Workshop on Vietnam’s WTO Accession Demetrios J. Marantis U.S.-Vietnam Trade Council demetrios.marantis@usvtc.org Ho Chi Minh City Bar Association 6 February 2004

Overview Key Facts WTO Accession Process Key Issues in Vietnam’s Accession Relationship Between WTO Accession and the BTA

I. Key Facts WTO Accession From 1995 to 2004

WTO Members WTO Members Applicants for Accession 146 current Members 18 have joined since founding of WTO in 1995 Ecuador first in 1996 Macedonia (2003), Armenia (2003), Taiwan (2002), China (2001) most recent Applicants for Accession 27 countries seeking to accede 2 completed accession process and about to join (Cambodia/Nepal) Saudi Arabia likely to finish next Other applicants include Vietnam, Russia, Serbia, Ukraine, Laos

Vietnam: Key Dates Application for Accession: January 1995 Working Party Established: January 1995 7 Working Party Meetings July 1998 December 1998 July 1999 November 2000 April 2002 May 2003 December 2003 ACCESSION: 2005??

II. WTO Accession Process Legal Basis and Procedure

Legal Basis for WTO Accession: WTO Agreement Article XII Accession Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of other matters from provided for in this Agreement ... may accede to this Agreement, on terms to be agreed between it and the WTO ... Decisions on accession shall be taken by the Ministerial Conference. The Ministerial Conference shall approve the agreement on the terms of accession by at two-thirds majority of the Members of the WTO Accession to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement. What are “terms to be agreed” between an applicant and the WTO. No guidance whatsoever.

Process: The Four “Stages” of Accession Stage 1: Establish Working Party/Engage in factfinding Stage 2: Negotiate terms of accession with WTO Members Stage 3: Finalize terms of accession Stage 4: Obtain WTO approval and domestic ratification

Stage 1: Factfinding WTO establishes Working Party after country applies Working Party consists of those WTO Members that have an interest in that particular accession Purpose of Working Party is to examine the application and ensure that the applicant’s trade regime complies with WTO rules Members conduct comprehensive review applicant’s trade and economic policies that relate to WTO agreements Applicant submits “Memorandum of Foreign Trade Regime,” relevant laws and regulations, currently applicable tariff schedule, legislative action plans, etc. Working Party members review materials, submit questions, and seek clarifications See example of foreign trade memorandum...unbelievably comprehensive.

Stage 2: Multilateral and Bilateral Negotiations 2 parallel tracks of accession negotiations: multilateral and bilateral Multilateral Track: Working Party ensures that applicant’s trade regime complies with all WTO rules Periodic Working Party meetings in Geneva Working Party report details steps applicant will take to comply with the WTO agreements Bilateral Track: Parallel bilateral negotiations on tariff rates for particular products and market access for particular services Different WTO Members have different interests MFN: whatever is negotiated bilaterally applies to all

Stages 3 and 4: Finalizing and Becoming a Member Stage 3: Working Party finalizes and adopts “package” of: Working Party Report, which contains the applicant’s commitments to comply with WTO rules, Schedules of commitments on goods (tariffs) and services, and Protocol of Accession (i.e., the legal treaty between the applicant and the WTO) Stage 4: Becoming a Member WTO Approval: WTO General Council approves membership by 2/3 majority Ratification: Applicant completes domestic ratification procedures (typically ranges from 2-11 months) Membership: Applicant formally deposits acceptance and becomes a Member 30 days later See China Example

III. Key Issues In Vietnam’s Accession Goods, Services, IPR, and the BTA

Overview Stage 1: COMPLETED Stage 2: ONGOING Vietnam applied for accession on 4 January 1995 Working Party established on 31 January 1995 (chaired by Seung Ho) Submitted Foreign Trade Memorandum on 24 September 1996 Stage 2: ONGOING Multilateral Negotiations Working Party has nearly 40 Members Working Party has met 7 times (most recently in December 2003) Bilateral Negotiations Vietnam has conducted bilateral negotiations with roughly 20 Members on tariff rates and market access for services None of these bilateral negotiations has closed Cannot move to Stage 3 until Working Party members and Bilateral partners are satisfied “Quantum Jump” WP Members: US, EU, Aus, NZ, Canada, China, Taiwan, Japan, Colombia, Uruguay, Argentina, Brazil, India, Korea, Singapore, Thailand, Latvia, Malaysia, Switzerland

Multilateral Negotiations: Key Issues Multilateral negotiations ongoing Vietnam has submitted information, including action plans, to demonstrate how it will comply with the various WTO rules (particularly recently) WTO Members continue to request more clear information Key issues remain Customs Valuation: will Vietnam need extra time to apply WTO rules? Agriculture: will Vietnam continue to provide export subsidies? Trading Rights: will Vietnam provide full national treatment to allow foreign companies to import and export goods in/out of Vietnam? Sanitary and Phytosanitary (SPS) Measures: when will Vietnam institute a WTO consistent system? Intellectual Property: how will Vietnam enforce IPRs and when will it join relevant multilateral IPR conventions? VN submitted alot of information between May and December. Beginning quantum jump. Customs Valuation: VN wants more time beyond accession b/c lacks technical capacity. But it already is implementing WTO rules for US in BTA. Export subsidies: Vietnam wants to retain certain ag export subsidies allowed for dev countries (e.g., to help reduce marketing costs). VN provides them for rice, pork, coffee, fruits and veggies Trading rights: currently, foreigners can only import goods specified in their investment license. Cannot import goods for resale. SPS: big issue is when will VN comply (they want 2-3 year transition) and have enquiry point

Bilateral Negotiations: Key Issues Vietnam is negotiating bilaterally with more than 20 WTO Members Bilateral negotiations focus on 1) tariffs and 2) services Tariffs: Key issue is tariff reduction Vietnam must negotiate tariff rates for individual products bilaterally (i.e., with interested WTO Members) and then apply these rates to all Members (remember MFN!) WTO Members will expect Vietnam’s simple average tariff rate to approximate those of recently acceded Members (e.g., Armenia, China) 10 most recently acceded non-LDC countries had simple average rates of 8 – 17% for agricultural products and 4.8 – 8.9% for non-agricultural products Vietnam’s most recent tariff schedule (dated 22 July 2003) has simple average tariff rates are approximately 29.37% for agricultural goods, and 17.03% for non-agricultural goods WTO Members also seeking zero tariffs on key products (e.g., information technology products) See chart

Bilateral Negotiations: Key Issues (Cont.) Services: Key issue is how much access Vietnam will grant to WTO Members in various services sectors (e.g., telecom, banking, insurance, professional, etc.) Vietnam must negotiate access for individual service sectors bilaterally (i.e., with interested WTO Member) and then apply this access to all WTO Members (remember MFN!) WTO Members will expect Vietnam to provide access similar to that of recently acceded Members (e.g., Armenia, China) BTA Services Commitments (Annex G) are floor for negotiations Vietnam’s BTA commitments to U.S. roughly approximate level of access provided by recently acceding WTO Members WTO Members will expect Vietnam give them at least what it gave the United States in the BTA. So far, Vietnam has not done so. Members will also seek reduced phase-in periods (e.g., telecom) Will seek reduced phase in for telecom (currently 6 years for basic voice) and more foreign equity (currently 49%)

IV. Relationship Between BTA and WTO Accession BTA = Vietnam’s Best Friend

From the BTA to the WTO BTA: Foundation for WTO Types of Trade Agreements Pre-WTO: MFN Trade Agreement (e.g., BTA) WTO: WTO Accession Post WTO: WTO Plus FTAs (e.g., U.S.-Singapore FTA) Historical Context Necessary for U.S. to apply MFN tariffs to Vietnam Other countries have also gone through MFN agreements with U.S. (e.g., Russia, Cambodia) Big Step to WTO BTA based on WTO principles Through BTA, Vietnam has already committed to do many of the things that will be required of it for WTO accession.

Multilateral Negotiations: Many BTA Rules Equal or Similar to WTO Rules Some BTA obligations incorporate WTO Agreements in full Ch. I, Art. 3(4): incorporates WTO Customs Valuation Agreement Ch. IV, Art. 11: incorporates substantive provisions of WTO TRIMs Agmt Chapter VI, Art. 8: incorporates WTO Import Licensing Agreement WTO Accession will require Vietnam to apply such agreements to all WTO Members. Some BTA obligations incorporate partial WTO obligations Chapter I: incorporates fundamental principles of SPS, TBT, and others Chapter II: incorporates most of TRIPS Agreement Chapter III: incorporates most of GATS Chapter VI: based on WTO transparency principles WTO Accession will require Vietnam to assume full agreements, where relevant (i.e.., SPS, TBT, TRIPS, GATS), and apply to all Members.

Bilateral Negotiations: BTA Is Baseline for WTO Negotiations Some BTA commitments will form basis of negotiations with Members Ch. I, Annex E: tariff commitments Ch. III, Annex G: services commitments WTO Members will expect Vietnam to “multlateralize” these commitments pursuant to WTO MFN obligations.

BTA Implementation Facilitates 2005 WTO Accession SUBJECT BTA TIMETABLE WTO 2005 Customs Valuation Ch. I, Art. 3(4): adopt WTO Customs Valuation Agreement (CVA) by Dec. 2003. Implementation enables Vietnam to meet CVA requirements by 2005. State Trading Ch. I, Art. 8 provides substantially similar obligations to GATT Art. XVII. Implementation enables Vietnam to meet key GATT requirement by 2005. IPR/TRIPS Phased implementation of BTA Chapter II (most TRIPS rules) ends in June 2004. Implementation enables Vietnam to meet most TRIPS requirements by 2005.

BTA Implementation Facilitates 2005 WTO Accession (Cont.) SUBJECT BTA TIMETABLE WTO 2005 GATS, GATS Annexes and Telecom Reference Paper Ch. III and Annex F incorporate most GATS obligations, 3 GATS Annexes and Telecom Reference Paper into the BTA. Implementation enables Vietnam to meet key services requirements by 2005. TRIMs Vietnam must eliminate trade balance and forex TRIMs by 12/01 and all other TRIMs by earlier of 12/06 or WTO accession. Implementation furthers Vietnam’s ability to meet TRIMs obligations by 2005.

February 2004