~ Le ViÍt Nam, aujourd'hui. ~
The Vietnam News

[Year 1997]
[Year 1998]
[Year 1999]
[Year 2000]
[Year 2001]

Opening the Door

Hanoi takes major step towards a trade deal with U.S.

HANOI - Since it opened in 1995, the U.S. embassy in Vietnam has seemed like a forlorn outpost--a nondescript building stocked with hand-me-down furniture and equipment that rarely seemed to work--standing on the edge of a worn capital in a country on the fringe of diplomatic oblivion.

Policy, too, has seemed caught in a time warp: Washington has spent millions of dollars a year combing the countryside for dead and missing soldiers and beaming in anti-communist radio broadcasts. Sure, it has added a few thousand dollars here and there for humanitarian extras such as tuberculosis research and typhoon relief. But Washington lifted its trade embargo on Hanoi on February 4, 1994, and normal trade ties have yet to develop. The Americans may have lost the war, but they aren't going to open the door to their vast market unless the Vietnamese are willing to do the same for U.S. firms and goods.

On January 29, Hanoi finally indicated that it would at least consider Washington's steep demands and work with U.S. counterparts to develop an acceptable calendar for opening its market. Though just a first step on a long road, the move is a major breakthrough in trade talks that had gone nowhere since Washington presented a thick draft trade agreement to Hanoi in April 1997.

Moreover, it shows that Hanoi is starting to be more practical at a time when its Communist Party leaders are huddling to try to map out a future for themselves and the country. When a trade deal is struck, Vietnam will have easier access to the world's largest market--critical for a developing country whose exports declined last year. "There does seem to be movement and a change in philosophy," says an American diplomat in Hanoi.

The acknowledgment is a dramatic turnaround from previous negotiating sessions that left the U.S. frustrated by Vietnamese intransigence on basic trade principles, despite the fact that Hanoi needs the agreement more than Washington. Negotiators at the Ministry of Trade initially said they would be able to comply with the sweeping requirements--but not until 2020, when Vietnam had developed its own industrial base. The early written responses ignored most proposals in the five-chapter draft document, which was sent back with black lines drawn through much of it. Now Hanoi is talking about an eight-year phase-in period.

Broad provisions in the draft covering general trade, tariffs, services, investment and intellectual-property rights would require Vietnam to virtually abandon its import-substitution policies and therefore threaten the dominance of state firms. There's the rub: "If the agreement improves trade, that's one thing," says a Vietnamese diplomat, "but it also pushes reform. That's what makes us hesitate. We must determine the steps of reform."

The U.S. wants Vietnam to open its service industries--especially insurance and banking--to foreign competition, treat foreign firms the same as domestic ones, and drop tariffs and quotas.

Vietnam is one of just five countries that don't enjoy normal trading status with the U.S.--the others are Cuba, Iraq, Libya and North Korea. Two-way trade between the U.S. and Vietnam amounts to less than $1 billion annually. Vietnam does manage to export a few items--including shoes--where tariffs under most-favoured-nation trading rules don't differ much from other tariffs.

The Vietnamese have complained that the Americans are demanding too much, too soon. The Vietnamese diplomat likened the U.S. to "a beautiful woman who is very hard to please." Another went further, saying that the tough draft "reinforces the Vietnamese perception that the U.S. is trying to destroy Vietnam." Washington counters by saying the high hurdles will be good for Vietnam since the country will have to meet similar requirements to join the World Trade Organization, to which Hanoi applied in 1995.

Hanoi has tried different tactics to win concessions from the Americans. A favourite has been to cite the refrain that Vietnam is a poor country, and therefore should receive more leeway. Then Hanoi decided to withdraw what it considers MFN status for countries with which it doesn't have a bilateral trade agreement. From January 1, the U.S., Japan, and others were subject to a 50% increase in tariffs.

U.S. officials objected, but to no avail so far. They warn that it's the wrong move when the two countries are in the middle of trade negotiations. "It looked as though Vietnam was trying to pressure the U.S. or somehow have an impact on negotiations and it wouldn't be considered very conducive to building the negotiations in a more positive way," says Dennis Harter, deputy chief of mission at the embassy in Hanoi.

Vietnamese trade officials declined to be interviewed for this article. But Nguyen Manh Hung, head of the Americas Department at the Ministry of Foreign Affairs, says the new categories are "in conformity with international practice" and that Vietnam will perhaps "learn from the U.S. and try to have a waiver for some nations," as Washington does for China annually.

Hanoi can't really afford to make more enemies when its economy is stagnating and its major trading partners in Asia--who make up two-thirds of Vietnam's trade--have yet to recover from the recession. Yet the mixed message of boosting tariffs while showing some flexibility on trade negotiations reflects an ambiguity that runs through the country's leadership: They want to integrate with the world, but at no cost to their own state-dominated system or the Communist Party.

Such a tactic could backfire, giving Washington an excuse to say it tried everything it could to conclude a deal, including spending $1.25 million for a technical-assistance team.

But many Vietnamese, including top leaders, feel that the world--especially the U.S.--owes Vietnam. When U.S. Sen. John Kerry visited Hanoi in December, he met with former party chief Do Muoi, who remains a dominant, and conservative, force in decision-making. When Kerry asked why Vietnam appeared to be falling behind in reform while its neighbours were trying to move ahead, the party elder pointed the finger of blame at a century of colonial rule and war--including the conflict with the Americans.

Muoi's argument overlooks one point, however: No matter who caused the problems, it's going to be up to Vietnam to solve them.

Far Eastern Economical Review - February 11, 1999.