GEG WP 2014/92 WTO Accession and the Political Economy of State-Owned Enterprise Reform in Vietnam

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Abstract

Conventional wisdom holds that international trade agreements can be used as external pressures and credible commitments to overcome opposition and lock in domestic economic reforms. This belief, however, underestimates the ability of politicians to use international trade agreements to leverage their policy choices and circumvent these restrictions. As a result, trade agreements may not induce necessary reforms and, in some cases, even become counterproductive. Through an analysis of aggregate and firm-level data as well as interviews with 40 Vietnamese senior politicians, government officials, policy analysts, and state-owned enterprise managers, this paper illustrates these insights by analyzing the political economy of state-owned enterprise reform in the context of Vietnam’s accession to the WTO.