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This study has examined whether trade liberalisation facilitated manufacturing firms in Vietnam to realise their production potentials fully using firm-level balanced panel data over the period 2000ȓ03. The fi ndings support the theoretical implications of the positive and robust impact of trade liberalisation on firm performance. The study reveals that while more trade liberalisation is conducive to better firm performance, increasing the share of skilled labour is the key for firms to achieve higher potential output in the long-run rather than using more unskilled labour, which is relatively more abundant in Vietnam. The policy implication is that more attention should be paid by policymakers to provide incentives and support for firms to facilitate upgrading the skills of their workers through different means such as on-the-job training. [ABSTRACT FROM PUBLISHER]