Advisories announcing the hearing

WITNESSES

Office of the U.S. Trade Representative, Ralph F. Ives, III, Assistant U.S. Trade Representative, Southeast Asia, the Pacific and APEC

U.S. Department of State, Christopher LaFleur, Acting Assistant Secretary, East Asian and Pacific Affairs

General Electric Company in Vietnam, Andre Sauvageot

New York Life International, and New York Life Insurance Company, Gary Benanav

Oklahoma Department of Commerce, Vietnam Trade Office, and Pacific Ventures, Incorporated, Barry L. Clark

U.S.-Vietnam Trade Council, Virginia B. Foote

SUBMISSIONS FOR THE RECORD

American Chamber of Commerce in Vietnam, Hanoi, Vietnam, Chris S. Tragakis, letter

Boeing Company, Arlington, VA, statement

Thursday, July 18, 2002

House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.

The Subcommittee met, pursuant to notice, at 10:04 a.m., in room 1100 Longworth House Office Building, Hon. Philip M. Crane (Chairman of the Subcommittee) presiding.

[The advisory and the revised and revised #2 advisories announcing the hearing follow:]

Chairman CRANE. The United States and Vietnam celebrated an important milestone last December when the long-negotiated and long-awaited bilateral trade agreement finally entered into force. That was a significant achievement, and I am personally satisfied to finally see normal trade relations between our two countries. The Bilateral Trade Agreement (BTA) was the fruit of a process of gradual engagement that began back in February 1994 when President Clinton ended the 19-year-old U.S. trade embargo with Vietnam.

Over the past 8 years, the United States has gradually expanded its economic engagement with Vietnam. Since 1998 when the President first granted a Jackson-Vanik waiver to Vietnam to allow the Overseas Private Investment Corporation and the Export-Import Bank to support U.S. business activities in Vietnam, two-way trade with Vietnam has nearly doubled.

Our engagement with the Vietnamese Government has already borne tangible results in promoting important U.S. policy objectives, such as encouraging political and economic reform, promoting Asian regional stability, the fullest possible accounting for prisoners of war (POWs) and U.S. servicemen still missing in action (MIA), and resolving the remaining immigration cases of concern to the United States.

On the issue of immigration, which is the only issue that is directly related to the renewal of Vietnam's Jackson-Vanik waiver, Vietnam has a solid record of cooperation with the United States to permit Vietnamese emigration. Over 500,000 Vietnamese have emigrated as refugees or immigrants to the United States under the orderly departure program. Only a small number of refugee applicants remain to be processed under both the orderly departure and the resettlement for Vietnamese returnee programs.

It is clear that the United States should and will continue to address serious concerns with Vietnam. However, the most effective way for the United States to seek progress on political and economic reform, human rights, labor rights, and environmental standards is through continued engagement. To that end, the Jackson-Vanik waiver provides an opportunity for dialogue to address issues of concern with the Vietnamese and to pressure them for change.

I support the renewal of Vietnam's Jackson-Vanik waiver and urge my colleagues to oppose H.J. Res. 101. With that, I would like to yield to our distinguished colleague from Massachusetts, Mr. Neal.

[The opening statement of Chairman Crane follows:]

Mr. NEAL. Thank you, Mr. Chairman. I would like ask your permission to enter Mr. Levin's opening statement into the record.

Chairman CRANE. Without objection, so ordered.

[The opening statement of Mr. Levin follows:]

Mr. NEAL. Thank you, Mr. Chairman.

I think that we are in agreement that continuing normal trade relations with Vietnam is a very important issue. I also think that today's hearing highlights the need, however, to focus on some additional issues as they relate not only to this trade relationship, but well beyond.

Included in that area of concern obviously is the whole issue of human rights and labor issues. I think that I can say collectively for the Members of the U.S. House of Representatives, where we can ascertain what has happened, still, to those POWs who have never been accounted for, I think that always has to be part of a steady dialogue here in the Congress, to demonstrate that we have not lost interest in that issue.

Just as importantly, we hope to bring that matter to closure, perhaps a long time down the road, but hopefully sooner. So, I look forward to the testimony today.

I think that you are to be commended, Mr. Chairman. I think, by and large, the Trade Subcommittee has demonstrated a pretty good approach toward normal trade relationships with nations across the globe.

Chairman CRANE. Thank you.

With that, I would like to introduce our two witnesses in the first panel. We have Ralph Ives, the Assistant United States Trade Representative for Asia and the Pacific, and Chris LaFleur, Acting Assistant Secretary for East Asian and Pacific Affairs with the U.S. Department of State. I would suggest, gentlemen, if you can keep your statements to -- in the neighborhood of 5 minutes, all of your statements will be part of the official record.

With that, proceed in order.

STATEMENT OF RALPH F. IVES, III, ASSISTANT U.S. TRADE REPRESENTATIVE, SOUTHEAST ASIA, THE PACIFIC AND APEC, OFFICE OF THE U.S. TRADE REPRESENTATIVE

Mr. IVES. I would like to keep my remarks brief and submit my full statement for the record.

Thank you, Chairman Crane, Mr. Levin, and the other Members of the Subcommittee, for this opportunity to testify in support of continuation of the President's waiver for Vietnam of the so-called Jackson-Vanik amendment to title IV of the Trade Act of 1974.

Congress, particularly this Committee, has a strong record of endorsing normalized trade relations with Vietnam. Continuing the Jackson-Vanik waiver, which former President Clinton first invoked in 1998, is required to maintain normal trade relations (NTR) status for Vietnam. Retaining NTR status is necessary to fully implement the U.S.-Vietnam Bilateral Trade Agreement, the BTA.

Today, I will focus on our trade relationship about Vietnam. Mr. LaFleur plans to discuss U.S. efforts to work with Vietnam on human rights, including religious freedom and labor rights.

The BTA, which entered into force on December 10, 2001, represents the culmination of a decade-long bipartisan effort to heal the wounds of the Vietnam era and to restore our relations with this country of 80 million people. The path to normalization of our bilateral relations was formulated by former President Bush in a "road map" in 1991, and passed important milestones under the Clinton Administration, particularly lifting of the trade embargo in 1994 and conclusion of BTA negotiations.

Under the BTA, Vietnam has made extensive commitments to reform its economy, including revision of its legal system as it relates to trade, finance, and other related areas. The BTA is probably the most significant economic reform measure Vietnam has adopted since the 1980s when it began embracing a market-based economy.

The BTA is the most comprehensive agreement the United States has ever negotiated with a country subject to Jackson-Vanik amendment. This agreement requires Vietnam to provide access to its market for a wide range of U.S. goods, services, and investment and to apply the rule of law to its trade regime, thereby laying the foundation for more extensive reforms in its World Trade Organization (WTO) accession.

Of course, conclusion of an agreement must be followed by implementation. The USTR, working with other key agencies like the State Department and the U.S. Agency for International Development (USAID), is monitoring Vietnam's progress. So far, Vietnam's political commitment to fully implement the BTA is resulting in substantial progress and increasingly being translated into new laws, rules, and regulations.

We are working intensively with the Vietnam Government to assist in this. With the strong support of Congress, USAID has undertaken a unique and substantial program to assist Vietnam, committing nearly $8 million over 3 years. This is the first USAID program aimed exclusively toward implementation of a trade agreement.

Efforts to ensure BTA implementation are also occurring at high levels. In May, Deputy USTR Huntsman and Vietnam's Vice Minister Tu convened in Hanoi the first meeting of the Joint Committee established under the BTA. The status of implementation was a principal element of this meeting and will continue to be a major focus of our work.

In conclusion, maintaining NTR status is not only good for our bilateral relationship, but helps encourage regional stability and prosperity. As Vietnam gains economically, it integrates itself further into the regional and global market. Prosperous countries with close economic ties to each other make better neighbors. Continuing NTR status advances the fundamental U.S. interest we have in expanding opportunity and freedoms in Vietnam and the Asian region.

We urge Congress' continued support for the Jackson-Vanik waiver for Vietnam.

I would be pleased to respond to any questions you may have. Thank you, Mr. Chairman.

[The prepared statement of Mr. Ives follows:]

Chairman CRANE. Thank you Mr. Ives, and now, Mr. LaFleur.

STATEMENT OF CHRISTOPHER LAFLEUR, ACTING ASSISTANT SECRETARY, EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF STATE

Mr. LAFLEUR. Thank you, Mr. Chairman.

Chairman Crane, other distinguished Representatives on the Subcommittee, it is an honor to be here before you today. This morning I look forward to consulting with you about the President's decision to waive the provisions of the Jackson-Vanik amendment again this year.

Since the waiver was first granted in March 1998, it has been an essential component of our policy of engagement with Vietnam. I am confident that this extension of the waiver will continue to advance U.S. national interests in Vietnam.

The common theme that you will hear in my testimony today is that engagement works. This month marks the seventh year since we normalized our diplomatic relations with Vietnam, and we have seen substantial progress in a number of areas important to the United States. From increased trade and investments, to greater cooperation on POW/MIA recovery efforts, our relationship has advanced dramatically. I must say that much of the credit is due to the Members of this Subcommittee and the Members of the House and their continuing contributions to the development of U.S.-Vietnamese relations. Much of the progress on our most important bilateral issues would not have been possible without the direct assistance of Members of Congress and their excellent staffs.

Vietnam's cooperation on immigration policy, the test issue for the Jackson-Vanik waiver, is continuing. We have completed nearly all immigration processing under our refugee programs. Less than 100 applicants remain to be interviewed. We hope to finish processing of eligible applicants under the former Orderly Departure Program and the Resettlement Opportunity for Vietnamese Returnees program by the end of this calendar year. I want to emphasize that we will not consider our refugee programs to be completed, however, until the last eligible applicant has had an opportunity to be interviewed, or we have an acceptable accounting in each case.

Our relations with Vietnam were tested last year when over 1,000 Montagnards fled to Cambodia following large-scale Montagnard protests in February 2001. The Vietnamese Government initially objected to third-country resettlement of the Montagnards in Cambodia and indeed tried to repatriate them directly back to Vietnam. After discussions between the United States, Vietnam, Cambodia, and the United Nations. High Commissioner for Refugees, Vietnam tacitly acquiesced and dropped its opposition to arrangements to resettle those Montagnards from Cambodia to the United States. Hundreds of those Montagnards have already arrived here and nearly all should be in the United States by the end of the summer.

We would like to work with Vietnam to help develop the Central Highlands and encourage greater respect for human rights so that this kind of exodus is no longer necessary.

We have established an impressive spirit of cooperation with the Vietnamese in the search for our servicemen and women still missing in action from the Vietnam War. There is certainly still work ahead, much of it dangerous.

In April last year, seven Americans and nine Vietnamese lost their lives in a helicopter crash on a mission to recover the remains of missing Americans. Nevertheless, our operations continue unabated, and young volunteer American servicemen and women and their Vietnamese counterparts continue to brave these severe and, in some cases, dangerous conditions to locate the remain of our MIAs.

We are also continuing to resolve cases. Of the 196 Americans who were on the last "known alive" list, we have determined the fate for all but 39 men.

Vietnam's cooperation in our efforts to account for missing Americans from the Vietnam War remain full and in good faith. Without such cooperation, closure for many of the families of our missing warriors would not occur. Let me assure you, the quest for fullest possible accounting of our POW/MIAs remains one of our top priorities with Vietnam.

Since we reestablished relations with Vietnam, we have seen human rights improvements in that country. It is far from a satisfactory situation, and we see a long road ahead in encouraging Vietnam to make further improvements in this critical area.

We share with the Congress and the people of the United States a deep concern for the human rights situation in Vietnam. We take a particular interest in religious freedom in that country. We have established what we hope is a serious dialogue with the Vietnamese on human rights issues, and this fall we will hold the next of our annual high-level human rights discussions with Vietnam.

Secretary Powell has raised human rights issues with the Vietnamese senior leadership in his meetings, and our staff at our embassy in Hanoi constantly work to keep this a key issue in our bilateral relationship.

Our cooperation with Vietnam on labor issues is improving and conditions for workers in Vietnam are improving along with it. Under a memorandum of understanding (MOU) on labor, signed in November 2000, the U.S. Department of Labor has developed five technical assistance projects with Vietnam and has a sixth on the drawing board. We also held the first-labor dialogue between the United States and Vietnam in March of this year. We were pleased, after long years of negotiation, to see the U.S.-Vietnam Bilateral Trade Agreement finally enter into force last December.

The BTA is comprehensive, binding Vietnam to an unprecedented array of reform commitments, including tariff reductions, protection for intellectual property rights (IPR), market access for American service industries, and protections for American investors.

The results of the BTA are already there to see. In the first 4 months of this year, U.S. exports to Vietnam increased by over 25 percent, compared with the same period last year. This increase came even as our exports to most other countries in Asia were not doing nearly as well. Extension of the Jackson-Vanik waiver is required in our view to keep the BTA in effect and vital to keeping our momentum on trade.

We have been working closely with the Vietnamese on implementation of the BTA, funding technical assistance to review Vietnam's legal and regulatory framework, and help draft new laws to meet its commitments. As we work to put in place these changes, the business climate in Vietnam for U.S. business and Vietnamese business should continue to improve.

The Jackson-Vanik waiver remains a prime example of executive-legislative cooperation on foreign policy and an essential element of our engagement with Vietnam. We have seen greater Vietnamese cooperation on the total range of bilateral issues, and its successes are visible and plentiful. Congressional approval of the waiver sends a vital message to Vietnam's leadership and people that the United States wants a cooperative, constructive relationship with Vietnam. I am confident that this extension of Jackson-Vanik will further advance the national interest of the United States in Vietnam.

Thank you, Mr. Chairman.

[The prepared statement of Mr. LaFleur follows:]

Chairman CRANE. Thank you, Mr. LaFleur.

I would like to put a question to both of you, and that is, I understand that the Communist Party in Vietnam has changed its rules this year to allow its members to own private businesses.

Has the Vietnamese military made any progress toward free enterprise as well?

Mr. LAFLEUR. I believe that the Vietnamese military has been engaged in some private business, or what we would define as private business activity. I am not sure whether this represents a reform initiative as much as it represents an effort on their part to further strengthen their own financial situation and meet their operational requirements. I believe that is the general situation at this time.

I don't think we have seen a dramatic change in that situation yet.

Chairman CRANE. I see.

Why do you think that our exports to Vietnam have increased while our exports to many other countries in the region have declined?

Mr. IVES. Thank you, Chairman. I think partly due to the BTA, since Vietnam committed to and implemented a wide range of tariff reductions. Also, Vietnam is a relatively new market for the United States and many other countries have had long-term, established relationships with that country, Japan, and the European Union in particular. So, we are just beginning to develop our market in Vietnam.

Chairman CRANE. Have you both seen a decrease in the extent of corruption of the Vietnamese Government?

Mr. LAFLEUR. Mr. Chairman, I think the situation on corruption in Vietnam continues to be a major concern for American businesses operating there and for the U.S. Government in general. I believe there are private nongovernmental organization studies of corruption in Vietnam that indicate that Vietnam ranks somewhere around 75 on the list of 99 countries, zero being best, and 100, I guess, being worst, which puts it certainly in the lower tier and in an area of concern, although there are other countries on there with whom we have fairly vigorous and extensive trading relations as well. It is a problem and the problem needs to be worked on.

I think there is recognition in Vietnam on the part of the leadership there that they do have a serious problem, and it is impeding their economic development. They have established a campaign to combat it among their own officials with, in some cases, quite draconian penalties for violators at the worst end of the spectrum.

It certainly remains an issue of concern that we encourage them to address. In our view, one of the most effective ways for addressing it will be the establishment of a more transparent legal and regulatory environment. This is exactly one of the areas that we are working with them on pursuant to implementation of the BTA and providing them with technical assistance.

Chairman CRANE. Can you please describe in more detail the progress made in the labor dialogue taking place between the United States and Vietnam?

Mr. LAFLEUR. Mr. Chairman, on the books, Vietnam has a quite impressive set of regulations governing labor law relations. In reality, of course, there are severe limitations on the rights and abilities of Vietnamese workers to organize and effectively carry out labor activities.

There has been some identifiable progress in recent years. We have seen, for example, in 2000, approximately 72 -- I believe it was -- labor actions of various kinds conducted by workers against various factories, companies, and institutions in Vietnam. These were not -- these were not perhaps organized in the classic way along our lines, but certainly the fact that they were allowed to be undertaken and received the support of the labor organization in Vietnam is an indication of recognition on the part of the authorities that labor has a role to play in industry relations in Vietnam, and certainly we hope to see further evolution along those lines.

In addition, Vietnam -- we and the Vietnamese have signed, as I indicated, a MOU pursuant to which our U.S. Department of Labor is providing technical assistance to Vietnam in a number of areas, including social services, dealing with workers with disabilities, efforts to prevent exploitation of child labor, industrial relations. As I indicated, we are also working on a possible project to deal with HIV in the workplace. So, we do have cooperative efforts under way with Vietnam.

Lastly, I think I would point to the role of American business investing in Vietnam as providing an important example and demonstration to other companies in Vietnam about how to effectively manage labor relations. We know that major U.S. companies there are making a real effort to provide independent monitoring of labor conditions, working conditions in their factories. So, we think that as U.S. business presence expands in Vietnam, this can have a beneficial effect on the labor area as well.

Chairman CRANE. Thank you. Did you want to add anything to that Mr. Ives?

Mr. IVES. No, Mr. Chairman, I think he did a very good job of responding to the question. Thank you.

Chairman CRANE. Very good. Mr. Neal.

Mr. NEAL. Thank you very much, Mr. Chairman.

Mr. LaFleur, thank you for your testimony. Which of the following two statements would be accurate? If neither is accurate, please fill if the blanks: that modern Vietnam is half-Communist and half-capitalist when suited, or half-socialist and half-capitalist when suited?

Mr. LAFLEUR. Well, I think we are really -- we have a system here that certainly is at least half-Communist and as we have seen in the case of China, for example, Communist Parties have recognized that in order to have a chance of maintaining their hold on power, it is essential in this day and age that the countries be moving forward and that they be able to respond to the demands of their populations for better living standards, better conditions, as well as improving the strength of the Nation as a whole.

So we have seen an effort, certainly, pioneered in Asia, if you will, by the Chinese, but very carefully watched now and in many cases imitated by the Vietnamese as they attempt to maintain a one-party state, while at the same time introducing the market mechanisms and some of the operational practices that are essential to a free-market economy.

How these two systems are going to meld together for the long term, of course, is something we are all very much watching. I think a lot of us expect that over time it will be natural for the requirements of a market economy to have a substantial impact on the way politics works in all of these countries and certainly in Vietnam. I think we see some indications, as I indicated earlier, with respect to the labor relations area in which, already, we are seeing some impact from this market economy on the -- what is a classical Communist system.

Mr. NEAL. Thank you, Mr. LaFleur. One other question.

Did you mention you thought there had been satisfactory progress on MIA issues, or POW issues? Could you speak on that specifically for us.

Mr. LAFLEUR. Certainly.

We have been conducting, as you know, a series of joint operations that require very extensive Vietnamese participation and support in Vietnam, since the late 1980s. Since that time, we have conducted numerous, what we call, "joint field investigations" in that our teams go off with Vietnamese counterparts to excavate areas where we believe losses have taken place in order to try to find remains and any other indications of the fate of our missing. Those operations can only be effective if the right amount of staff and support work precedes them and if the teams get the kind of support in the field they need.

As I indicated, a number of locations where these operations take place, particularly these days, are in remote areas, hard to support and hard to live in. So, we really do have to have pretty full cooperation to make these possible, and we have seen that from the Vietnamese.

We have also had a series of turnovers by the Vietnamese of documents, hundreds of pages of documents, that help give us some pointers to what happened during the war and shed some light on the fate of the missing, again. The Vietnamese have provided, as well, a number of living witnesses of events that occurred, in some cases, in quite remote areas so that we can try to get as firsthand as possible accounts of incidents in which we believe some of our missing were lost. That effort continues; we have interviewed quite a number, and we have more being made available by the Vietnamese.

So, it is a package that -- there are a number of important elements that go into making that total package and making the judgment about Vietnamese cooperation, but the work continues, the accounting continues; and so we feel that it is justified to make that judgment.

Mr. NEAL. Thank you, Mr. LaFleur.

Thank you, Mr. Chairman.

Chairman CRANE. Thank you. Ms. Dunn.

Ms. DUNN. Thank you very much, Mr. Chairman.

It is good to have you here today, gentlemen. Thank you for coming.

As part of the BTA, Vietnam has pledged to phase in over 18 months the trips agreement under the WTO. I am wondering if you could please -- maybe, Mr. Ives, this is an appropriate question for you. Could you bring us up to date on how they were moving along with the implementation, particularly with the enforcement of the laws that would provide the trips qualification, please?

Mr. IVES. Certainly. Thank you very much for that question.

Vietnam, as you indicated, has 18 months to comply with the TRIPS obligation as part of the bilateral trade agreement. Overall, Vietnam is making substantial progress in implementing its commitments under the BTA, which, as I indicated, are among the most comprehensive we have ever negotiated with any country. In terms of the IPR provisions, in particular, we have had a team in Vietnam working with Vietnam overall in implementation. The IPR provisions are part of that effort to work with Vietnam in implementing its commitments.

The enforcement remains a serious concern with the Vietnamese on intellectual property protection. It is a serious concern throughout the region. Piracy is widespread. We have been working with all the countries in the region to bring piracy under control, but we have a long way to go in terms of Vietnam and indeed most of the other countries in the region to reduce the rate of piracy. So, we still have a great deal of work to do on that.

Ms. DUNN. I can imagine. I think that is very typical in some of the nations that we are doing BTAs with.

What about the progress toward their membership in the WTO? I know that they have applied, but I am not sure what the outstanding issues are and where that stands. Would you care to comment on that.

Mr. IVES. Certainly.

Vietnam applied for membership in 1995. There have been, I believe, five meetings of what we call the "working party," which is the committee -- basically, Committee of the Whole -- of all WTO members working with Vietnam in its accession process. The most recent meeting of this working party was earlier this year.

The USTR and other countries are actually using the bilateral trade agreement as the foundation for Vietnam's accession to the WTO, again highlighting the importance of the BTA not only in the bilateral relationship with Vietnam, but also in terms of its accession process.

That said, Vietnam still has a way to go, primarily in its market access commitments, not only to us but to other WTO members. So, it is making good progress. We have indicated to Vietnam that -- Ambassador Zoellick has indicated to Trade Minister Vu Khuan and at lower levels that we are pleased to work with Vietnam in the accession process. We want Vietnam to accede to the WTO, but it has to be on terms that other members have acceded to the WTO.

Ms. DUNN. Thank you, Mr. Ives.

Thank you, Mr. Chairman.

Chairman CRANE. Mr. Levin.

Mr. LEVIN. Thank you, Mr. Chairman.

Welcome. Let me just ask a couple questions about our commercial relationships.

There is a reference in the testimony to the increase in exports, but say a word also about the import side of it, just so we can get a balanced picture here. There has been an increase, right, of imports? Just say a word about that so the record is complete.

Mr. IVES. Thank you, Mr. Levin. In terms of U.S. imports in 2001, which the most recent year, we have complete data, Vietnam's -- U.S. imports from Vietnam increased approximately 21 percent to $1 billion. During the first 4 months of this year, we don't have a complete record for 2002. During the first 4 months of this year, Vietnam's imports were valued at a little over $400 million, and that represents approximately a 67-percent increase over the same period in the previous year.

Mr. LEVIN. As I understand, a substantial portion of that, a growing portion, is in textiles, apparel.

Mr. IVES. Textiles and apparel during the full year 2001 represent a little under $50 million of U.S. imports. For the first 4 months of this year, textiles and apparel imports represent about $65 million.

Mr. LEVIN. I mention it in part because I think negotiations have begun on a textile agreement, right? There have been some early discussions about a textile agreement with Vietnam?

Mr. IVES. We have had some consultations with Vietnam on textiles. We have had teams in Vietnam discussing this with them.

Mr. LEVIN. I think it has been productive for the Chairman and others to raise and for to you discuss the labor picture in Vietnam. When we talk about movement towards a free market, a free-labor market is an important piece of free market, and that is reflected in the MOU.

I think that in terms of Mr. Neal's question about the balance between Communist control and non-Communist control, socialism and the free-capital market, capitalist market, movement towards a free-labor market is a critical element -- so critical that it is likely to be resistant.

As mentioned by one of you, there were some worker actions allowed, and that is a step forward. Still there is control, there can only be, in essence, one labor union controlled by the party that controls the government. I think it is important that as we discuss the textile agreement with Vietnam that this issue be raised, as it was with Cambodia.

I think the textile agreement with Cambodia was a very significant step forward, and Cambodia is moving, with the help of technical assistance from the United States, including the labor movement of the United States, towards a more free-labor market. When our staff was in Cambodia, one of the concerns was that their neighbors did not have the same, and we were moving in the same direction and, therefore, in terms of competition could have an economic advantage.

So, I hope very much that -- and we have made this clear, a number of us for a number of years, going back to the previous Administration -- as we talk over with the Vietnamese a textile agreement that that be very much -- not the only, by any means, but an important ingredient. I mentioned that to the Ambassador when we had a discussion, the distinguished Vietnamese Ambassador, yesterday.

So, I don't know if you want to react to that, but I wanted that to be very clear on the record. We have made it clear to Mr. Zoellick and, I think, to Mr. Evans. I am not sure if we made it clear to Mr. Paul.

Any comment?

Mr. IVES. It is very clear, sir. I mean, we understand.

Mr. LEVIN. Thank you.

Chairman CRANE. Mr. Houghton.

Mr. HOUGHTON. Thank you, Mr. Chairman. Thank you, gentlemen, for being here this morning. It always is fascinating to me, having lived a lot longer than an awful lot of other people around here, to think of our enemies being our friends. I mean, I think of it in terms -- I happened to be in World War II -- of Germany, Japan, Italy, Korea, and now Vietnam, and how powerful the urgings of peace and the cementing of that peace through economic activity are. I just hope we can continue that.

I have got just a couple of questions. One, we do have, as a counterbalance to Mr. Levin, a question on imports: We have been rather successful in terms of our exports, haven't we, to Vietnam? Maybe you want to elaborate on that a little bit.

Then the other thing is, as you move forward and get a solid and a much more meaningful relationship, you have to have sort of a rule of law at play. One of the things that bothers me is this whole concept of intellectual property rights, which are so important here, particularly since the United States, if it is to export all it has to export, on -- with an advantage, it can't be low labor rates, it has got to be some sort of technical input.

So you might be able to comment on both those issues.

Mr. IVES. Certainly, sir. In terms of exports, I believe, as Mr. LaFleur indicated, our exports to Vietnam --

Mr. HOUGHTON. Could you move that microphone a little closer to you.

Mr. IVES. In terms of our exports to Vietnam, they are up approximately 27 percent the first 4 months of this year, compared to the first 4 months of 2001. They are covering a wide range of products -- wood and paper, cotton, chemicals, machinery -- they are all among the important exports that we are expanding to Vietnam.

You have also made a very important point in terms of the rule of law. This is one of the most significant changes that the BTA will help Vietnam with, that is, introducing transparency in its rules and regulations, requiring Vietnam to observe public trade related rules and regulations, requiring Vietnam to receive public comment much along the lines that the United States does when it implements rules and regulations. So that is all very important.

In terms of intellectual property rights, that is a very, very serious issue with Vietnam. We recently put Vietnam on our special 301 list indicating that it does have serious problems and that we need to work very closely with Vietnam on those problems, and we will do so.

Mr. HOUGHTON. Mr. LaFleur, have you got any comments you would like to make?

Mr. LAFLEUR. Sir, referring to your earlier comments on the transition that has taken place in our relationship with Vietnam, I guess I would observe on a somewhat personal note, if you will permit me that, some 10 years ago I had an opportunity to visit Hanoi when I was assisting General Vessey in his efforts to improve cooperation from the Vietnamese on our POW/MIA accounting.

I had a chance to go back to Hanoi for the first time in a decade only a few months ago, and I can attest that Hanoi has changed remarkably during that period. The visible level of economic activity, the tremendous expansion of commerce, the availability of consumer goods, in some cases quite costly consumer goods, was extraordinary to see having seen what Hanoi looked like a decade ago.

There was a visible change when you see it in that sort of snapshot. Although it is true that progress on some issues with Vietnam isn't always as rapid as we would like to see, there clearly has been progress and it is visible.

I might note, too, that the reason I was in Vietnam a few months ago was because Vietnam was hosting a meeting of the Association of Southeast Asian Nations (ASEAN) regional forum members, and one of the transformations that has taken place in Vietnam's role in the region is that is as joint ASEAN. It is now being incorporated into the community of Southeast Asians, which includes, of course, many excellent friends and good allies of the United States. So the role Vietnam is playing in the region is different. Our cooperation, I think, is expanding with them.

So the trend, sir, as you so correctly noted, is very different from what it was in the past, and I think, very positive for U.S. interests.

Mr. HOUGHTON. Thanks very much.

Thank you, Mr. Chairman.

Chairman CRANE. Mr. Shaw.

Mr. SHAW. Thank you, Mr. Chairman.

I was in Vietnam many years ago, in fact, I think Sam Gibbons of Florida was Chairman of the Trade Subcommittee when I was there. I would hope there have been some remarkable changes over the years, so that is very good to hear. I hear from the Ambassador, and also from Members who have traveled to Vietnam, that there has been a great change.

Where are we as far as corruption in the government? How have they proceeded? How are they subsidizing trade coming into the United States -- these types of things, if you would comment on that, either one of you.

Mr. LAFLEUR. Perhaps, if you will permit me, I will make a couple of quick comments on the corruption issue, and perhaps my colleague will respond on the subsidy of trade.

As I indicated in response to an earlier question, there clearly is a significant level of corruption in Vietnam, including corruption that affects performance of official duties. There are studies by nongovernment organizations that note the seriousness of this and rank it -- in fact, in Vietnam versus other countries. Vietnam certainly has a serious problem based on those sorts of standards.

We are doing what we can, I think, to encourage Vietnam to improve on corruption, to try to develop a more transparent system of rules and regulations, which in the long run is probably the best way to try to stamp out this practice in a broad and general way.

Vietnam itself, clearly the government there has made the prosecution of this crime, this series of crimes, when they had identified it as a serious national concern. No question, the general person in the street, if you will, in Vietnam finds corruption unacceptable, even as they have to live with it.

So I think that there are efforts under way to deal with it, but you are absolutely correct in pointing to it as a very serious concern for the Vietnamese and for us.

Mr. IVES. Thank you, sir. In terms of your question regarding subsidies, we are not aware of any direct subsidies that the Government of Vietnam is providing in terms of their exports to the United States. On a positive note, I would like to point out that the Government of Vietnam, as part of its transition to a market-based economy, is moving a number of its State-owned enterprises to the private sector. So that to the extent that the government is involved in its production, manufacturing and sales of products, as it moves from State-owned enterprises to the private sector, any degree of involvement by the government should diminish.

Mr. SHAW. What if -- any other restrictions on foreign investment in Vietnam?

Mr. IVES. The BTA would require Vietnam, over a transition period, to allow U.S. investors to gradually own greater shares of various --

Mr. SHAW. Where are we now? What are those percentages now?

Mr. IVES. In this case, U.S. companies cannot invest in the particular sectors that we negotiated in the bilateral trade agreement, for example, in telecommunications distribution services, which is one reason why in the BTA we wanted to make sure that Vietnam would allow those investments to occur.

Mr. SHAW. It would seem to be to their advantage. I mean, it is a capital-poor country. It would seem they would want to be reaching out everywhere they can for foreign investment, not necessarily from here, but all over the world. As I recall, the desire of American business to be able to invest in Vietnam and open up trade with Vietnam, back when I was there years ago and it wasn't open, this was really what thrust us into opening up trade and getting us where we are today.

Mr. IVES. Clearly, U.S. business wants to be engaged in Vietnam, which is, of course, one reason why we asked for and received the market openings that we did under the bilateral trade agreement.

Mr. SHAW. I recall, when we were there, Jake Pickle, who was a very highly regarded Member of this Committee, had his wife along. She stumbled and broke her hip, and we really had to fly her out of Vietnam to get her proper medical treatment.

Are their medical facilities better than they were at that time? As I recall, we flew her over to Japan to have her treated.

If you don't know the answer, it is not really in the scope of things, but I think does tell us a lot about the quality of life today in Vietnam.

That question will go unanswered. Let's hope we don't have anyone else.

Mr. LAFLEUR. We will be happy to try and get an assessment of that and provide it to you.

I think it is fair to say the conditions medically are improving, but there is no question that having American medical supplies, equipment, devices, and pharmaceuticals more widely available in Vietnam can only improve the situation.

[The information follows:]

Currently available medical care in Vietnam is basic by U.S. standards, reflecting the limited resources available.  For example, anything involving broken bones or other surgical procedures among the western expatriate community usually results in a medical evacuation to Bangkok, Singapore, or points beyond.  Nevertheless, Vietnam has a growing number of medical professionals able to provide increasingly good care to those who can afford it, despite the lack of resources one would find in Western clinics.  Medical care for the majority of Vietnamese remains inadequate.

Mr. SHAW. I will close with this. In just following up on this, the physician that was traveling with us at that time said they took her down to the hospital to x-ray her, and he came back and said, this is 1950s technology. If there was ever a better argument for opening up Vietnam, that was it.

Thank you, Mr. Chairman.

Chairman CRANE. Mr. Herger.

Mr. HERGER. Thank you, Mr. Chairman.

Mr. Ives, which U.S. exports are we seeing the most growth in since the BTA went into effect?

Mr. IVES. The major categories of U.S. export growth are in wood and paper products, cotton, chemicals, and machinery.

Mr. HERGER. Can you tell me, why do you think our exports to Vietnam have increased while our exports to many other countries in the region have declined?

Mr. IVES. We would like to attribute it, at least in part, to the bilateral trade agreement. I think that is a fair attribution in that it significantly reduces tariffs on a wide range of products to the United States and therefore lowers the cost of exporting to Vietnam.

In addition, Vietnam is a relatively new market to the United States since Vietnam's major trading partners are primarily the European Union and Japan. So, we are starting from a relatively low base and developing a market.

Mr. HERGER. Thank you.

Then a final question: How do you believe the Vietnamese would respond if the President's Jackson-Vanik waiver were disapproved, and would it adversely affect our ability to encourage the Vietnamese to expedite the processing of immigration cases?

Mr. LAFLEUR. Sir, the Jackson-Vanik waiver has clearly been a key element in encouraging many of the positive trends we see in Vietnam today. I think it is true that our arrangements on the effort to account for our POWs and MIAs and, as well, as our efforts to bring populations of people of special concern to the United States out of Vietnam, are arrangements that were put into place before that, commitments that the Vietnamese made over the years and have honored.

So, our hope certainly would be that they would continue. An expectation, I think, is that they would continue to provide the sort of effort that we look for in those areas.

Of course, in any relationship, the steps the two sides take are going to have an impact as new issues come up and new problems arise. So, I think I would continue to point to the waiver as a very important element that helps provide the positive atmosphere in which we can more easily address our additional concerns and problems with Vietnam, as well as maintain the current positive trends.

Mr. HERGER. Thank you very much.

Thank you, Mr. Chairman.

Chairman CRANE. Mr. English.

Mr. ENGLISH. Thank you. Thank you, Mr. Chairman.

You know, I am continuing to be concerned somewhat with the cooperation of the Vietnamese Government to provide the fullest possible accounting of POW and MIA cases. I guess what I would like to pose to the Administration witnesses is, how can the United States continue to most effectively influence the pace and direction of economic and political reforms in Vietnam while, at the same time, gain the fullest possible accounting of these POW/MIA cases and progress on remaining immigration cases?

Mr. LAFLEUR. Sir, I think we have in place a number of tools that have been advancing us toward our goals with Vietnam, particularly with respect to immigration and toward the fullest possible accounting for our POWs and MIAs.

As I indicated earlier, the work takes years and has taken years and particularly in the case of POW/MIA accounting, we can see that this effort is going to have to continue for some time, but the results do come in and they do come in over time, but they are coming. Therefore, we feel it is important to maintain the positive momentum that we have developed with Vietnam.

The BTA, the trading relationship is part of sustaining that positive environment in any government. Certainly including a government run by one party as in Vietnam, you are always going to have differences of view among those involved about the commitment to reform that the country should take, the particular decisions that are going to affect the relative economic performance, and benefits that different regions of the country receive from any change in policy.

We want to do our best, I think, to empower those who want to move the country forward, to have a more open trading environment, to be more welcoming to American business, to be more cooperative in general with the outside world. That kind of environment, of course, benefits our economic interests, naturally.

Mr. ENGLISH. I understand. Mr. LaFleur, reclaiming my time, we have seen the Vietnamese Government take some baby steps to liberalize their economy. Do you feel corruption in recent years has increased or decreased, and to what extent within the economy?

Mr. LAFLEUR. I am not sure I can give you a statistical response to that. I think the sense is if you look at it over a time span of a decade or two, you would probably see an increase as the opportunities for that sort of behavior have expanded in what is a more open economy and of course, too, as officials feel the need to supplement their income from the private economic activity that is expanding around them.

However, as I indicated earlier, I think the government does see how serious a problem this is for them, both in economic and political terms, and is trying to deal with it more effectively.

Mr. ENGLISH. What concrete measures have they undertaken, in your view, to address the problem of corruption?

Mr. LAFLEUR. They have instituted a campaign to encourage people to report on corruption that they encounter and they have established some -- a wide series of penalties for varying degrees of construction which go up to the most severe penalty that can be levied. So, they are trying to deliver a signal to the officialdom there. Whether it is going to be effective remains to be seen.

Mr. ENGLISH. Thank you, Mr. Chairman. I have no further questions.

Chairman CRANE. Gentlemen, I want to express our appreciation for your testimony and cooperation in communicating with us in getting the message out, and we look forward to working with you on a continuing basis. Last time I was in Vietnam was a couple of years ago, but they told me at that time that 65 percent of the Vietnamese population was not even born at the time of the U.S.-Vietnam War. Is that up to 70 percent by now?

Mr. LAFLEUR. Sir, once again, I don't have a statistic for you, but I think we are pretty confident it is up in that range now; yes, sir.

Mr. WATKINS. Mr. Chairman.

Chairman CRANE. Wes.

Mr. WATKINS. I indicated I did not have a question, and I mention, though, from the testimony I have a question if I may ask, sir. Are we getting the cooperation -- I shouldn't say -- is Vietnam getting the cooperation from the developing banks like World Bank, the Asian Development Authority? Are you familiar with the increases? Are they increasing in the development phases in Vietnam? I know they have massive problems in pollution and solid waste and a lot of other things. The Chairman was correct in that I think most of the population is less than 25 years of age. Do you have any information on that by chance?

Mr. LAFLEUR. We can certainly get you some. I am confident, although I don't have the figures with me, that the Asian Development Bank (ADB) has a number of projects in Vietnam, but we can get you further information.

Mr. WATKINS. I would like to see what kind of increases or what the situation is, because I know what several of them involve. They have indicated they had more than just a passing interest in trying to solve a lot the problems, and some of my people I worked with have indicated a desire to try to help, and I want to see if they are truly making that effort.

Thank you, Mr. Chairman. I apologize.

[The information follows:]

Vietnam is working very closely and very successfully with international development organizations and international financial institutions like the World Bank, including the International Financial Corporation, and The Asian Development Bank, as well as the IMF and the UNDP. These organizations are actively working with Vietnam on the full range of development issues, including health, as well as economic, legal and institutional reform. Many other donors are also working with Vietnam in these areas. Sustainable development, in particular preservation of the environment and natural resources, is a primary focus of many international organizations and donors, including the United States.

Chairman CRANE. With that, this panel may be excused.

We now would like to call to our next panel, Mr. Gary Benanav, Chairman and Chief Executive Officer of New York Life International; Ms. Virginia Foote, President of U.S.-Vietnam Trade Council. The next gentleman I am going to skip over for a moment, because I want our distinguished colleague from Oklahoma to introduce him., and Mr. Andre Sauvageot, Chief Representative of General Electric in Vietnam.

Now I yield to Mr. Watkins to introduce our fourth panelist.

Mr. WATKINS. Thank you for letting me have the honor, and members of the panel, I just would like to say that the other fourth member is Barry Clark, who is the Director of Oklahoma-Vietnam Trade Office in the Oklahoma Department of Commerce. It is our true belief that there is a lot to be developed and gained from both sides if we are working and engaging one another and finding out what our problems are and what we can do to make a contribution in that area. We are very fortunate to have a person like Barry Clark heading our efforts from Oklahoma, and we think we are building not only trade relations but tremendous relationships in the future not only between Oklahoma and Vietnam, but for our country. Thank you, Barry.

Chairman CRANE. Now, gentlemen, if you will proceed in the order that you were organized at the dais there, and try and limit your presentations to 5 minutes of oral testimony, and any written remarks will be made a part of the permanent record.

Chairman CRANE. With that, Mr. Benanav.

STATEMENT OF GARY BENANAV, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, NEW YORK LIFE INTERNATIONAL, AND VICE CHAIRMAN, NEW YORK INSURANCE COMPANY

Mr. BENANAV. Thank you, Mr. Chairman and Members of the Subcommittee. My name is Gary Benanav I am Chairman and Chief Executive Officer of New York Life International and Vice Chairman of New York Life Insurance Company. In addition to my corporate responsibilities, I am Chair the U.S. National Committees of the Pacific Basin Economic Council, known as PBEC, and the Pacific Economic Cooperation Council, known as PECC. My company is also a leader in the U.S.-Vietnam Business Council and the U.S.-ASEAN Business Council.

I appreciate the opportunity to testify on an issue which is important not only to the United  States and Vietnam, but to the entire Asian Pacific region. Once again this year, Mr. Chairman, the eyes of the world are looking to the United  States to see if we are going to continue to engage fully with Vietnam. Once again this year, the House Committee on Ways and Means must consider a resolution disapproving of the waiver of the Jackson-Vanik provision of the Trade Act of 1974.

The steadily increasing bipartisan majority of the House since the first disapproval resolution reflect the understanding and insights which we have gained as more officials, legislators, educators, business managers, and tourists have seen Vietnam firsthand. This year, the stakes remain high.

The continuation of Vietnam's normal trade relations status is vital for four reasons:

First, it is a precondition for the further integration of this important emerging Nation into the Asian Pacific community.

Second, it is an essential element to the continued progress of Vietnam towards WTO membership and the rules-based trading system.

Third, it is necessary in order to improve the international investment environment in Vietnam, and fourth, and perhaps most important, it is vital if we want to continue improving the U.S.-Vietnam relationship and enhancing the economic development, security, and stability of the region.

I believe that we must remain fully engaged with Vietnam, both economically and politically, in order to anchor Vietnam in the world community of nations. The multilateral rules based on cooperation and transparency form a set of building blocks for a global system that can secure and sustain economic stability. Without economic stability, no nation can hope to achieve political stability and security. Vietnam needs to be part of this global system if it is to realize its full growth potential.

How can the United States best anchor Vietnam in the global rules-based system? By expanding our bilateral economic relationship. We must continue Vietnam's NTR status and not link it to other, albeit important, issues which should be pursued vigorously but separately as part of the improving of the U.S.-Vietnam relationship.

Vietnam needs to take further action to promote that process also. First and foremost, it must fully implement the terms of the Bilateral Trade Agreement. In addition, Vietnam should move as rapidly as possible to join WTO and continue its transition to a market-based economy grounded in the rule of law.

The WTO is a crucial next step. The continuation of Vietnam's NTR status is a precondition to the full implementation of BTA and for Vietnam's eventual entry into the WTO. Even with the determination demonstrated by the citizens and leadership of Vietnam, the process of joining WTO will not be simple. Doing so will require Vietnam to develop institutional capacity to operate as an effective competitor in the world's marketplace and to construct a domestic market in which companies from the United States and other WTO member countries can operate effectively.

Mr. Chairman, I am convinced that it is in our national interest to assist Vietnam in developing that institutional capacity. We should support capacity-building efforts that can be made available through multilateral, regional, and bilateral mechanisms. The private sector can contribute to this assistance process. My company, for example, has made several corporate commitments to build capacity in Vietnam's financial sector. However, the willingness and ability of the private sector to continue programs like this are fully dependent upon overall economic context, the positive context created by granting NTR status to Vietnam.

In conclusion, Mr. Chairman, continuation of progress in the relationship between the United States and Vietnam is dependent on this waiver. Broad engagement will benefit not only the United  States and Vietnam, but also the entire community of responsible nations. Thank you, sir.

[The prepared statement of Mr. Benanav follows:]

Chairman CRANE. Thank you Mr. Benanav. Ms. Foote.

Ms. FOOTE. Mr. Chairman and Members of the Subcommittee, I am very pleased to be here today testifying on behalf of the U.S.-Vietnam Trade Council before your Subcommittee. At this important time again this year, as you assess the renewal of the Jackson-Vanik waiver for Vietnam, we strongly urge you to vote against H.R. Resolution 101.

The Trade Council is a trade association, with strong membership from the American business community, working to develop relations between the United  States and Vietnam. We also chair a coalition of over 270 associations and companies who support trade relations with Vietnam and the renewal of Jackson-Vanik.

The U.S.-Vietnam Trade Agreement and NTR status, which only began in December last year, is the beginning of a new and extremely important, indeed hopeful, chapter in U.S.-Vietnam relations. December 10, 2001 may well be the most significant day in U.S.-Vietnam relations since the war ended.

While further steps in normalization lie ahead, the first 6 months of NTR have shown again that the 12-year path of the step-by-step normalization process has benefited bilateral relations, Vietnamese citizens, Americans' interests -- and all impressively. What other conflict, so bitterly and costly fought, has come to new resolution and a new beginning so successfully?

The U.S.-Vietnam Trade Agreement is the most comprehensive trade agreement Vietnam has ever signed and the most comprehensive NTR agreement the United States has ever negotiated in exchange for sweeping commitments from Vietnam, which include providing greater market access for trading goods and services, protecting intellectual property rights, improvements in the investment regime, and far greater transparency than U.S.-granted normal trade tariffs.

The results that were identified from the last panel have been immediate. Over the first reporting period, the first 4 months of this year, two-way trade between the United States and Vietnam is up over 60 percent. In implementing the BTA, Vietnam has already passed laws and ordinances, one on Most-Favored-Nation status and national treatment status, safeguards, Customs valuation. It is drafting a commercial arbitration law, transparency laws, auditing laws, and regulations. These are just a few.

Private companies, multilateral donors and governments, and U.S. organizations such as the Trade Council are providing technical assistance and comments on each of these laws and multiple drafts of these laws. American companies are beginning to turn a profit. The reforms in Vietnam don't just apply to foreign companies but also to domestic companies. An enterprise law was passed last year, and since that time, there are 53,000 new private enterprises creating over a million jobs in Vietnam.

Also important was the opening of a stock market in July 2000. It is still a tiny stock market. There are only 15 companies listed, but the government has plans to expand this year and to include joint stock companies.

American involvement in this process of economic reform is welcome in Vietnam and is extremely important to overall bilateral relationships in the long run. Our business community, particularly with extensive involvement of the Vietnamese American business community, continues to play a key role in the economics and the normalization of commercial relations and in the implementation of the BTA.

The initial waiver of Jackson-Vanik in 1998 allowed trade support programs such as the Overseas Private Investment Corporation, Export-Import (Exim) Bank to get started, but now the waiver includes NTR status, and therefore it is even more critical that it be renewed.

In addition to great progress the United States and Vietnam have made on MIA and immigration work, our relationship has strengthened in many personal and more human ways. Many Americans are traveling to Vietnam. Vietnam veterans are returning on organized trips and individually. Vietnam veterans have led the way in the normalization process. Vietnamese Americans are traveling to Vietnam; 230,000 Vietnamese Americans returned to Vietnam last year for visits. Two to three billion dollars are remitted annually.

Additionally, the United States and Vietnam have signed a memorandum of understanding on labor issues that include a $3 million support program for technical assistance. Many American companies are involved in these programs. Since our two countries set out on a path to normalize relations, Vietnam has had many successes while suffering a few setbacks. In the year 2000 and 2001, Vietnam became the second-largest coffee exporter after Brazil, yet coffee prices have plummeted and serious land rights disputes have emerged. Seafood exports have risen dramatically from Vietnam, while catfish farmers in the Mekong Delta, who now face an antidumping petition by the U.S. industry, and labeling rules were changed.

The point is the trade relationship is developing. A strong bipartisan policy of a step-by-step process of normalizing relations with Vietnam has produced positive results for Americans, Vietnamese, regional interests, and we encourage the continuation of this policy. On behalf of the U.S.-Vietnam Trade Council, we urge the renewal of Jackson-Vanik again this year for the benefit of both American and Vietnamese interests. Thank you.

[The prepared statement of Ms. Foote follows:]

Chairman CRANE. Mr. Clark.

STATEMENT OF BARRY L. CLARK, PRESIDENT, PACIFIC VENTURES, INCORPORATED, TULSA, OKLAHOMA, AND DIRECTOR, VIETNAM TRADE OFFICE, OKLAHOMA DEPARTMENT OF COMMERCE

Mr. CLARK. Thank you, Mr. Chairman and Members of the Subcommittee, and Congressman Watkins, thank you for that very kind introduction, sir.

Thank you for the opportunity to testify before you today. My name is Barry Clark, and I am the President of Pacific Ventures, which is an Oklahoma-based consulting and private equity company. Headquarters are in Tulsa, Oklahoma with field offices in Ho Chi Minh City and Hanoi, Vietnam.

The focus of our consulting business has been to assist American companies entering the Vietnamese market. We have been in Vietnam since 1995, 1 year after President  Clinton lifted the trade embargo.

From my first visit to Vietnam in 1993 to moving there in 1995 for 3 years, I have witnessed firsthand the dramatic changes as Vietnam took the first uncertain steps towards a market economy. These changes are providing new economic and civic hopes for many Vietnamese people and new business opportunities for American companies.

Similar to most people doing business in Vietnam, our challenges have been frequent and time-consuming, but nevertheless we are seeing real and significant successes as a result of the improved trade relations between the United  States and Vietnam.

In addition to our private endeavors, Pacific Ventures also represents the State of Oklahoma Department of Commerce. In September 1996, the State of Oklahoma became the first State of any nation to open a trade office in Vietnam. Through our company infrastructure, Oklahoma now has offices in Hanoi and Ho Chi Minh City with a staff of 10 Vietnamese and 2 Americans.

Oklahoma is still the only American State to have a trade office there, and the reason the State of Oklahoma opened the trade office was because many of the major industries matched those of Vietnam. Some of those industries are agriculture, oil and gas, education, and the need for building infrastructure.

Through businesses we represent directly and through our ties with the State of Oklahoma, we manage the daily challenges of arranging meetings, securing licenses, conducting market research, and identifying potential partners, distributors, and agents. It is significant that Oklahoma ranked 38 in overall international exports, ranks 13 in exports to Vietnam with over $10 million in export sales. Through our contract with the State of Oklahoma, Pacific Ventures has led 14 delegations of Oklahoma businesses and institutions to Vietnam to sell Oklahoma goods and services, as well as 8 delegations from Vietnam that have come to Oklahoma to purchase equipment and look for potential business partners.

The goods and services sold to Vietnam have included oil field service equipment, biotech products for shrimp farming, assistance in building environmentally friendly landfills, beef and dairy cattle genetics, and infrastructure building equipment.

One major export for which the State of Oklahoma has great pride is education. Oklahoma has more than 9,000 foreign students studying in its colleges and universities. Oklahoma is second in the Nation in the number of Vietnamese students that are studying in higher education in our State. This next month our Governor, Frank Keating, will travel to Vietnam to sign a major education agreement between 12 Oklahoma universities and Vietnam National University.

Currently, Petro Vietnam, the Vietnamese national oil company, has 65 students, young people, that they feel will be its future leaders, as full-tuition-paying graduate and undergraduate students at the world famous Sarkeys Energy Center at the University of Oklahoma. These students will go back to Vietnam not only with a world-class education, but also a better understanding of the American way of life.

The Jackson-Vanik waiver has brought about dramatic changes that are indeed part of the rising tide that is floating more hopes and dreams for Vietnamese companies and entrepreneurs. As the Vietnamese economy continues to emerge, the middle class is growing, the population is becoming more educated and exposed to more free market realities, and Vietnam continues to evolve in a more open and transparent society.

A good example of Vietnam's new efforts towards the development of an open market is reflected in its new enterprise law. This law allows Vietnamese citizens to freely establish enterprises in most industries without restriction. Because of this new law, within the first 2 years there were over 35,000 new registered enterprises. This number exceeded the total number of registered enterprises established during the past 9 years. The number of new jobs created directly through the enterprise law encompassed over one-third of Vietnam's annual increase in the labor force.

However, changes come in increments. There now exists a critical moment of opportunity between the United States and Vietnam, and by extending the Jackson-Vanik waiver, continued implementation of the Bilateral Trade Agreement, the United States can best support Vietnam's ongoing transition to a sustaining market economy.

In conclusion, I want to express my appreciation to Oklahoma's business and government leaders for continuing their pioneering spirit of opening up and building valuable trade relationships in global markets that will benefit future generations of Oklahomans. I would like to thank the U.S. Embassy in Vietnam and the U.S.-Vietnam Trade Council for their continued efforts and support and leadership on behalf of all the American businesses with interests in Vietnam. They have made our work much more productive than we could have been otherwise. Thank you again for the privilege to be here today.

[The prepared statement of Mr. Clark follows:]

Chairman CRANE. Mr. Sauvageot.

STATEMENT OF ANDRE SAUVAGEOT, CHIEF REPRESENTATIVE, GENERAL ELECTRIC COMPANY, HANOI, VIETNAM

Mr. SAUVAGEOT. I am Andre Sauvageot, residing in Hanoi as the Chief Representative for General Electric (G.E.) in Vietnam. In fact I met you, Mr. Chairman, in Hanoi a couple of years ago. I have held this position for over 9 years, and we greatly appreciate the opportunity to present testimony before your Subcommittee this morning.

As one of the first 10 American companies to establish a representative office in Vietnam and as an active player in the Vietnam market for over 9 years, General Electric strongly supports the President's Jackson-Vanik waiver.

First, our 9 years' experience certainly is indicative that Vietnam is committed to and inexorably moving towards a market economy, as has been testified this morning in greater detail.

I would like to say this morning, sir, that the waiver of the Jackson-Vanik amendment is more important to us this year than it has ever been before, and it has been important every year. And the reason for that is that the waiver, or the lack thereof, will have an immediate, direct effect on project opportunities that -- whether we win or not -- will greatly affect the number of exports, American exports, into the Vietnam market in the very near future.

And I would just like to point out a couple of dramatic ones. One of the most -- the most successful G.E. business in Vietnam is G.E. Power Systems based in Atlanta, Georgia. The Vietnamese are soon going to invite four companies to bid on a 720-megawatt combined cycle power plant. The only competitors we have are going to be foreign, because they will restrict the bidding to those companies in the world who can provide high-level technology -- we call F level technology for big gas turbines. There are only four in the world that can: Alstom from France, Siemens from Germany, Mitsubishi Heavy Industries from Japan, and General Electric.

Now, since this project is going to be fully run by the Vietnamese -- in other words, this is not like some of the other projects where the prime contractor was Sumitomo from Japan. This is strictly a Vietnam operation, so they either fund it themselves or they demand supplier credit. In this case, I am quite sure they are going to need supplier credit. Our foreign competitors can all arrange it. We can arrange it with the waiver of the Jackson-Vanik amendment. We cannot without.

We have significant technical advantages because we have the best turbines, the most firing hours, by any measure, we are the best. They can't acquire our technology without recourse to American financing option. Now, should we win this, sir, that is not only an opportunity for General Electric but for -- as many, depending upon our specific sourcing arrangements, for as many as 190 American companies based in 38 States. You know, that includes Oklahoma, by the way, Texas, and California, but I have listed those States in my testimony.

Also, we have a current proposal to the Vietnam railway to provide upgrades for 25 old G.E. locomotives, and these kits would be made in Erie, Pennsylvania, and also offer opportunities for other suppliers. Right now, the feedback I am getting from the railway, they like our technical proposal a lot, but they are not so enamored with our partner's financing proposal. I would like to be able to assure them that we could arrange U.S. Ex-Im Bank financing, and I think that would put us over for this opportunity.

We are also provided leasing arrangements. We have three Boeing 767s on lease to the airlines now for over 6 years into the lease, with our engines manufactured in Cincinnati, Ohio. Again, our relationship with the airline has a strong commitment with a Vietnamese major company to the implementation of their contractual obligations to General Electric. We are very impressed.

Medical systems, x-ray machines, ultrasound, we have very good opportunities there. We continue to expand our market share. Very soon we are going to take advantage of the Vietnamese liberalization of their laws to form 100-percent-owned General Electric Company, to provide after-market service for our MRI machines, our high-technology stuff that we make in Milwaukee, Wisconsin, and other locations.

So we really need this waiver, Mr. Chairman, and we appreciate your Committee's support in the past years, but this year it is more important than ever. We will continue to work closely, of course, with the U.S. Government every step of the way.

We greatly appreciate the active support received from Ambassador Burghardt and his fine staff in Hanoi, and we are going to continue our active involvement with the U.S.-Vietnam Trade Council and the American Chamber of Commerce. Clearly, as the U.S.-Vietnam relationship continues to improve on the basis of mutual respect and mutual benefit, progress will continue on all fronts. Thank you so much.

[The prepared statement of Mr. Sauvageot follows:]

Chairman CRANE. I have a couple of questions I would like to put to anyone on the panel who feels inclined to respond. The first one is, how does the level of activity of U.S. companies in Vietnam compare with other countries' investment in the region? Secondly, do foreign companies receive greater government-sponsored trade promotion and investment support than U.S. companies? Anyone?

Ms. FOOTE. I may be able to take a crack at that, sir. The United States is still -- I think it is maybe 12th or 13th on the list of foreign investors in Vietnam. As I mentioned in my testimony, it has only been 6 months that the United States has extended NTR status. We are still behind the curve on the economic normalization process. We are catching up, but we have had a much slower start than other countries in the region and I think our numbers show that.

The U.S. -- the companies who have been there now for some time have turned the corner in terms of profits and are looking at their second and third generations of investment. So, I think the United States is beginning to move up in the process.

Chairman CRANE. Thank you. Anyone else want to add anything to that?

If not, second question: Where has Vietnam been most successful in implementing the Bilateral Trade Agreement, and where is more work required? What are your priorities?

Ms. FOOTE. I could start that one.

Chairman CRANE. Ladies first.

Ms. FOOTE. One of maybe the model programs has been in the area of insurance technical assistance. We just last week had an insurance program in Hanoi that New York Life, ACE, and the American International Group (AIG) with the Department of Commerce and the Trade Council worked on. There are four chapters of the trade agreements, and different ministries are involved in different chapters. Things get phased in over time. I think probably the most technically difficult would be the intellectual rights chapter. The investment chapter is pretty straightforward and the rules and regulations are being implemented right now.

Chairman CRANE. You raised a question there. Let me follow up on that. Vietnam has one of the worst records on protecting intellectual property rights. What specific steps have they taken to improve IPR enforcement?

Ms. FOOTE. They have been very involved in some of the U.S. Government programs. We have been able to facilitate bringing Vietnamese officials to the United States and other programs. The drafting of the law and the writing of the regulation I think is going fairly well.

The problem is on the other side, which is enforcement. That is where I think a lot of work needs to be done, and there is an increasing amount of products coming in from their neighboring countries. This is not a problem of companies producing products in Vietnam. It is a smuggling and import problem.

Chairman CRANE. Anyone else want to comment? Mr. Levin?

Mr. LEVIN. Thank you. Welcome. I think most on the Subcommittee and the Committee share your basically positive approach. I admire your enthusiasm, Mr. Sauvageot. You have been in Vietnam a number of years, but you haven't forgotten how to look at the impact of programs on each State. Well done.

Let me, though, comment, because I do think we have come far enough with Vietnam, even though it has been briefed that we can have kind of an honest dialogue with them on outstanding issues. I regret there is nobody here today to talk about human rights issues. The State Department report, as you know, the most recent report, essentially says that the human rights situation in Vietnam worsened in 2001. Then they go on to spell out why that is true. Then they say with respect to labor conditions, the annual human rights report reports that Vietnam restricts the ability of workers to form or join unions of their own choosing.

I think it is important to keep that in mind, Ms. Foote, in regard to your statement you cover labor issues.

Then, at the end, say the main criticism of Vietnam's labor code remains the requirement that all unions affiliate with a quasi-governmental entity. That is a major deviation, to put it mildly, from the labor standards and, as I discussed with the Ambassador yesterday, I think a critical issue that we need to discuss with them.

Each country is different. Cambodia is not the same as Vietnam, I acknowledge.

I wanted to say something, if I might, to our friend from General Electric about the annual process versus elimination of it. The waiver will continue, and I hope with a decisive vote. I think that is the way we should proceed. The issue of eliminating the Jackson-Vanik provisions as to Vietnam I think is more complicated than just saying that you do. It creates uncertainty. It also -- there really isn't that much uncertainty in the sense that we are going to annually -- presuming that there is a continued positive evolution, we are going to vote yes.

It also creates, I think, some useful pressure. That was true of our deliberations as to China. Remember, Jackson-Vanik did not start as an immigration provision. It started as a trade bill, and the immigration portion was added on to it. It was a vital addition.

We are facing this issue, for example, as to Russia, and I think we need to ask ourselves carefully how the annual process fits into the discussions of the terms of accession to WTO, as well as keeping the pressure -- intellectual property, for example, has been mentioned.

I mean, the business community has a major stake in Vietnam, not only passing good laws but implementing them. You have a major stake in the workers back here who work for the companies -- have a major stake in Vietnam developing a true rule of law, because if you get contracts and you can't enforce them through any transparent process, I mean you are not further ahead, and you may be further behind if any government entity is dealing underneath the table with some entity other than a U.S. company where there are restrictions on that.

So, I think your positive approach resonates, provided that we look at it in its full perspective. I mean, it is going to take time. There are going to be problems in our relationship. The catfish issue is just one example. I would not have voted, if I had a separate vote, the way the Senate did, and that is another issue.

Anybody want to spend -- the red light is on -- do you want to spend 15 seconds before the Chairman --

Mr. BENANAV. I agree with you that there are many issues inside Vietnam that we need to keep the pressure on -- labor issues, human rights issues -- and we are going to see progress be sort of two steps forward, one step back, and those are certainly issues that the government and the people of the United States have an interest in.

I also agree with you that Jackson-Vanik in the early days was an extremely effective tool for getting some progress for it. I do believe that we have reached the point in our relationship where the value of this, what I call kabuki dance, has really become minimal. There are many, many other mechanisms in place today to deal with those issues, the catfish issue, the enforcement of contract issues. There are lots of mechanisms that are in place.

The relationship has reached such a level of maturity and positiveness that I think the whole waiver process has become a tremendously inefficient utilization of your time and a lot of other people's time. We would, I think, serve ourselves much better by treating the relationship with Vietnam as a mature relationship, as we have with other countries where we have big issues, and not go through this annual kabuki dance, with the results almost being certain anyway.

Mr. LEVIN. My time is up. You know, we don't spend enough time talking about these relationships, really. I mean, you all come and visit us, but our institutions should spend more time rather than less, I think, understanding what is going on in Vietnam. We can argue whether this is the best way to do it. Thank you.

Chairman CRANE. Mr. Houghton.

Mr. HOUGHTON. Thanks, Mr. Chairman. I agree with Mr. Levin that it is too bad that we have to have this annual review of the Jackson-Vanik waiver, but it does afford us an opportunity to talk about some of our international relations. I tend to think that we as a country tend to sort of fall back in sort of an insular position and think that a lot of things we can do ourselves, or do, you know, within the continental limits. So, I think there is an opportunity for us to be able to have a conversation and dialogue with people like yourself.

Mr. Benanav, I would like to ask you a question. You are obviously concerned about the Bilateral Trade Agreement and also I think you are interested in the World Trade Organization involvement, but you say something about your company going into Vietnam to try to increase the financial services sector there. You know, everybody's got his or her own participation here, and ultimately the financial services section, in addition to the whole concept of the rule of law, is going to be very, very important. So, what do you plan to do? Are there others doing this thing with you? What is going to be the impact?

Mr. BENANAV. Yes, sir. I think the financial service sector is a very important industry if we are going to see Vietnam's economic development continue. We actually, in one way, shape or form, provide a lot of the fuel, if you will, for a growing economy. Today in the life insurance sector, Vietnam has one State-owned company and three foreign companies operating. One is an American company, AIG; one is a British company, Prudential U.K.; and one is a Canadian company, Manual Life. Others, including my company, would like to enter that market, and we think we can bring significant value both to the consumers in Vietnam as well as the Vietnamese economy.

The Bilateral Trade Agreement requires Vietnam to open its market over a 5-year period to American insurance companies. We are encouraging the Vietnamese to move much more quickly than that. We think the market is a large enough market with great potential. We have tried to educate the Ministry of Finance on how life insurance in particular is a valuable, valuable tool. We collect the very small savings of the 80 million people in Vietnam, we can pool them together and reinvest them into the Vietnamese economy in long-term projects, not short-term projects, but long-term infrastructure projects that are absolutely essential if that country is going to develop.

The life insurance industry financed the infrastructure of the United States, railroads, many of the roads and housing. We can do the same for Vietnam, but we can't do so until they open the door to us. As I said, we think that a strong, positive relationship with the United States, the waiver of the Jackson-Vanik will encourage them to open doors to American companies.

Mr. HOUGHTON. Do you have the same restrictions in Vietnam in doing business that you would here in terms of the same financial walls against various financial institutions, commercial banking, insurance?

Mr. BENANAV. The first wall we have in Vietnam is that you are not allowed to do business in Vietnam until they give you a license, and they are not required to give you a license at this point. Once you are there, the companies operating there are operating in a regulatory structure that I would say is somewhat primitive, if you will. The regulations are not highly developed. They don't have the expertise. They do keep the industries separate -- banking, insurance and whatever they have of securities at this point.

One of the things that my company is doing, and other companies, is really trying to provide expertise to the Government of Vietnam and its various regulatory bodies so they can develop their regulations and move them ahead. Whether they keep the financial pillars separate for many years I think will have to be a decision they have to make. They are a long way from making that decision. They are really significantly behind much of the world in developing solvency regulation and consumer protection regulation.

Mr. HOUGHTON. I guess what I was trying to get at, do you have more flexibility in terms of financial services in Vietnam than you would in the United States?

Mr. BENANAV. No, we don't. We have less.

Chairman CRANE. Mr. Watkins.

Mr. WATKINS. Thank you, Mr. Chairman, and members of the panel. I am listening with great interest to the various testimonies. I know, as Mr. Clark is there and I thin

Ms. Foote, you made the comment about our companies, more involvement with the companies. There is a great deal more dumping of solid waste, more problems, and that is one of the things that has been brought to my attention by several people; the problems that Vietnam has in pollution is one of the major problems.

That is why I was asking the other question of the other panel about the involvement of World Bank and the Asian Development Bank and the group there, are they participating? I was looking at some other testimony here earlier or reading some other document, and we have the foreign -- the United States Foreign Commercial Service, Foreign Agricultural Service. We have offices in Hanoi as well as in Ho Chi Minh City.

I am reading these groups, a number of priorities -- they have got several, including about the sixth or seventh listed down there, the need for environmental and pollution control efforts, but some inquiries have been made from time to time; they haven't seemed as interested in trying to get involved, to getting it solved. Do you have any -- I know I have one other major question about this. Do any of you have an answer of how we open that door to get more activity in there? Evidently they are getting the same problem. The water, the sanitation, pollution problems, are affecting drinking water and everything else in a big way.

Ms. FOOTE. I can tell you that the multilateral donor community is extremely active in Vietnam. I believe World Bank, ADB, United Nations Development Programme, some of the other organizations, have pledged about 9 billion in poverty reduction, development assistance funds in the last 5 to 7 years. The United States has --

Mr. WATKINS. United Nations made a commitment in the area?

Ms. FOOTE. The USAEP, the United States Asia Environmental Partnership, which is an USAID-funded program in Vietnam, it is small, I don't know what its annual budget is, but there is an environmental group there funded by the United States. There are also many bilateral donor-assisted programs such as building a new dike system in Hanoi, the water system in Hanoi which desperately needs it, as you point out. There is certainly a door very much open in Vietnam for environmental help, pollution control, waste management. There are donors who are working on that. Poverty reduction is the overall theme of the World Bank program, and pollution control is only one part of that.

Mr. WATKINS. A lot of that is probably in the agriculture. I know, Barry, you have done some things in that area. I assume there is a tremendous need of increase in their production in order for them to have some gainful income. Are they trying to increase the production of their land?

Mr. CLARK. Dramatically, sir, and they are doing it both in the production of -- in the rice area, but also in shrimp farming. They have become the second-largest exporter of shrimp behind Thailand. A lot of it is because of the technology from a company there in Tulsa that provides biotech products to clean up the ponds and has been a dramatic improvement in their shrimp production, taking them to second place in the world.

Mr. WATKINS. Another thing in discussing with a number of people, their development depends a good deal on a great more involvement of training and the lack of training in job descriptions, job areas. Do you find this to be an area that needs some attention? Any of you got firsthand experience with that?

Mr. BENANAV. Definitely.

Mr. WATKINS. That is education, you know.

Mr. BENANAV. Absolutely. Training is vital if they are going to move ahead, if they are going to open the economy. I think the Vietnamese recognize it, and they are willing to accept it.

For example, my own company is about to implement a program where two officials from the Vietnamese Ministry of Finance will come to New York for several months for training on insurance regulation. They are quite open about their need for it. They are not ashamed to admit that they need to move forward, and the best way to get it is through training. Other companies are providing the same kind of training in various industries, and the universities are really doing a wonderful job of training the younger people in general skills.

I do believe that the more Vietnamese that we can bring to this country either for short-term training or long-term training, the better off the relationship will be, as well as our ability to convince them that open markets and democratic societies are really the way to go.

Mr. WATKINS. How about technology and mechanical areas?

Mr. SAUVAGEOT. Sir, we have the same positive experience with our Vietnamese customers and their enthusiasm for getting technical training.

A couple of examples. Very recently we had a very tough competition against a British company, Rolls Royce, for selection of aircraft engines the Vietnamese are leasing to -- they have already signed a lease agreement with International Leasing Finance Corporation, ILFC, to lease two brand-new Boeing triple 7200 ER -- for extended range -- which will do heavy-duty service, nonstop between Vietnam and Paris with heavy payloads. The ILFC could offer either the Rolls Royce engine or could offer the General Electric engines. Tough competition.

One of the things that helped us get selected was the Trade and Development Agency offered approximately $300,000, the exact amount we will know in a little bit, but about $300,000 to the Vietnam airlines to provide training in the United States. We are now seeking other help from trade development agencies to bring some Vietnamese from Vietnam Oil and Gas Company, Petro Vietnam, and maybe Lei Llama, the big construction company who is the prime contractor on this 720-megawatt combined cycle plant that I mentioned in my 5-minute remarks. We are seeking those funds to bring them to an orientation visit, and later maybe for some additional training. We are finding a lot of interest on technical training in the United States.

Mr. WATKINS. I have had some interest expressed to me and that is why I wanted to follow up on it. Mr. Chairman, I thank you. I know my time has run out. I appreciate the panel and I appreciate you hosting this particular hearing.

Chairman CRANE. Well, we all appreciate your testimony and your involvement in this effort that is one that I think our Committee on a bipartisan basis is supportive of.

We will be meeting in here at 2:30 this afternoon with the full Committee, and the objective is to renew Vietnam's Jackson-Vanik waiver. With strong bipartisan support, I am confident that we will report it out favorably; might take 15 minutes or so, but report it out favorably. It is in no small measure because of the constant ongoing input from people like you and your involvement and communicating that to us and we are grateful.

With that, the Subcommittee stands adjourned.

[Whereupon, at 12:00 noon, the hearing was adjourned.]
[Submissions for the record follow:]

American Chamber of Commerce in Vietnam, Hanoi, Vietnam, Chris S. Tragakis, letter

Boeing Company, Arlington, VA, statement