U.S. and Vietnam Sign Landmark Trade Deal

 

By Joseph Kahn , July 13, 2000

 

WASHINGTON, July 13 -- The United States and Vietnam signed a sweeping trade agreement today that would allow generally unfettered commerce between the two nations for the first time since the end of the Vietnam War more than a quarter-century ago.

The deal was signed by the United States Trade Representative, Charlene Barshefsky, and Vietnam's Trade Minister, Vu Khoan, this afternoon. "This constitutes for the first time a broad opening of Vietnamese markets for the United States and will provide a major stimulus to Vietnam's economic-reform efforts," the White House said in a statement.

But the deal must still be approved by Congress, and that may not happen soon, although opposition on Capitol Hill is not expected to be strong.

Vietnamese and American officials reached the agreement in Washington this week after nearly four years of fitful negotiations and after Vietnam walked away last year from a deal that the Clinton administration had considered sealed.

President Clinton praised the signing. "And so, from the bitter past, we plant the seeds of a better future," he said on the White House lawn. "This is another historic step in the process of normalization, reconciliation and healing between our two nations."

Though Vietnam and the United States restored full diplomatic ties in 1995, it has been a cold peace commercially. The two nations have minuscule trade flows totaling about $1 billion. America ranks ninth among foreign investors there despite an initial flurry of interest in the Vietnamese market.

A handful of major American multinationals, including Cargill, Caterpillar and Nike, have invested in Vietnam. Some economic analysts predicted that companies like Nike would immediately add thousands of jobs there if American tariffs on Vietnamese-produced goods are substantially lowered, because they could then use that country's industrious but low-wage workers to produce in bulk for the American market the way workers in China do today.

The trade agreement would also open Vietnam's market of 77 million people to a range of American companies as never before, though it would not immediately eliminate the bureaucratic inertia that has made that market impenetrable for all but the most resilient multinationals.

Some analysts also see the agreement as an indication that Vietnam's leaders are willing to push the economic reforms started in the 1980's to a new level, perhaps because neighboring China has accelerated its economic overhaul in preparation to join the World Trade Organization. Hanoi has also said it plans to open its first stock market later this month, an idea it has been debating since the early 1990's.

The accord would allow President Clinton to claim yet another milestone in trade liberalization shortly after the House of Representatives granted China permanent normal trading rights, another of the administration's final remaining foreign policy priorities. The Senate has yet to vote on the China trade bill.

Congress would still have to approve the pact to extend normal trade privileges to Vietnam, a vote that some administration official believe is unlikely this election year.

The agreement would require sharp reductions in United States tariffs on sensitive Vietnamese goods -- like textiles, shoes and electronics -- a concession that labor unions have fought bitterly to prevent in the past.

Some 58,000 American soldiers died and 2,000 are still listed as missing in action in Vietnam from the war years, and anti-Vietnam sentiment among some veterans groups and members of Congress still runs strong, especially because the government in Hanoi has not embarked on substantial political change.

But few expect strong resistance to the agreement in Congress.

"I think this should be viewed as a sign that they are undertaking serious economic and political reform there, and that's something we have to be in favor of," Senator John McCain, the Arizona Republican who was a prisoner of war in Vietnam, said today. "There's some negative sentiment left over, but I think Congress would be happy to pass this."

The agreement would grant Vietnam the same trading rights here that most other nations have, with tariffs levied on Vietnamese exports falling from 40 percent to 3 percent on average. That would make Vietnam a far more attractive place for manufacturing companies, which have invested much less in Vietnam than in China and Southeast Asian nations that have broader trading rights in the United States.

American companies, in turn, could crack open areas that are essentially off limits today, including telecommunications, financial services, retail and distribution, people involved in the talks said. Vietnam would also agree to protect foreign intellectual property.

Administration officials declined to release details of the agreement.

"This trade agreement is absolutely necessary if Vietnam wants to be connected to a globalized world," said Thomas Vallely, an expert on the country at Harvard's Kennedy School of Government. "It's just a huge problem for them to remain basically cut off from the world's biggest economy."

The market-opening agreement was reached in principle this week after talks between Ms. Barshefsky and Mr. Khoan.

Vietnam is expected to use the momentum from the deal to push for membership in the World Trade Organization. But many expect that process to take several years.


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© 2000 by Neil Mishalov