Vietnam: Opening Up? The Vietnam-Us Trade Agreement

2000

Professor Carlyle A. Thayer

In September 1999 Vietnam and the United States were poised to sign an historic bilateral trade agreement at the APEC summit in New Zealand. At the eleventh hour Vietnam begged off with the excuse that it was not yet ready to sign. This decision came after three years of negotiations. It would have marked a very major step forward in Vietnam's domestic reform program and Vietnam's further integration into the global economy.

What accounts for this turnaround?

Vietnam's leadership has been divided for a number of years about the pace and scope of change in its program of renovation or doi moi. The proposed trade agreement with the U.S. brought matters to a head. The main opponents of the trade agreement come from state-owned enterprises that receive state subsidies and protected sectors of the economy, which would be subject to global competition. A firestorm of protest was set off when the terms of the draft trade agreement were circulated in early September.

The trade agreement was discussed by the party Central Committee at its eighth plenum held in Hanoi from 4 to 11 November. Immediately after the meeting a party spokesperson announced that the trade agreement was 'inequitable' and 'still needs some work' before it would be acceptable.

Vietnam's economy has faced difficulties since late 1996 when growth rates began to decline and foreign direct investment began to fall. Vietnam's leaders have been deadlocked over whether to launch a new phase of reform or continue on the same cautious path. Pressure to act only intensified when China and the United States signed a trade agreement on 15 November. China now has a head start into the American market.

There are signs that Vietnam is now responding. The draft trade agreement was discussed by the Politburo in January 2000 after party secretary general Le Kha Phieu reportedly made a secret visit to Beijing. Politburo member Truong Tan Sang, the head of the party committee which runs Ho Chi Minh City, was called to Hanoi to take charge of the Central Committee's Economic Commission. Sang brings with him much needed experience in dealing with the private sector. There are also strong rumors that the ministers for trade and foreign affairs will be replaced.

Note: The views expressed in this article are those of the author and do not reflect the official policy or position of the Asia-Pacific Center for Security Studies, Department of Defense, or the U.S. Government.

WATCHPOINT: Further leadership changes to strengthen managerial control over the reform process. Signals from Hanoi that the Politburo has decided to finalize the terms of a trade agreement with the United States before American presidential year politics interfere.

 

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