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World Development Vol. 37, No. 2, pp. 341–353, 2009
Ó 2008 Elsevier Ltd. All rights reserved.
0305-750X/$ - see front matter
www.elsevier.com/locate/worlddev
doi:10.1016/j.worlddev.2008.04.005
Trade and Development: Lessons from Vietnam’s
Past Trade Agreements
PHILIP ABBOTT
Purdue University, IN, USA
JEANET BENTZEN and FINN TARP *
University of Copenhagen, Denmark
Summary. — History, not predictions of CGE models or cross-country growth studies, shows a strong relationship between trade and
development. Vietnam’s experience with bilateral trade agreements, comparing actual outcomes with predictions from existing models,
demonstrates this and the limitations of research methodologies. Forecasts for Vietnam greatly underestimated the impact of past agreements because tariff reform was not the main factor driving adjustments. Addressing market imperfections through institutional reform
was central to bringing output and trade expansion. Key questions for future research are whether policy reform will result in new institutional changes, and how resulting incentives determine the evolution of investment by sector.
Ó 2008 Elsevier Ltd. All rights reserved.
Key words — trade and development, trade liberalization, bilateral trade agreements, WTO accession, Vietnam
faster growth. Also, critiques of CGE and econometric growth
studies speak more to the limitations of these methodologies
than to the underlying relationship between trade and growth
(e.g., Rodrik & Rodriguez, 1999; Stiglitz & Charlton, 2005).
Econometric studies (Andersen & Dalgaard, 2006; Frankel
& Romer, 1999; Rodrik & Rodriguez, 1999) and reviews of
this voluminous literature (Temple, 1999; Santos-Paulino,
2005) on cross-country growth performance report conflicting
results on the role of trade. Effects of trade variables are collinear with (some argue dominated by) macroeconomic variables and other globalization indicators, and tariff reductions
per se are seldom found to matter....