TEXT: HOUSE PANEL STATEMENT ON U.S.-VIETNAM TRADE AGREEMENT
(Fullest accounting of POW/MIAs top policy priority)

Washington -- Obtaining the fullest possible accounting for service personnel listed as prisoners of war or missing in action (POW/MIAs) remains the Clinton Administration's top policy priority with respect to Vietnam, and all other policy decisions are considered with this in mind, including issues pertaining to economic normalization and trade relations, according to a June 18 House Ways and Means Trade Subcommittee statement.

In light of continued cooperation in accounting for POW/MIAs, President Clinton normalized diplomatic relations with Vietnam in July 1995. The statement notes, however, that although in 1994 the trade embargo was lifted, high tariffs were applied to Vietnamese exports. Vietnam is one of only a small number of countries that is not currently eligible for normal (i.e., most-favored-nation) trading status.

Title IV of the Trade Act of 1974 establishes two preconditions for extending Most Favored Nation (MFN) trading status to Vietnam. First, Vietnam must meet certain freedom of emigration requirements set out in the Jackson-Vanik amendment to the Trade Act. Second, a completed bilateral trade agreement must be approved.

The Clinton Administration seeks to conclude a trade agreement that is equitable and mutually beneficial, follows international norms and standards, and facilitates trade and investment.

Although many substantive issues are still left to be resolved, the statement notes that negotiations on this comprehensive agreement are underway and making progress.

Following is the text of the Subcommittee statement:

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Statement on Status of U.S.-Vietnam Bilateral Trade Agreement
Office of the United States Trade Representative
House Ways and Means Subcommittee on Trade
June 18, 1998

Obtaining the fullest possible accounting for POW/MIAs remains the Administration's top policy priority with respect to Vietnam, and all other policy decisions are considered with this in mind, including issues pertaining to economic normalization and trade relations. In fact, it was in the context of progress on POW/MIA accounting that President Clinton lifted our trade embargo in February 1994. Until that time, the United States had no trade relations with Vietnam. In July 1995, again in light of continued cooperation in accounting for POW/MIAs, the President normalized diplomatic relations with Vietnam, and directed that the process of economic normalization with Vietnam begin in accordance with relevant U.S. laws.

With the lifting of the trade embargo in 1994, trade was allowed to flow between the United States and Vietnam, but not on normal terms. Vietnamese exports to the United States still face high tariffs in the range of 40%-80%. These high tariffs, known as "Column 2" rates, apply to the few countries that do not receive MFN treatment. Vietnam is one of only a small number of countries that are not currently eligible for normal trading status.

Extending such most-favored nation trading status to Vietnam is governed by Title IV of the Trade Act of 1974. Title IV establishes two preconditions for extending MFN trading status to Vietnam:

-- First, Vietnam must meet certain freedom of emigration requirements set out in the Jackson-Vanik amendment to the Trade Act. The President may waive these requirements annually upon a finding that issuing such a waiver would promote the freedom of emigration goals of the statute. The State Department has already addressed the granting of this waiver in March 1998 and its extension this month.

-- The second precondition on extending MFN status to Vietnam is the conclusion of a bilateral trade agreement addressing, at a minimum, the issues of safeguards, intellectual property rights, the settlement of commercial differences and disputes, and trade promotion. A bilateral trade agreement with Vietnam may not enter into force until after Congress passes a joint resolution of its approval.

If these two criteria are met, MFN treatment can be extended to Vietnam. However, under Title IV, the continued extension of MFN trading status to Vietnam is subject to an important caveat: if the President determines that Vietnam is not cooperating with our efforts to achieve a full accounting of military personnel lost during the Vietnam War, he may revoke its MFN trading status.

From the beginning, the Administration's policy has been to conclude a solid, commercial agreement with Vietnam that fulfills three broad objectives:

-- The agreement should be equitable and mutually beneficial. This means that in return for extending Vietnam our low "column 1" tariff rates, we expect equitable market access in Vietnam.

-- The agreement should be on the basis of international norms and standards, primarily WTO standards, since these standards are the basis of our trade relations with practically every other country. In reality, because Vietnam is not yet a WTO member, the agreement will need to demonstrate that Vietnam is moving in a concrete and specific way toward WTO norms.

-- The agreement should facilitate trade and investment. In other words, it should address to a reasonable degree the concerns expressed by U.S. firms interested in doing business in Vietnam.

An agreement that meets these three criteria would benefit both the United States and Vietnam by establishing trade relations on the firmest possible footing. It would create business opportunities for exporters on both sides -- by giving Vietnam access to the large U.S. market, and ensuring equitable access for the United States to Vietnam's growing market of over 70 million people. Such an agreement would also serve as a concrete indication of Vietnam's commitment to integrating into the world economy on terms accepted by nearly all other countries, and would thereby advance economic reform and liberalization in Vietnam. In contrast, over the long term, the lack of an agreement can be expected to result in the loss of opportunities for Americans in Vietnam's market, since virtually every other country already has normal trade relations with Vietnam.

Negotiations on this comprehensive agreement are underway and making progress. In early 1997, after spending most of 1996 discussing and analyzing Vietnam's trade and investment regime, the United States completed a detailed proposed text for the agreement. In April 1997, we successfully concluded negotiation of a bilateral copyright agreement that will give U.S. copyrighted works legal protection in Vietnam for the first time. In October 1997, Vietnam presented a first partial response to our proposed text of the trade agreement. This was followed in April 1998 by a detailed comprehensive Vietnamese response, that included all four substantive issues proposed by the United States: market access for goods, intellectual property rights, market access for services, and investment.

In light of the comprehensive Vietnamese response, a round of negotiations was held in Washington in late May. Those negotiations served to highlight the areas where the gap between the two sides has narrowed, as well as areas where our views continue to diverge. We expect talks to continue actively in the coming months.

It is difficult to predict when this agreement will be completed because there are still many substantive issues left to be resolved. The Administration is firmly committed to concluding this agreement, and to normalizing trade relations with Vietnam, but we have made it clear that the agreement must meet the substantive criteria outlined above for it to be in the commercial interests of the United States. We will continue to keep this Committee apprised of progress in the negotiations, and look forward to working with you to ensure the approval of the agreement after it is completed.

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