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The BBC's Rob Watson
"Another milestone in the long, slow process of reconciliation"
 real 28k

US President, Bill Clinton
"From the bitter past we plant the seeds of a better future"
 real 28k

Former US trade representative, Carla Hills
"It is a step forward"
 real 28k

Friday, 14 July, 2000, 14:57 GMT 15:57 UK
US and Vietnam enter new era

So far only a few big US companies have invested in Vietnam
US President Bill Clinton has hailed a landmark trade agreement with Vietnam as proof that former enemies can forgive each other and embrace the future.

He said the agreement - signed after four years of tough negotiations and 25 years after the war betweeen the two countries - would accelerate Vietnam's integration into the world community.

Vietnam said the deal, under which it will be given full access to the US market, was an important milestone in the country's integration into the world economy.

Trade Minister Vu Khoan said it created favourable conditions for Vietnam's admission to the World Trade Organisation and put the seal on the normalisation of relations with Washington begun with the restoration of diplomatic ties five years ago.

The deal comes soon after Washington signed a trade liberalisation deal with China. Both agreements must be approved by Congress.

Reduce tariffs

Vietnam war helicopters
For years the aftermath of war coloured US-Vietnamese ties
The deal is an indication that Vietnam's ageing Communist leadership has decided to embrace reform.

The Vietnamese have pledged to reduce import tariffs on goods and services from the US and other foreign countries - a key requirement before Vietnam can join the World Trade Organisation.

"From the bitter past, we plant the seeds of a better future," said President Clinton.

And his Vietnamese counterpart, Prime MInister Phan Van Khai, also welcomed the deal.

"The signing of the trade agreement marks the completion of the process of normalisation of economic and trade relations between the two countries," he told state television.

Path to reconciliation
1964 US imposes embargo against North Vietnam
1973 US forces withdraw from Vietnam
1975 War ends, Vietnam reunified; US embargo extended to all Vietnam
1988 Vietnam begins cooperation on missing US soldiers (MIAs)
1995 Clinton announces normalisation of relations, US opens Hanoi embassy
1997 Vietnam veteran Douglas "Pete" Peterson appointed US ambassador
1999 Talks begin on trade pact
The US and Vietnam reopened diplomatic relations in l995, ending two decades of hostility which followed the Vietnam War.

The market-opening agreement was reached in principle this week after talks between the US trade representative, Charlene Barshefsky, and Vietnam's trade minister, Vu Khoan.

Under the deal, tariffs on Vietnamese products would fall from an average of 40% to 3%.

Vietnam has received a wave of foreign investment since it first opened its economy in the 1990s.

But US companies have been slow to take advantage of the situation, put off both by the cost of exporting back to the US, and the difficulties of Vietnam's conservative bureaucracy.

Those difficulties have taken their toll.

Clinton
Clinton: Planting the seeds of a better future
Total foreign investment in Vietnam declined from $8bn in 1996 to $2bn this year, and the US is only the ninth largest foreign investor, behind many Asian countries.

Several US companies have announced cutbacks or withdrawals of investment in recent years, including DaimlerChrysler, which decided not to proceed with a $190m auto assembly plant, and Procter and Gamble, which said it had lost millions in joint ventures with state-owned companies.

Vietnam's economic expansion has also slowed, with a growth rate of 5% compared to the 10% in the early 1990s.

As in the case of China, the problem of restructuring Vietnam's large but inefficient state sector has slowed reform.

Vietnam has just announced the creation of a stock market to trade in shares of its newly privatised companies - but initially it will have only four companies as members.

Congressional opposition

The trade deal could face opposition in the US Congress, which will need to approve permanent normal trading relations.

Trade unions are likely to be concerned about the impact on US jobs of Vietnamese imports of shoes, textiles, and cheap electronic goods.

A vote may be put off until after the November elections.

However, many Republicans, who have a majority in Congress, appear to be in favour of the deal.

Senator John McCain, who was a prisoner of war in Vietnam, said the deal was "a sign that [the Vietnamese] are undertaking serious economic and political reform - and that's something we have to be in favour of".

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See also:

28 Apr 00 | Asia-Pacific
America reflects on Vietnam
13 Mar 00 | Asia-Pacific
Cohen seeks details of war dead
25 Apr 00 | Asia-Pacific
Vietnam: A new Asian Tiger?
07 Jul 00 | Business
Vietnam to open stock market
14 Dec 99 | Asia-Pacific
Vietnam pledges more progress on economy
16 Aug 99 | Asia-Pacific
US consulate opens in Vietnam
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