Socialist Republic of Vietnam

As much as the Vietnamese have shown their desire for independence throughout their history, they understand the benefits of economic integration. World Trade Organization (WTO) membership has become one of Hanoi's key goals for 2005 and would be the crowning achievement of a year that also celebrates 30 years of unification and 10 years of normalized relations with the United States.

But WTO membership is not just a feather in the nation's cap. It is a necessary condition for the continuation of the economic miracle that has seen poverty rates drop to around 25% today from higher than 70% in the late 1980s. Some key export industries will suffer severe disadvantages if Vietnam stays outside the WTO (see textile story pg. 4); others are likely to bounce back from the negative effects of protectionist measures against them under WTO rules.

While Vietnam is unlikely to be admitted to the club January 1, 2005, analysts still believe that Hanoi may be ready later that year. The timing depends largely on the success of a number of bilateral negotiations. Vietnam must conclude bilateral market access agreements with any member requesting negotiations. So far, negotiations have taken place with 20 countries, including the United States and the European Union. Important progress has been made, but by the eighth round of negotiations about membership in June, only one final agreement had been signed.

In all negotiations, the other side wants concessions important to them, and often what pleases one party may anger another.

On the multilateral side, Vietnam has outlined a number of concessions during the June negotiations. On April 29, 2004, Vietnam ratified the Ordinance on Anti-dumping of Imported Goods. That ordinance, of great importance for the determination what free trade really means and with strong impact on the present trade disputes with the United States, holds that "Commodities are considered being dumped if they are sold below normal price," which is "the price that can be compared with similar products sold in the market of the exporting countries in line with normal trade conditions." The ordinance opens the door for various anti-dumping measures, such as temporary tariffs on imports and a commitment from importers to stop dumping.

Heavyweight agriculture

Another bone of contention in WTO negotiations around the world is agriculture. For Vietnam as one of the world's most successful producers of agricultural commodities, agreement on this sector is of key importance.

Rice exports ranked top among major farm produce with $347 million in export earnings in the first quarter of 2004, making it the world's second rice exporter after Thailand. Moreover, Vietnam is the world's top black pepper and second tea exporter. Coffee sold $221 million in the export markets in the first quarter, putting Vietnam in second place. Other significant export commodities are rubber (77,000 tons exported), peanuts (17,000 tons), fruits and vegetables and, increasingly, wood products.

Vietnam is prepared to commit to the elimination of all export subsidies for agricultural goods. Vietnam’s WTO delegation agreed to eliminate subsidies for its coffee exports upon the date of accession, but is seeking a three-year delay for other agricultural products.

Sticky financial services

Vietnam also presented a revised offer on goods and services in May. Vietnam will subject its entire tariff schedule, with the exception of petroleum products to tariff bindings. This means that tariffs will not surpass a certain ceiling. The country agreed to an average tariff rate of 18%, 4% lower than its previous offer. Vice Minister for Trade Luong Van Tu said in June that they also agreed to reduce "substantially" the number of products subject to tariff quotas.

One of the sticking points in negotiations with the United States are financial services. Vietnam agreed to abandon efforts to secure exceptions from the WTO most favored nation principle in this area. It now offers to liberalize 10 general services sectors and 92 sub-sectors.

The U.S. insurance industry is still hoping for more licenses in the extremely lucrative life insurance sector. While the Vietnamese regulators don't want to open up too fast, American insurers feel that a country where only a little over 5% of the population have life insurance could open up faster for everybody's benefit.

Vietnam will also implement the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), the Agreement on Trade-Related Investment Measures (TRIMs), the Customs Valuation Agreement, the Agreement on Technical Barriers to Trade and the Agreement on Import Licensing from the date of its accession, thus eliminating problem areas, according to Vice Minister Tu.
Deputy U.S. Trade Representative Josette Sheeran Shiner said the trade liberalization offer at the June negotiations was a very serious bid that demonstrated Vietnam's commitment. Washington still looks for more on the services side in several sectors, however, and says that efforts need to be stepped up regarding the protection of intellectual property rights. The ninth round of negotiations with WTO member countries is taking place this fall, and Vietnam's commitment to joining in 2005 is unbroken.

For many, it would be ironic if one of the poster children of the success of free trade were to be left out of its key institution.

The key message Vietnamese officials are sending nowadays – and one that is heartily endorsed by the Vietnamese business community and the proverbial "man in the street" – is that Vietnam has become a "normal" country in its relationship with the United States (see interview with Ambassador on pg. 1). No longer is it a memory of a war, no longer do single issues overshadow the overall relationship. Vietnam today is dealing with the rest of the world, including former foes like the United States, on a web of issues of higher or lesser importance.

This complex interdependence assures that no one irritant can dominate the relation between Washington and Hanoi. Undoubtedly, trade is Vietnam's top priority, and Vietnam's government has done a lot since its economic opening policy initiated in 1986 (see article by Dept. Prime Minister Vu Khoan). WTO membership is the logical next goal to anchor Vietnam ever more deeply in the international community.

WashingtonTimes Vietnam Report 2004, published September 28, 2004