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TIME IS NOW

Vietnam Economic Times, February 2006

- By Christopher Runckel, President of Runckel & Associates (Business-in-Asia.com)

Vietnam and the US concluded three days of talks in Hanoi last month on what I believe is their ninth round discussions on Vietnam accession to the World Trade Organization (WTO).  After the meeting the lead US negotiator, Assistant US Trade Representative Ms Dorothy Dwoskin, said at a press briefing that "we are pleased with our progress and believe the meetings this week have created new momentum and energy for the negotiations." She also noted that "both sides have narrowed the remaining differences ... it (he gap was 20 cm previously, it is now two centimeters, "Vietnam's Minister of- Trade Mr Truong Dinh Tuyen, meanwhile, had a more realistic assessment, saying "there are few differences...between the two sides left, but the final stage will always be the difficult one."

In negotiations, truer words have seldom been spoken. If one looks back at US-Vietnam relations since the lifting of the embargo, to negotiations on return of assets, opening of offices in both capitals, the Bilateral Trade Agreement (BTA) negotiations, ere., it is always the last details in an agreement that often prove the most difficult for negotiators and that often take additional study and discussion inside both capitals before a final agreement can be reached. 

Based on current reports, the difficult items still not quite agreed to continue to be agricultural tariffs, telecommunications, export subsidies, market access for service companies, copyright, and trademark. Minister Tuyen confirmed that tariffs and services remain sticking points. Meanwhile. US Ambassador to Vietnam Mr. Michael Marine seemed to presage these very points last September in an address to the American Chamber of Commerce (Amcham), when he noted that Vietnam should open up its financial-services industry, reduce control and price subsidies, drop limits on foreign and private investors, and remove restrictions on royalty payments, which have been a major complaint by several investors.

The reality is that for the US, services and particularly financial services is one of the most critical industries and that although the US may be willing to compromise on other issues it will hold firm in protecting its access in services because it is so important to the US economy.  

Banking, insurance and other service industries are among the largest in the US and have very strong lobbyists and ready access to Congressional champions who will quickly speak up to protect the interests of these companies. According to one recent article, financial services are the largest portion of the US economy. In 1987 the financial services, real estate and rental industries (this is how the sector is defined in the North American Industrial Classification System) accounted for 17.7 per cent of US GDP. It was the largest of the 14 major sectors in the US economy (manufacturing was second at 17.1 per cent).

Also, this is an industry (hat is continuing to grow and provide jobs and profits for Americans at a time in which manufacturing is continuing to move overseas. In 2004, the financial services, real estate and retail sector continued to grow and accounted for 20.7 per cent of GDP. This was far and away the largest sector of the US economy (second was still manufacturing, but it now accounts (or only 12.4 per cent of GDP). With these statistics in mind and the big dollar values involved, it is no wonder that opening up Vietnams service industries is become a slicking point. It is also the area in which the US will be unlikely to relent in pursuing a strong bargaining position. 

Telecommunications is also a major issue and one where the US will continue to push for improvement's in Vietnam's terms of access for US telecom companies. Protection of intellectual property also continues to be an issue that receives high level interest and to be an area where the US would like to see further progress. These issues will also get a lot of attention and are important to the US side. 

A further reality here is that the US did not get everything it wanted in the US-China WTO accession talks. Part of this is that it was much harder to move a country of such large population, military, and foreign policy interests and with such a fast growing economy that offers promise to US investors and company executives. Criticism of the US-China agreement is still very well remembered and is narrowing the negotiating room for the US side. T his also affects the US-Vietnam negotiations, as does the fact that the US will be going into Congressional elections soon and both US political parties arc staking out positions in advance of these elections.

What does all of this mean for Vietnam? The negotiators have noted that the next session of the talks will take place in March. Amcham in Vietnam has encouraged negotiators to target approval in April, noting that otherwise the accession could be delayed to 2008 or 2009.

Although I am not so sure that there is either a March or April deadline, I do believe that the longer negotiations continue to remain unfinished then the more complex they will become. I would therefore encourage both sides to spend the next month in both critical study of the costs and benefits of an agreement for both and (o continue dialogue and refrain from taking inflexible positions.  

The US-Vietnam relationship has broadened and deepened in the years since the embargo was lifted. For too long both sides refused to interact and to concentrate on the differences that separate us and not the much greater number of similar interests between our two countries that encourage co-operation and consultation - issues such as the bird flu, SARS, trafficking in women, protection of the interest of children and women, and so many other issues.

The time is now for both sides to build bridges and to find solutions that reflect both the realities in both countries and the benefits of a long-term and beneficial relationship. The US-Vietnam relationship is critical for both sides. Neither side will get everything it wants in these negotiations, but both must keep their eye on the long-term and not solely on the immediate in striking a fair and flexible compromise that works for both sides.
 

About the Author:  

Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com)

Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations. Mr. Runckel is one of only two non-Ambassadors to receive this award in the 200-year history of the U.S. diplomatic service.

 



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