Statement of Virginia B. Foote, President, U.S.-Vietnam Trade Council

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on Renewal of President's Waiver for Vietnam
from the Jackson-Vanik Freedom of Emigration Requirements

July 18, 2002

Mr. Chairman and Committee Members, I am pleased to be here today representing the U.S.-Vietnam Trade Council to testify before your Committee at this important time in U.S.- Vietnam relations as you assess extending the Jackson-Vanik waiver for Vietnam another year.  We strongly urge you to vote against H.R Resolution 101. 

The U.S.- Vietnam Trade Council, founded in 1989, is a trade association with strong membership from the American business community and offices in Washington D.C., and Vietnam.  We have worked through the Council and our Education Forum, to help improve relations between the United States and Vietnam with educational exchange programs, annual conferences, Congressional delegations and programs designed to provide technical assistance on international trade norms and standards.  We chair a coalition of over 270 associations and companies who support trade relations with Vietnam and the renewal of Jackson-Vanik.  I hope  my full testimony can be submitted into the hearing record today.

Today I would like to discuss the importance renewing the Jackson-Vanik waiver and maintaining NTR status.  The U.S.-Vietnam Trade Agreement and NTR status, which entered into force on December 10, 2001 and the process of normalizing relations overall have had positive impact on cooperation between the United States and Vietnam in a number of crucially important areas.  This agreement and the granting of NTR status, marked the beginning of a new and extremely important – indeed hopeful – chapter in U.S. – Vietnam relations.   December 10, 2001 may well be the most important day in U.S.-Vietnam relations since the war ended.

The reciprocal granting of NTR status is key to the economic development of Vietnam and for the successful involvement of American companies.  Repeal of NTR status, only 6 months old, would be the economic equivalent of an act of war and is wholly unwarranted.  The old war is over, a new one should not begin.  While further steps of normalization lie ahead, these first 6 months of NTR have again showed that the 12 year path of step-by-step normalization  has benefited bilateral relations, Vietnamese citizens, and American interests – impressively. 

What other conflict, so bitter and so costly, has come to resolution and a new beginning so successfully.

In the late 1980’s, the Vietnamese government committed to ending its isolation and began working to normalize relations worldwide – including the United States.  With great effort Vietnam has had tremendous diplomatic and commercial success in establishing relations in Europe, within Asia, and with the United States.  Vietnam normalized with China in 1991, joined ASEAN in 1995, APEC in 1998, and now belongs to over a dozen international organizations and signed onto numerous international agreements. Vietnam has observer status in the WTO and has a stated commitment to join in 2005. And now, Vietnam and the U.S. enjoy the normal trade relations on tariffs. 

The Reagan, Bush, Clinton and Bush administrations have all followed a policy of normalizing relations with Vietnam through a step-by-step process pegged to cooperation on the U.S.’s principal goal of seeking the fullest possible accounting for our missing in action from the Vietnam War, and emigration issues. As the attached timeline shows, this process has proceeded successfully, albeit slowly through four administrations.  Overall it has led to the lifting of the trade embargo in 1994, the establishment of diplomatic relations in 1995, the exchange of ambassadors in 1997.  Economic normalization includes the initial waiver of the Jackson-Vanik amendment in 1998, signing of the Bi-lateral Trade Agreement (BTA) in July 2000, and the granting of NTR status in December 2001.  Other bi-lateral steps such as an aviation agreement, a textile agreement, PNTR, and WTO accession lie ahead.  BTA implementation and WTO accession will go hand in hand over the next several years with important U.S. involvement.

Throughout the process of normalization, Vietnam has greatly enhanced its efforts on issues of high priority to the U.S. including MIA efforts, emigration goals, and economic integration. Vietnam and the U.S. have also developed important bilateral dialogue on regional issues, human rights and labor standards. Vietnam is the second most populous nation in Southeast Asia, the 13^th largest in the world, and with a population of 78 million it has enormous growth potential. 

The entry into force of the U.S.-Vietnam Trade Agreement last year was a key step to further progress in normalizing relations.  The U.S.-Vietnam Trade Agreement is the most comprehensive trade agreement Vietnam has ever signed, and the most comprehensive NTR  trade agreement the U.S. has ever negotiated.  In exchange for sweeping commitments from Vietnam including providing greater market access for trade in goods and services, protecting intellectual property rights, improvements in the investment regime, and far greater transparency, the U.S. granted Vietnam normal trade tariffs – moving Vietnam from column two in the U.S. tariff code to column one.  

The results were immediate.  Over the first reporting period of 2002, January – April, two-way trade between the U.S. and Vietnam was up over 60% from the same period last year.  Two-way trade has grown steadily from $666 million in 1997, $827 million in 1998, $899 million in 1999, $1,189 million in 2000, to $1,513 million in 2001.

Equally important, the Vietnamese government has committed to important reform in the areas of trading rights, transparency, customs, investment, services, and intellectual property rights.  Moreover, approval of the trade agreement ensured that exports from U.S. companies receive treatment in Vietnam no less favorable than products of foreign competitors. Vietnam has signed bilateral trade agreements and granted reciprocal NTR to 72 countries, including the European Union and its Asian neighbors. 

The entry into force of the U.S.-Vietnam trade agreement was a watershed event.  While the negotiations between the U.S. and Vietnam were long and difficult, it was the discussions  between and among the Vietnamese that were the most important.  The result is that the BTA is an important blueprint or roadmap for Vietnam to follow while tackling some of the more difficult issues of economic reform which lie ahead.  It is a roadmap of economic reform commitments that the Vietnamese government reached consensus on before signing.

Towards this end, commercial law reform is already underway.  To help track these effort since the BTA was signed in 2000, the Trade Council’s Education Forum has been publishing a Catalog of Legal Updates, which compiles summaries of new laws, decrees and regulation that address commercial law reform and with possible impact on BTA implementation.  Our July 2002 Catalog is 33 pages long.  In the last two months Vietnam has passed laws and ordinances on MFN and NT, Safeguards, Customs Valuation, and is drafting Commercial Arbitration, Transparency and Auditing laws and regulations to mention 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 new laws.  The Catalog can be found on our website.

Some examples:  Vietnam passed a new Insurance Law in December 2000 and is finalizing the implementing regulations.  The General Department of Customs drafted a new Customs law, which passed overwhelmingly in the National Assembly on last year.  The new law is based on WTO valuation procedures and has been favorably reviewed by international customs experts. Vietnam is also addressing competition policy, the elimination of burdensome registration and licensing procedures, intellectual property protection, administrative procedures, and increased transparency.  A new database of Vietnamese law is now available on the internet and the Ministry of Planning and Investment in Ho Chi Minh City will offer online licensing for foreign investment projects that do not require appraisal.

With respect to IPR issues, Vietnam has recently made significant legal reforms in its implementation of the trade agreement.  A system has been put in place for patent and trademark registration.  In the year 2000 several important decrees protecting trade names, trade and business secrets, patent registration, and protection of industrial designs were issued.

The Enterprise Law, which came into effect in January 2000, marked a turning point in Vietnam’s efforts to reform the domestic private sector.  According to the World Bank, more than 30,000 private small and medium sized enterprises (SMEs) were registered under the new Enterprise Law in the first year compared to only 3,000 registrations a year for the previous three years.  These figures are very significant given the small size of Vietnam’s fledging private sector.  The number of enterprises founded in the six months after the law went into effect in January 2000 equals the total number of enterprises founded in the previous nine years.  By the end of 2001 there were an estimated 53,000 new enterprises creating over a million jobs.

The number of private enterprises engaged in trade has multiplied five times between 1997 and 2000.  As a result the share of private domestic firms has increased from 4 percent to 16 percent of total imports and from 10 percent to 17 percent of total exports.  For non-oil exports the percentage is higher at 22 percent.  Total non-oil exports grew by 42 percent from 1997 to 2000. Private domestic exports grew by 161 percent during this time period and accounted for 46 percent of the overall increase. 

And Foreign Direct Investment continues to grow as well.  New reforms in licensing procedures were partially responsible for an upsurge in foreign investment last year.  Total FDI to date by May 2002 is $38.3 billion, with over one billion coming from the U.S.  $3.4 billion in new investment was committed in 2001.  $19.8 billion has been disbursed.  Overseas Development Assistance has been generous as well. From 1993 when Vietnam first became eligible to the end of 2001, total ODA equaled over $9.0 billion

Also important was the opening of a stock market in July 2000.  The tiny stock market started with treasury bonds and shares of only five listed companies, which has now increased to fifteen and the government plans to open a second transaction center in Hanoi and develop the OTC market (Over-the-Counter) for companies prior to listing.  Additional companies are expected to be listed on the market this year.

The United States should continue to be involved in this process.  It is in our interest to see an economically healthy and internationally engaged Vietnam.  The Economist Intelligence Unit foresees annual GDP growth of 6-7% over the coming years.  With fully normalized economic relations, the United States could well join the top ranks of investors in Vietnam, up from our rank in 13^th position.    

The agreement includes important benefits for American business, consumers and farmers.  Trade rights will be liberalized for U.S. firms, current tariff rates on key agricultural and industrial goods have been reduced and will be reduced further; and quantitative restrictions will be removed on steel and cement after six years and petroleum products after seven years.  Other immediate improvements were made in trading, IPR, transparency, investment and services.  In the services sector, Vietnam is providing American companies with greater access in many sectors, and entry into and equity in banking services will be increased.   WTO consistent intellectual property rights will be introduced in 12-18 months after the date of entry into force of the BTA, and all WTO inconsistent trade related investment measures will be eliminated within five years. The chapter on transparency requires that all laws and governing decrees be published, and that the right of appeal and tribunals for review be established. The Trade Council’s Summary of the U.S.-Vietnam Trade Agreement will be available on our website later this month.

The BTA is not only strengthening market access for American companies in Vietnam, it is also greatly benefiting the people of Vietnam.  With a per capita GDP of $395 in 2001, Vietnam is still one of the poorer nations in the world.  In a comprehensive report, the World Bank concluded the significant achievements on reducing poverty that were made in the period between 1993 and 1998, continue today.  Indeed per capita rose from 370 to 395 in one year.  The proportion of people with per capita expenditures under the total poverty line dropped impressively from 58 percent in 1992/93 to 37 percent in 2000. The number of people below the much lower "food poverty line," has also declined from 25 percent to 15 percent, indicating that the very poorest segments of the population have experienced improvements in their living standards between 1993 and 1998.  The poverty rate has fallen by half in the past ten years, one of the sharpest declines for any country,

The BTA could contribute to lifting Vietnam out of endemic poverty by increasing trade, investment, and development in Vietnam, as well as promoting market reforms, including greatly expanded trading rights.  Furthermore, by expanding trade and extending the rule of law in Vietnam, the BTA will encourage access to information and greater transparency for domestic enterprises as well. Vietnam has great potential for development as a significant trading partner worldwide.  Over half the population is under the age of 25 and the literacy rate is over 90%.  The work ethic, entrepreneurial talent, and emphasis on education is strong. 

American involvement in the process of economic reform is welcome in Vietnam and could be extremely important to overall development in the long run.  American companies set a high standard for trade, investment, labor and business practices.  American technology is greatly admired in Vietnam.  American companies are actively involved in training and technical assistance programs in Vietnam, through the Trade Council and individually.  American products are popular.  Our business community, particularly with the extensive involvement of the Vietnamese-American businesses, continues to play a key role in the normalization of economic relations and BTA implementation.

In the absence of NTR status, a trade agreement, and initially without trade support programs, American companies and individuals nonetheless began traveling, investing and trading with Vietnam when the embargo was lifted in 1994.  Given that the U.S. normalized relations far more slowly than other nations did, American business involvement in Vietnam has lagged behind other nations and still operates with handicaps.  The U.S. fell from the fifth largest investor in 1995, to the 12^th largest investor in 2001 with slightly under one billion committed to foreign investment projects, and one billon in two-way trade. 

But following the initial “road map” for normalization laid out under the Bush Administration in April 1991, the bilateral relationship has made a great deal of progress.  In 1998 President Clinton issued the first waiver of the Jackson-Vanik Amendment, which Congress upheld by a vote of 260 in favor and 163 opposed.  Congress renewed the waiver in 1999 by a vote of 297 in favor and 130 opposed.  In 2000 the margin increased positively again to 332 in favor and only 91 opposed.  The 2001 vote was 324-91 in favor of renewing the waiver.  We hope this year’s vote will be equally strong.

The initial Jackson-Vanik waiver in 1998 allowed trade support programs, such as loans from the Overseas Private Investment Corp (OPIC), the Export-Import Bank (Exim) and other credits for American business to establish operations in Vietnam.  In December 1999 Exim and the State Bank of Vietnam completed the framework agreements, which allowed Exim to begin operations in Vietnam.  Now the waiver is necessary for the continuation of normal tariffs as well.

Initially, U.S. policy pegged the Jackson-Vanik waiver to progress on the Resettlement Opportunity for Vietnamese Returnees (ROVR) program specifically and immigration in general.  Although it was extremely difficult to reach agreement initially, the implementation of the ROVR program has been fairly smooth and rapid.  The State Department reports that the government of Vietnam has cleared all but a handful of the nearly 20,000 ROVR cases.  The  Orderly Departure Program overall has also been successful.  Approximately half a million Vietnamese have come to the United States under ODP and only a small number of ODP cases remain to be processed.  Since the initial waiver of Jackson-Vanik, the Vietnamese have allowed all remaining ODP cases – including the Montagnard cases which are of particular concern to the U.S. – to be processed under the new more responsive system developed by the Vietnamese initially just for ROVR cases. 

The U.S. and Vietnam are jointly pursuing the 913 missing in Vietnam, of the 1,363 missing in Southeast Asia.  Since 1973, 578 Americans have been accounted for, including 412 in Vietnam.  Since January 1993, the remains of 258 individuals have been repatriate, identified and returned to their families.  Additionally, the Department of Defense has confirmed the fate of all but 39 of 196 individuals who fall in the “last known alive” discrepancy cases.  The U.S. has maintained a permanent staff to visit crash sites and interview witnesses throughout the country since 1993, with teams of experts coming to Vietnam monthly.  The U.S. and Vietnam have provided reciprocal access to information on MIAs from the war and have conducted 68 Joint Field Activities on POW/MIA cases since 1988.  Vietnam has unilaterally undertaken case specific investigations in 216 cases since 1996.   President Bush most recently certified Vietnam issuing a determination that Vietnam "is fully cooperating in good faith with the United States."  It is a model program.

Our relationship has strengthened in other areas as well.  Americans are traveling to Vietnam in great numbers.  In 1997 Vietnam issued 98,000 visas for Americans to travel to Vietnam, over 66,000 for Vietnamese Americans.  In 2000 the total was 152,928 visas, approximately 137,000 of which were for Vietnamese Americans.  In 2001 this number grew to 230,470.  Remittances from overseas Vietnamese are estimated at $2-3 billion annually.  Vietnam veterans are traveling, working and involved in charitable activities in Vietnam. Veterans groups organize visits for their members and their families.

In November 2000, President Clinton became the first U.S. President to visit Vietnam since the end of the war.  During the President’s trip ten new business partnerships were announced and our two countries concluded numerous bilateral agreements. One of these was an Agreement on Scientific and Technological Cooperation to facilitate cooperation between American and Vietnamese scientists in areas such as health, technological innovation and entrepreneurship, disaster mitigation and marine and water resource management.  Increased cooperation in the prevention and treatment of infectious diseases, including typhoid fever and HIV/AIDS, will strengthen Vietnam's ability to meet critical health challenges.  Environmental projects operate through the U.S. Asia Environmental Partnership and cooperation on Agent Orange research.  The Vietnam Education Foundation was established.

Equally important, the U.S. and Vietnam also signed a Memorandum of Understanding on Labor in November 2000. The MOU was the result of a dialogue over labor that the U.S. and Vietnam have developed. The MOU includes $3 million in technical assistance working with the ILO to strengthening labor protection, skills training, employment services, social insurance and safety nets, employment of the disabled, industrial relations and child labor.  The child labor provisions focus on street children and child trafficking.  Workplace education and prevention programs on HIV/AIDS are also including in the MOU.  These projects are ongoing.

The 2002 Labor Code, incorporating standards of internationally recognized worker rights. A complete English translation of the Labor Code can be found at http://www.ivietnam.com/Eng/ in the iVietnam Law database.  The labor code stipulates the requirements for the formation of unions.  In addition to trade unions, the Labor Code stipulates a number of workers’ basic rights including:  freedom to chose employer (Article 30), standard work week (Article 68), overtime limits and pay (Article 61), leave, holidays, and rest (Article 71, 73, 74 & 78), minimum wage, bonuses (Article 64), maternity leave (Article 114 & 144), severance entitlements (Article 17 & 42), workplace safety (Article 97 & 100), etc.  In recent years, the Government of Vietnam has sent labor experts to the U.S., the U.K., Singapore, New Zealand, South Korea, and Hong Kong in its efforts to update the 1994 Labor Code.

In April 2002, Vietnam’s National Assembly passed the Law on Amendment of and Addition to a Number of Articles of the Labor Code.  The Assembly made changes and revisions to 56 articles of the Labor Code, updating and amending existing law and clarifying points, which had been unclear in the previous regulations.  In a major shift, foreign enterprises will be allowed to directly recruit and hire staff without going through employment agencies and middlemen.  The new code also clarifies regulations on wage and salary scales, which had been the subject of some dispute under existing Circular 11.  Private and foreign-invested enterprises are not required to follow State Enterprise wage scale systems under the new Code.  However they are required to establish and make public a salary scale system, which must be registered with the Labor Department.  Some 56 amendments were made including articles 17, 27, 41, 69, 85, 140 and 166.  The new Labor Code will require additional implementing regulations to take effect and will come into force January 1, 2003. 

Since 1992, Vietnam has ratified 15 ILO conventions, including three of the ILO’s eight core human rights conventions: No. 100, equal pay for men and women for work of equal value (ratified by Vietnam in 1997); No. 111, prohibiting discrimination in employment (1997); and No. 182, prohibiting the worst forms of child labor (2000). Currently, the Vietnamese are working on a plan to gradually ratify the remaining core ILO conventions and hope to ratify both forced labor conventions and the minimum age convention.  With offices in Hanoi, the ILO has 24 ongoing projects, 6 of which the ILO defines as promoting fundamental principles and rights.

On commercial law reform, the U.S also pledged six million in technical assistance to Vietnam over a three-year period to assist with implementation of the bilateral trade agreement.  Through a grant from the U.S. Agency for International Development (USAID) and the support of our members, and in coordination with USAID’s STAR project, the Council’s Education Forum has provided technical assistance on commercial and legal reform to Vietnamese Ministries and government branches with economic portfolios on the issues raised by the BTA and WTO standards.  For example, just last week the Department of Commerce, three prominent US insurance companies, and the Trade Council held two days of seminars in Hanoi with the Ministry of Finance. Other training has been on going with the Ministries of Trade, Justice, Labor, Finance, Planning and Investment, with effective public/private partnerships.    

Unique to this agreement, the U.S.-Vietnam BTA establishes a Joint Committee to monitor implementation, to guarantee enforcement, and to make recommendations.  This Committee will meet at a minimum of once a year and should be a very effective mechanism for both sides on implementation and in shaping technical assistance and monitoring compliance.  The Committee met for the first time in May this year in Hanoi, with Ambassador Jon Huntsman, Deputy USTR as chair on the US side.

Since our two countries set out on the path to normalized relations, Vietnam has enjoyed many successes, while suffering a few setbacks.  The bold economic reform program that Vietnam embarked on in the late eighties showed impressive results almost immediately.  Vietnam went from near famine to become the third largest rice exporter behind Thailand and the United States in a matter of a few years.  In the year 2000, Vietnam was the second largest coffee exporter after Brazil, while coffee prices have plummeted and serious land right disputes emerge. Seafood exports have risen dramatically from Vietnam while catfish farmers in the Mekong Delta face an anti-dumping petition by the U.S. industry and labeling rules change.  

But the strongly bi-partisan policy of a step-by-step process of normalizing relations with Vietnam has produced positive results for American, Vietnamese, and regional interests, and we encourage a continuation of this policy into the future.

Vietnam and the U.S. share a tragic history, which both countries remain mindful of as we build a new future.  Normalization of relations, matched with a growing economy and commitment to a market based economy will continue to contribute to Vietnam’s increased openness, increased transparency in government, a rise in living standards, and greater international economic and political integration.  But more important to the U.S., this policy of normalization has also ensured that American business, diplomatic, and regional interests are met.  The past ten years are proof.

On behalf of the members of the U.S.-Vietnam Trade Council, we urge the renewal of the Jackson-Vanik waiver for the benefit of Vietnamese and American interests, again this year.

Chronology of U.S. - Vietnam Relations