VIETNAM NATIONAL UNIVERSITY, HA NOI

INTERNATIONAL SCHOOL
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REPORT SUBJECT

INTERNATIONAL ECONOMICS

Course Code: INS200504

Lecturer: Dr. Tran Thi Mai Thanh

MEMBERS OF GROUP 9:

Name Student ID

Đinh Hương Ly 20070241

Nguyễn Khánh Linh 20070509
Ngô Hồng Anh 20070400
Hoàng Hà Chi 20070119
Trần Bảo Ngọc 20070274
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TABLE OF CONTENT

PART 1 5
I. Introduction of US economics 5
II. US’s balance of payment in 2022 5
2.1 Definition 5
2.2 The current account 6
2.3 The capital account 7
2.4 The financial account 8
2.5 The data about the US in 2022 8
III. Assessment 13
3.1 The US's comparative advantage in key industries 13
3.2 The US's disadvantages in international trade 14
3.3 A deficit means for the U.S. economy and it’s impaction 15
IV. Conclusion 17
PART 2 19
I. Introduction to Vietnam’s economics 19
II. The changes of Vietnam in export 19
III. Analysis 21
3.1 Vietnam’s trade integration 21
3.2 Comparative advantage analysis 22
3.3 Gravity model 23
IV. Conclusion 24
REFERENCES 25
CONTRIBUTION 27

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TABLE OF FIGURE

Figure 1: The U.S. Current-Account and Component Balance to 2022

Figure 2: The U.S. Current-Account Transaction to 2022
Figure 3: Gross domestic spending on R&D
Figure 4: The health spending in G7 in the year 2022
Figure 5: Nominal Interest Rates
Figure 6: Budget Deficits and Exchange Rates
Figure 7: Ten largest export commodity groups of Vietnam
Figure 8: Export structure by product group in Vietnam 2022
Figure 9: Goods Export Changes, 2021 and 2022

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LIST OF TABLE

Table 1: Updates to Third-Quarter 2022 International Transactions Accounts Balances

Table 2: U.S. capital account
Table 3: U.S. financial account
Table 4: U.S. International Trade in Goods and Service in 2022
Table 5: U.S. Imports of Services by Major Category
Table 6: U.S. Imports of Goods by End-Use Category and Commodity
Table 7: U.S. Exports of Services by Major Category
Table 8 : U.S. Exports of Goods by End-Use Category and Commodity

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PART 1

I. Introduction of US economics

The United States Gross Domestic Product (GDP) rose 2.1% in 2022, a weaker annual
growth than in 2021, which had been the strongest since 1984. Consumer spending was the
main driver of the GDP annual increase, contributing 1.9% to growth in 2022.
According to the United States Bureau of Economic Analysis (BEA), the increase in real
GDP in 2022 reflected increases not only in consumer spending but also in exports, private
inventory investment, and nonresidential fixed investment. They were partly offset by
decreases in residential fixed investment and federal government spending. Imports increased
more than exports, thus trade’s contribution to annual growth was negative.

II. US’s balance of payment in 2022

2.1 Definition

The balance of international payments (BOP) is a record of all transactions between entities
in one country and the rest of the world over a certain time period. It summarizes all
transactions between individuals, businesses, and government entities within a country and
individuals, businesses, and government bodies outside the country.

Table 1: Updates to Third-Quarter 2022 International Transactions Accounts Balances

[Billions of dollars, seasonally adjusted]

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2.2 The current account

Figure 1: The U.S. Current-Account and Component Balance to 2022

(Source: U.S. Bureau of Economic Analysis)

According to data released today by the U.S. Bureau of Economic Analysis, the U.S.
current-account deficit, which is a reflection of the combined balances on trade in goods and
services as well as income flows between residents of the United States and residents of other
countries, decreased by $12.2 billion, or 5.6%, to $206.8 billion in the fourth quarter of 2022.
The U.S. current-account deficit widened by $97.4 billion, or 11.5 percent, to $943.8 billion
in 2022. The deficit was 3.7 percent of current-dollar GDP, up from 3.6 percent in 2021. The
$97.4 billion widening of the current-account deficit in 2022 primarily reflected expanded
deficits on goods and on secondary income that were partly offset by an expanded surplus on
primary income.

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Figure 2: The U.S. Current-Account Transaction to 2022

(Source: U.S. Bureau of Economic Analysis)

Exports of goods and services to, and income received from, foreign residents decreased $1.1
billion to $1.14 trillion in the fourth quarter. Imports of goods and services from, and income
paid to, foreign residents decreased from $13.3 billion to $1.34 trillion.

2.3 The capital account

Table 2: U.S. capital account

(Source: U.S. Bureau of Economic Analysis)

Capital-transfer receipts increased from $5.3 billion to $9.1 billion in 2022. Transactions in
2022 reflected third-quarter receipts from foreign insurance companies for losses resulting
from Hurricane Ian. Capital-transfer payments increased from $7.4 billion to $13.8 billion,
reflecting an increase in infrastructure grants.

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2.4 The financial account

Table 3: U.S. financial account

(Source: U.S. Bureau of Economic Analysis)

Net financial-account transactions were −$677.1 billion in 2022, reflecting net U.S.
borrowing from foreign residents.

2.5 The data about the US in 2022

For 2022, the goods and services deficit increased $103.0 billion, or 12.2 percent, from 2021.
Exports increased $453.1 billion or 17.7 percent. Imports increased $556.1 billion or 16.3
percent.

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Table 4: U.S. International Trade in Goods and Services in 2022

(Source: U.S. Bureau of Economic Analysis)

2.5.1 For imports

Table 5: U.S. Imports of Services by Major Category
(Source: U.S. Bureau of Economic Analysis)

Imports of goods increased $4.5 billion to $258.8 billion in December.

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Table 6: U.S. Imports of Goods by End-Use Category and Commodity

(Source: U.S. Bureau of Economic Analysis)

Imports of goods on a Census basis increased $4.8 billion.

- Consumer goods increased $4.1 billion.
+ Cell phones and other household goods increased $3.5 billion.
- Automotive vehicles, parts, and engines increased $2.9 billion.
+ Passenger cars increased $1.6 billion.
+ Other automotive parts and accessories increased $0.7 billion.
- Industrial supplies and materials decreased $2.7 billion.
+ Fuel oil decreased by $0.8 billion.
+ Organic chemicals decreased $0.8 billion.
Net balance of payments adjustments decreased $0.3 billion.

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Imports of services decreased $0.3 billion to $58.8 billion in December.

- Travel decreased $0.5 billion.
- Transport decreased $0.1 billion.
- Charges for the use of intellectual property increased $0.2 billion.

2.5.2 For exports

Table 7: U.S. Exports of Services by Major Category
(Source: U.S. Bureau of Economic Analysis)

Exports of goods decreased $2.9 billion to $168.1 billion in December.

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Table 8 : U.S. Exports of Goods by End-Use Category and Commodity

(Source: U.S. Bureau of Economic Analysis)

Exports of goods on a Census basis decreased $2.8 billion.

- Industrial supplies and materials decreased $3.1 billion.
+ Nonmonetary gold decreased $1.6 billion.
+ Crude oil decreased $0.8 billion.
+ Other petroleum products decreased $0.6 billion.
- Consumer goods decreased $1.0 billion.
+ Jewelry decreased $0.4 billion.
+ Pharmaceutical preparations decreased $0.2 billion.
- Foods, feeds, and beverages increased $0.7 billion.
Net balance of payments adjustments decreased $0.1 billion.

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Exports of services increased $0.7 billion to $82.0 billion in December.

- Travel increased $0.4 billion.
- Transport increased $0.1 billion.
- Other business services increased $0.1 billion.

III. Assessment

3.1 The US's comparative advantage in key industries

3.1.1 Technology
The US enacted the National Artificial Intelligence Initiative Law in 2020 to promote
investment and facilitate AI research, standards and education activities to ensure that the US
will lead the world in development. As of 2021, the two countries lead the way in private
investment in AI, with the US's total investment three times higher than China's.
The United States is the country that patents and commercializes semiconductor chemicals,
and dominates the most profitable links in the semiconductor supply chain including chip
design and software tools.

Figure 3: Gross domestic spending on R&D

(Source: OECD statistic)
3.1.2 Healthcare

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In 2018, health spending contributed for 17.7% of the nation's gross domestic product (GDP).
Furthermore, investor interest in healthcare and biotech equities remains high. McKinsey
business analysts say health is a market worth $1.5 trillion globally and is growing 5-10%
each year. About 50% of American consumers today say health is now a top priority.

Figure 4: The health spending in G7 in the year 2022.

(Source: OECD health statistic)

3.2 The US's disadvantages in international trade

3.2.1 Trade Deficit

The US continued to experience a trade deficit, meaning that it imported more goods and
services than it exported. This ongoing deficit can be a disadvantage as it indicates a net
outflow of capital and raises concerns about the competitiveness of domestic industries.

3.2.2 Manufacturing Job Losses

The US has been grappling with job losses in certain manufacturing sectors for years. Factors
such as automation, outsourcing, and competition from low-cost countries contributed to the
decline in manufacturing jobs, affecting the US's competitive advantage in those industries.

3.2.3 Trade Barriers

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The US faced trade barriers in the form of tariffs, quotas, and non-tariff barriers imposed by
other countries. These barriers can hinder US exports and make it more challenging for
American businesses to access foreign markets or compete with domestic producers in those
countries.

3.2.4 Exchange Rates

Fluctuations in exchange rates can impact the competitiveness of US exports. The US dollar
experienced varying exchange rate movements against other currencies. Exchange rate
fluctuations can make American goods relatively more expensive or cheaper for foreign
buyers, influencing the demand for US products in international markets.

3.2.5 US-China trade tensions

At the heart of the trade conflict is the two countries' competitive economic systems. Trade
competition between the US and China increased as Washington imposed new tariffs and
trade barriers on Beijing.

3.3 A deficit means for the U.S. economy and it’s impaction

As we mentioned in the section above, the current-account deficit in the United States
increased by $97.4 billion, or 11.5 percent, to $943.8 billion in 2022.

3.3.1 A Growing U.S. Deficit

The annual budget of the federal government has been in deficit since 2001. Among the
contributing elements are:
-Spending on Social Security, health care, and interest on the national debt began to surpass
the rise in federal receipts in 2016. In 2018, Medicare spending made about 15% of all
government spending. From 2018 to 2028, per capita spending is projected to increase at an
average annual rate of 5.1%.
- The COVID-19 pandemic caused the U.S. government deficit for the fiscal year 2020 to rise
from $984 billion in 2019 to $3.1 trillion. Congress also approved the $2.2 trillion CARES
Act.
- The deficit grew as a result of the Trump tax cuts' reduction in revenue. Over a ten-year
period, the anticipated amount of these tax cuts was $1.5 trillion. The Joint Committee on

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Taxation projects that tax cuts will boost GDP by 0.7% a year, but over a ten-year period, the
deficit will rise by $1 trillion.
- Even if it dropped by 50% from FY 2021 to $1.4 trillion in FY 2022, the federal deficit
remained the fourth-largest in American history.

3.3.2 Interest Rate Environment

Both long- and short-term interest rates have trended downward for the pastseveral decades
from relative highs in the 1980s. This has happened despite periods of significant budget
deficits.

Figure 5: Nominal Interest Rates

3.3.3 Inflation
Spending deficits have the potential to temporarily raise inflation. But despite decades of
budget deficits, the federal government has not seen a discernible rise in inflation. During the
recession of 2007–2009, inflation, as shown by the personal consumption expenditures index,
has mostly been below the Federal Reserve’s 2% objective. Despite a number of stimulus and
relief policies passed in reaction to the COVID-19-related economic crisis, inflation stayed

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comparatively low. According to Fed projections, inflation will gradually increase to 2.4% in
2021 before eventually falling to 2%.

3.3.4 Exchange rate

A trade deficit, a stronger currency rate, and an influx of foreign financial capital can all be
directly caused by a budget deficit.
Naturally, a stronger exchange rate makes it more difficult for exporters to sell their goods
overseas while driving down the cost of imports, leading to a reduction in the trade surplus or
trade deficit.

Figure 6: Budget Deficits and Exchange Rates

IV. Conclusion

The United States' balance of payments in 2022 reflected an economy with both strengths and
weaknesses. The US remains a global leader in key industries such as technology and
healthcare, but it faces significant challenges in international trade. The widening current
account deficit, reaching $943.8 billion in 2022, highlights the growing imbalance between
exports and imports. This deficit has far-reaching implications for the US economy, including

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increased foreign ownership of US assets, higher interest rates, and a weaker dollar. Despite
its comparative advantages in certain sectors, the US struggles to compete in a globalized
market characterized by factors such as automation, outsourcing, and low-cost production in
developing countries. The decline in manufacturing jobs and the erection of trade barriers by
foreign nations further hinder US exports, making it more difficult for American businesses
to access foreign markets and compete with domestic producers in those countries.
In conclusion, the US's balance of payments in 2022 reflects an economy grappling with both
internal and external challenges. While the US boasts strengths in certain industries, it faces
significant hurdles in international trade and struggles with a growing budget deficit.
Addressing these issues will require a multifaceted approach that combines economic
policies, trade strategies, and fiscal reforms. By taking these steps, the US can strengthen its
position in the global economy and ensure its long-term prosperity.

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PART 2

I. Introduction to Vietnam’s economics

Vietnam has been a development success story. Economic reforms since the launch of Đổi
Mới in 1986, coupled with beneficial global trends, have helped propel Vietnam from being
one of the world’s poorest nations to a middle-income economy in one generation. One of the
main goals of global trade strategy is exporting to assist economic restructuring. In 2022,
economies have gradually reopened, although still affected by the complicated developments
of the COVID-19 epidemic and new diseases. The outbreak and prolonged conflict between
Russia and Ukraine have negatively impacted the supply chain's ability to recover, driven up
the cost of key commodities on the global market, and jeopardized the food and energy
security of many nations, including those with the world's largest economies. Between 2002
and 2022, GDP per capita increased 3.6 times, reaching almost US$3,700. Poverty rates
(US$3.65/day, 2017 PPP) declined from 14 in 2010 to 3.8% in 2020.

II. The changes of Vietnam in export

The year 2021 is the first year of the Strategy for socio-economic development for 10 years
2021-2030 and the Five years Plan on socio-economic development 2021-2025, as well as the
year of grasping, concretizing and organizing the implementation of major guidelines and
directions of the Party as the spirit of the Resolution of the XIII Party Congress. With the
prospect of global trade getting better when the Covid-19 pandemic is gradually controlled,
effectively utilizing favorable conditions from integration strategies, the framework of free
trade agreements having been and will be signed, import and export activities of Viet Nam
are expected to accelerate in 2021. Exports in Vietnam increased to 32.25 USD Billion in
October from 30.68 USD Billion in September of 2023. Exports in Vietnam averaged 10.10
USD Billion from 1990 until 2023, reaching an all time high of 34.92 USD Billion in August
of 2022 and a record low of 0.54 USD Billion in February of 1997.

Vietnam's agricultural sector plays a crucial role in its export economy, but recent years have
seen a downward trend in agricultural exports due to various challenges. While Vietnam
holds the top spot globally in the export volume of certain agricultural products, its export
value remains relatively low.

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Figure 7: Ten largest export commodity groups of Vietnam in 11 month of 2022 and
compared to the same period in 2021
(Source: General Department of Vietnam Customs)
In 2022, there are 8 items with export turnover of over 10 billion USD, accounting for 70.1%
of total export turnover. Exports of all kinds of phones and components increased by 0.8%
from 2021 to reach $57.99 billion. With the above results, the mobile phone and components
group continued to maintain its position as the commodity group with the largest export
revenue in Vietnam, accounting for 16.2% of Vietnam's total export revenue in 2022.
The export turnover of phones and components of the main markets achieved high growth
rates. In which, the export of this group of goods to the Chinese market reached 16.26 billion
USD, up 7.1%; to the US market with a value of 11.88 billion USD, up 22.5%; to the EU
reached 6.7 billion USD, down 15.1%; to Korea reached 5.05 billion USD, up 5.3% over the
previous year.

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III. Analysis

3.1 Vietnam’s trade integration

Vietnam is currently having a strong development speed and is being considered as a country
with a solid foundation and advantages in exporting electrical machinery and equipment. This
marks a new development step of Vietnam's economy with many favorable competition.

Figure 8: Export structure by product group in Vietnam 2022

Vietnam's exports have recently shifted strongly toward processed and high-tech industrial
products such as iron and steel; electronics, computers, and components; machinery,
equipment, tools, and spare parts; and phones and components.

With international integration, Vietnam can achieve its goals for the sake of trade,
employment, political cooperation and empowerment. In other words, Vietnam can reduce
trade costs through signed free trade agreements (FTAs), reducing or eliminating non-tariff
barriers that hinder trade. Stronger economic links can also strengthen political cooperation
between Vietnam and other countries, creating incentives to resolve issues amicably and
bring about greater stability.

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3.2 Comparative advantage analysis

As the world’s largest trading nation, with more than $5.3 trillion in exports and imports of
goods and services in 2022, the United States is a cornerstone of the global economy.
Currently, the U.S. has trade relations with more than 200 countries, territories and regional
associations around the globe.

Figure 9: Goods Export Changes, 2021 and 2022

(SOURCE: Export Changes by Sector, 2020-2021, ITA Annual Trade Infographic)

U.S.based corporations understand the needs of other multinational firms. Of the $547 billion
in capital goods exported, 65% is from six categories:

● Commercial aircraft ($132 billion): produced mostly by Boeing.

● Industrial machines ($57 billion)
● Semiconductors ($50 billion): primarily Intel and Texas Instruments.
● Electric apparatus ($44 billion)
● Telecommunications ($36 billion)
● Medical equipment ($38 billion): Unlike most other U.S. export leaders, more than

80% of medical device companies are small businesses.

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The next category is industrial supplies and equipment. Materials utilized by manufacturers
in the United States are worth $531 billion. Oil and oil-based items make up the majority of
it. Again, the majority of trade is done by giant multinational corporations. Phones of all
kinds and their parts are the most exported items of Vietnam's six commodity groups, with a
total turnover of more than 10 billion USD.

The political situation in Vietnam is also stable. One of the most attractive features for
Vietnamese investors is political stability, which is also valued by foreign allies. When
examining a number of countries in the region, it is clear that the majority have faced coups
or political crises. The workforce is both young and abundant. Vietnam has a young
population structure, with more than 88% of people aged 25-59 entering the labor force,
nearly 40% of whom have graduated from lower secondary school and 23.1% have degrees
or certificates.

3.3 Gravity model

The gravity model of international trade in international economics, in its traditional form, is
a model that predicts bilateral trade flows based on economic size and distance between two
units. The study found that "there is a lot of evidence that trade tends to decrease with
distance."

Vietnam has achieved remarkable success in increasing its exports, with the export profits of
manufactured goods constituting over 50% of the total export revenue, excluding oil exports.
This trend indicates a positive shift in Vietnam's export structure, towards a sustainable path
of industrialization that is similar to successful exporting countries. Vietnam is moving away
from its traditional reliance on resource-based products towards labor-intensive and
capital-intensive products, taking advantage of its abundance of labor to achieve comparative
advantage.

· Gravity model analysis:

By analyzing the gravity model of international commerce to consider the trade

interactions between the US, China and EU

Gravity Model Formula : Tij = A * Yi * Yj/Dij

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(where A is a constant, Tij is the value of commerce between nations I and j, Yi is the GDP of
country j, and Dij is the distance between them. The value of trade between two countries is
proportional to the product of their GDPs, and it decreases as the distance between them
increases.)

IV. Conclusion

Vietnam has undergone significant economic transformation in recent decades, transitioning

from a low-income country to a lower-middle-income economy. This success can be
attributed to various factors, including economic reforms, strategic trade policies, and
favorable global trends. The country's export structure has shifted towards processed and
high-tech industrial products, reflecting its growing industrialization and competitiveness.
International integration, particularly through free trade agreements, has played a crucial role
in facilitating Vietnam's trade expansion and economic growth. Vietnam's comparative
advantages lie in its stable political environment, young and abundant workforce, open
investment policies, and dynamic low-cost labor market. These factors have attracted foreign
direct investment and facilitated the development of manufacturing industries. The gravity
model of international trade suggests that Vietnam's trade potential is significant, given its
proximity to major markets and its growing economic size.

Looking ahead, Vietnam's export prospects remain promising, as the country continues to
integrate into the global economy and enhance its industrial capabilities. To further
strengthen its position in the global market, Vietnam should focus on improving
infrastructure, enhancing skills development, and fostering innovation. By addressing these
challenges, Vietnam can continue to achieve sustainable economic growth and further elevate
its living standards.

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REFERENCES

1, (No date). Available at: https://www.bea.gov/sites/default/files/2022-06/trans122.pdf

(Accessed: 23 November 2023).

2, (No date) United States Economic Outlook - repositorio.cepal.org. Available at:

https://repositorio.cepal.org/server/api/core/bitstreams/4fc6db6a-0f7a-452f-ae3f-0f5b3ee16ca
e/content (Accessed: 23 November 2023).

3, (No date) U.S. Bureau of Economic Analysis (BEA). Available at:

https://www.bea.gov/sites/default/files/2023-02/trad1222.pdf (Accessed: 23 November 2023).

4, (No date) Overview of Vietnam’s economy. Available at:

https://www.worldbank.org/en/country/vietnam/overview (Accessed: 24 November 2023).

5, (No date a) Vietnam exports. Available at: https://tradingeconomics.com/vietnam/exports

(Accessed: 24 November 2023).

6, Crane, K. (2023) What are the top U.S. exports?, Shipping Solutions Export Document
Software - Home Page. Available at: https://www.shippingsolutions.com/blog/top-us-exports
(Accessed: 24 November 2023).

7, Vietnam’s agricultural sector: A Quick Guide for 2023 (2023) Vietnam Briefing News.
Available at: https://www.vietnam-briefing.com/news/vietnam-agricultural-products.html/
(Accessed: 24 November 2023).

8, Tạp Chí Cộng Sản (no date) Tạp chí Cộng sản. Available at:
https://www.tapchicongsan.org.vn/web/guest/the-gioi-van-de-su-kien/-/2018/827508/canh-tra
nh-cong-nghe-my---trung-quoc--ky-nguyen-moi-trong-chien-luoc-nuoc-lon.aspx (Accessed:
24 November 2023).

9, Baodientuvtv (2023) Ngành công Nghiệp Chăm Sóc Sức Khỏe Bùng nổ tại MỸ, BAO DIEN
TU VTV. Available at:
https://vtv.vn/kinh-te/nganh-cong-nghiep-cham-soc-suc-khoe-bung-no-tai-my-202301121614
23487.htm (Accessed: 24 November 2023).

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10, (No date) Federal deficits, growing debt, and the economy in the wake of COVID-19.
Available at: https://crsreports.congress.gov/product/pdf/R/R46729 (Accessed: 24 November
2023).

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CONTRIBUTION

NAME STUDENT ID CONTRIBUTION LEVEL

Đinh Hương Ly 20070241 100%

Nguyễn Khánh Linh 20070509 100%

Ngô Hồng Anh 20070400 100%

Hoàng Hà Chi 20070119 100%

Trần Bảo Ngọc 20070274 100%

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