Bridges Weekly Trade News Digest • Volume 10 • Number 37 • 8th November 2006
WTO Members Approve Vietnam’s Accession
WTO Members on 7 November formally approved Vietnam’s membership in the global trade body, bringing to an end a process that had lasted over 11 years.
With the WTO General Council’s approval of Vietnam’s package of accession commitments, the only steps that remain for Vietnam to attain full membership are for Hanoi itself to ratify the deal and notify the WTO of its ratification. As Vietnam’s National Assembly is expected to do so on 28 November, the country should become the WTO’s 150th member on 28 December, following a 30-day waiting period.
Details of the accession deal
Vietnam’s accession agreement consists of more than 800 pages of documents detailing its liberalisation commitments on goods and services, along with the WTO working party’s report on its institutional and legal framework and the various reforms it has committed to undertake.
Under the terms of accession, tariffs on most goods will ultimately be capped at between zero and 35 percent, with changes phased in over varying periods up to 2014. A handful of products are protected by tariff rate quotas, which are scheduled to be expanded until they disappear. Vietnam has promised not to subsidise agricultural exports. As a developing country, it will be allowed to make ‘de minimis’ payments worth up to 10 percent of the value of domestic agricultural production, and provide additional trade-distorting support of up to USD 246 million. Like other WTO Members, it will be allowed to spend an unlimited amount on domestic support measures to that have no direct impact on prices or quantities produced.
Vietnam has also signed the plurilateral Information Technology Agreement, which commits it to allow duty-free imports of several computer and electronics products. In some cases the zero duty will apply immediately, but in others it will be phased in over four to eight years.
Hanoi has committed to increase foreign ownership limits on a range of services, in some cases to 100 percent. It has also agreed to open up services sectors including banking, insurance and telecommunications to foreign ownership.
The report of the WTO working party on Vietnam’s accession notes that Hanoi has committed to abide by International Monetary Fund (IMF) and WTO rules. It has also promised to continue privatising state enterprises; to harmonise registration procedures for foreign and domestic traders; and to simplify its system of excise duties.
Challenges loom, but positive attitude prevails
Some have questioned whether the deep liberalisation commitments that Vietnam had to agree to in order to join the WTO will have costs that outweigh the benefits of membership. Civil society groups had described the demands that Vietnam faced in its bilateral market access negotiations as overly onerous. During the talks, Vietnamese government officials had complained that they were being asked to do more than other comparable countries (see BRIDGES Weekly, 26 July 2006).
Many businesses will need to adapt quickly to keep up with foreign competition. Vietnamese exports will still be liable to face anti-dumping duties by developed nations, such as those recently imposed by the EU on shoes and by the US on shrimp. However, they will now be able to seek legal redress at the WTO if they deem such measures unfair.
Even WTO Director-General Pascal Lamy acknowledged that the price of joining the WTO was increasing every year. He told Agence France Presse that this was "for the simple reason that the cost of not belonging to the club increases with each accession."
While Vietnamese government officials acknowledge the challenges that increased foreign competition will pose to the Vietnamese economy, both Vietnam and the WTO remain overwhelmingly positive about the prospects that membership creates for the Southeast Asian country.
Shortly after the General Council’s decision, Lamy said that "Vietnam has shown how anchoring domestic reforms in the WTO can yield dramatic results. Vietnam’s economic growth topped 8 percent last year, foreign direct investment rose steeply to over USD 6 billion, and exports surged by over 20 percent. More must surely follow with the new laws, administrative measures, and commitments on goods and services that are in Vietnam’s membership package."
Vietnamese Trade Minister Truong Dinh Tuyen said "WTO accession poses major challenges to Vietnam’s economy. However, we do believe that with cooperation extended by the Members, Vietnam will make the most of opportunities, successfully handling challenges, ensuring fast and sustainable growth, [and] pro-actively playing its part for the development of the multilateral trading system."
International firms are already looking to take advantage of Vietnam’s more open markets. However, Vietnam will not be obliged to extend its new trade concessions to US businesses until Washington votes to normalise trade relations with Hanoi. Upon the announcement of the WTO’s approval of Vietnam’s terms of accession, US Trade Representative Susan Schwab called on Congress to quickly do so. Congress is expected to vote on Permanent Normal Trade Relations legislation on 13 November, when it reconvenes following the recent midterm elections.
"Communist Vietnam Will Become WTO’s 150th Member," REUTERS, 7 November 2006; "Cost of Joining the WTO Becoming Higher: Lamy," AGENCE FRANCE PRESSE, 7 November 2006; "General Council approves Viet Nam’s Membership," WTO PRESS RELEASES, 7 November 2006; "Intel to treble Vietnam Investment to $1 Bln," REUTERS, 8 November 2006; "Opportunities, Threats for Vietnam Post-WTO," THAN NIEN NEWS, 7 November 2006; "NA to Approve Vietnam’s WTO Accession on Nov. 28," VIETNAMNET BRIDGE, 17 October 2006; "Statement by U.S. Trade Representative Susan C. Schwab on WTO Members’ Approval of Vietnam’s Terms of Accession to the World Trade Organization," UNITED STATES TRADE REPRESENTATIVE, 7 November 2006; "U.S. Businesses Want Normal Trade Status For Vietnam: Official," THANH NIEN NEWS, 17 October 2006.