In Water, Everyone Must Swim

In Water, Everyone Must Swim

On June 24, 2005, Mr Michael Smith, former Deputy Trade Representative of the United States discussed free trade and Vietnam’s admission to the WTO with business leaders in Ho Chi Minh City. Following is some excerpts from the discussion.

So far, Vietnam has not reached an agreement with the US on WTO admission.  So what are the US’s conditions?

The biggest hurdle is the failure of Vietnam in creating a level playing field. Vietnam should implement intellectual property rights, expand telecommunications and financial markets. Due to constraints, few investors of international standard in finance and telecommunication are involved in Vietnam.  While Vietnamese telecommunication services are the highest performers in the county, Vietnamese GDP is the lowest per capita in the region. International banks and financial organisations cannot receive equal treatment without transparency and with too many formalities. In taxation, Vietnam is committed to readjust 10,000 tax rates, but has completed only 250.

Why is negotiation difficult with the US, are there any political implications?

The US has no pressure or political motivation regarding Vietnam. The requirements for Vietnam are neither higher nor more difficult than for other countries. The US is fully aware that Vietnam is a developing country and started a policy of openness only 10 years ago. However, the US had to explain frankly what Vietnam should do to join WTO.

What are the benefits of free trade?

Free trade will create an equal and open business environment. Enterprises will work harder to provide products of higher quality and be more competitive. This will result in better living conditions and more jobs for the people.

How will WTO admission affect the government, business and the people, especially small and weak Vietnamese enterprises?

Look at the benefits brought by Vietnam-US bilateral agreement :  tariffs on Vietnamese imports to the US decreased from 40 to 4 per cent; Vietnam-US trade in 2004 increased four times prior to the BTA. Also, after the BTA, the US invested in over USUS$10 billion when Vietnam was in need of capital.

Agriculture is the most sensitive and difficult issue in trade negotiations with certain protection by all governments. But the WTO does not affect agriculture and people. Though the US has only 2 per cent of the population involved in agriculture, it is the world’s second biggest exporter in agricultural produce thanks to WTO reductions in taxes and non-tariff barriers. Vietnam will be treated the same after joining the WTO. For the business community, a larger and more competitive but healthy and level playing field will be ensure better productivity.

For the enterprises, the question is not big or small but whether their products attract buyers or not. All big companies began as small companies. Free trade makes the competition harder but also boosts development. Competitive companies with high quality products will be fully rewarded while poorly competing companies must change or accept failure.

The US is leading in anti dumping lawsuits, causing certain difficulties for Vietnam, what will this entail in the future?

The lawsuits have not been brought by the government but American companies. The companies have to produce facts supporting charges of dumping and related losses. The facts must be convincing. The US position is for free trade, not restricted trade. When joining the WTO, Vietnam will have a voice and suffer no further losses as in the past law suits.

How do you see Vietnam in the road ahead?

Vietnam will soon join the WTO. This means that Vietnam accepts to swim in the sea. Therefore, you must learn to swim and swim well. In a favourable environment and in warm water you can swim as you like. However, at the present time the water is cold and there are many sharks. You have to swim fast and in correct way unless stronger competitors swallow up you up. Vietnam has the advantages of a high level of education, and as a late comer can learn from the successful models of other countries. By way of two examples are Malaysia and Ghana. Both countries became independent in 1965 with the same per capita income of USUS$200 dependent on palm oil. Malaysia has now a per capita income of USUS$3,850 while Ghana has only USUS$280. The difference is that, besides palm oil, Malaysia developed an electronic sector and became the third biggest producer of transistor chips, while Ghana remains the same with palm oil.  In economic integration, Korea, Thailand, Taiwan began with textiles and garments. Vietnam is no exemption. But evidently, Vietnam cannot stay long in this initial stage. It must take some short cuts and develop high technology such as IT and software.

Dong Phuong