May 14, 2006

US agrees to deal for Vietnam to join WTO

By Doug Palmer

WASHINGTON (Reuters) - The United States and Vietnam have
reached an agreement in principle paving the way for the
communist-run country to join the World Trade Organization this
year, U.S. and Vietnamese officials said on Sunday.

The pact lowers Hanoi's tariffs on U.S. industrial and farm
products and removes other barriers that block U.S. companies
in sectors such as telecommunications, retailing, banking,
insurance and energy from doing business in Vietnam, the U.S.
Trade Representative's office said.

U.S. officials hailed it as a milestone in a
two-decades-old process of normalizing relations severed by the
1957-75 Vietnam War and said it would boost U.S. exports in one
of the fastest-growing markets in Asia.

In Hanoi, the state-run Tuoi Tre (Youth) newspaper quoted
an official at the Vietnamese Embassy in Washington as saying
the two countries were expected to sign the agreement in early

Vietnam's ability to reach a deal with the United States,
stands in contrast to Russia, which has been pushing for years
to join the world trade body but remains at odds with
Washington over the terms of its accessions.

"Vietnam recognizes that broad-based reform and economic
liberalization are essential to its integration into the global
economy," outgoing U.S. Trade Representative Rob Portman said.
"We intend to work hard with Vietnam to complete the process of
its full accession to the WTO."

Once a deal is completed, the U.S. Congress must vote on
giving the Southeast Asian country of 83 million people
Permanent Normal Trade Relations Status. Then Vietnam would
submit its final request for WTO membership later in 2006.

Sen. Max Baucus, a Montana Democrat whose constituents
could see increased beef exports under the deal, said he would
push for approval of PNTR before August.


Vietnam agreed to eliminate WT0-prohibited industrial
subsidies as part of the pact, including in its textile sector,
U.S. trade officials told reporters in a conference call.

That is enforced through a special mechanism allowing the
United States to reimpose quotas on Vietnam's textile and
clothing shipments if it does not abolish the prohibited
subsidies before joining WTO, they said.

The actual amount of Vietnam's textile subsidies are
nowhere near "the billions of dollars that have been bandied
around," a senior U.S. trade official said.

"We believe ... it's a very small program. But whatever it
is, it needs to be eliminated and the Vietnamese have committed
to us that it will be eliminated," he told reporters on
condition he not be identified.

However, U.S. textile producers said the pact was too weak
and would lead to American job losses by allowing Vietnam to
flood the U.S. market with heavily subsidized exports.

The two countries could sign a final agreement when Vietnam
hosts the annual APEC (Asia Pacific Economic Cooperation) trade
ministers meeting in early June.

U.S. trade officials said they did not expect the
congressional vote on establishing permanent normal trade
relations with Hanoi to be contentious.

The United States and Vietnam restored diplomatic relations
in 1995, 20 years after the end of the Vietnam War.

Since the countries signed a business deal in 2001,
Vietnamese exports to the United States have grown to more than
$6.5 billion in 2005. The United States exported more than $1.2
billion of goods to Vietnam last year.

Hanoi wants to be a WTO member by the time it hosts
President Bush in November for the annual summit of the
21-member APEC forum.

Vietnam has completed deals needed to join the Geneva-based
WTO with all of its other leading trade partners, but still
needs to finish work on a multilateral agreement bringing its
overall trade regime in line with global rules.

(Additional reporting by Nguyen Nhat Lam and Grant McCool
in Vietnam)