Monday, November 1, 1999 | Print this story

Delay Rattles Certainty of U.S.-Vietnam Trade Accord
Economy: Deadlines for signing the deal have passed. Years of effort could be wasted if the Communist nation is not prepared for change.

By DAVID LAMB, Times Staff Writer

     HANOI--Three months after Hanoi and Washington struck a landmark deal to normalize economic ties, two deadlines for signing the formal agreement have passed, raising fears both sides could end up empty-handed after years of tough negotiations.
     To many political analysts, the delay is confirmation that the debate rages on between reformists and conservatives in the secretive Politburo over the fundamental question of whether Vietnam really wants to commit itself to a free-market economy. All indications are that it has not made up its mind.
     Despite the delay, Vietnam and the United States say the trade agreement could still be realized pending clarification of technical issues. But, Western economists say, it's clear that the clock is ticking and that Vietnam stands to lose an important economic opportunity if its ruling Communist Party continues to dither over how free and open it wants its markets to be.
     "In conversation after conversation I've had, the Vietnamese say they're going through the review process," said Peter Ryder, an independent investor and chairman of the American Chamber of Commerce in Hanoi. "They say: 'Don't worry. We'll get it signed by the end of the year.' All we can do is hope that is truly the case."
     Vietnam is the only country with which Washington has full diplomatic relations but not normalized trade relations. The U.S. ambassador, former prisoner or war Douglas "Pete" Peterson, has made the Bilateral Trade Agreement a cornerstone of his reconciliation mission here, believing it represents one of the last steps in ending the mutual distrust stemming from the wartime years.
     One reason the all-powerful Politburo--a group of 19 elderly Communists whose collective psyche is still shaped by Vietnam's long battle for independence--is having doubts is that the trade agreement cuts to the very quick of issues about maintaining control, protecting state enterprises and vested interests, and limiting foreign influence in order to protect local culture.
     The trade deal, the most comprehensive and stringent the U.S. has ever negotiated, would require Vietnam to fundamentally change the way it relates to the world. Trade barriers would be lowered, markets opened to competition, the role of state companies reduced and investment standards raised to international levels. U.S. negotiators argue that their demands are no tougher than those Vietnam will have to meet to gain entry to the World Trade Organization.
     In addition to internal policy differences, Vietnam--which seeks equilibrium in relations between China and the United States--knows it could be bad timing to sign the agreement when Washington and Beijing are at odds and Hanoi and Beijing are trying to settle a border dispute. In addition, Vietnam has grown weary of the country it defeated militarily sending a stream of officials from Washington to lecture on human rights and free markets.
     The matter of signing the agreement was further complicated by a visit Secretary of State Madeleine Albright made to Hanoi in early October. In meeting with Le Kha Phieu, secretary-general of the Communist Party, she sidestepped items on the agenda--human rights and the trade agreement--and asked about Vietnam's plans to implement true democracy and multiparty politics (of which it has none). Phieu, said a knowledgeable official, was surprised and peeved to be receiving more advice from another American about how to run Vietnam.
     By the time Albright got to New Zealand, where the agreement was to have been signed at an economic summit, Vietnam decided the 70-page document needed more clarification. The delay was particularly odd because Vietnam and the United States had signed a memo of understanding in July, accepting all points of the deal and making the signing only a formality.
     Although Vietnam's 77 million people represent an attractive long-term market for U.S. business, at this point Vietnam needs the trade agreement much more than the United States does. Foreign investment was down 60% for the first six months of 1999 compared with the same period last year, and except for the oil, garment and agricultural sectors, the economy is flat after years of heady growth.
     Ryder, quoting World Bank figures, said a trade agreement would increase Vietnam's exports to the world's largest consumer market by $800 million the first year. "And for us," he added, speaking of Vietnam's small U.S. business community, "it would give a meaningful psychology boost, which we badly need. Over time it would stimulate the local economy and make Vietnam a lot more attractive to American investors."
     Once signed, an agreement would have to be ratified by Congress. U.S. diplomats said if it isn't signed by March, about the time Congress will slip into election mode, the deal could be scrapped and that a new president would probably be much less attentive to Vietnam than President Clinton has been.
     Clinton lifted the trade embargo against Vietnam in 1994, granted diplomatic recognition in 1995 and in 1997 sent an ambassador to Vietnam--the first since Graham Martin fled Saigon in 1975. Clinton plans to visit Vietnam next year. The trip would make him the first U.S. president to set foot on Vietnamese soil since President Nixon spent a few hours with American troops here in 1969.

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