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Two-way trade between the two countries now amounts to almost $8 billion

WASHINGTON, DC - 05/16/06 - The US and Vietnam have reached an agreement "in principle" on a bilateral market access agreement that will lower trade barriers to a wide range of US-made industrial and agricultural products and services and help clear the way for Vietnam's accession to the World Trade Organization (WTO). 
 
The agreement would substantially lower tariffs on US industrial and agricultural products and remove the existing non-tariff barriers currently faced by US service providers. It also continues the process of political and economic reform in Vietnam, which includes increased transparency in commercial activity and adherence to the rule of law.
 
The formal signing of the bilateral agreement will take place "in the near future" once both sides have undertaken the required legal consultations, sources have said.

The agreement "signals an historic step in our bilateral relationship", US Trade Representative (USTR) Rob Portman said in a statement after nearly a week of talks with Vietnamese Trade Minister Truong Dinh Tuyen.

"Vietnam recognizes that broad-based reform and economic liberalization are essential to its integration into the global economy," he said. "We intend to work hard with Vietnam to complete the process of its full accession to the WTO in the near future."

Over the course of the negotiations, the White House consulted closely with members of Congress, particularly members and Staff of the House Ways and Means Committee, the Senate Finance Committee, and the House and Senate Agriculture Committees.

Members of all three committees had been very vocal in insisting that any bilateral deal with Vietnam would create new market opportunities for US-based farmers, ranchers, manufacturers, and service providers.

The Bush Administration also worked with advisory committees representing private sector business interests.

Congressional action is necessary to grant Permanent Normal Trade Relations (PNTR) to Vietnam, but the new agreement is expected to clear the way for the US and Vietnam to apply the WTO Agreement between them when Vietnam is accepted into the 149-member trade group.
 
Vietnam has been negotiating its terms of accession to the WTO since 1995 and is required to complete bilateral market access negotiations and also the multilateral negotiations on a Working Party Report and Protocol of Accession before it can be admitted to the organization.  

Hanoi is also still in the process of enacting legislation that will enable it to apply WTO provisions after its accession.
 
After Vietnam signed a WTO deal with Mexico last month, the US was the last country with which it needed to conclude bilateral negotiations in order to join the Geneva-based trade group.

Two-way trade between the US and Vietnam already has grown to more than $7.8 billion a year, an increase of more than 400% since 2001.

Without providing precise industry-by-industry details, an official close to the negotiations noted that, in the manufacturing area, 94%of imports from the US would encounter Vietnamese duties of 15% or less. 

On key products like construction equipment, pharmaceuticals and aircraft, for example, the negotiated duties would fall between zero and five percent, he said.

He called the agreement "similarly positive" for US agriculture, as duty rates are pegged at 15% or less for a wide range of products."

As for the trade in services, the officials said, the agreement would "open up key sectors like telecom, financial services and energy services, (and) open up branching in the non-life insurance sector and in securities.

Despite a few details still needed to be worked out, the new agreement, he said, is "a major accomplishment in a 20-year process of the normalization of bilateral relations between the US and Vietnam."

Praise for the new agreement has come from several US-based industry and trade groups including the Telecommunications Industry Association (TIA), which has long supported a deal opening the Vietnamese market to its members products and services.

"The trade agreement reached last week between Vietnam and the US marks a significant step forward in Vietnam's efforts to join the World Trade Organization," the Washington, DC-headquartered industry group said in a press release.

"Vietnam's commitment to market reform and international economic liberalization by signing this agreement will encourage further interest and investment in Vietnam," it added.

The Vietnamese telecommunications market is valued at roughly $1.5 billion. The country boasts about 5.3 million Internet users, or 6.5% of the population.

That, the release stressed, "is a clear indicator that the opportunities for growth in Vietnam are tremendous."

Deputy US Trade Representative Karan Bhatia will be in Ho Chi Minh City, Vietnam in early June to advance the US trade agenda and discuss the new agreement with business leaders there, according to the Office of the USTR.

The visit will be Ambassador Bhatia's first trip to Vietnam where the Asia Pacific Economic Cooperation (APEC) Trade Ministers will be meeting June 1-2.

Ambassador Bhatia will be accompanied by Wendy Cutler, Assistant USTR for Japan, Korea, and APEC Affairs.

Bhatia is expected to visit Taipei, Taiwan and New Delhi, India before she arrives in Vietnam, the USTR said.

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