VIETNAM: Preparations for WTO Membership

By Tran-Nam, Binh | Southeast Asian Affairs, January 1, 2007 | Go to article overview

VIETNAM: Preparations for WTO Membership

Tran-Nam, Binh, Southeast Asian Affairs

The year 2006 has proven to be another highly successful year for Vietnam's foreign relations. Many events signified Vietnam's growing stature in the international community. Throughout the year, Vietnam hosted visits from top US officials, including the then House Speaker, Dennis Hastert, then secretary of Defense, Donald Rumsfeld, and the secretary of State, Condoleezza Rice. In October, the Asian group of the United Nations nominated Vietnam as the continent's sole candidate for a non-permanent membership of the UN security Council for the 2008-2009 tenure. In November, Hanoi hosted the summit of the Asia-Pacific Economic Cooperation (APEC) forum, only eight years after it had joined the organization. However, the single most significant event that has captured international attention and the Vietnamese imagination was Vietnam's accession to the World Trade Organization (WTO).

Eleven years after Vietnam first applied for admission to the WTO, its General Council approved Vietnam's membership at a special session in Geneva on 7 November 2006. After Vietnam's National Assembly ratified its accession package, the WTO announced that Vietnam would formally become its 150th member on 11 January 2007. Of critical importance to Vietnam's full WTO membership was its long-term trading status with the United States. This issue was also finally resolved in 2006. In the evening of 8 December 2006 the US House of Representatives passed a bill granting permanent normal trade relations (PNTR) to Vietnam and five hours later, the US Senate passed a version of the same bill. This bill was signed by President Bush and became effective on 20 December 2006.

Vietnam's membership in the WTO represents a political and economic milestone in the modern history of Vietnam. Politically speaking, especially to the Vietnamese people, WTO membership confirms the international community's recognition of Vietnam's efforts in becoming a modern, outward-looking nation. This is particularly important in view of the fact that Vietnam was one of the last Asian countries to be admitted to WTO. Further, the granting of PNTR to Vietnam by the US government signals the end of Vietnam's long, often tortuous, path to full normalized relations with its former adversary. These outcomes strengthen Vietnamese public's confidence in the gradual reform approach adopted by the government.

Economically speaking, Vietnam's integration to the global economy via the WTO represents both tremendous opportunities and challenges. The economic benefits from WTO membership are expected to be highly significant. Greater international economic integration will ensure further domestic market building and sustained increases in Vietnam's exports and inflow of foreign direct investment (FDI), which have been crucially important to Vietnam's GDP growth and economic development. At the same time, the short-term adjustment costs of WTO membership may also be substantial. In summary, Vietnam's admission to the WTO in 2006 was a fitting tribute to the 20th anniversary of the country's first official embrace of the market-based renovation policy.

In order to maximize the potential benefits and minimize the potential costs of WTO membership, it is necessary for Vietnam to make careful preparations and planning, both in the short run and long run. This article outlines Vietnam's preparations for WTO membership and the domestic reforms it is undertaking in order to do so, and assesses the impact of this development on the broader Southeast Asian region.

Legal Reforms

In order to join the WTO, Vietnam has undertaken substantial legal reforms, at least from the legal enactment perspective. As a general WTO rule, a member country's laws relating to trade must be clear, certain, and transparent. In addition, domestic laws relating to agricultural subsidies, financial services, intellectual property rights, trade-related investment measures, tariffs, quotas, technical barriers to trade, and sanitary and phyto-sanitary measures must all conform to WTO conventions. …

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