Next door neighbors

The one question everyone here wants answered--including the Vietnamese--is how Vietnam will manage to compete with China. China's mountainous economies of scale loom over every discussion; Vietnam has no offsetting advantages to speak of. Vietnamese economists and trade officials speak of moving up the value chain, but while this works in domestic markets, where Chinese imports are usually on the very cheapest end of the market, it's not clear how that will translate into the export market.

Moreover, China uses its vast market power to bullyrag its neighbours, and those who would trade with them--the dispute over the Spratlys is the most prominent recent example. Everyone here seems very conscious that the 600 pound gorilla in the neighbourhood could come down hard on them at any moment.

On the other hand, China's rapid growth may be pulling its neighbors along with it. Moreover, the trade officials I've spoken to have been shockingly willing (for trade officials) to consider that providing cheap goods to their country's consumers might be, well, a good thing. One nice man went on at considerable length about the many consumer benefits of cheap motorcycles--less for the opportunity to buy one, than because the competition has forced down the price of the Japanese models (assembled in Vietnam) that he prefers.

And Vietnam does have one comparative advantage I can think of: it isn't so big. To be sure, it's been saddled with textile limits, but it isn't the target of the kind of ire that China's enormous market draws. It's not unreasonable to hope that the 600 pound gorilla may attract the attention of all the big game hunters in the anti-dumping movement, leaving the Vietnamese to trade in peace.