Political economy of domestic influences of free trade agreements: A case study of the agricultural sector in Vietnam

This political economy analysis investigates how free trade agreements (FTA) influence economic performance and the agricultural sector in Vietnam. The greatest attention is placed on the EU-Vietnam FTA (EVFTA) as the broadest deal of its kind and with an expected significant impact on Vietnam’s economy. Content analysis is used for secondary sources and narrative analysis for the semi-structured interviews conducted with the representatives of the stakeholders, all based on the grounded theory of new institutional economics, finding the patterns that connect institutions, FTA provisions, and organizations' interests helps to separate changes in an institutional setting that FTAs largely drove. Institutional change is assumed to trigger economic change with the reflection on economic performance. While the impact of traditional FTAs on long-term economic performance is at best ambiguous, “new generation” agreements and EVFTA in particular, have influenced formal institutional settings. The impact on informal institutions is limited, with no impact on enforcement power. The state’s failure to properly implement some requirements can be substituted by a market shift that activates other actors such as businesses, including foreign invested companies. Deeper integration of the Vietnamese economy into the global system, including global value chains (GVC) caused by FTAs, exposed it to international institutional standards, which are successfully implemented in Vietnamese parts of the GVC. Their local suppliers might then follow these standards and potentially spill over to broader parts of the economy, causing a shift in informal norms. Consequently, incremental changes might result in effective institutional change. In agriculture, the negative impact of FTAs on the sector was largely mitigated. An expected positive indirect impact of EVFTA is yet to come. All rights reserved.