Text: Barshefsky Testimony to Senate Hearing on Vietnam Trade Deal
(Says trade agreement "culmination of bipartisan policy")

The recently concluded trade agreement in principle between the United States and Vietnam was the "culmination of a vigorous, bipartisan policy," according to United States Trade Representative Charlene Barshefsky.

Speaking Wednesday, August 4 before a joint hearing of the Senate Foreign Relations subcommittees on International Economic Policy, Exports and Trade Promotion and East Asian and Pacific Affairs, Barshefsky said negotiation of the trade agreement, as part of a process of engaging Vietnam, "serves a broader U.S. interest in regional stability and growth."

The process of opening trade, Barshefsky said, "contributes to economic liberalization within Vietnam." Integrating Vietnam, along with Cambodia and Laos, into the wider U.S.-Pacific trade "will advance our strategic interest in Asia," she said.

"By opening these markets," the U.S. Trade Representative said, "our trade policy can help create substantial new opportunities for American businesses, farmers and working people. Vietnam, as ASEAN's second-largest country, "has the potential to develop into a rapidly growing economy with significant demand for our products," Barshefsky said.

While noting that the agreement with Vietnam was an agreement "in principle," Barshefsky told senators that she was confident that the final text would be completed, and that the concluded agreement with Vietnam "will do more to open markets for our goods and services by reducing trade barriers, ensuring national treatment and promoting transparency."

The agreement, she said, will also serve joint American and Vietnamese goals of "promoting economic reform and sustainable growth within the Vietnamese economy; helping Vietnam integrate securely with the regional economy; and creating a stronger foundation for Vietnam's World Trade Organization entry."

Following is the text of Barshefsky's testimony, as prepared for delivery:

(begin text)

AMERICAN TRADE NEGOTIATIONS WITH VIETNAM

Testimony of Ambassador Charlene Barshefsky
U.S. Trade Representative

Senate Foreign Relations Subcommittees
On International Economic Policy and Asia-Pacific Affairs
Washington, DC

August 4th, 1999

Chairmen Hagel and Thomas, Senators Sarbanes and Kerry, Members of the Subcommittees, thank you very much for inviting us to testify on our trade negotiations with Vietnam.

In the last two months, after over three years of negotiations, we reached an agreement in principle on a bilateral trade agreement with Vietnam. We are now consulting with Congress and working with the Vietnamese government to finalize legal text and move toward completion of the agreement. This will address a range of agricultural, industrial and services issues on our trade agenda, and allow us to request from Congress the authority to open Normal Trade Relations with Vietnam, subject to annual Congressional review.

This afternoon I would like to review for the Subcommittee the major elements of the agreement in principle. Let me begin, however, by reviewing the broad goals of our policy in Indochina and Vietnam in particular, and the place trade holds in that policy.

INDOCHINA TRADE POLICY

The agreement in principle, Mr. Chairman, is the culmination of a vigorous, bipartisan policy which President Clinton has followed throughout his Administration, and which dates to the Bush Administration's presentation of a "roadmap" for improved relations with Vietnam in 1991.

Our first priority, like that of previous Administrations, has been a full accounting for American service personnel listed as Missing in Action in the aftermath of the Vietnam War. Ambassador Peterson and others have noted progress on this issue. With this continuing, the full engagement of Vietnam, Cambodia and Laos in Southeast Asian regional institutions and the Pacific economy serves a broader U.S. interest in regional stability and growth. Likewise, our negotiations on a number of fronts can advance the principled interests we hold in Indochina as elsewhere in the world - in open markets, human rights and the rule of law.

Trade policy in Indochina takes place within the context of these priorities, interests and values. In each nation, a successful trade policy can contribute to our goals in several areas:

First, opening trade, in particular through formal legal agreements, contributes to economic liberalization within Vietnam, Laos and Cambodia. Trade agreements commit these countries to move toward market economics and the rule of law. Both of these tend to reduce arbitrary state power, offer individuals greater economic opportunities and more freedom to determine their own future, thus complementing the diplomatic efforts of our colleagues on human rights.

Second, integrating these countries into U.S.-Pacific trade will advance our strategic interests in Asia. In this decade, their entry into ASEAN has already removed a major source of tension and instability within Southeast Asia. A growing trade and investment relationship with the United States will continue and strengthen this trend.

Finally, of course, by opening these markets, our trade policy can help create substantial new opportunities for American businesses, farmers and working people. Vietnam in particular, as ASEAN's second-largest country, has the potential to develop into a rapidly growing economy with significant demand for our products.

SPECIFIC GOALS OF TRADE POLICY

Our trade negotiations with all three Indochinese countries began in the mid- I 1990s. Although the three economies are substantially different, in each case we faced a set of similar issues:

-- All had highly closed trade regimes and non-market economies.

-- All three governments, however, were interested in moving toward market-oriented domestic economic reform in the aftermath of the Cold War, and in opening economic relations with the United States.

-- Likewise, all three, as non-market economies, were ineligible for Normal Trade Relations without negotiation of a Bilateral Commercial Agreement (BCA). (Vietnam, unlike the other two, was subject to the Jackson-Vanik Amendment, requiring a certification of freedom of emigration as well as negotiation of a Bilateral Commercial Agreement to gain NTR status.)

Our goal, therefore, was to negotiate agreements with each country that would lead to significantly more open markets, contribute to domestic reform and liberalization, and (assuming success in freedom of emigration in the Vietnamese case) allow us to endorse Normal Trade Relations. The grant of NTR would be conditional, renewed annually on determination of adherence to freedom of emigration. As in other cases, we would not move on to requests for permanent NTR until these countries join the WTO -- some years away.

CAMBODIA AND LAOS

With respect to the two smaller countries, we were able to move relatively quickly. We succeeded first with Cambodia through a BCA in 1994, which entered into force on the Congressional grant of NTR in 1996. As this agreement was negotiated before the completion of the Uruguay Round, it is less comprehensive than the Laos and Vietnam agreements. However, it does contain comprehensive intellectual property commitments and ensure national treatment for imports.

With respect to Laos, we completed a BCA in 1997. In this agreement we were able to use the completion of the Uruguay Round as a foundation. The result is a more comprehensive agreement, covering market access for goods and services, and intellectual property rights. It has not yet come into force, however, as Laos has not yet been granted NTR. We thus hope to work with you to grant NTR this year.

VIETNAM

In Vietnam, the task was more complex. Vietnam, with nearly 80 million of Indochina's approximately 100 million people, is by far the largest of the three countries. Its economy is much larger and more industrialized than the other two, the degree of economic planning and government control over the economy likewise greater, and the central planning system has been in existence significantly longer.

President Clinton has thus overseen a step-by-step opening of economic relations, with the authorization for resumption of international lending and for US firms to join in development projects in 1993; the lifting of the economic embargo in 1994, and the opening of normal diplomatic relations in 1995. These in turn build upon earlier decisions by President Bush in 1991 and 1992 to open organized travel, allow commercial sales to Vietnam for basic human needs and open telecommunications links.

After the opening of diplomatic relations, we began negotiations on a Bilateral Commercial Agreement in 1996. The talks proceeded very slowly for three years. However, our work this year has proceeded rapidly, culminating last month with an agreement in principle that, when completed, will fundamentally change Vietnam's trade regime and contribute to a broader liberalization of its domestic economy.

The specific provisions of this agreement go well beyond the terms of BCAs negotiated in the past to end Jackson-Vanik restrictions on other covered economies. These previous agreements had few or no market access commitments; as a result, U.S. commercial results in some cases were limited, and our partners in the negotiations found themselves unable to make rapid progress toward the larger goal of membership in the World Trade Organization.

By contrast, when completed, our BCA with Vietnam will set a course toward greater openness to the outside world, receding government control over the economy, and ultimately has potential to contribute to greater freedoms for individuals to find jobs and determine their own futures, At the most basic level it will do more to open markets for our goods and services by reducing trade barriers, ensuring national treatment and promoting transparency. Beyond this, however, it will serve goals we share with the Vietnamese government: promoting economic reform and sustainable growth within the Vietnamese economy; helping Vietnam integrate securely with the regional economy; and creating a stronger foundation for Vietnam's WTO entry.

I must stress, however, that this remains an agreement in principle. It represents understanding on the key issues, but legal issues and extensive drafting remain to be resolved or completed. A great deal of work remains to be done before a text can be finalized, including verification and review of the various schedules and detailed provisions in this complex and comprehensive agreement. Neither side, however, believes that these remaining issues will prove to be an insurmountable obstacle to timely conclusion of an agreement.

PROVISIONS OF AGREEMENT

Let me now review the understandings we have reached. While, as I noted earlier, the legal text has not been finalized, broadly speaking we have a comprehensive set of commitments that will go into effect on our grant of NTR, and address our major priorities in all areas through specific commitments and timetables for their implementation.

The major points are as follows.

1. Market Access for Goods

In goods, commitments include:

Tariffs -- Vietnam will guarantee MFN-level tariffs for U.S. goods. (This is a significant point, as Vietnam has in place a law applying higher, non-MFN, tariff treatment to US goods; while this law is now suspended, the agreement will ensure that it is never enforced.) Vietnam will also commit to substantial reductions in tariffs in both industrial and agricultural products.

National Treatment - Vietnam will apply national treatment for imports in areas including standards, taxes and commercial dispute settlement.

Government Procurement - Vietnam will commit to provisions on transparency in government procurement.

Quantitative Restrictions - Vietnam will prohibit quotas or other forms of quantitative restrictions, with some exceptions for listed products. Existing quantitative restrictions will be abolished according to a set time-table.

Trading rights - Vietnam will allow its own citizens to trade all products immediately. In addition, U.S. investors in Vietnam and, over time, all businesses will be able to import parts and other inputs from the United States.

Other - Vietnam will accept WTO rules on customs valuation and fees and import licensing.

2. Intellectual Property Rights

With respect to intellectual property rights, Vietnam will accept all obligations of the WTO TRIPs Agreement within two years. A number of provisions, including passing and enforcing IPR laws, will be effective immediately.

3. Trade in Services

In services, the major commitments are as follows:

Rules -- Vietnam will accept a framework of rules based on the WTO's General Agreement on Trade in Services. These include MFN treatment, improved transparency and other guarantees of impartiality and openness in domestic regulation regimes.

Sectors -- The agreement addresses sectors including distribution, financial services and others.

Market Access Commitments -- In these sectors, Vietnam will provide market access commitments such as the right of establishment, and licensing for professionals with specific qualifications. Timetables for these commitments will vary by sector.

4. Investment

Vietnam will eliminate trade-related investment measures such as export performance or local content requirements within a fixed timetable, or by WTO accession if that comes first.

With respect to timetables, immediately on our grant of NTR, Vietnam will implement provisions including guarantees of national treatment and MFN except for certain specific exclusions, transparency, movement of employees and expropriation protection. Commitments on import licensing, discriminatory pricing and other issues will phase in.

5. Other

Finally, the agreement includes a number of other provisions outside these categories but essential to the operation of any business and to the building of international confidence in the Vietnamese economy. These include commitments on transparency, requiring Vietnam to publish national economic data, laws, regulations and so forth; and business facilitation including access to dispute settlement. Both of these will be effective immediately on our grant of NTR

Altogether, then, we have reached understandings on the major issues we set out to address. When finalized, the result will be a comprehensive agreement that opens Vietnam's market to U.S. goods and services; promotes reform and liberalization at home; anchors Vietnam more firmly in the world economy; and provides a basis for eventual WTO entry.

CONCLUSION

Mr. Chairman, a significant amount of work remains ahead, and we will consult closely with you as we complete the agreement and present it to Congress. But with your help, we have come close to the goal.

Completion of this agreement, and approval of NTR for Vietnam and Laos, will open significant new opportunities for Americans. More important still, it will contribute to aspirations for liberalization and the rule of law in these countries; complement the work we are pursuing in human rights; and advance our long-term vision of a peaceful, stable Asia.

Since the Second World War, upheavals and conflicts within Indochina have been one of Asia's principal sources of suffering and international danger. In the past decade, a concerted, bipartisan and effective policy stretching across three Administrations has contributed to the end of the Cambodian conflict; an accounting for Americans missing in action during the Indochina wars; and the reopening of hope for millions of Cambodians, Laotians and Vietnamese. This agreement will be another step, and a significant one, toward the end of this long and painful era.

This makes me very pleased to present the results thus far to the Subcommittee today, and to work with you to bring the work to completion.

Thank you very much.

(end text)


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