This paper attempts to present a quantitative analysis in order to figure out the reasons of continuous increase of trade deficit in the last decade in Vietnam. After a long period of unceasing economic growth and macroeconomic stability, Vietnam has become one of the attractive investment destinations for many foreigner investors. However, the country starts to worry about its overall economic situation after overexciting the first half of 2007 when Vietnam officially joined the World Trade Organization (WTO) in January the same year. The study explains output multiplier and power of dispersion on import, based on structure of the economy through input - output tables published by General Statistical Office and the Leontief and Keynes’ theories, aiming at helping policy-makers and planners to prioritize the key sectors and appropriate structure for the Vietnam’s economy. The study also introduces a comparison between the power of dispersion on import and the effective rate of protection in order to have the most appropriate economic policy with respect to the WTO’s commitments.

The study is a contribution to a new line of trade theory arguing that good trade policy depends on many factors. By using effective rate of protection (ERP) concept, the study provides analysis of the current tariff structure from 2005 to 2009 in order to estimate the structural change of ERP by goods sectors, and the impact of trade barriers (through tariff) on the Vietnam’s economy. Vietnam’s 2007 competitive and non-competitive input-output tables are the main database used. Economic indicators like ERP, OM (output multipliers) and BL (backward linkage) calculated from the I/O model are used to assess the effectiveness of industries. The relevant policies on trade Vietnam are then suggested.