Macroeconomic factors and trade balance: An analysis of Vietnam's relations with RCEP countries

Abstract

This study conducts a comprehensive analysis of the impact of macroeconomic factors on Vietnam's trade balance with the member countries of the Regional Comprehensive Economic Partnership (RCEP) during the period from 2002 to 2021. Grounded in established trade theories and a comprehensive review of pertinent literature on inter-country trade balances, the investigation identifies the pivotal determinants influencing trade balances between Vietnam and RCEP nations. These determinants encompass key elements such as tariffs (TRF), foreign direct investment (FDI), gross domestic product (GDP), geographic distance (DIS), exchange rate (EXC), and the trade openness of individual economies (OPEN). The research outcomes substantiate parallels with previous studies, indicating that reducing tariffs, enhancing trade openness, augmenting GDP, and attracting higher foreign direct investment within RCEP member nations yield constructive effects on Vietnam's long-term trade balance. Conversely, in the short term, impediments like exchange rate fluctuations (EXC), geographic distance (DIS), and GDP disparities emerge as challenges to refining Vietnam's trade balance with RCEP countries. Accordingly, this article proffers pragmatic policy recommendations aimed at advancing Vietnam's trade equilibrium with RCEP countries. Proposed measures include facilitating business comprehension of tax regulations within RCEP, elevating the investment milieu to entice capital from developed RCEP economies, and executing trade promotion initiatives to facilitate market access for businesses across RCEP jurisdictions.