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Two important events occurred in the month of July: the signing of the US-Vietnam trade agreement and the official opening of Vietnam's stock exchange.
The US-Vietnam trade agreement was expected to be signed in September 1999 by Bill Clinton and Phan Van Khai at the APEC summit in Auckland, but the Vietnamese decided at the last minute that they were not ready to proceed. Following nearly a year of further internal debate, on 13 July, Vietnam's Minister for Trade Vu Khoan, and the US Trade Representative Charlene Barshefsky, officially signed the bilateral Trade Agreement on behalf of their respective governments.
The Trade Agreement is widely regarded as most important for the trade between the two nations and for Vietnam's integration into the world economy. In President Clinton's words ‘The agreement we signed today will dramatically open Vietnam's markets on everything from agriculture to industrial goods to telecommunications products while creating jobs both in Vietnam and the United States.’ Nevertheless most of the press reports and commentaries on the signing of the trade agreement follow predictable lines, verging on superficiality. Most say the trade agreement is more important to Vietnam than to the United States, and that Vietnam's initial hesitation stemmed from irrational fears held by revolutionaries unaccustomed to the modern world of global commerce.
While it's true that the trade agreement will boost Vietnam's export to the USA, in the longer term its provisions will open up Vietnam's economy to global competition as well. When that happens, and the trade agreement provides for a timetable of implementation, the social consequences (and their impact on the Communist Party's support base) will be substantial, complex and difficult to predict.
The full implementation of the trade agreement will bring to the fore a number of issues. Too close a connection to the world economy may bring an over-dependency that would threaten the nation's sovereignty – a fear underscored by the collapse of several Asian economies. To expose the economy to foreign competition too fast may cause further social unrest (unemployment is already high) and erode the Party's support base. While these questions may have been discussed and resolved at the Central Committee last November, it will be at the implementation stage that clashes of interest between different interest groups will materialise.
In a related development, Vietnam's stock exchange opened its doors on 20 July, exactly 46 years from the date of the signing of the Geneva Treaty, which divided the country along the 17th parallel.
None of Hanoi's top leaders was present at the signing of the trade agreement, and there was an absence of effusive congratulatory rhetoric from Vietnam's leadership for both events. This cautious behaviour seems to indicate that enthusiasm for the trade agreement was limited, and that support for it was qualified by the realisation that there is no real alternative.
WATCHPOINT: The trade agreement will bring economic benefits to both countries, but Vietnam is the party more vulnerable to the political fall-out from its implementation.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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