Opening the Door
Hanoi takes major step towards a trade deal with
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
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
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
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
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
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
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
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.