U.S., Vietnam Reach Trade Agreement
The U.S. and Vietnam completed three years of negotiations Sunday, agreeing to normalize trade relations in a move that should markedly increase commercial ties between the former enemies.
Both sides were ecstatic. “It’s something we really wanted,” said David Thai, a U.S. investor in Vietnam’s coffee industry. “It provides an important psychological boost to the business environment here.”
The “agreement in principle” was reached by U.S. Deputy Trade Representative Richard Fisher and Vietnamese Trade Minister Truong Dinh Tuyen after several days of tough negotiations, including a 17-hour session that started Saturday and ended early Sunday. Fisher called the agreement historic.
“This would represent the final chapter in the transformation of our relationship from adversaries to trading partners,” Fisher said. He added that the accord would help modernize the sluggish economy of Vietnam, one of the world’s few remaining communist states.
Though still committed to communism, Hanoi began free-market reforms in 1986 and has steadily increased the role of private enterprise in its state-controlled economy.
But in the past two years, U.S. investors in Vietnam have become increasingly disgruntled by the slow pace of economic reforms. In the past 12 months, some Fortune 500 companies--including Chrysler and Exxon’s Esso division--have pulled their fledgling operations out of the country.
“A relationship of the sort on which we have agreed in principle will be a very important step in building a commercial regime and a trade regime that is compatible with Western norms,” U.S. Trade Representative Charlene Barshefsky said in Washington.
“For Vietnam, the issue is one of economic progress versus economic stagnation,” Barshefsky said.
The agreement must be formally signed, then ratified by the U.S. Congress and Vietnam’s National Assembly. Fisher said he hoped that could be accomplished by year’s end. U.S. diplomats here say they do not expect much difficulty winning congressional approval, although an anti-Vietnam lobby remains vocal in the United States.
But before the pact can be submitted to Congress, Barshefsky said, it will need fine-tuning. She also expressed hope that it will be ready to go to Congress by year’s end.
Both sides stand to gain from a trade agreement, which would mark a milestone in Vietnam’s integration into the global economy.
Vietnam would gain from the accord because it would open new U.S. markets to Vietnamese exports and help Vietnam gain entry to the World Trade Organization. The United States would gain because the pact would enable U.S. investors to get a foothold in the emerging markets of Vietnam, the world’s 14th-most-populous country, with 77 million people.
What the agreement essentially would do is level the playing field for conducting business for both countries. By lowering tariffs, for example, it would enable Vietnamese fishermen to export their shrimp to the United States and sell it at a competitive price. At the same time, by liberalizing investment codes, it would make it easier for, say, General Electric or Nike to invest here and make it possible for U.S. banks and some other firms to operate without a Vietnamese partner.
Two-way trade between the United States and Vietnam totals less than $1 billion a year. The United States observed a trade embargo against Vietnam until 1994. Diplomatic relations between the countries were established in 1995.
U.S. businesses rushed into Vietnam when the embargo was lifted, believing that Hanoi’s economic reforms, combined with the industrious nature of the Vietnamese people, would turn Vietnam into another of Asia’s “economic tigers.”
But doing business in Vietnam proved costly and frustrating. Hanoi has moved at a turtle’s pace in its economic reforms, and foreign businesses have to cope with multilayered bureaucracy, corruption and governmental indecisiveness.
Economists say it is unlikely that the trade agreement would lead to a rush of new foreign investment because Vietnam remains a difficult place to do business. But they believe that the accord would improve the environment for investing here and put Vietnam back on investors’ radar screens.
Times staff writer Esther Schrader in Washington contributed to this report.
