August, 2001: Publius

By Greg Rushford
Published in The Rushford Report

The U.S.-Vietnam Bilateral Trade Agreement — now moving through Congress —is a classic illustration that international trade is about more than economics.

It was almost casual, the way the State Department official mentioned the U.S. national security interest in Vietnam in little-noticed testimony earlier this summer. America’s interest is in “a secure Vietnam,” Deputy Assistant Secretary (East Asia) Ralph “Skip” Boyce told the Senate Finance Committee on June 26. Because we want Vietnam to be secure, Boyce testified, it is important for Congress to ratify the U.S.-Vietnam bilateral trade deal as soon as possible.

“As we have seen, Vietnam can be a source of regional instability,” Boyce declared. Finishing the thought, Boyce added that Vietnam “also has the potential to contribute to stability and security and to be an engine for regional economic growth.”

Hold on.

A source of regional instability?

Mr. Boyce (who has been tapped to be the next U.S. ambassador to Indonesia), it seems, has the diplomat’s gift for understatement. Inscribed on the black granite Wall of the Vietnam Veterans Memorial in Washington, D.C. are the names of 58,196 Americans who were sent to Vietnam — and didn’t come back alive. Five American presidents told us that it was important to our national security to prevent the Communists from coming to power. Now, 26 years after the unrepentant Vietnamese Communists did precisely that, the American government tells us that our true national security interests in fostering regional stability turn on doing business with those Communist victors.

Remarkable — and still painful. One of the names on the Wall is Stephen Charles Sellett. He was my cousin.

But at least this time the United States government has got it right.

Trade and market-oriented reforms will eventually accomplish what the war failed to do: create a prosperous, stable Vietnam. There will always be sharp differences of opinion on whether we should have sent Big Macs and Nikes to Vietnam in the first place, instead of B-52s and my cousin Steve. But it is now possible to see the light at the end of the (economic) tunnel, to update and revise Gen. William Westmoreland’s famous claim in the late 1960s.

The blueprint to Vietnam’s prosperity is delineated in the trade document. The pace will depend upon how well the Vietnamese stick to their sweeping promises to reform and modernize their economy.

Nobody who knows the first thing about the Vietnamese economy expects that reform will be easy.

A quarter-century of Marxist-Leninist economics convincingly documents — as if any more evidence was needed in this regard — communism’s failure to unleash the considerable talents of the Vietnamese people.

When I visited Saigon (now Ho Chi Minh City) and Hanoi in April, 2000, it was sad. You could see the energy and intelligence in the eyes of the Vietnamese people, who have a well-deserved reputation for both. But 25 years after Uncle Ho’s victory, Vietnam’s per capita income of roughly $400 was comparable to some of the poorest countries in the world, like Burundi. The World Bank was reporting that more than one third of all Vietnamese children age five and under had stunted growth because of malnutrition. A disgrace.

But authorities in Hanoi were dithering over the bilateral accord (they finally signed it in July). Officials were talking the talk of market economics, but they weren’t walking the walk.

Meanwhile, the economy was crippled by the usual protectionist suspects: high tariffs and taxes, money-losing state-owned enterprises that hogged scarce credit, import and export licenses and corruption, and more than enough red tape to strangle most aspiring entrepreneurs.

Much-needed foreign investments, which had been running about $2 billion a year when Vietnam’s rulers started to open the economy in the mid-1990s, had fallen off to some $600 million annually.

Vietnam had passed some reforms, including an Enterprise Law aimed at cutting that economic red tape. But there was considerable doubt the law would be implemented.

Happily, the atmosphere has changed dramatically in the past year.

Vietnamese officials have implemented the Enterprise Law. Last year, more than 14,000 private small and medium sized enterprises registered to do business; this compares to only 3,000 new entrants into the private sector for each of the previous three years. “This marks a turning point in Vietnam’s efforts to reform the private sector,” says Virginia Foote, who is the president of the U.S.-Vietnam Trade Council and one of the really important players in nurturing the trade bilateral to fruition.

Vietnam has enacted various commercial law reforms. Last year, an Insurance Law was passed. Two months ago, the National Assembly passed a new Customs law. (The Customs law was written with the drafting and technical assistance of Dick Belanger, who works with Dan Price at Powell, Goldstein, Frazer & Murphy. Price, along with Virginia Foote, is one of the key figures in developing the U.S.-Vietnam bilateral).

The reforms continue. Last month, authorities in Hanoi released draft regulations aimed at reducing the current lengthy delays in granting building licenses.

Today, Vietnam is no longer isolated from its neighbors. Hanoi joined the Association of Southeast Asian Nations in 1995. It became a member of the Asian Pacific Economic Forum in 1998. Currently, Vietnam has observer status in the World Trade Organization (hoping to become a full member in perhaps three to five years).

Take a gander at some of the following statements in a 15-page document that the Vietnamese Embassy in Washington has circulated on Capitol Hill:

“Vietnam will eliminate quotas on all imports over a period of 3-7 years and treat imports of US products the same as domestic products (National Treatment).”

“Vietnam will adhere to WTO rules in applying customs, import licensing, technical standards, sanitary measures.”

“Vietnam will reduce tariffs on about 250 products; the cuts range from 33% to 50% and are to be phased in over 3 years.”

“Vietnam has pledged to phase in the WTO Agreement on Trade-related Intellectual Property Rights (TRIPS) over 18 months. The bilateral TRIPS agreement goes above and beyond the WTO’s TRIPS agreement by including Vietnamese commitments to protect satellite signals within 30 months.”

There’s a lot more in the 100-plus U.S.-Vietnam trade bilateral accord, which is extraordinary in its sweep. Besides the tariff cuts, there’s an investment chapter.

There are also transparency promises. Services? You name them, and they are in the document. By comparison, the U.S. has been trading with China since 1979 with a trade bilateral running less than ten pages.

Before they signed the document, the Vietnamese went over each of the items in the usual painstaking manner they bring to negotiations (remember the miserable fight over the shape of the table at the Paris Peace talks?). Finally, the wary old men in Hanoi were persuaded that what the Americans were asking them to sign was in their own economic interest.

Sure, there will be plenty of problems along the way to translating these promises into reality — there always are. But the promises that the Vietnamese have made in the bilateral deal are extraordinary.

“The thing I’m most proud of is that they have done their homework and are taking the leap of faith that is what has been true in other countries, they can do, too,” says Virginia Foote of the Vietnamese.

It’s a matter of national security.

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