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Last Updated: Wednesday, 31 May 2006, 13:14 GMT 14:14 UK
Vietnam and US agree trade deal
Nike workers in Ho Chi Minh
Vietnam has agreed to drop a plan to invest $4bn in its textile industry
Vietnam has formally agreed a trade pact with the US, paving the way for Vietnam to join the World Trade Organization (WTO).

Under the deal, Vietnam will reduce its tariffs and lift restrictions on almost all US imports.

Representatives from the US and Vietnam signed the agreement at a ceremony in Ho Chi Minh City.

The latest deal goes further than a previous deal between the two countries, which was agreed in 2000.

Last year, trade between the two rose by more than 20% to $7.8bn after the US ended quotas on Vietnamese textiles and garments.

Under the latest deal, Vietnam will cut tariffs to 15% on 94% of US manufactured goods and on 75% of farming goods as well as opening up its energy, telecoms and financial services markets to foreign competition.

The country has also agreed to drop a $4bn plan to improve its textile and garment industry - a move the US had viewed as a means to subsidise the sector.

WTO eyed

Vietnam is keen to become the 151st member of the WTO, which would give it the right to equal treatment in terms of market access to all the organisation's members.

But under WTO rules, it first has to reach agreement on the steps it will take to open its own markets to foreign goods.

The US was the last country Vietnam had to negotiate a treaty with, but it must still win approval for permanent normal trading relations from US Congress.

Deputy US trade minister Karan Bhatia called the treaty an "historic step forward" adding it was "the culmination of years of hard work and preparation on both sides".

Mr Bhatia added he would push for prompt approval from Congress, adding he felt "fairly optimistic" about winning backing for permanent trading.

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