U.S./VIETNAM TRADE AGREEMENT: MORE SYMBOLIC THAN SUBSTANTIAL

Byline: Jim Ostroff

WASHINGTON — The signing Thursday of a sweeping trade accord between the U.S. and Vietnam was hailed in all quarters as a fitting rapprochement, officially ending 25 years of enmity between the former foes and setting the stage for a boom in trade.
However, U.S. makers and retailers said a mix of logistical concerns and protectionist gambits may keep Vietnam a bit player on the sourcing scene for many years to come.
Whatever the fate of the accord, it was hard to miss the symbolism as President Clinton strode into the Rose Garden to announce that the former bitter enemies had fully agreed to a comprehensive trade agreement a quarter century after U.S. forces retreated from their last stronghold in Saigon (now Ho Chi Minh City).
“This is another historic step in the process of normalization, reconciliation and healing between our two nations,” Clinton said in late afternoon comments, as his chief trade negotiator, Charlene Barshefsky, and her Vietnamese counterpart, Vu Khoan, looked on minutes after signing the historic trade document.
“The agreement we signed today will dramatically open Vietnam’s markets on everything from agriculture to industrial goods, while creating jobs both in Vietnam and in the United States,” he said.
Although the agreement’s full details were not released, both sides agreed to open their markets to the other’s goods and services, as well as provide investment and copyright protection guarantees.
Vietnam will not receive full benefits, however, until Congress grants Vietnam normal trade relations status. Without this, U.S. import duties on Vietnamese goods would remain at their average 40 percent level and range up to 90 percent. With NTR, the average U.S. tariff would fall to 3 percent for all products and about 16 percent for apparel and textiles.
Analysts said they anticipate Congress will grant Vietnam NTR by yearend, a forecast that encouraged American sourcing interests. For years, makers and retailers have eyed Vietnam as “the next China,” given its large population, rock-bottom labor costs and a workforce that is skilled in the needle trade.
Privately, some American importers have said they could do little more than envy their European competitors who were importing an estimated $100 million-plus worth of apparel annually from Vietnam.
“Obviously, so long as U.S. duty rates remain sky high there, trade will remain stunted, shipping mainly men’s cotton woven shirts and cotton gloves,” said Julia Hughes, Washington vice president with the U.S. Association of Importers of Textiles and Apparel.
Hughes noted that the U.S. imported $44 million worth of apparel from Vietnam, composed almost entirely of these two products, for the year ended in April. This placed Vietnam in 55th place as a foreign U.S. apparel supplier.
Some analysts have said Vietnam, with heavy foreign investments, could ship up to $2 billion in apparel a year to the U.S., which would place it among the Big Five: Mexico, China, Hong Kong, Taiwan and South Korea.
Hughes said that with NTR between the two nations — and Vietnam’s already growing apparel-making industry — Vietnam can be expected to become a major source of a broad range of garments and one of the largest suppliers in the U.S., so long as quotas are not imposed.
The specter of Vietnam apparel quotas doesn’t sit well with Larry Martin, president of the American Apparel Manufacturers Association, who said, “We favor a regime that allows for open trade between both countries without any artificial restraints and we doubt we’d support efforts to impose quotas on Vietnam.”
The American Textile Manufacturers Institute will fight to insure just such quotas are negotiated with Vietnam, said Carlos Moore, ATMI executive vice president. Averring that “Vietnam could easily ship enormous quantities of apparel here very quickly, that would damage our industry by displacing apparel being made with our fabrics and yearns in Mexico and the Caribbean,” Moore said ATMI has urged the Clinton administration to act quickly on comprehensive quota talks with Vietnam.
He said textile makers are encouraged that the administration indicated it would do so “as soon as feasible after NTR status is granted” that country. But should Vietnam join the World Trade Organization, which also is a near certainty, it will join a quota-free trade regime for apparel and textiles that is slated to begin Jan. 1, 2005.
Whether Vietnam gets easy access to the U.S. this year, or has to wait five more, it very quickly will be able to build itself into an apparel export powerhouse, said Ron Sorini, the Chicago-based senior vice president with Sandler, Travis and Rosenberg, a trade consulting firm.
“Vietnam has all the elements that we’d expect to see in a developed and viable apparel industry and it could take as little as 18 months” to get large-scale exports up and running, he said.
Norman Fryman, executive vice president of The Bayer Clothing Group, said: “In all probability, Vietnam will become a major apparel source just as Japan once was, then Korea, then Hong Kong and Malaysia. And after Vietnam, they’ll turn to Africa.”
Jonathan Gold, international trade policy director with the International Mass Retail Association, said: “We have some retailers — the big boxes like Wal-Mart and the Home Depots — that are looking to open stores in Vietnam, although this might have to wait for Vietnam’s accession to the WTO, since it is generally in accession talks that market access issues really are settled.”
National Retail Federation member stores are not about to beat a path to Vietnam either to set up stores there or do sourcing programs, due to uncertainties about investment protections and that nation’s uncertain infrastructure,
However, Erik Autor, vice president and international trade counsel for the National Retail Federation, said, “There are logistical concerns about Vietnam’s roads, port facilities and electrical system: the fact it is on the other side of the world, and the fact it still has a largely state-controlled, communist economy where corruption can be a serious problem.”
Taking a broader view, Bob Zane, senior vice president of manufacturing and sourcing at Liz Clairborne Inc., said, “Although we are not actively involved in sourcing from Vietnam, we welcome all agreements that facilitate free trade. We believe that the stabilization of trade between the U.S. and Vietnam will be beneficial to the industry, since it will broaden the base of product availability.”

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