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US is yet to grant the country Permanent Normal Trade Relations

GENEVA, Switzerland – 11/08/06 – After more than a decade of negotiations, Vietnam has become gained membership to the World Trade Organization.

The country will officially join the WTO and become its 150th member 30 days after its national assembly ratifies the accession agreements.

According to analysts, WTO membership will give the surging Vietnamese economy increased access to foreign markets. In return, the country will have to drop high tariffs on foreign imports and eliminate subsidies for state-owned companies.

Reacting to the occasion, Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, told the media that WTO membership will also help bring more foreign investment to Vietnam.

"We're going to see lower tariffs, better market access, better rule of law, and generally just international standards of doing business in Vietnam, which is going to improve the investment and economic climate here," he said.

Vietnam's WTO accession comes just before the country hosts the Asia Pacific Economic Cooperation summit in Hanoi next week with a number of leaders including President George Bush expected to attend.

One trade hurdle yet remains, said the AMCHAM’s Sitkoff.
“The US hasn’t yet granted Vietnam PNTR [Permanent Normal Trade Relations], but that’s chiefly a problem for American businesses,” he said.

According to WTO mandates, all members of the WTO are required to give other members non-discriminatory treatment, so if Washington wants to participate in the benefits of Vietnam's WTO accession, it's required to grant PNTR.

If the US fails to grant Vietnam PNTR, WTO rules allow the country to discriminate against American businesses.

A bill to grant Vietnam PNTR is currently stalled in the US Congress.

Despite the celebratory mood, some feel that not all Vietnamese businesses will benefit from the increased openness of the economy.

"If we look at the particular sectors where Vietnam is most vulnerable, I think one of them, a very important one, is in banking and financial services," said Robert McNown, a lecturer at the National Economic University in Hanoi, adding that some local companies may lose out to more efficient foreign rivals.

But, he said, while some Vietnamese banks may be unable to compete, overall, the banking sector in Vietnam will improve.

Others say that Vietnam’s accession to the global trade body could well cause nervous jitters among its Southeast Asian neighbors – the same reaction some ten years ago when China was admitted to the WTO.

Vietnam registered 8.4% growth last year – second only to China among Asian countries, and, like China and many of its partners in the Association of Southeast Asian Nations, Vietnam has used a combination of low cost labor, foreign direct investment and export-oriented industry to fuel that growth.

"After entering the W.T.O., Vietnam is going to be much more competitive, have a much more competitive advantage than other ASEAN countries, particularly Thailand," said Somphob Manarangsan, a professor of economics at Bangkok's Thammasat University.

At least two of Thailand's main export industries - electonics and food processing - will be severely affected by Vietnamese competition, while Indonesia will be similarly affected by Vietnamese competition in the footwear and garment industries, he said.

Why will Vietnam enjoy such a strong competitive advantage?

According to Somphob, it is because the Vietnamese have invested far more in education, in science and in technology than most other ASEAN countries.

He foresees that, within five years, Vietnam will also become competitive in both information technology and biotechnology.

Because Thailand’s minimum wage is three times that of Vietnam, Somphob stressed that Thailand has to move into service-based industries where it is likely to enjoy an upper hand for a long time, such as tourism and entertainment.

But he also argues that Bangkok must improve its country’s own educational system in order to compete effectively in high-value manufactured products, an area in which it could eventually face competition from Vietnam, as well as China and India.

Singapore, the leading service economy in Southeast Asia, has continued to concentrate on high-value manufactured products like semiconductors.

But even Singapore is taking advantage of Vietnam's hard-working, low-cost labor force.

 The island nation is currently the newest WTO member's second biggest source of foreign investment, after Taiwan.

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