3:26:37 PM | 7/8/2005
Vietnam has yet to reach an agreement with the US on its entry to the World Trade Organization (WTO) and many officials have warned that Vietnam will meet more difficulties in the WTO negotiations with the powerful country than in the bilateral trade agreement talks that took Vietnam five years from 1999 to 2004.
The third WTO bilateral negotiation between Vietnam and the US closed last weekend in Washington DC. Information from the talks has not been released but those in the know in Hanoi say that in this case, no news does not necessarily mean good news.
Nguyen Dinh Luong, head of the Vietnamese negotiation delegation, said that the US only ever signs bilateral trade deals that adhere to WTO regulations. “No matter what party holds power in the US, promoting trade liberalization is always a prerequisite requirement because this further benefits American companies and people,” Mr Luong said.
“The US has been successful in shifting from the General Agreement on Trade and Tariff (GATT) to WTO to push world trade liberalization to a new level. The US does not sign agreements with partners at a lower level than the WTO.”
The result is that new members of the WTO must accept newer conditions than those previously negotiated with the US.
Questions are being asked whether Vietnam’s completion of negotiations with the EU last year have had any impact on the negotiations with the US, Mr Luong said that the US goes uninfluenced by other partners and it always sets high requirements.
During the multilateral negotiations, Vietnam committed to cut average import tax from 22 to 18 per cent, a promise that received support from many partners.
Yet, this means an average import tax rate of 18 per cent will be imposed on goods imported from the US, while that country’s average import tax rate levied on all partners, including Vietnam, is less than 5 per cent. This difference is a major challenge for Vietnamese negotiators.
On the other hand, among ASEAN countries and between ASEAN and China, Japan and South Korea, negotiations are underway for the establishment of free trade areas with tax rates of 0-5 per cent.
The WTO has regulations however that excludes bilateral free trade agreements or free trade areas and these exclusions have affected negotiations between Vietnam and the US.
The US sent a letter to WTO member countries suggesting that from now to 2010, import tax rates around the world would be 5 per cent and down to 0 per cent by 2015.
If multilateral negotiations in Doha fail, the US will enter into separate negotiations to reach this target through free trade agreements, which are similar to those signed with Singapore, Chile, and Jordan.
Vietnamese policy makers and enterprises need to understand this trend and have selected commitments to protect themselves, Mr Luong said.
The difficulty at present, according to Mr Luong, is that Vietnam does not have a ‘referee’ to define which industries need protection or for how long. “If we only try to keep the small things that we have just had we could lose larger ones,” he said. The Vietnamese Prime Minister has accepted that an industry that opens and accepts competition will develop in a stronger fashion than those that are protected.
Many Vietnamese businessmen and State officials are scratching their heads over the need to re-negotiate with the US.
In the BTA, Vietnam committed to give American investors conditions no less favorable than those from other countries. However, concern has been raised over European life insurance companies being permitted to provide their services in Vietnam, while New York Life International has had to wait for four years and has not received licenses yet.
At a workshop on Vietnam held in Texas on March 17, US Ambassador to Vietnam W. Marine said that if US investment is flowing to other countries than Vietnam, the reason is that they predict higher profits from those markets.
The ambassador said that expenses that arise from red tape, unforeseen fees and charges, troublesome licensing formalities, legal barriers and corruption when calculating investment costs in Vietnam tend to scare off US investors.
Many American companies hope that Vietnam’s accession to the WTO will create an equal legal environment for them to join the Vietnamese market.
Before the negotiations in Washington DC, the US sent a letter to Vietnam requesting advance drafts of the 11 laws the National Assembly is preparing to approve this year, including the unified Enterprise Law, the unified Investment Law, and the Law on Intellectual Property.
Joining the WTO means that Vietnam must observe WTO regulations, while the country’s laws must be in line with the common standards of the WTO, Mr Luong said.
“WTO member countries have to submit their issued legal documents for the organization to see whether they acceptable under WTO rules. This, on one hand, forces member countries to adhere to common values, while on the other hand re-confirming to foreign investors a transparent and consistent investment environment,” he added.
Vietnam and the US held the first negotiation talk on the formers accession to the WTO last October and the second mid March this year. They, however, did not make agreements on Vietnam's opening of services, its import tariff cut and the Southeast Asian country's legal making programs.
So far, Vietnam has attracted US$47.72 billion of FDI. The US investment in the country accounted for only 2.71 per cent of the total or US$1.295 billion.
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