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Status of Vietnam’s WTO Accession Summary Vietnam applied for WTO membership in January 1995 and is currently among 24

countries (including Russia and Ukraine) seeking WTO accession. Vietnam’s goal is to accede to the WTO before the APEC Summit in Vietnam November 2006.

149 countries (including newly acceded Saudi Arabia) are currently members of the WTO. WTO accession for Vietnam involves agreement by Vietnam to accept the WTO rules through bilateral negotiations with interested Members on market access for goods and services and multilateral negotiations under the with the Working Party structure. Through its Bilateral Trade Agreement (BTA) with the U.S. which came into force in December 2001, Vietnam accepted many core WTO principles such as Most-Favored Nation (MFN), national treatment, and transparency, thereby providing a solid basis for its accession. Under the BTA, Vietnam has also committed to a substantial portion of multilateral WTO disciplines, including the WTO disciplines on trade in goods, Trade-Related Investment Measures (TRIMS), Trade-Related Aspects of Intellectual Property Rights (TRIPS), General Agreement on Trade in Services (GATS), and the WTO’s Basic Telecom Reference Paper. These commitments are expected to be multilateralized as a requirement for accession, in addition to other commitments being added. For a comparison produced by the Trade Council of BTA commitments to the commitments of other recently acceding country, please visit our website. Currently, Vietnam has concluded all bilateral negotiations, including with the U.S. which will be signed officially in late May or early June 2006. Vietnam will need to complete the multilateral negotiations before the WTO Working Party adopts its accession package. The package will then be forwarded to the WTO General Council for ratification. Before Vietnam becomes a full member of the WTO, its National Assembly needs to ratify the WTO accession package, and U.S. Congress will need to grant Permanent Normal Trade Relations (PNTR) status to Vietnam.

1. WTO Accession – Bilateral Negotiations U.S. Bilateral Negotiations: Vietnam reached an agreement-in-principle with the United States on 14 May 2006. The agreement, expected to be signed officially in late May or early June 2006, provides U.S. businesses with increased market access in a full range of goods and

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services. For 94% of all industrial goods, tariffs have been reduced to 15% or lower. Tariffs have also been reduced to 15% or lower for a wide range of agricultural products. Vietnam has also signed on to sectoral initiatives lowering tariffs on key products like construction equipment, pharmaceuticals and aircraft to between zero and five percent. Vietnam has also committed to improved market access in key services of interest to the U.S. including banking, insurance, telecom, distribution, express delivery, and energy services. As part of the agreement with the U.S., Vietnam has accepted a period of up to 12 years for which it will be treated as a Non-Market Economy (NME). It has also committed to the elimination of prohibited industrial and agricultural subsidies upon accession. The U.S. has also agreed to terminate current quotas on textiles and apparel from Vietnam upon accession. However, in exchange, Vietnam will eliminate upon accession prohibited subsidies on textiles that are conditioned on exportation or local content requirements. For the first year of Vietnam’s accession, there will be an “unprecedented enforcement mechanism” to ensure that Vietnam abides by the commitment to eliminate the subsidies. Under that mechanism, if the U.S. believes there are prohibited subsidies that have not been eliminated, it can request consultations with Vietnam. If the consultations do not result in a resolution, the matter would be referred to an arbitrator, appointed through the WTO. The arbitrator will make a determination within 120 days. If the determination is that there is a violation, the U.S. would have the right to re-impose quotas for one year, at levels that include some growth. However, at the end of the first year of Vietnam’s accession, the special mechanism expires and any quotas re-imposed would end after one year as well. The U.S. was the final country to have concluded an agreement with Vietnam in order for it to join the WTO. Commitments made in this agreement will be multilateralized and extended to all members of the WTO. U.S. Ratification of WTO Accession – Permanent NTR for Vietnam:

As noted above, Vietnam does not currently have unconditional normal trade relations (NTR) status (also known as permanent normal trade relations (PNTR) status) with the United States. Unconditional NTR is enjoyed by virtually all U.S. trading partners who are members of WTO. As a Member of the WTO, the U.S. is obligated to grant on a reciprocal basis immediate and unconditional most-favored-nation treatment to the products of all other WTO Members. Therefore, upon Vietnam’s accession to the WTO, the U.S. must grant Vietnam unconditional NTR status.1

The U.S. can extend PNTR status to Vietnam by the enactment of a statute authorizing the U.S. President to terminate the application of Title IV of the Trade Act of 1974 with respect to Vietnam and to extend PNTR status to it. This procedure was used to grant PNTR status to Albania, Bulgaria, China, Czech Republic, Estonia, Georgia, Hungary,

1 Unless the U.S. invokes the “non-application” clause of Article XIII of the WTO Agreement before Vietnam's

accession. If the “non-application” clause is invoked, however, Vietnam will have the right to withhold from the U.S. the benefits of its WTO accession commitments (i.e., those that go beyond the BTA), denying to the US market access gains which would otherwise have been afforded to U.S. goods and services and that all other WTO Members will enjoy

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Kyrgyzstan, Latvia, Lithuania, Mongolia, Romania and Slovakia. And Ukraine?? The legislation moves through Congress under normal procedures - there are no special or “fast track” procedures for a bill to terminate the application of Title IV of the Trade Act of 1974. Upon introduction in the House and the Senate, the bill is referred to the House Ways & Means Committee and Senate Finance Committee for consideration. The bill is open to amendments and Congressional rules that typically govern any ordinary bill would apply. Upon enactment of the statute, the U.S. President would implement the extension of PNTR status by a Presidential proclamation. To date, the following six Jackson-Vanik countries have become full members of the WTO prior to the U.S. Congress granting them PNTR status: Romania (original GATT member), Mongolia (1997), Kyrgyz Republic (1998), Georgia (2000), Moldova (2001), Armenia (2003), and Ukraine (2006). For more information on the PNTR process for Vietnam, please refer to http://www.usvtc.org/trade/wto/PNTRmemo.pdf EU Bilateral Negotiations: Vietnam and the EU have concluded bilateral negotiations. On 9 October 2004, EU Trade Commissioner Pascal Lamy and Vietnam Trade Minister Truong Dinh Tuyen announced the successful conclusion of an agreement including agreement to reduce tariffs for agricultural, fisheries and industrial products to an average of 24%, 22%, and 16% respectively. The EU’s bilateral agreement with Vietnam includes an “early harvest agreement” which came into force in January 2005, with some commitments due end of March 2005, and others during 2005 through 2006. In exchange for quota free access on textile and clothing to the EU, Vietnam has reportedly committed to granting companies of EU origin reduced tariffs on yarns, clothing, fabrics and made-up articles, fibers, beverages, motorbikes or scooters. Vietnam committed to increase market access for service providers in the telecom, cement and clinker production, construction, computer, engineering, integrated engineering, architecture, and urban planning service sectors. Further market access has also been granted to service providers in the life insurance, distribution, shipping, computer reservation system, environmental, and real estate service sectors. Significant concessions were also extended to the pharmaceutical sector including licenses for toll manufacturers and a reduction in the number of prohibited molecules allowed for importation into Vietnam. Concluded Bilateral Agreements: Vietnam has now concluded bilateral negotiations with all its Working Party Members including the EU (October 2004), Chile (November 2004), Argentina (November 2004), Brazil (November 2004), Singapore (December 2004), Uruguay (April 2005), Japan (June 2005), Canada (June 2005), China (July 2005), Columbia (July 2005), South Korea (July 2005), Iceland (August 2005), Norway (August 2005), Switzerland (August 2005), Paraguay (September 2005), New Zealand (February 2006), Australia (March 2006), Honduras (March 2006), the Dominican Republic (March 2006), Mexico (April

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2006), and the United States (May 2006). Negotiations with Cuba, Kyrgyzstan, India, Turkey, Bulgaria and EI Salvador have also been concluded.

2. WTO Accession – Multilateral Negotiations

In October 2003, Vietnam submitted materials, including its applied tariff schedule, and

a new services offer to its WTO Working Party. Action plans, including a general legislative action plan, were also submitted on the implementation of the WTO Agreement on Customs Valuation (CVA), WTO Agreement on Import Licensing, Agreement on Sanitary and Phytosanitary Measures (SPS), Agreement on Technical Barriers to Trade (TBT), Agreement on Trade Related Investment Measures (TRIMS), and Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). On 10-11 December 2003 at its 7th Working Party Meeting in Geneva, Working Party Members continued to discuss issues relating to Vietnam’s general application of MFN, phase-in periods relating to its CVA, SPS and TBT Action Plans, and whether or not to move towards drafting the Elements of a Final Report. While noting progress overall, Working Party Members reiterated the importance of improved goods and services offers, and commitments to achieve full implementation of WTO multilateral disciplines upon accession. Bilateral talks also took place with Argentina, Brazil, India, Japan, Canada, EU, Norway, Switzerland, Paraguay, New Zealand, Australia, Korea, and the United States. In late April 2004, Vietnam submitted to its Working Party new paperwork including revised goods and services offers. Its new tariff offer binds close to 100% of its tariffs in agricultural and non-agricultural goods. Vietnam’s new services offer now includes many commitments equal to what Vietnam has committed to in the U.S.-Vietnam Bilateral Trade Agreement (BTA), as well as commitments in service areas not committed to in the BTA. In addition, revised action plans for implementing overall legislation, and the Agreements on Customs Valuation, SPS, TBT, and TRIPS were submitted. On 15 June 2004, Vietnam had its 8th Working Party meeting in Geneva, with plurilateral discussions on Agriculture held the day prior. As next steps, Members agreed to produce a Draft Working Party Report and hold the 9th Working Party session in early-December 2004. Members were expected to submit new questions by the end of July, and Vietnam would circulate replies by the end of September. Bilateral negotiations were also conducted with the EU, Australia, the U.S., and other Working Party members during this time. Vietnam closed its first market access bilateral with Cuba. In late August 2004 Vietnam received follow-up questions from the 8th Working Party and a new round of paperwork was submitted in response to the Working Party in October 2004. Vietnam’s 9th Working Party meeting was held in Geneva on 15 December 2004. The meeting moved Vietnam’s accession process towards an initial draft report while

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examining new documents and legislation submitted. Of significance, Vietnam committed to the implementation of the SPS Agreement upon accession and pledged to speed up the passage of pending bills for accession in 2005. An informal Working Party meeting was held on 20 May 2005. At this meeting, new Working Party Chairman Eirik Glenne urged Vietnam to complete bilaterals in the “next couple of months” if it were to hope for accession in December 2005. Eight new commitments and developments were presented by the Vietnamese side, including a proposed revision of excise duties to end discrimination against imported motor vehicles; a similar proposal for excise duty on beer; the elimination of export performance subsidies; a commitment to require supported products made in free zones to be subject to normal customs formalities when entering Vietnam; the establishment of TBT and SPS enquiry points; the extension of trading rights with exceptions for sensitive products, such as petroleum, pharmaceuticals, sugar, tobacco, salt, fertilizers, rice and cultural products; and the streamlining of import licensing procedures. The Secretariat also received a series of draft laws, including drafts of Commercial Law, Law on Amendments to Law on Customs, and Law on Conclusion of, Accession to and Implementation of International Treaties as well as a document comparing the draft Law on Export and Import Duties (Amended) against the existing Law (all of these draft Laws were subsequently promulgated at the May-June 2005 Session of Vietnam's National Assembly). Drafts of Law on E-Transactions, Law on Investment, Law on Intellectual Property Rights (all of these draft Laws were approved at the October-November 2005 Session of Vietnam's National Assembly) and Law on Technology Transfer (scheduled for promulgation in 2006) were also provided. Vietnam’s 10th Working Party was held in Geneva on 15th September 2005 during which in-depth discussions were held on Vietnam’s policies towards state trading enterprises, subsidies, investment incentives, and tax policies. Positive developments include a new offer on trading rights, with Vietnam committing to provide full trading rights to foreign companies and individuals no later than 1 January 2007. Reports also indicate that Vietnam’s latest offer on goods include commitments to cut tariffs to an average of about 18% (a 4% improvement over the previous offer). Issues remain with regard to industrial subsidies for export related industries, discriminatory taxation on distilled spirits and farm goods, tariff rate quotas, and import bans on certain chemicals and second-hand goods. In early December 2005, another round of paperwork was submitted to the Working Party. This included revised commitments on trading rights, and industrial subsidies. On 27 March 2006, Vietnam’s 11th Working Party was held in Geneva to resolve remaining issues such as industrial subsidies, trading rights, and a timetable for the issuance of regulations to implement the new Law on Intellectual Property. Working party members agreed to accelerate its discussions with Vietnam to produce a revised report in the next few weeks. (The second revision of the draft report was circulated among the working party on 21 February 2006). At the sidelines of this meeting,

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Vietnam concluded agreements with Honduras and the Dominican Republic and held bilateral meeting with the U.S.

3. WTO Approval of Vietnam's Accession:

Once the Working Party process and the bilateral negotiations conclude, the Working Party will adopt Vietnam's accession package, which includes the Working Party Report, the Draft Protocol of Accession (incorporating Vietnam's commitments on market access, services, and agriculture), and a Draft Decision inviting Vietnam to accede as a member of the WTO. If a two-thirds majority of WTO Members agree, either at a WTO Ministerial Conference or at a meeting of the WTO General Council, Vietnam's accession package will be adopted.

4. Vietnam Ratification of WTO Accession – Necessary Action by Vietnam:

To complete the process, as with the BTA, Vietnam's National Assembly ("NA", Vietnam's highest legislative body) will be expected to pass legislation implementing Vietnam’s commitments made “upon accession”, ratify the WTO accession package and enact the remaining requisite legislation possibly through an omnibus package. The Ministry of Justice and other key Ministries are working to revise and keep up-to-date lists of laws and regulations including those adopted in the May-June 2005 Session and the October-November 2005 Session of the National Assembly. Over 200 laws and decrees have been submitted to members of Vietnam’s Working Party. The full NA typically meets twice a year, with May and November sessions. Vietnam has committed to hold additional sessions if necessary, but this has not yet occurred. Once Vietnam completes its domestic ratification procedures, it can become a WTO Member 30 days after depositing its "acceptance" with the WTO Director General. Vietnam's NA passed the Law on Conclusion of, Accession to and Implementation of International Treaties on 14 June 2005. Effective 1 January 2006, this Law governs the process of Vietnam's ratification of the WTO accession package and the enactment of implementing legislation, Of note, it clarifies the hierarchical order of treaties in the legal system of Vietnam.