Vietnam: Preparing for WTO Accession and Beyond

2006

Associate Professor Binh Tran-Nam

Vietnam's ambition to join the WTO by the time it hosts the annual APEC Summit in November this year became a distinct possibility after the official signing of the US-Vietnam bilateral market access agreement on 31 May 2006. However, before gaining entry to the WTO, Vietnam must first be granted permanent normal trade relations (PNTR) by the US Congress and then complete multilateral agreements with WTO partner countries. While Vietnam's finalisation of its multilateral negotiations with 28 WTO partner countries can be considered a formality, its accession to the WTO by November 2006 depends crucially on Vietnam receiving the PNTR status from the US by the end of July 2006. After the summer recess, the US Congress would then be too preoccupied with the congressional election to consider trade relations with Vietnam. Failing to be granted PNTR by the US, Vietnam still could, in principle, complete multilateral agreements and apply to become a member of the WTO (although in this case Vietnam's WTO membership would not apply to the US). This is obviously a suboptimal outcome from Vietnam's perspective.

Although two bills were introduced in the US Congress on 13 June 2006 to extend PNTR to Vietnam, there are still several hurdles facing Vietnam in this practically final step. Traditionally, Vietnam's trade relations with the US have often been linked to concerns for human rights and religious freedom. In addition, the US-Vietnam agreement has been consistently opposed by US textile manufacturers and lobbies such as the National Council of Textile Organizations and American Manufacturing Trade Action Coalition. Facing an election, US lawmakers may be reluctant to vote on a trade pact that may damage their re-election prospects. On the positive side, there has recently been a constructive development in the political relationship between the two countries, manifesting in top-level bilateral visits (such as Prime Minister Khai's US visit in 2005 and House Speaker Dennis Hastert's recent visit to Vietnam). Vietnam can also count on the support of the US-Vietnam WTO Coalition, a powerful lobby group launched in April 2006. President Bush's forthcoming APEC and bilateral visit to Vietnam is another factor in Vietnam's favour. The Vietnamese Government is conscious of the significance of political lobbying and has taken a pro-active stance by sending several delegations to the US.

Business preparation for WTO membership in Vietnam has got off to a bad start. Several weeks after the signing of the US-Vietnam bilateral market access agreement, the Minister of Vietnam's Ministry of Commerce has failed to deliver on his promise to make a public announcement of the details of the agreement. According to a trade official, the details of Vietnam's WTO agreements can only be announced after Vietnam has completed all multilateral negotiations with its WTO partner countries. This explanation is not plausible because, as a member of the WTO, Vietnam cannot, in principle, discriminate between its partner countries (ie, the US-Vietnam WTO agreement can also apply to Vietnam's other WTO partner countries). This also seems to contradict Vice Prime Minister Vu Khoan's view about the need for widespread public dissemination of the detailed content of the agreement to the people, especially the business community, by responsible government departments. In the absence of concrete information from the Vietnamese side at this stage, local businesses and organisations have had to rely on a list of specific and detailed content of the agreement published on the website of the Office of the US Trade Representative (USTR). Naturally, this list is intended for the consumption of US businesses and does not particularly cater to the Vietnamese business sector.

In cases where the US-Vietnam WTO agreement requires Vietnam to open its markets deeper and faster than the BTA between US and Vietnam, the WTO agreement will replace the BTA. However, the BTA encompasses many issues that the WTO agreement does not (eg, the BTA has a separate chapter that deals explicitly with FDI) and not all elements of the WTO agreement are more favourable to US businesses as compared with the BTA (eg, to establish a branch in Vietnam, a US bank needs to have assets exceeding US$10 billion under the WTO agreement while this was not required under the BTA). Although not explicitly stated in the URTS list, it is understood that Vietnam agreed to an enforcement mechanism stating that if Vietnam did not comply with its commitments to give up export subsidies, and even within the first 12 months of accession, the US could reimpose textile quotas. Further, Vietnam will continue to be treated as a non-market economy for US anti- dumping cases for up to 12 years from 2006 (compared with 15 years when China signed a similar deal with the US in 2001).

As widely recognised in Vietnam, its WTO membership means both opportunities and challenges to both the government and the private sectors. Overall, WTO membership will provide Vietnam with a much needed kick-start to revive its economic reform which seems to have been losing momentum in recent years. However, it is not the kind of reform that the Vietnamese government can dictate or control. It is indeed difficult to visualise how a small, transition nation founded on the principle of national independence will navigate its course in an increasingly interdependent world. In particular, Vietnam's willingness and ability to live by the rule of WTO law, including the protection of intellectual property rights (which is extremely important to the US as evident by Mr Bill Gate's recent visit to Vietnam), remains to be tested. Competition in a globalised world is fierce and many sectors, especially the agriculture and service sectors, will suffer some inevitable short-term costs of resource allocation adjustments. However, in the case of inefficient and state-owned banks and telecommunications, Vietnam's accession to the WTO will be a blessing to the country.

WATCHPOINT: How fast and by how much Vietnam will eliminate its export subsidies will indicate Vietnam's early commitment to its imminent WTO membership.

 

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