FTA. Besides the static outcomes according to Viner, Free trade agreements also result to dynamic effects that take a lot longer time to be apparent to the economy but has a tendency to continue on providing benefits even after the withdraw of a country from a Free Trade Agreement. It promotes cooperation within the country and within the areas of creating jobs and sustainable development. Helping in a way of creating opportunities for nations especially for developing countries, in harmonizing trade policies and reforming them. Free trade agreements also allows companies to acquire Competitive advantages by making many different types of business models such as, expanding exports and utilizing preferential tax rates, import goods from FTA trading partners rather than from other non-FTA partner countries etc. In each of these models there must be points and strategies that the companies must be able to look out for. In expanding exports, one must first identify preferential tax rates of the free trade agreement partner country next is to check whether or not products meet the rules of origin.
Some examples of Free trade agreements are ASEAN Free trade area, Pacific Alliance, Gulf Cooperation Council and many more. ASEAN was first formed in 1967. The ASEAN Free trade agreement came into force on January 1 1993, and in the year 2010 Malaysia with five other ASEAN member states is considered to ba complete free trade area which have eliminated their import duties. In November 2004, negotiations for Korea and ASEAN was launched and obviously came before the Vietnam-Korea Free trade agreement. ASEAN has actually become Korea’s 2nd largest trading partner in 2011 and it has reached over a $100 billion in 2012.
In the middle of the 1980s, during Doi Moi’s regime Vietnam has been reformed into a highly centralized command economy to a mixed economy. And as a part of having a mixed economy there will be an equal distribution of power or control which means that the government will have less regulation and the private market will have the freedom to operate, expand and grow. However, there will be a problem in finding a balance between big issues between equality and the market freedom thus can lead to poverty. According to the International Monetary Fund, Vietnam’s gross domestic product increased by more than 6 percent in the year 2013 and that the country was being supported by both the increase of foreign investors and exports in the country. According to an interview by the Vietnam News Agency, Vietnam will have a pioneering chance to promote and sell products such as garments, footwear, wooden furniture etc. to the Republic of Korea. The reason behind why both Korea and Vietnam agreed to sign into this agreement as to what the Deputy director of the Vietnamese Ministry of Industry and Trade said that it would be possible if both of the countries, Vietnam and Korea, had linkage to increase bilateral trade volume to $100 billion by 2020. He then suggested that governments should ought to support organizations and business in taking advantage of preferential commitments to attract investment. With the given results in the conducted study one could say that the foremost immense result of Korea’s association in Vietnam is to be found within the economic area, and other totally different changes within the domestic and universal stance of present government. Vietnam and Korea plans to establish a clerical stage committee and under it are the sub-committees for food safety, trade defense and customs. When Vietnam-Korea free trade agreement began, it was first proclaimed on the August of 2012. Their first deliberation round took place on the October of 2012 and there were many deliberations that were passed before the actual Vietnam-Korea free trade agreement was declared on December 2014. In the past four years, in 2014, Korea is considered as the third trading partner of Vietnam after China and US.
The Free trade agreement between Vietnam and Korea covers a huge variety of components which include goods and service liberalization, measures on food hygiene and protection, investment, change protection, economic cooperation and legal matters. In the occurrence on the Vietnam-Korea Free trade agreement, according to some studies that was conducted in 2015, both Korea and Vietnam, according to Nehru, 2015 is expected to have positive social effects by giving more opportunities for Vietnamese workers and help with Vietnam’s problem in poverty in rural areas. The VKFTA agreed to help Vietnam improve on their implementation capacity, formulating a policy and also help the country improve their competitiveness. This VKFTA says that it promotes opportunities on investment and trade & economic growth for both countries. Companies such as the Korean Trade investment Promotion agency, Korea Chamber of Commerce are expected to have a more vital and active role in Vietnam’s economic development in the future that will somehow act as an agitator for an increase in Korean investment merely because Korea’s economy is considered to be the third largest in Asia. It has remained to be one of the fastest growing developed countries in the entire world. Bilateral economic relations among Korea and Vietnam have attained fast development thanks not solely to their geographic proximity, social and cultural similarities and corresponding economic structures but also to the active efforts of the Korean government to help and contribute in the improving economic infrastructure and investment environment in Vietnam as well as to establish a solid foundation where it will be beneficial in their cooperation through the Official Development Assistance to Vietnam.
Korea and Vietnam are considered to be the perfect ideal partners in many points of view. v. And according to the said agreement this import can have a zero tax rate when it is shipped to the North Asian Market. According to Petri and Plummer on their in 2014 about Vietnam and Korea’s free trade agreement, Vietnam is the first partner of Korea under the free trade agreement with which its important export categories like fish, pivotal aqua-products of shrimp, industrial products of garment etc are offered new opportunity by the Korean government if they will reduce and eliminate tax. Korea adds that they commit to grant market place access in service and investment and agreed to foster economic cooperation and technical support on some diversified sectors. They also open their market place for products such as honey, garlic, ginger, giving vast opportunities for Vietnam in competition with different exporters from the region.
Many countries have agreed to include themselves in to Free Trade Agreements with its continuous expansion in both Asia and some parts of the Pacific Region. South Korea companies like Samsung and, gave a big amount of investment intro Vietnam and currently Samsung is now Vietnam’s largest exporter and has really helped the country attain a trade plethora for the very first time in many years. The VKFTA is expected to bring about many positive benefits to Vietnam. Korea has always been one of Vietnam’s best trading partners based on 1992 while Vietnam was considered to be Korea’s fourth-largest export in 2015. Korea was able to maintain its position as one of Vietnam’s best 5 trading partners for the past 15 years. Vietnam as considered to be Korea’s largest exports market for the goods of the industry. As an effort to develop this strategic partnership that was established between Korea and Vietnam, the trade ministers of Korea and Vietnam involved themselves and their countries to a free trade agreement. This Vietnam-Korea free trade agreement (VKFTA) was signed on the 20th of December 2015 and they aim to increase their bilateral trade between both the countries to US$70 billion by the year 2020 and also to attract Korean investors on their management expertise and technology. Joining this Free Trade Agreement has helped Vietnam improve the country’s trade efficiency since according to the Foreign Investment Agency under the Ministry of Planning and Investment, South Korea is Vietnam’s largest investor with over $35 billion in more than 4,200 projects and also one of Vietnam’s main export partners with 5.3% of $6.4 million of exports in the first few months of 2015. Under the VKFTA, both of the country’s companies will benefit from reduced taxes which means that it will improve their economy by increasing sales (more buyers will be enticed to spend their money). However, since imported goods are now more saleable people would be more willing to buy imported goods than local goods which will also affect the local manufacturers. Some Vietnamese Companies view the Republic of Korea as an established marketplace. Then comes the Vietnam-Korea Free trade agreement that will likely assist the company increase its exports by using lower tax rates and also by securing more partners.
Prime Minister Dung and President Park said that the Vietnam-Korea Free trade agreement does not only focus on improving the economy but also to deepen the relationship of the two countries’ participation on security and defense problems.
Considering all the positive effects of the Vietnam-Korea Free trade agreement to the country of Vietnam, it also presents numerous challenges. . Joining the Free Trade Agreement there must some challenges that you should take into consideration. First, from a social welfare perspective a Free Trade Agreement is not considered as the first best choice due to its nature of discrimination and other countries that are not involved or included in the Free Trade Agreement. Second, it causes a diversion of trade thus it can reduce welfare which is absolutely not good for the country’s economic stability. Lastly, since participation is now more visible in the country then this can lead to a Spaghetti Bowl Effect, where the increasing number of Free Trade Agreements between countries slows down trade relations between them. It is therefore important that in order to have a more effective FTA to involve all parties that will be impacted by the said agreement before it comes into action. Companies may need to reform in order for them to enhance their strategy skills and also to involve themselves in both regional and international production networks. Also, one of the many challenges that may be encountered is because of having lower tax rates this will put more competitive pressure on Vietnamese enterprises or in other words, some manufacturers in their economy. Local authorities, as said earlier, must be aware of the country’s consolidation process and the implication of the Vietnam Korea free trade agreement to be able to utilize the advantages and avoid or somehow minimize the negative effects of the said trade agreement. State agencies should make small adjustments on legal regulations that are in line with the global standards while enhancing the employees work capacity. Some related studies claims that the greatest challenge in the business sector is rising competition when Vietnam and Korea companies offer the consumers countless choices of products at extremely lower costs.
At this point, I conclude that the Vietnam-Korea free trade agreement has benefited both Korea and Vietnam in somehow similar but different ways. Vietnam, though, is still a less developed country however I could say that it is in the process of developing itself. Vietnam through the help of the Vietnam- Korea free trade agreement has had rapid growth both in economic and development and it has transformed it from one of the most poorest countries to the one of the world’s lower middle income country. The country’s performance has been strong through the past ten years. Even though Vietnam has not achieved being an independent country, it still remains positive especially on its growth and economic stability. Over time, the country is experiencing rapid increase in population which is also rapidly aging and there is the emergence of the middle class (bourgeoise) in the year 2006. Compared to the past years, Vietnam today is more educated and revitalized.
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