TWN Info Service on WTO and Trade Issues  (Nov06/03)

2 Nov 2006

Vietnam receives green light to join WTO
By Kanaga Raja (SUNS), Geneva, 27 Oct 2006

Members of the World Trade Organization negotiating the terms of Vietnam's membership concluded their talks on Thursday 26 October by accepting the accession documents that spell out Vietnam's commitments and rights.

The Working Party on the Accession of Vietnam, consisting of those WTO members negotiating with Vietnam, in agreeing on the final package of agreements on Thursday, finally ended over 11 years' of negotiations over Vietnam's membership.

The accession package still has to be approved by the General Council, when WTO members will formally decide that Vietnam can join the WTO. The General Council is scheduled to meet on 7 November to take up the accession package.

If approved by the General Council, Vietnam will thereafter have to ratify the package of agreements. And thirty days after notifying the WTO of the package's ratification, Vietnam will officially become the 150th member of the WTO. It is expected that Vietnam will become a member of the WTO in early January next year.

Vietnam's accession package consists of: Draft commitments on goods and services; the Working Party's 260-page draft report describing Vietnam's legal and institutional set-up for trade and the commitments it has made in many of these areas; and the protocol of accession.

"I have to pay homage to the delegation headed by H. E. Minister Tuyen and his team who have remained fully committed to pursuing the accession negotiations, often working around the clock, in particular, these past few months," said the Chair of the Working Party Ambassador Eirik Glenne of Norway.

"Accession to the WTO is a long and arduous process, which requires difficult policy decisions. The government of Viet Nam has done admirable work in responding promptly and constructively to members' requests and in putting into place WTO-consistent legislation. I would also like to thank members for their continued efforts, goodwill and spirit of compromise, which has enabled us to bring this accession process to completion," he added.

According to trade officials, several members described the negotiation of almost 12 years as a "long road".

The EU said: "It has been a road worth taking because it has seen a transformation of the Vietnamese economy and its trading system." Canada described the results as "high quality".

The US praised Vietnam's "courage" and "perseverance" and described Vietnam's desire to join as a vote of confidence in the WTO. "Their membership will be an important addition to the organization," the US added.

The time is also "exciting" because US-Vietnamese trade has "expanded by 400% over the last five years to reach almost $8 billion per year," the US said.

China, India, the Association of Southeast Asian Nations, and other Asian, Latin American and European countries said that they looked forward to the contribution that Vietnam would make to the WTO. Pakistan said that Vietnam is a model for developing countries struggling to meet the Millennium Development Goals.

Vietnamese trade minister Truong Dinh Tuyen described his country's commitments as "extensive and far-reaching" and hoped that they would continue the country's economic momentum.

Under Vietnam's draft schedule of concessions and commitments on goods, for the majority of agricultural and non-agricultural goods, Vietnam is promising ceilings (or bound rates) on duties ranging between zero and 35%. Some of these involve reductions from higher ceilings, phased over periods up to 2014, the precise end date varying from product to product.

A handful of products are going to be protected with tariff quotas: eggs, tobacco, sugar, and salt. But Vietnam will expand the quotas until they disappear according to agreed timetables.

Vietnam has signed the Information Technology Agreement. For these products, it has agreed to allow imports in duty-free. In some cases, the zero duty will apply immediately; in others, it will be achieved gradually over periods ending in 2010 to 2014.

In agriculture, Vietnam has promised not to subsidize exports. It will be allowed to support its farmers domestically with trade-distorting supports ("Amber Box" or "Aggregate Measurement of Support") of up to 3,961.5 billion Vietnamese dong (about $246 million) in addition to the allowance for developing countries ("de minimis") of up to 10% of the value of domestic agricultural production. Vietnam can also spend unlimited amounts on supports that do not distort trade ("Green Box" supports).

Under its draft schedule of specific commitments on services, Vietnam has made commitments on a range of services. In some cases, it has reserved the right to limit foreign ownership of services companies operating in Vietnam - for example, in some telecommunication services, the eventual limits can be 49% or 65%, depending on the service.

In a few cases, permitted foreign ownership is 100% (for example, accountancy). In many cases, the permitted foreign ownership is phased in to reach 100% after a few years (for example, express delivery courier services after five years).

The Working Party report on Vietnam outlines the economic context and the institutional and legal framework, and includes Vietnam's commitments to undertake or to preserve reforms that have been introduced to secure membership.

Among the commitments undertaken are that in respect of foreign exchange, Vietnam will abide by IMF and WTO rules, according to trade officials.

As to trading rights (i. e. the right to import and export), a new law has now harmonized the procedure for both. Among the details are a commitment that all foreign firms and individuals will be able to engage in importing and exporting as importers/exporters "of record" so long as they register, and importers will be able to choose their domestic distributors.

A number of products are listed as subject to state trading enterprises due to consumption restrictions, for cultural and moral reasons, or because they are "natural monopolies". These include tobacco products, petroleum, cultural products such as newspapers, journals and audio-visual materials, and aircraft.

On excise duties, Vietnam has agreed to simplify the structure, with a single tax rate for all forms of beer (within three years from accession), while spirits containing 20% alcohol or more will be taxed with a single 'specific' rate based on the alcohol content or a single 'ad valorem' rate based on the price (also after three years).

As to quantitative and other restrictions, quotas, bans and other restrictions will be abolished, including import bans on cigarettes, cigars and used vehicles, or only applied according to WTO rules.

Vietnam has promised to comply with the Customs Valuation, Rules of Origin, Pre-shipment Inspection, Anti-dumping, Safeguards, Subsidies, and Trade-Related Investment Measures agreements, with some provisions phased in over a period. It will also apply the Technical Barriers to Trade, and Sanitary and Phytosanitary Measures agreements without a transition period.

Vietnam will however consider signing the Government Procurement Agreement after it has become a WTO member.

On intellectual property rights, Vietnam has agreed to comply with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement immediately, without any transition period.

According to some trade observers, the accession terms for Vietnam are stiffer than was the case for China.

Vietnam with an estimated annual 8.4% growth rate is now the second fastest growing economy, behind only that of China and just above that of India.

The country has a large trade surplus with the United States - exporting several times more worth of goods - mainly made-up garments - than it imports from the US.

This last may complicate the US administration's efforts to get the Congress to agree to normal trade relations with Vietnam (and extend full most-favoured-nation treatment to that country).

According to a report in the New York Times, in an effort to overcome resistance from Senators and Congressmen from Southern states with textile interests, the Bush administration has reportedly held out assurances that it would invoke and use on its own anti-dumping remedies against 'low priced' garment imports from Vietnam.

Even before entry, Vietnam has been the target of US and EC anti-dumping actions on its exports of shoes to these two markets, and two years ago over its exports of cat-fish to the United States.