Vietnam: we giveth, we taketh away

The rich countries give approximately $2 billion a year in aid to Vietnam, which is about 4% of Vietnam’s national income.  Aid to Vietnam has inreased in recent years as the Government has pursued a successful policy of market liberalisation, which has brought down the number of people living in poverty and expanded incomes. Despite the progress that has been made, average income per head is still below $600 a year, and half of Vietnam’s 82 million people live below the poverty line.

There has been some more good news in the last few years.  The abolition of quotas on shoe imports from 1 January 2005 has given Vietnam an opportunity to begin trade its way out of poverty.  Vietnam has begun making not only sports shoes but also high quality, leather upper shoes, partly as a result of a bilateral trade agreement with the US in 2001. The shoe industry in Vietnam now employs at least half a million people, four fifths of them women; and their incomes support many more.
The EU is Vietnam’s biggest footwear market, absorbing 75% of Vietnam’s shoe exports.

This is, of course, excellent news if you want to see an end to poverty. It is not such good news if you are an Italian shoe-maker.  In July 2005, under pressure from Italy and European shoe manufacturers, the EU Commission launched an investigation into whether shoes with
leather uppers from China and Vietnam were being "dumped" in Europe at
prices below the cost of production. The Commission has until April to decide whether to recommend adding duties to shoes imported from Vietnam and China.

According to the Guardian, the Commission is considering a "tariff rate quota" which would allow a set number of shoes to be
imported, with a levy imposed on any surplus; and the European
Branded Footwear Coalition, which has denounced the Commission’s investigations, is proposing a "minimum import price". 

So it looks as if European consumers are going to be asked to spend about $10-20 extra on each pair of shoes, in order to protect an unprofitable industry in Europe, to keep the people of Vietnam poor, so that we can go on giving them aid. 

How hard is it for people to understand that it would be in our interests and the interests of the people of Vietnam for us to buy the shoes that they can make more cheaply than we can? 

 

5 comments on “Vietnam: we giveth, we taketh away”

  1. Stop the aid and buy the shoes.  What could be easier to understand?

    Owen replies: I’ll be happy to buy the shoes, and stop the aid when the people of Vietnam no longer need it. 

  2. I guess it’s pretty hard to understand. I know plenty of people who think it’s immoral to buy goods manufactured in poor countries (sweatshops are for boycotting). I blame the Groan.

    Owen replies: we need to explain this to people. 

  3. Well then, you give the aid, Owen, but stop taxing me to give it too. 

    Owen replies: I am not taxing you.  I am voting for a democratically elected government which taxes you.  I personally don’t want to pay taxes which are used for maintaining UK nuclear weapons, or for building roads, or subsidizing farmers.  And I will argue against spending taxpayers’ money on such things.  But I don’t dispute the right of a country to elect a government that collects taxes and spends the money on things that not every citizen would choose to pay for.

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Owen Barder

Owen is Senior Fellow and Director for Europe at the Center for Global Development and a Visiting Professor in Practice at the London School of Economics. Owen was a civil servant for a quarter of a century, working in Number 10, the Treasury and the Department for International Development. Owen hosts the Development Drums podcast, and is the author Running for Fitness, the book and website. Owen is on Twitter and