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Viet Nam Joins World Trade Organisation

by Mary Swire, for, Hong Kong

12 January 2007

Viet Nam on Thursday became the 150th - and newest - member of the World Trade Organisation, following its ratification of the accession package in December 2006.

The decision ends over 11 years of preparation, including eight years of negotiation. The working party of members negotiating with Viet Nam was set up on 31 January 1995 and met 14 times between July 1998 and October 2006.

Speaking late last year, WTO Director-General Pascal Lamy stated that:

“The remarkable efforts that Viet Nam has put into preparing for membership should be an inspiration to us all, as several members have observed.”

He continued:

“Viet Nam has shown how anchoring domestic reforms in the WTO can yield dramatic results. Viet Nam’s economic growth topped 8% last year, foreign direct investment rose steeply to over $6 billion, and exports surged by over 20%. More must surely follow with the new laws, administrative measures, and commitments on goods and services that are in Viet Nam’s membership package.”

Vietnamese Trade Minister Truong Dinh Tuyen, speaking at the same time, explained that the negotiations for WTO membership closely accompanied his country’s economic reforms, known as “doi moi”.

“It is these reforms that ensure Viet Nam’s constant economic growth, forming a firm foundation for the accession as a whole,” he said. “On the other hand, WTO membership also helps Vietnam refine its reform process, creating opportunities for trade expansion, which is an important tool for economic growth."

“WTO accession poses major challenges to Vietnam’s economy. However, we do believe that with cooperation extended by the members, Vietnam will make the most of opportunities, successfully handling challenges, ensuring fast and sustainable growth, pro-actively playing its part for the development of the multilateral trading system.”

The Viet Nam’s accession documents consisted of:

  • Viet Nam’s commitments on goods — the 560-page list (or “schedule”) of tariffs, quotas and ceilings on agricultural subsidies, and in some cases the timetable for phasing in the cuts;
  • Viet Nam’s commitments on services — the 60-page document (also a “schedule”) describing in which services it is giving access to foreign service providers and any additional conditions, including limits on foreign ownership
  • The working party’s 260-page report — describing Viet Nam’s legal and institutional set up for trade, along with commitments it has made in many of these areas.

For the majority of agricultural and non-agricultural goods, Viet Nam has promised ceilings (or “bound” rates) on duties ranging between zero and 35%. Some of these involve reductions phased over periods up to 2014, the precise end date varying from product to product.

Among products with higher ceilings are: alcoholic drinks, tobacco products, instant coffee and some related products, new and used motor vehicles and components, and roof tiles. Used vehicles less than five years old can be charged additional flat-rate duties up to specified limits.

These “bound” rates are legal ceilings. The actual duties that Viet Nam can charge (the “applied” rates) can be lower than the committed rates. Among the details of Viet Nam’s commitments is a promise not to charge higher applied rates on rapeseed (also known as colza or canola) and derived meal, oil and other products than the duties actually charged on soy products — allowing the oilseed products to compete with soy.

A handful of products are going to be protected with tariff quotas (higher duties for quantities outside the quotas, and lower duties for quantities within the quotas): eggs, tobacco, sugar, and salt (which Viet Nam says is the main income source for 100,000 poor farmers in coastal areas). But Viet Nam will expand the quotas until they disappear according to agreed timetables.

Viet Nam has also signed the “plurilateral” Information Technology Agreement (“plurilateral” meaning only some WTO members have signed). For these products, Viet Nam has agreed to allow imports in duty-free. In some cases, the zero duty will apply immediately; in others it will be achieved gradually over periods ending in 2010 to 2014.

In agriculture, Viet Nam has promised not to subsidize exports. It will be allowed to support its farmers domestically with trade-distorting supports (“Amber Box” or “Aggregate Measurement of Support”, i.e. supports that have a direct impact on prices or quantities produced) of up to 3,961.5 billion Vietnamese dong (currently about US$246 million) in addition to the usual allowance for developing countries (known as “de minimis”) of up to 10% of the value of domestic agricultural production. As with all WTO members, Viet Nam can also spend unlimited amounts on supports that do not distort trade (“Green Box” supports).

Viet Nam has made commitments on a range of services. In some cases Viet Nam reserves the right to limit foreign ownership of service companies operating in Viet Nam — for example in some telecommunications services the eventual limits can be 49% or 65%, depending on the service. In a few cases, permitted foreign ownership is immediately 100% (for example accountancy). In many cases, the permitted foreign ownership is phased in to reach 100% after a few years (for example express delivery courier services after five years).

As is normal in this sector, the effect of the commitments depends also on complex relationships with domestic regulations — for example in the first two years, 100%-foreign-owned architectural firms can only serve foreign companies.

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