Normalizing Ties to Vietnam Important Step for U.S. Firms : Pacific Rim: California stands to profit handsomely when barriers fall to trade with fast-growing country.
San Diego businessman Kuoc Vuong has been working on a deal to bring Vietnamese produce such as baby corn to California. But the steep 30% import tariffs that still exist on goods coming from that former U.S. enemy have kept those goods out of the American market.
Don Dang’s small trading company in Orange County’s Little Saigon has been shipping California wine to Vietnam, trying to compete with the French and Australians, but the $6-a-bottle tariff more than doubles his cost. Now he sees the promise of lower tariffs and more opportunities.
“From a business standpoint, I’m happy with normalization,” said Dang, 48, who is also trying to export bathtubs and lavatories to his native country.
Dang and Vuong are among the Californians hoping that Tuesday’s decision by President Clinton to normalize relations with Vietnam will reduce tariffs, free up low-cost financing and open other doors that have been closed to U.S. business under trade restrictions left over from the Vietnam War.
And this state, with huge Vietnamese American communities in Orange County and the Bay Area and with its proximity to Asia, is positioned to profit handsomely when all the barriers fall to trade with the fast-growing Southeast Asian country. Blue chip California companies such as Bank of America and Unocal Corp. are among the 100 U.S. firms that have already opened up offices in Ho Chi Minh City or Hanoi.
“If you look at almost any particular industry, you would find some California companies that would benefit,” said Lisa Spivey, editor of “Destination: Vietnam,” a San Francisco-based travel magazine.
While Tuesday’s action is a major step--allowing the exchange of ambassadors and establishment of embassies in both countries--it doesn’t in itself remove the remaining restrictions on doing business with Vietnam. The biggest immediate impact will be a boost in confidence for U.S. and Vietnamese companies worried about the long-term health of the bilateral relationship and political stability.
“Normalization will give businessmen the confidence to look at the Vietnamese market both for expansion of U.S. exports as well as imports from Vietnam,” said Jim Downing, president of International Trade Group, a New York-based business consulting group that has worked in Vietnam since 1993.
But the chief payoff for U.S. companies interested in Vietnam remains in the future, when the U.S. government is expected to negotiate trade, investment and tax treaties and lift restrictions on export finance support through such groups as the U.S. Export-Import Bank and the Overseas Private Investment Corp.
These federal agencies can provide long-term, low-cost government guaranteed loans or technical aid of the sort that are routinely granted by other governments to competitors from Asia or Europe. Such finance programs are of particular concern to U.S. manufacturers of big-ticket items, such as airplanes or construction equipment.
But hurdles remain. With normalization underway, President Clinton has asked an interagency group to explore the repercussions of establishing full economic relations with Vietnam. A top State Department official said Tuesday there is “no timetable” for implementing any of those measures, despite pressure from some of America’s biggest companies.
Spokesman Dan O’Flaherty of the Coalition for U.S.-Vietnam Trade said his members, who include many of the Fortune 500 companies, are expecting resistance in Congress--including efforts to ban U.S. export finance support for Vietnam until further progress is made on such issues as the whereabouts of the Americans missing from the Vietnam War.
O’Flaherty expressed confidence that the President has enough congressional support to overcome concerns about human rights and other controversial issues. But he also acknowledged that it could take weeks before some of the trade finance programs are freed up and more than a year before such difficult issues as the granting of most-favored-nation trade status are tackled.
Bilateral trade treaties require congressional ratification and some trade privileges are tied to U.S. government certification of such issues as labor rights, human rights and environment protection.
And there remain plenty of risks, including Vietnam’s lack of a legal structure and intellectual property and copyright protections. Foreign businessmen also complain about corruption and the high costs of doing business.
But Vietnam’s Communist leaders, trying to push their long-isolated economy onto the economic fast track, have sought out American expertise in areas such as agriculture, aerospace, construction, engineering and high technology.
It is a country with a young, entrepreneurial population--more than half of its 73 million people are under age 25--and a pent-up consumer demand for everything from bath soap to blue jeans. The Vietnam War and several decades of economic isolation have left the country with a crumbling network of roads, bridges and airports. Manufacturing plants still operate with prewar equipment.
McDonnell Douglas and Boeing Co. have been negotiating to sell airplanes to Vietnam Air, which is hoping to tap into the country’s attraction as a tourism and business destination. Boeing estimates Vietnam will buy $2 billion worth of airplanes over the next 15 years.
Caterpillar, the Illinois-based construction vehicle company, is scrambling to make up for being frozen out of the market while its major Japanese competitor, Komatsu, made inroads. Both companies are eyeing $7 billion worth of infrastructure projects that will translate into $350 million to $700 million worth of construction equipment.
But Bill Lane, Caterpillar’s government affairs specialist, said the company can’t compete with Asian and European companies without U.S. export finance support.
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Times staff writer Don Lee contributed to this report.
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U.S. recognizes Vietnam. A1
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