Asia Times: Vietnam's trumpeted trade pact stays unsigned



	December 8, 1999	atimes.com

Southeast Asia

Vietnam's trumpeted trade pact stays unsigned
By Nguyen Nam Phuong

HANOI - Vietnam's much-trumpeted trade deal with the United States is the subject of intense debate within the higher echelons of the Communist Party, signaling a reassessment of the benefits it sees in integration in the global economy.

Observers point out that the trade agreement was agreed in principle in July but has not yet signed. And, after months of near-silence on the topic, Prime Minister Pham Van Khai recently reaffirmed the government's commitment to the pact but offered no proposal for a signing date.

The government's reticence is unsurprising. On the positive side, the accord would give Vietnam preferential tariffs under normal trading status with the US. The World Bank estimated that exports to the US would double within the first year to $800 million. However, it would also, after a phase-in period of five to seven years, allow American banks, law firms, insurance and telecommunication companies to operate freely in Vietnam.

Vietnam's legal system would then have to cohere with international and World Trade Organization standards and reform of its customs and licensing procedures would be required.

Despite the government's policy of ''doi moi'', or economic openness, launched in the mid-1980s, the country's inefficient state-owned enterprises, which currently account for around 40 percent of GDP, still enjoy preferential treatment. They would suffer a severe blow in the new competitive climate, not least from a removal of import barriers.

''It (the US-Vietnam trade deal) extends into every facet of the system and to the cultural identity of the country and is causing a great deal of angst in the eyes, minds and hearts of the leaders,'' Carlyle Thayer, a Vietnam expert at the Asia-Pacific Center for Security Studies in Hawaii, was quoted as saying in October. ''The debate in Vietnam is probably as crucial as the pre-doi moi debate.''

The fact that the pact has not yet been signed reflects the uncertainty among Vietnam's leaders over the country's ideological direction and who its foreign friends are.

Following the much trumpeted ''agreement in principle'', the pact was expected to be inked at the Asia-Pacific Economic Cooperation (Apec) forum in Auckland, New Zealand, on September 12-13. However, diplomatic sources cited criticism by US Secretary of State Madeleine Albright of Vietnam's human rights record to party General Secretary Le Kha Phieu in Hanoi a few days prior to the Apec forum as contributing to the breakdown of the deal. ''The meeting was less than cordial,'' one diplomat said.

Speculation has also focused on the role of China. Some observers suggest that Vietnamese leaders feel more comfortable letting their communist neighbor test the waters of global integration first. Others claim that Beijing had pressured Hanoi to delay signing, arguing that the stringency of the US-Vietnam pact would have raised the stakes for China while it was negotiating its own pact.

While Vietnam officially applauded China's agreement with the US reached on November 15, one source close to the Communist Party said there was some surprise at the speed at which it was sealed. During an earlier visit by a Chinese Communist Party delegation to Hanoi, he said, Vietnamese leaders had been advised to approach a deal with Washington with caution. ''Then China went off and signed this deal with the United States. Whose advice can Vietnam trust?'' the source asked.

Trust or no trust, few doubt that China's membership of the WTO will have serious economic consequences for Vietnam and place further pressure on leaders to ink their own deal. ''Of course China's move will affect us. Besides being a tougher competitor for exports, China will be very competitive in attracting foreign investment,'' Pham Chi Lan, executive vice-president of the Vietnam Chamber of Commerce and Industry, said.

Vietnam shares major exports - notably shoes and garments - with its northern neighbor and local businessmen have become jittery at the prospect of a more strongly competitive China.

Vo Ngoc Be, general director of shoe maker Legamex, quoted in the Ho Chi Minh Youth newspaper last month, explained how his industry could be affected. ''At present, each pair of made-in-Vietnam shoes sold in the EU is 6 US cents cheaper than made-in-China shoes because Vietnamese exporters do not have to pay quota fees,'' he said. ''But when China gets WTO access, its shoes will be sold at lower prices and Vietnam's export shoe market in the EU will be seriously threatened.''

Exports to China, notably rubber, valued at around $70 million a year, are also expected to be hit. ''It (China) will increasingly turn to buy more rubber from WTO members,'' said Le Tan Lam Anh of Ho Chi Minh City Rubber and Plastic Exporters. ''Thailand will become China's major rubber supplier.''

The threat of China's potential economic might comes at a time when Vietnam's economic shortcomings have come into sharp focus. National Assembly delegates have, in recent weeks, been discussing how corruption, bureaucracy, and over-indulged state industry accumulating growing stockpiles of unsold goods are slowing the economy.

GDP growth this year is projected to drop to between 4.7 and 5 percent, the lowest in 10 years. Foreign direct investment has shrunk from 11 percent of GDP in 1995 to 2.2 percent this year, a mere $1 billion.

While Vietnam endured the Asian economic crisis relatively unscathed - reassuring conservatives within the party that continued isolation was preferable to the risks of integration - signs of recovery in other regional countries has made leaders reassess their position.

''The Politburo . . . must place the country's interests above [their own] egoistic privileges especially in signing the trade agreement with the US and paving the way for the integration of Vietnam into the world economy,'' Nguyen Dan Que, a former Noble Peace Prize nominee and leading Vietnamese dissident, said earlier this year.

(Inter Press Service)

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