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| Vice Prime Minister Vu Khoan
is satisfied with the trade pact he signed. |
| Courtesy Embassy of Vietnam |
A little over one year after signing the Bilateral
Trade Agreement (BTA) for the Vietnamese side as
then-Trade Minister, Vice Prime Minister Vu Khoan
is satisfied with the overall development of the
trade relationship, but fears that individual actions
may derail progress.
Giving his assessment of the state of affairs
on the occasion of the Vietnamese New Year, Vu Khoan
praises the development of trade between Vietnam
and the United States overall, but cautions that
the average Vietnamese could get disillusioned with
actions perceived as very unfair to the smaller
partner in the relationship.
The total two-way trade volume grew by 60% to
$2.4 billion, he says. “I am very satisfied,
but also concerned with what we need to do to implement
the BTA. … On the other hand, I am concerned
about newly emerging barriers.” Referring to
an anti-dumping action by the United States against
Vietnam’s catfish industry, Vu Khoan says poor
farmers could potentially dump one load of fish
into the U.S. market, but they lack the financial
strength to do any more than that.
The finding of dumping by the Commerce Department
is “not a good signal,” he says. “Prices
are low because of low labor costs and the favorable
natural conditions.”
These actions have more profound consequences
than only the loss of some export dollars. The catfish
row has led to a change in perception of free trade
with the United States. When he travels to the provinces,
he says, farmers tell him that they thought the
agreement would lead to greater opportunity, but
then they are faced with sudden barriers. “So
they ask me, ‘Why did you sign that agreement?’
and ‘Why do we push for free competition?’
This action has sent the wrong signals to businesses
in Vietnam. Therefore, this will do harm to the
development of trade relations. It is certain that
this will affect the relations between the two countries.”
Textile doublespeak
A second hot spot in the BTA is the imposition
of textile quotas. The United States decided to
impose a quota on imports from Vietnam within one
year after signing of the BTA. This one-year delay
is designed to allow the Vietnamese industry to
build up capacity. The quota will reflect the realistic
abilities of the Vietnamese industry to export to
the United States.
“But in our opinion,” says Vu Khoan,
“no textile quotas should be imposed on developing
countries. Improved market access is the best way
to help developing countries reduce poverty.”
He hastens to add that developed countries continuously
call on developing nations to open up their economies,
while they maintain theirs closed to products where
the developing nations have a clear advantage. Garment
and textiles are among the industries with great
potential. “This is also of interest for U.S.
corporations like Nike” which produce in Vietnam
for the U.S. market.
Vu Khoan believes there is no particular need
for the United States to impose textile quotas in
the first place. He admits that the volume of Vietnamese
exports has increased, but not markedly if compared
to the total U.S. import numbers. The United States
imports tens of billions of dollars worth of textiles
every year, while Vietnamese exports amount to some
hundreds of millions. Only a little more than one-tenth
of one percent of U.S. textile imports comes from
Vietnam, he points out.
Trade is a two-way street, he says. “We could
import more from the United States if we could sell
more. Can you imagine how many T-shirts we have
to export to the United States to pay for one Boeing
[aircraft]? So this is an issue of mutual interest.”
Economy on track
In spite of these sticking points, the Vietnamese
economy is healthy. GDP growth in 2002 reached 7%,
the second highest growth rate after China under
difficult global conditions, especially with the
war on terrorism and the U.S. war against Iraq frightening
international markets and sending stocks and business
activity downwards.
For Vietnam, the Iraq war represents lost trade,
as Vietnam sold $500 million worth of tea, vegetable
oil and rice under the food-for-oil program. [The
rice sales have been renewed since Vu Khoan gave
his assessment, and Vietnam’s trade balance
has improved, due to high oil prices – Vietnam
is a net exporter.]
For 2003, the Vice Prime Minister remains optimistic,
based on past achievements and trends. But he warns
of three major challenges:
(1) lower competitiveness of Vietnamese products
while Vietnam continues to integrate with the
world and regional economy due to lower efficiency
and quality problems;
(2) social issues, such as poverty reduction
in poor communes, traffic accidents and drug problems;
and (3) further administrative reform is needed
to define better the responsibilities of various
ministries and avoid overlap.
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