It is called NTR. Arguably it is the most important remaining barrier for local and foreign-invested businesses in Vietnam. Normal Trade Relations status used to be called Most Favored Nation (MFN) status. Virtually every country in the world had it so the name was changed from "most favored" to "normal" trade relations. For exporters the semantics is the difference between companies from certain countries with competitive access to the US market and companies (either locally or foreign owned) from other countries with import tariffs so high that it is essentially impossible to do business in the US market.

Vietnam does not have NTR. The US placed a trade embargo on the North Vietnamese government in the late 1950s. This was automatically extended to include the whole of Vietnam after liberation and the unification of the country in April 1975. The embargo was lifted in February 1994 but it did not include automatic NTR since there was no trade agreement between the two countries. Political relations were normalized in July 1995. Since normalization, Vietnamese and American negotiators have been working on a comprehensive trade agreement that will ultimately lead to NTR.

This section of the Mekong Research web site will be an NTR Watch. Using all available sources, we will report any new news, new developments, new ideas, or any other issue that will affect NTR. These reports will be archived within the site and listed chronologically with the most recent developments at the top. At the bottom of this page, we provide the most recent data accumulated from a variety of sources on current and historical US-Vietnam trade. We will continue to maintain this section until a trade agreement is signed between the two governments and NTR is approved by the US Congress. 

We started this project in May 1999 with full expectations that we would close this section of the site by the end of the year. Meaning, a trade agreement would have been signed and trade between the US and Vietnam would begin to grow exponentially. Alas, the world of trade and politics follows no time schedule. We will still be at it for 2000.

Entry 17 - June 22, 2000
Second chance? With Bill Clinton’s days in the White House slowly ticking away, yet another slim hope that an NTR agreement will be signed is on the horizon.

There has been an exchange of letters between Vu Khoan, the new Minister of Trade, and USTR Charlene Barshefsy. Industry sources say this could possibly lead to a summit meeting in the middle of July in Washington D.C. There has been virtually no official comments or news on the issue for some time (note the last NTR Watch entry was more than three months ago). For the most part, the issue seemed dead or at least in a serious coma.

So why now? First and foremost is the November signing of a trade agreement between the US and China and the US House of Representatives’ approval of this same agreement last month. In terms of manufactured exports, Vietnam has no greater competitor than China. With most tariff barriers down for Chinese exports to the US, Vietnamese factories stand to lose hundreds of millions of export dollars because they simply will not be able to compete on price. However, politics likely plays a bigger role. Vietnamese-Chinese relations are strained at the best of times. When Vietnam refused to sign the bilateral trade agreement (BTA) last September, the foreign and locally-fueled rumor mill put forward the ‘China Card’ as one of the key reasons for backing out. Upstaging its powerful northern neighbor by being the first to cut a deal with the Americans was not in Vietnam’s best interests so the argument went.

But there are other reasons for the new movement. With a new US administration on its way in, the US trade team that had been jockeying with their Vietnamese counterparts for the past four years will probably all be replaced. The ‘old agreement’ may not even be recognized forcing both sides to start over. There has also been some new developments and ‘newspeak’ word swapping to indicate that the deal may be reviewed and possibly re-negotiated. In the various letters passing between the two capitals, the Vietnamese side pointed to areas that were "unfair" to which the US responded that they would "clarify" the points in a new round of meetings. What these "clarifications" will actually mean is anyone’s guess. The US has stated firmly that the agreement would not be re-negotiated because it had already been approved in principle by both sides in July 1999, but it seems ready to ‘clarify’ points that took four years to arrive to. That does not make sense unless there is at least a little bit of room for negotiation.

Outside factors are also relevant. Top Vietnamese officials rightly feared that the agreement would open up the economy to competition from American companies and that their archaic state-owned industries would not be able to compete. Too soon, too fast was their argument. The BTA also demanded WTO standard transparency concerning government procurement. However, with the collapse of the Seattle round of WTO talks, such demands for transparency may be able to be waived or at least delayed. 

Perhaps the biggest reason the issue has come up again is the economic consequences of avoiding it. The World Bank is estimating GDP growth of about 4% for 2000. The Vietnamese government’s forecast is predictably higher (5.5-6%), but there is no hiding from the fact that the good times are over. The high GDP growth rates of the mid-1990s are history. The Asian Economic Crisis is also history for those countries, such as South Korea and Thailand, who have been able to re-adjust, swallow some bitter medicine, and get on with it rather than just muddle along in place.

There is probably no greater issue that will either seal Vietnam’s fate (or at least its reputation) as an inward-looking country with a limited future and poor economic growth, or as a country that uses its comparative advantages wisely and actually lives up to its optimistic mid-90s billing as the next ‘tiger’ economy. The tiger has definitely lost its stripes, but it could get them back. Step one is to sign the BTA.

Entry 16 - March 13, 2000
No news is bad news for the bilateral trade agreement (BTA). The virtual press blackout on reporting on the BTA continues amid rumors that the treaty will not be signed by the Vietnamese side. According to various and unconfirmed sources, the Politburo held a meeting in late February with the BTA on its agenda. Reportedly, the meeting concluded with a final decision, more firm than before, to not sign the trade agreement at this time. The American side has left the door open for further clarification and explanations of the agreement to the Vietnamese government and Party officials in need of further details, but has said that all negotiations over its substance were finished. There would be no re-negotiations of its content and the existing treaty must be signed by both sides before being presented to each side’s legislative body.

The US Congress is back in session and could take up the issue if a signed agreement were presented. For what it is worth, political analysts say the current mood in Congress is positive and the ongoing US Presidential elections would probably not harm the chances of the treaty being approved. 

Entry 15 - February 9, 2000
The fact that the US-Vietnam bilateral trade agreement has not been signed by the Vietnamese side seems to be the biggest well known secret in Vietnam. The country’s official press has not reported on its status at all. When it is mentioned by senior leaders, it is done so in only very vague terms as "an ongoing discussion." In a recent press conference in Hanoi held by officials from the propaganda department of the Communist Party for local and foreign journalists, a foreign journalist asked the representative about the status of the trade agreement. He was told that it was not an issue for the Party but for the government and did not discuss the issue further. 

At the end January, Reuters quoting un-named sources reported that Vietnam was preparing to send a letter to the US that outlined its position on the trade agreement and possibly explanations, called "points for discussion" by a Reuter’s source, on why the government has so far refused to sign the deal. The "points for discussion" were not necessarily issues for re-negotiation but rather clarification reported the news agency. The US has long stated that all negotiations were over and that only a signing of the document remained since the two sides had already agreed in principle to the trade agreement in July 1999.
The ripple effect, if any, from the framework agreement signed between the US and China has not appeared in any extraordinary way. No doubt the US-China deal has stirred more intense inner political debate, but the fruition of this debate has not yet appeared. 

On the US side, the 2000 Presidential Campaign is in full swing. It is thus hard to see how the US Congress would be willing to pay much attention to the issue even if it were to arrive on their desks. This would particularly be the case if it arrived in the form of a letter asking for further clarifications of the two sides four-year negotiating effort. Or, perhaps it would be ignored even if it were a fully signed legal document, ready and waiting for a floor vote of the full Congress. While the Vietnamese side may not have yet missed the boat, they are risking irrelevancy.

Entry Fourteen - December 27, 1999
After six years of talks, the United States and China have signed a bilateral commercial agreement that opens the door for China’s entry into the World Trade Organization (WTO). 

The landmark deal affects Vietnam in a number of ways. One, it has Vietnamese exporters nervous because Chinese companies will have easier access to world markets, making an already formidable competitor to Vietnam even more so. This is especially the case with several key export earners like garments and footwear.

"Chinese goods will be stronger, more competitive," said a garment manufacturer who, despite high import tariffs, has succeeded in carving a comfortable niche in the U.S. market. Dinh Cong Hung, Director of state-owned Thanh Cong Textiles, estimates that five years after joining WTO, China will earn an additional $24 billion from exports to the U.S., EU, Canada and Japan. "These are also our markets. That gives reason for our worries," Hung says.

Most threatening to Vietnamese manufacturers is the prospect that U.S. quotas on Chinese textile products will be lifted in five years. Since production in China is almost always cheaper than in Vietnam, the quotas placed on Chinese goods are perhaps the primary reason why garment companies set up operations in Vietnam. With the quota restrictions gone, producing in Vietnam will be harder to justify. 

It’s not just exporters who have cause for worry. Companies producing goods for the domestic market will likely face increased pressure. The reason? The deal with the U.S. will encourage foreign investment and higher production in China. That means smugglers will be able to bring in even more goods from China, a severe problem impacting domestic companies already. 
The deal may not be all bad news, however. The increased competitive pressures from the "giant to the North" will likely inject renewed urgency into efforts to sign a trade deal with the United States. 

China’s decision to further open its markets to foreign goods and investment, as demanded by U.S. negotiators, will not go unnoticed by Vietnam’s leaders. Since the beginning of doi moi in 1986, Vietnam’s leadership has considered China as something of a model (whether they like to admit it or not). Vietnam has often based its policy decisions on the success, or lack thereof, of those made in China. Vietnam and China, after all, are engaged in the same kind of experiment: blending Party-based political rule with market-based economics.

By agreeing to reform its state-owned enterprises, increase transparency, and reform its trade regime, China’s leaders have stated their desire to integrate further into the world economy. This is the opposite message that Vietnam’s leaders sent in mid-September when they decided not to sign a bilateral trade agreement with the U.S.

Since the China-U.S. agreement, however, Vietnam’s leaders have begun to talk more openly about the need to conclude their own agreement with the U.S. Talking with the local press at last week’s National Assembly meeting, President Tran Duc Luong seemed to be following suit. "It helps us get more experience in dealing with significant treaties. Vietnam has already negotiated actively and will go on with its efforts towards signing a rapid trade agreement with the U.S."

This week, Chinese Prime Minister Zhu Rongji, the man who spearheaded the deal with the U.S., is in Hanoi. You can bet that trade deals with the U.S. are on the agenda, and that Vietnam’s leaders are all ears.

Entry Thirteen- October 8, 1999

Under a best-case scenario, a signed trade agreement today, having survived its near-death experience in the Vietnamese political sphere, just might be able to survive a near-death experience in the American political sphere. 

Time is simply running out. The US Congress closes its session at the end of the month (not on October 6 as incorrectly reported earlier). If a signed agreement was submitted to Congress today, it would have just 60 days to take up the agreement since it has been fast-tracked. The treaty would still have to go through various committees and be presented to the full floor for a vote. Since there is probably not enough time to do that in the current session, it could at best be introduced to the committees, run through the initial American political hurdles, and then be scheduled for a full vote in January 2000 when Congress reconvenes. At that time and with the US Presidential elections so much closer, US legislators will most certainly test carefully the political waters before deciding whether or not to move forward on a Vietnam treaty vote. After all, politicians (American, Vietnamese, or whatever) are just politicians, and they tend to look out for number one.

If the agreement is not signed before the end of October but later in November or December, it would have to be introduced to the new Congress and go through the standard political maneuverings in a new session starting at ground zero. To survive such an environment intact would be difficult. 

For now, it is all hearsay until the first part of the best-case scenario takes place. The agreement still needs to be signed. Keep watching this space.

Entry Twelve- September 11, 1999

NTR is a lost cause for 1999 and will probably be put off until after the US Presidential elections in 2000. The already agreed-to-in-principal trade agreement was not signed in Auckland New Zealand though it was reportedly ready for signing. According to US government sources in Hanoi, the US side had suggested a signing ceremony on the evening of the 10th between Prime Minister Phan Van Khai and President Bill Clinton. Instead the Vietnamese side requested a meeting rather than a signing ceremony in order to discuss trade issues further even though an agreement had already been reached. The US side refused this type of meeting and a signing never took place.

Though the trade agreement could be signed at any time, the APEC Summit was the best and most convenient window of opportunity for the American side. The US Congress is currently in session and had indicated it would put the treaty on its agenda. Though the anticipated vote on the treaty was not expected to be unanimous, it was expected to pass with a strong majority. The Congress will close on or around October 6 and will not meet again until the new year. US government analysts have said that there would be no treaties or potentially politically explosive issues dealt with during the year 2000 because of the Presidential elections. 

Sources in Hanoi say the refusal to sign in Auckland is primarily due to an internal political struggle within the Communist Party. At the heart of the matter is the pace and style of reform of the state-controlled economy. Unlike other nations that have had to negotiate a trade agreement with the USA, Vietnamese and American trade officials based their negotiations on Vietnam’s eventual entry into the World Trade Organization (WTO). In a sense, the steps taken followed a ‘WTO model’ rather than a state-to-state model that has been more common in the past. This meant the trade agreement would have required Vietnam to speed up the reform of many facets of the state-controlled economy as well as allow more equitable competition from Vietnam’s private sector and especially from foreign companies. Insurance, banking, telecommunications, and other sectors would have been required to open up thereby threatening entrenched state-owned interests. For the more conservative leaders in Hanoi, the agreement was apparently asking for too much too soon. 

What’s next? The issue is not really over. Since the trade agreement has already been agreed to in principal, it simply requires official signatures and official approval from the National Assembly in Vietnam and the Congress in the USA. NTR Watch will continue to follow events surrounding the issue. We will also begin to monitor and analyze potential repercussions of local and foreign businesses if the treaty is not signed within the next several months

Entry Eleven - September 8, 1999
Time is running out for the signing of the bi-lateral trade agreement. Industry sources say the two sides may not sign the treaty framework during the APEC meeting in New Zealand from September 9 to 13. If the treaty is not signed, there will be nothing to present to the US Congress which will be in session only until the first part of October. The Congress will reportedly be working on the US budget and then will recess until next year. Most analysts say there will be no political will on the US side to move forward on the issue at the beginning of 2000 due to the upcoming Presidential elections.

Though the APEC Summit is not the only opportunity to sign off on the agreement, it is the most convenient opportunity since the heads of state, Prime Minister Phan Van Khai and President Clinton, would be present for such a signing as would the relevant trade officials. 

The reasons for the possible delay are unclear. While a trade agreement has been approved in principal by both sides, there may be some retrenchment on the Vietnamese side say sources in Hanoi. Reuters news has reported that a political retrenchment is taking place within the Politburo due, in part, to the role that state-owned enterprises may lose when the trade agreement goes into effect. The news service reported that US Secretary of State Madeleine Albright asked Vietnamese leaders if there was such a retrenchment and the leaders told her that they were ready to move forward with the trade agreement. Secretary Albright was in Vietnam for a two-day working visit. She left Vietnam for Auckland on the 7th. In a press conference in Hanoi, she said she "hoped" the agreement would be signed in Auckland.

Entry Ten - July 26, 1999 
In the early morning hours of Sunday July 25th, Vietnamese and US negotiators completed ‘in principle’ a bilateral trade agreement. In a joint statement, trade representatives say they would work out the technical details and draft an accord to be presented to the National Assembly in Vietnam and the US Congress in the United States. The US Congress will have just 60 days to decide on the issue since it has been fast-tracked. This means the Congress must decide on the issue within the 60 day time period.

NTR Watch will continue to follow the pace of negotiations and legal drafting. As well, we will research and present the new opportunities that NTR will bring to Vietnamese and American businesses. Keep your eyes on this page.

Entry Nine - July 20, 1999 
The ninth round of talks between Vietnamese and US negotiators is expected to take place this week. Official spokespersons from both sides have said that there remain only a few issues to resolve. However, a source close to the negotiations reported that a deal could be made within this week or next week and that the talks would effectively be over with a joint announcement made before the end of July. As it currently stands, the agreement would be favorable to US banks and insurance companies while Vietnamese exporters of manufactured goods could begin exporting under favorable tariff structures right away. However, the source said the textile industry could be faced with problems in the future.

There was no further word on a visit to Vietnam by President Clinton other than it would be scheduled in, if at all, during his visit to New Zealand in September. Watch this space.

Entry Eight - July 14, 1999 
According to sources close to NTR Watch, the yet-to-be-signed trade agreement will be fast-tracked in the US Senate when it is presented in the fall. As reported earlier, a trade agreement has already been agreed to in principle and lawyers are drafting the agreement into treaty language to be signed by US and Vietnamese trade authorities. Fast-track authority means the Senate will have just 60 days to decide on the trade agreement. This will rule out any attempts to filibuster or table the issue for discussion and voting at a later date (such as after the US Presidential elections).

Though not fully confirmed, there are strong rumors that President Clinton is tentatively scheduled to preside over the official opening of the new US Consulate in HCM City and the signing of the trade agreement in September. In the local press, US Ambassador Peterson has said that President Clinton was eager to visit Vietnam before his term was up. 

Entry Seven – June 25, 1999
A trade agreement has been completed in principle and draft documents have been sent to lawyers for legal drafting into an official trade treaty said a US Embassy official on Friday. According to the source, during the eighth round of negotiations in Washington D.C. Vietnamese and American negotiators made all agreements necessary to finalize the nearly four-year effort. Vietnam’s Trade Minister Truong Dinh Tuyen and US Trade Representative Charlene Barshefsky will iron out the final details in a meeting in New Zealand, but the trade agreement has been completed in principle.

The next step will be to draft the agreement into a document (treaty language) that both sides will sign. This treaty will then be presented to Congress in September when it convenes. According to the source, most of the incentives/benefits for the Vietnamese side (meaning Vietnamese exports to the US) will go into effect immediately. For the American side (US access to the Vietnamese market), there will a series of long phase-in periods though some sectors such as banking and telecommunications are expected to be opened up fairly early on. 

Entry Six-June 21, 1999
The eighth round of negotiations between Vietnam and US trade officials concluded on Friday in the USA. According to local news reports, both sides have claimed that progress had been made on the remaining issues. Reuters news agency quoted US Trade Representative Charlene Barshefsky saying, "We have significantly narrowed the number of remaining issues in this round of negotiations, which would set the stage for normalization of trade relations between the two countries." She further said that issues concerning access for goods and services for certain markets still need to be discussed. Barshefsky is scheduled to meet Vietnamese trade minister Truong Dinh Tuyen this month in New Zealand. As reported earlier in NTR Watch (see below), US government sources have said that an agreement is expected to be finalized in New Zealand with documents being handed over to lawyers for legal drafting at that time. This would mean a trade agreement could be in place by the summer.

Entry Five-June 17, 1999
This week the eighth round of negotiations began in Washington D.C. with the Vietnamese side confidently predicting that a deal could be worked out. Over the past two weeks, there were more news articles stating that it was basically the ‘last chance’ for an agreement to be made since the upcoming presidential elections would likely force postponement of the issue for two years.
One of the strongest advocates of a trade agreement has been Pete Peterson, the US Ambassador to Vietnam. In a short brochure produced by the US Embassy and titled "A Bilateral Trade Agreement: Who Benefits", the Ambassador and his staff outline a series of arguments on why the trade agreement will be good for Vietnam.

In summary these include:
New industries and jobs would be developed to meet demand in the US market. The World Bank estimates Vietnam’s exports to the US could increase to $800 million (see graph below for present day trade flow). 

Vietnam’s manufactured exports are still quite small ($30 per capita compared to $660 per capita in Thailand) but this would grow tremendously with a trade agreement in place. 

Vietnam will attract more FDI, technology, management and other business opportunities since a signed trade agreement would be a strong indication that the country is committed to integration and establishing a fair and level playing field for all businesses. 

Incomes will rise and so the cost of goods and services will decline as it has in other trading nations. Presently, 10kg of rice requires about 20 percent of a Vietnamese worker’s per capita monthly income compared to just 3 percent for a Thai worker. 
The brochure emphasized the point that the US negotiating stance with Vietnam is no different than with any other developing and transitional economy. The negotiations are based upon international norms and in particular on the changes that Vietnam must make anyway in order to enter the WTO. Finally, the brochure states that the US recognizes that a transitional period will be required. 

Entry Four – June 8, 1999
This week a Vietnamese trade delegation will go to Washington D.C. for the eighth round of negotiations reports the Saigon Times Daily. Meetings are scheduled to begin on Monday, June 14 and last about one week. The Vietnamese representative quoted in the story said substantial progress was expected and that the two teams would cover the remaining outstanding issues. The representative or the paper made no mention of Trade Minister Tuyen’s visit to New Zealand scheduled for this month.

Entry three – May 31, 1999
An agreed-to-in-principal trade agreement could be on the desks of lawyers for legal drafting by summer said a US Embassy official. The official made the comments based upon Minister Truong Dinh Tuyen’s most recent visit to the United States. Minister Tuyen reportedly came to agreement in-principle on a number of issues with US negotiators. The US side is now waiting for an official letter noting each of these areas of agreement. Those areas remaining to be discussed are to be settled when Minister Tuyen meets US Trade Representative Charlene Barshefsky in New Zealand in June. If the remaining issues can be settled in New Zealand, an agreement-in-principle will be signed and the entire package will be sent to lawyers for drafting into legislation. 

Entry Two – May 21, 1999
According to US Ambassador Pete Peterson, US Trade Representative Charlene Barshefsky might meet Minister Truong Dinh Tuyen from the Ministry of Trade at a regional meeting to be held in New Zealand in June. As he has before, Ambassador Peterson expressed optimism in interviews with local papers about a trade agreement before the end of the year. Yet he continued to note the areas remaining to be discussed such as tariff schedules and trading rights for American companies to enter economic sectors currently closed.

In HCM City, the US Commercial Service recently sponsored a seminar together with the HCM City Foreign Trade Development and Investment Center. The seminar brought together 170 local companies from HCM City and the surrounding provinces. It was intended to help local companies become more acquainted with trade opportunities with the US.

Entry One – May 12, 1999
On March 19 in Hanoi negotiators completed the seventh round of talks with both sides claiming in the local press that an agreement could be reached by the summer. Some agreements were reached within four key areas of the trade agreement. This included trade and goods (tariffs and quotas), intellectual property rights, trade and services (market access), and investment. Though agreements were reached within these areas, there are other issues still remaining. Nevertheless, optimism is high. US Ambassador Pete Peterson was quoted as saying, "I think we have made significant progress. I think we are at a new threshold."

Conventional wisdom argues that an agreement must be presented to the US Congress by the fall. Politically this is the most opportune time because of the upcoming presidential elections. Political pundits say any attempts to push through a Vietnam trade agreement close to the presidential campaign period would likely fail since most politicians would be afraid that a "vote on Vietnam" would cost them votes. Unfortunately and despite the enormous efforts made by Vietnamese and American government and military officials, the MIA issue remains the biggest obstacle to any kind of constructive policy between Vietnam and the US.

Vietnam - US Trade Flow in US$ millions
Year Imports from USA Exports to USA Total Trade Vietnam Trade (Deficit)/Surplus
1994 $172 $50 $222 ($122)
1995 $247 $164 $411 ($83)
1996 $339 $258 $597 ($81)
1997 $306 $371 $677 $65
1998 $200 $534 $734 $334
1999 $332 $600 $932 $268

Source: Mekong Research, Ministry of Trade, General Department of Customs, IMF