United States, Vietnam Sign Historic Trade Pact
Thursday, July 13, 2000
By Adam Entous
WASHINGTON (Reuters) - Former enemies the United States and Vietnam signed
a landmark trade agreement on Thursday, clearing the way for normal trade
relations for the first time since the Vietnam War and boosting communist
Hanoi's bid to join the World Trade Organization.
The agreement, signed by U.S. Trade Representative Charlene Barshefsky and
Vietnam's Trade Minister Vu Khoan after four years of negotiations, would
reduce tariffs on goods and services, protect intellectual property and
improve investment relations between the two countries.
"From the bitter past, we plant the seeds of a better future," President
Clinton told reporters on the White House South Lawn before returning to
Camp David, Maryland, for a Middle East peace summit.
"This agreement is one more reminder that former adversaries can come
together to find common ground in a way that benefits all their people, to
let go of the past and embrace the future, to forgive and to reconcile," he
added, with Arizona Republican Sen. John McCain, a former Navy pilot who
spent 5-1/2 years in a Hanoi prison camp, at his side.
The trade agreement was one of the most important economic milestones for
Vietnam since the country embarked on market-oriented reforms in the late
1980s, and could help Hanoi in its efforts to join the Geneva-based WTO,
though Barshefsky said accession was a "number of years off.
It also marked a major step toward completing the normalization process
that began on July 11, 1995, when Clinton extended diplomatic ties to
Vietnam. America lost 58,000 lives in the Vietnam War, which ended in 1975.
The trade agreement must still be approved by the U.S. Congress. Though
Republican congressional leaders support closer trade ties with Vietnam, it
remained to be seen whether lawmakers would approve the pact before this
year's abbreviated legislative session ends.
In terms of commerce, the trade agreement would mean far more for Vietnam
than for the United States. With Congress' approval, Hanoi would win
Washington's coveted normal trade relations (NTR) status.
According to a recent World Bank report, the agreement could more than
double Vietnam's exports to the United States to $768 million from $338
million in 1996.
It could also boost foreign investment in Vietnam, which fell to around
$500 million a year from peaks of $2.8 billion in 1996 and 1997 when Hanoi
was viewed as Asia's next dynamic tiger economy.
For the United States, the impact was harder to gauge. Under the pact,
Vietnam agreed to cut tariffs in most cases by one-third to one-half on a
wide range of products, from toiletries to mobile phones to pasta.
U.S. companies like shoemaker Nike Inc. and agribusiness giant Cargill Inc.
stand to benefit from increased access to the Vietnamese marketplace, but
analysts said the gains may be slow to materialize since Vietnam would
reduce trade barriers over a three-to-seven year period in many cases.
Thursday's signing came one year after Washington announced an "agreement
in principle" with Vietnam, only to have Hanoi back away, arguing that
certain provisions were unfair.
Analysts believed Vietnam balked in 1999 because it feared the loss of
economic control that would come with market opening. The delay darkened
the mood among investors, fed up with Vietnam's closed economy and high costs.
But U.S. officials and business leaders said Vietnam was emboldened to sign
the agreement in part by U.S. House of Representatives' approval of a
landmark trade agreement with China. Beijing is expected to join the WTO
later this year, and Vietnam has similar aspirations.
"Once China concluded its very large bilateral agreement with us, Vietnam
feared it would be left behind in Asia," Barshefsky said.
Clinton, who avoided serving in the military and joined protests against
the Vietnam War, was also eager to complete the normalization process
before he leaves office in January. Popular with business, a market-opening
agreement with Vietnam would help cement Clinton's free-trade record
following the 1999 deal with China.
Under the pact Vietnam would lower its tariffs and undertake a broad range
of measures to open its markets to U.S. goods, services and investment. For
example, Hanoi agreed to eliminate all restrictions on auto parts, citrus
and beef within seven years.
After as little as two and as many as six years, U.S. firms would be
allowed to enter into joint telecoms ventures in Vietnam. But access would
be restricted in some cases, and U.S. equity stakes would be capped at 49
percent for telephone, mobile and satellite services. U.S. equity in
Internet services would be capped at 50 percent.
In return, Hanoi would get access to the U.S. market under the same system
of low tariffs accorded most nations, assuming Congress approved normal
Vietnamese exporters could benefit almost immediately, with tariff rates
averaging 40 percent being cut to less than 3 percent, but Hanoi's NTR
status would be subject to annual congressional reviews.
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