Trade Policy, Firm Behavior, and Economic Development in Vietnam Case Study

Trade Policy, Firm Behavior, and Economic Development in Vietnam - Case Study Example The key determinant of Vietnam’s trade policy is the 1986 Doi Moi Renovation Policy, which sought to shift the country from the left to a middle position in terms of economic and governance policy system. Under Doi Moi, the government has two positions; the first is to transform the economy from a centrally planned one to a free market economy and the second is to promote export oriented industries (Auffret 2). The transformation of the nation’s economy was done by the devalution of the currency, breaking state-owned monopolies, privatization and the development of trade policy instruments like tariffs, quotas and licensing. The nation also has mechanisms that seek to support export oriented industries like manufacturing industies. The nation has pegged its currency, the Dong to world market prices and it is fixed by the forces of demand and supply. Due to this, prices of goods and services are standardized. This makes it propitious for the elements of the market economy to function effecitvely and efficiently. Vietnam has a trade policy that supports the establisment of private sector companies. This is done through an incentive structure that utilizes tax discrimination to support some private ventures particularly export-oriented manufacturers (Athukoralan). With strengthened structures within the country, Vietnam seeks to expand its influence into other nations around the globe through multilateral and bilateral trade arrangements with other countries. These policies are meant to create a conducive atmosphere for international trade and also create an unending trend of demand for Vietnamese goods around the globe. Vietnam is a member of ASEAN which gives it economic links with its neigbhbors and causes it to follow the collective actions of these nations to protect national interests. It is also a member of the World Trade Organization which in turn