VIETNAM TRADE
July 13, 2000

The United States and Vietnam open up formal trade relations for the first time since the Vietnam War.

Online NewsHour Special Reports: Remembering Vietnam The China Trade Debate The WTO and Global Trade The World Bank and IMF March 23, 2000: Secretary of Defense Cohen discusses his trip to Vietnam. Dec. 6, 1999: U.S. Trade Representative Charlene Barshefsky about the future of world trade relations Nov. 18, 1999: U.S. Trade Representative Charlene Barshefsky details the China-U.S. trade deal. Aug. 9, 1999: Pete Peterson is appointed the first American ambassador to Vietnam June 10, 1998: DNA reveals identity of Vietnam War's unknown solider. May 25, 1998: U.S. Poet Laureate reflects on the Vietnam War May 15, 1997: Normalizing relations with Vietnam Browse the NewsHour's coverage of Asia     U.S. Trade Representative White House PBS: Pete Peterson: Assignment Hanoi PBS/The American Experience: Vietnam PBS/POV: RE:Vietnam U.S. State Department	KWAME HOLMAN: Today's trade deal comes 25 years after one of the most enduring images in U.S.-Vietnam relations, the final pullout of Americans from Saigon. But in the past dozen years, new links have formed between Washington and Hanoi, beginning on the economic front. In the late 1980's, Vietnam began to privatize its state-run economy, seeking to pull itself out of dire poverty. Before long, trade and investment from abroad poured in, and the economy underwent double-digit yearly growth. American companies such as Nike entered the scene after 1994, when Washington lifted its trade embargo against Vietnam. But many tariffs and other trade barriers remained. The nations reestablished diplomatic relations in the summer of 1995. For the 77 million people of Vietnam, life expectancy has risen to 68, and the adult literacy rate is 93%. But annual per capita income is only $1,700, about half the average for developing countries, and only 45% of the population has easy access to safe water. In the last three years, the Southeast Asian nation has seen economic growth slow to about 5%. Overseas investment has declined, too. Proponents of today's accord say it will break down several trade barriers between the U.S. and Vietnam, and increase the current trade flow of a billion dollars a year. Among other provisions, the agreement would reduce tariffs on Vietnamese exports to the U.S. from an average 50% to 3%; cut Vietnamese tariffs on U.S. goods, including electronics and food, by as much as half; and allow U.S. firms to enter the Vietnamese market in areas such as banking, insurance, and telecommunications. The President spoke about the deal this afternoon. PRESIDENT CLINTON: With this agreement, Vietnam has agreed to speed its opening to the world, to subject important decisions to the rule of law and the international trading system, to increase the flow of information to its people; by inviting competition in, to accelerate the rise of a free market economy and the private sector within Vietnam itself. We hope expanded trade will go hand in hand with strengthened respect for human rights and labor standards, for we live in an age where wealth is generated by the free exchange of ideas, and stability depends on democratic choices. This agreement is one more reminder that former adversaries can come together to find common ground in a way that benefits all their people; to let go of the past and embrace the future, to forgive and to reconcile. KWAME HOLMAN: For the deal to take effect, both Congress and Vietnam's national assembly must approve it.
	A sweeping agreement
	JIM LEHRER: For more on today's agreement, Charlayne Barshefsky, the United States Trade Representative, and Pete Peterson, the U.S. Ambassador to Vietnam. Ambassadors, welcome. Ambassador Barshefsky, how would you describe the importance of this agreement today? CHARLENE BARSHEFSKY: This is a sweeping agreement which will begin to open Vietnam's markets across the range of goods and services and agriculture. It is an agreement of a type that Vietnam does not have with any other country in the world, so it is a dramatic first step in the reform of the Vietnamese economy, and its opening to Western norms. JIM LEHRER: And, Ambassador Peterson, what would you add to that from a diplomatic standpoint, from the overall relationship between the United States and Vietnam how important is this? PETE PETERSON: It's a huge leap forward. What we have here is the completion of a circle. We've had normalization in the diplomatic area and a number of other areas that we have never completed the normalization process economically. This trade agreement completes the circle. JIM LEHRER: Yeah. Ambassador Barshefsky, what it is that Vietnam has that they want to sell us? CHARLENE BARSHEFSKY: Well, right now, Vietnam sells principally quite low-end goods, for example, low-end footwear, and things like coffees and teas and other spices. Over time, of course, Vietnam would like to sell perhaps mid-range consumer goods, likely displacing other import sources, rather than displacing U.S. producers. From our point of view, of course, we already sell rather high value added products to Vietnam, like machinery, for example, and those types of exports - consumer goods, and of course services market opening in areas like Telecom and banking and telecommunications products will likely grow quite substantially. JIM LEHRER: Did you sit down, Ambassador Barshefsky, with some kind of rough thing and say, okay, we're likely - the United States is likely to import as a result of this deal so many billions of dollars of goods, and they're liable to import to us or export to us - who gets the better end of the deal, in other words? CHARLENE BARSHEFSKY: I think we both have a very good deal. First off, as Ambassador Peterson has said, it is vitally important we complete the circle of normalization with Vietnam. This has overriding importance well beyond notions of simply a trade agreement. Second of all, we have a decided interest in seeing economic reform and economic opening, economic freedom, brought to Vietnam, which is still, after all, a one-party state. And then third, of course, our exports will increase as the market opens. Their exports to the U.S. will likely increase, at least in lower end - lower value-added goods that's good for consumers here.
	A state-owned enterprise
	JIM LEHRER: Yeah. Ambassador Peterson, you're there on the ground in Vietnam. Give us a feel for how the economy operates now. PETE PETERSON: Well, the economy is mostly run with state-owned enterprises. They compose about 70 percent of the economy. JIM LEHRER: Like what? What is it that the state owns? PETE PETERSON: Oh, they have everything from beer companies, hotels -- companies to cement, fertilizer, transportation, construction, all of those things of course, all of the utilities are state-owned enterprises yet. But there is a process of equitization. It's their word for privatization. It's slow-moving, but this agreement is going to speed that effort up. JIM LEHRER: How? How will it speed it up? PETE PETERSON: Well, they're going to see the opportunities to strike for the equity markets, and they're just opening a stock market in Vietnam, I think in fact on the15th. With that, the Vietnamese, through equitization will be able to stake a claim against some of the equity markets that are out there worldwide -- and that then will strengthen the private enterprise sector. JIM LEHRER: But as a practical matter, they want outside investment, I assume? PETE PETERSON: Absolutely. JIM LEHRER: They want U.S. investment, right? But what is there is to invest in if everything is owned by the state? PETE PETERSON: Well, there's going to be a lot of new investments. Right now, just for instance, the greatest export from Vietnam is agriculture. But it's operating at a very low end. There's no value-added processing, there's no marketing, there's... it's just sitting there. They're producing product, but they're not really taking advantage of the potential wealth that could be imagined if they had the kind of investment in that sector that is possible. JIM LEHRER: Do you have the feeling, Ambassador Peterson, that they have the know- how and the ability to take advantage of this opportunity that this trade agreement gives them? PETE PETERSON: Oh, I don't think they have the know-how. That's where the investment comes in because when you bring investment, you bring technology, you bring marketing skills, you bring a process. And so I don't think, no, they don't have that skill now, but it'll be one that they'll go through the learning process.
	A slow process
	JIM LEHRER: Ambassador Barshefsky, you negotiated this deal. What, it took four years, is that right? CHARLENE BARSHEFSKY: Almost five. JIM LEHRER: What was the problem? CHARLENE BARSHEFSKY: Well, we embarked upon this negotiation at the President's direction shortly after he normalized diplomatic relations with Vietnam and instructed that we begin to pursue bilateral trade agreement with Vietnam. I think for Vietnam, this has been a difficult process. This is a closed country with a very closed economy. It's very difficult to do business in Vietnam. But it's also an economy that isn't growing, isn't diversifying, isn't creating jobs and is experiencing net disinvestment. So from the point of view of the Vietnamese leadership over the course of these last five years, it's become obvious that they have simply got to move forward or be left further and further behind. The situation for Vietnam I think became all the more acute after we pursued trade agreements with Laos, with Cambodia and of course with China. JIM LEHRER: What was your reading, Ambassador Barshefsky, in talking to the negotiators for Vietnam about... when they say they want a free-market economy, do they mean... do they really mean it? I mean is there a Vietnamese version of a free market economy, or is there something that is familiar to ours? CHARLENE BARSHEFSKY: I don't believe that the words "free-market economy" should be taken literally. I think what the Vietnamese are after is additional economic growth, and we know from experience that that growth is very hard to obtain on a sustainable basis without economic reform, without competition, without at least some degree of market opening. I think at least in its first stage, this is what Vietnam wants to accomplish. It will not happen overnight, even under this agreement. We phase in a number of obligations in the good sector and in services and in cutting of tariffs and so on because it will take time for Vietnam to begin even a moderate market opening. JIM LEHRER: Are we going to help them in any way, other than just to sign this deal? CHARLENE BARSHEFSKY: We'll certainly provide technical assistance. This is particularly the case on what I would call rule-of-law issues. This agreement, apart from effecting the most important market opening in Vietnam in 30 years, also has very substantial provisions on increased transparency in Vietnam's trade regime, in the way they pass laws, in the way they pass regulations, notions that the public should have advanced notice of changes in law, that they should be able to comment on changes in law. This is very radical for Vietnam, and in particular, in these rule-of-law areas we'll be providing substantial technical assistance. And of course we'll assist, as well, in implementation of regulatory reform and other areas, as needed. JIM LEHRER: Would you agree, Ambassador Peterson, that that kind of thing, transparency is a radical idea in a closed country such as Vietnam? PETE PETERSON: It's a major problem. And of course, with the lack of transparency corruption operates freely. JIM LEHRER: What kind of corruption? Give us a feel for the kind of corruption that operates. PETE PETERSON: Well, there's petty corruption and then there's major corruption. The petty corruption is just sort of a service issue, where somebody does something for you and there's an expectation that you're going to pay for that service, even though you're getting that service from a governmental agency. They pay very low wages, and so some of their take-back is through that process. But the major corruption is with the lack of transparency in doing contracting and in doing the kinds of business issues that Ambassador Barshefsky has talked about. This agreement is going to carry the Vietnamese to a new level in transparency that is going enact, I think, a significant process of reducing corruption, as well. JIM LEHRER: How will the transparency do that? PETE PETERSON: Well, because people are going to be able to see, you're going to see what ministries are doing, you're going to see... in fact, one minister is going to see what the other minister is doing that currently that even doesn't take place. A person puts in a contract for a... or a bid for a contract, and that's going to be seen all the way up and down the line. There's going to be open bids. It's going to be a process that they haven't done before. JIM LEHRER: Is this going to... agreement, Ambassador Peterson, likely to create new wealth at the upper reaches of Vietnamese society, or is that society is not going to allow that to happen, at least to individuals? PETE PETERSON: No. There's going to be an accumulation of wealth across the entire spectrum. And there's quite a disparency between the rural and the urban areas now and they're going to have to be very careful with their investment to make sure that that doesn't widen in this process. I think that you're going to see that 77 million people in Vietnam becoming major consumers for American goods ultimately. JIM LEHRER: But Ambassador Peterson, the wealth now is held by the people who are running the government, right? PETE PETERSON: Well, it's... JIM LEHRER: No? PETE PETERSON: It's across the board. Is not as distributed as much as we would like, but you would be surprised to go to an average Vietnamese home now and that home is chuck full of assets. Those assets have been accumulated in just the last ten years. It's a major change, and you see this even in the rural areas, where televisions, telephones, refrigerators, a whole host of other kinds of consumer articles that are present now couldn't have been even thought of ten years ago.
	New property rights
	JIM LEHRER: Ambassador Barshefsky, back to the rule-of-law issue, you negotiated some property rights issues here, as well. And they're considered very important. What are they, and why are they important? CHARLENE BARSHEFSKY: Well, for example, Vietnam will lease property to foreigners. This is, again, something quite radical but important, as we begin to effect market opening. Foreign companies, American companies will be able to own outright businesses in a whole host of services... and sectors. JIM LEHRER: That was not possible before? CHARLENE BARSHEFSKY: Never. Never. Not at all. Not at all. So this is very, very important. This isn't merely a means for Vietnam to attract investment; it also allows for the growth of expertise and the expansion of sectors of its economy that have never before existed, let alone expanded. Of course the United States is a leader in services trade, whether it's banking or insurance or telecom, architecture, engineering, accounting, advertising, so on and so forth, all of which are covered by this agreement. So there are very substantial rights that will be acquired by U.S. companies and a very substantial change destined for Vietnam. JIM LEHRER: And finally, Ambassador Peterson, in that respect, tell us why it's in the United States' interest for there to be a prosperous Vietnam, a Vietnam that is growing economically and otherwise. PETE PETERSON: Let me add one point before we get to that, that this trade agreement will bring a great deal more predictability in Vietnam for American businesses, so they will know exactly what kind of returns they can expect, what kind of rules that they will operate under ultimately, and - JIM LEHRER: Sure. PETE PETERSON: -- this is going to be a big issue, as well. There's a whole number of reasons why it's important for the United States to be engaged in Vietnam, one and then two, to conclude a trade agreement like this one. It is on our interest to be there in Vietnam, to help bring stability to an area that has been historically destabilized for centuries. Right now, the Vietnamese people can actually look out over the horizon and anticipate peace and prosperity for generations. This is the first time in 4,000 years that's in place. And with that, the United States is there not only to sell goods but also to encourage the Vietnamese to continue to work with their neighbors, to work with the community of nations and to be a good player, if you will, on the stage with the rest of the world to bring peace throughout that region and through the entire world. JIM LEHRER: Well, thank you both, Ambassadors. PETE PETERSON: Thank you. CHARLENE BARSHEFSKY: Thank you.