Vietnam, U.S. Make Trade Deal To Let Former Enemy Into WTO

The United States and Vietnam said yesterday that they have agreed in principle on the terms for Vietnam's membership in the World Trade Organization, one of the final steps toward eliminating the vestiges of enmity from a war that ended more than three decades ago.

The accord would require Vietnam to take a number of measures aimed at opening its economy wider to foreign goods and services, and would thus intensify the country's move toward a market-based system. Though still under communist rule, Vietnam has been gradually liberalizing its economy since embarking on a policy called doi moi, or renovation, in 1986, and has enjoyed blistering growth in recent years. Gross domestic product expanded 8.4 percent in 2005.

The agreement "signals an historic step in our bilateral relationship," U.S. Trade Representative Rob Portman said in a written statement. "Vietnam recognizes that broad-based reform and economic liberalization are essential to its integration into the global economy."

If finalized as both sides said they expect, the agreement will pave the way for Vietnam to join the WTO later this year, because the United States was the last member of the Geneva-based trade body with which Vietnam needed to negotiate such a deal. Countries seeking membership in the WTO must reach bilateral agreements with individual member nations, and the pledges they make to lower important barriers to trade are extended to all other members.

Joining the Geneva-based WTO, which sets the rules for trade and mediates trade disputes among its 149 member countries, has long been one of Vietnam's goals. Membership would give Vietnam legal protection against the possibility that major trading partners could capriciously impose sanctions on its products.

Vietnam is particularly eager to end quotas that limit the amount of textiles and apparel it can ship to the United States. It is one of the few countries on which such limits remain since the WTO eliminated a worldwide quota system last year.

Besides a variety of legal details that still must be worked out, the agreement depends on Congress granting Vietnam permanent "normal trade relations." The United States and Vietnam provisionally agreed to establish such relations in July 1999, giving Vietnamese products the same low-tariff access to U.S. markets as most other countries. Only Cuba, North Korea and a few other nations are denied such treatment. Vietnam's status must be renewed periodically under the terms of legislation passed in the 1970s that restricted the trading rights of communist and formerly communist countries.

Congress has generally supported expanding trade with Vietnam. "The road to normalization between the United States and Vietnam is almost complete," Sen. Max Baucus (Mont.), the ranking Democrat on the Senate Finance Committee, said in a written statement. Referring to legislation granting Vietnam permanent normal trade relations, Baucus said: "I intend to push this issue in the Senate and hope we can complete this process before the August recess."

Administration officials touted the economic benefits of the accord for the United States. "It opens a new and growing market for American agricultural goods, services, such as financial services, and manufactured products," Portman said.

But Vietnam, a nation of 84 million, remains a relatively poor country and is still a small market for U.S. firms. Shipments of U.S. products to Vietnam, though up 24 percent last year, totaled $1.2 billion, about 1 percent of all U.S. exports.

One controversy could still threaten implementation of yesterday's agreement: how to handle shipments of Vietnamese clothing. U.S. textile makers allege that Hanoi provides substantial government support to its textile and apparel industry, and the National Council of Textile Organizations, a trade group, said in a statement issued yesterday that the deal was a "victory for Vietnam at the expense of U.S. textile workers."

The group said "U.S. textile manufacturers will face a flood of heavily subsidized imports from Vietnam within as little as the next nine months." Those imports, the group said, will hurt U.S. firms' operations in Central America, which depend on large shipments of U.S.-made fabric and other textiles.

U.S. trade officials maintained that Vietnam has pledged to eliminate all "prohibited" subsidies for its industry -- such as special subsidies for exports -- and that the subsidies were not nearly as substantial as the U.S. industry claimed. If Vietnam does not eliminate the subsidies within 12 months of joining the WTO, the agreement provides that Washington can reimpose subsidies, according to the officials, who spoke on condition of anonymity because the agreement is not final.