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Hopes for a Vietnam Trade Shift

A proposal to normalize relations would benefit U.S. importers. Critics fear another China.

July 24, 2006|Evelyn Iritani | Times Staff Writer

When Nghia Van Phi first returned home to Vietnam in 2003, he still carried animosities toward the Communist government he had fled nearly three decades earlier.

But Phi, president of a Santa Ana discount home improvement outlet, has since become an enthusiastic supporter of the economic rebuilding of that country. His company, US HiFi Inc., a scaled-down version of Home Depot that caters to the Vietnamese American community, imports 70% of its ceramic tiles, solid oak entry doors and other home products from Vietnam.

That's why Phi hopes Congress will act soon on a bill that would establish "permanent normal trade relations" with Vietnam, the final step in freeing up trade and investment between the former adversaries. During the Cold War, most Communist countries were denied that trade status, which meant they paid higher tariffs on goods exported to the U.S.

Supporters hope to pass the legislation before Vietnam joins the World Trade Organization, the Geneva-based global trade group. Leaders in Hanoi want to finalize their WTO bid by November, when they host President Bush and Asian leaders for this year's meeting of the Asia-Pacific Economic Cooperation forum.

Vietnam hopes to replicate the success of China, which saw its global prestige and trade volume soar after it joined the WTO in 2001. To secure the country's membership, Hanoi officials have agreed to lower tariffs, remove barriers to foreign retailers and banks, strengthen the judicial system and crack down on corruption.

The U.S. Chamber of Commerce and other business leaders expect the Vietnam bill to be approved, given the bipartisan support from congressional leaders who served in the war, including Sens. John McCain (R-Ariz.), Chuck Hagel (R-Neb.) and John F. Kerry (D-Mass.). But it is unclear when the legislation can be squeezed into Congress' crowded summer agenda.

Vietnam could still enter the WTO without the U.S. approval, but trade between the country and the U.S. would not be governed by global rules, putting U.S. firms at a disadvantage, the bill's supporters say.

Passage of permanent normal trade relations with Vietnam wouldn't have much of an immediate effect on Phi, because the goods he imports already have low tariffs and he hasn't directly invested money there. But he says normalized relations would have the psychological benefit of clearing away the final barrier between the U.S. and Vietnam, plus it would encourage the Communist government to continue moving toward greater economic and political openness.

Phi also believes that full normalization between the two countries would lessen hostility among Vietnamese Americans toward the government of Vietnam, making it easier for them to do business with their homeland.

"The people in my country are very smart, very hardworking," said Phi, 53, whose company imports as many as seven container loads a month from Vietnam. "If Americans give Vietnam the chance to open up and step into the WTO, the life of my people will change."

Human rights groups, however, have raised concerns about Vietnam's harsh treatment of political dissidents, ethnic minorities and Christians. Vietnam's bid is also opposed by some U.S. textile and apparel makers, who contend that its entry into the WTO would reward another Asian exporting juggernaut that has used unfair trade practices to bolster its textile and apparel exports at the expense of U.S. competitors.

After the U.S. and Vietnam signed a bilateral treaty in 2001, two-way trade jumped from $1.5 billion to $7.8 billion. The biggest beneficiaries were Vietnamese textile and apparel makers, whose exports to the U.S. increased 6,000% over that period, according to the American Manufacturing Trade Action Coalition, a domestic lobbying group. Over the last year, Vietnam shipped $3.1 billion worth of textiles and apparel to the U.S.

"We're talking about making the same mistake with Vietnam that we did with China," said group spokesman Lloyd Wood in Washington.

But Virginia Foote, president of the U.S.-Vietnam Trade Council, a business lobbying group, said Vietnam wasn't even close to having China's clout in the U.S. marketplace. Even with its recent export spurt, Vietnam represents less than 4% of the U.S. textile and apparel market, she said.

The Vietnamese government has improved its business climate in anticipation of joining the WTO, said Walter Blocker, managing partner of Gannon Vietnam Ltd. and chairman of the American Chamber of Commerce in Ho Chi Minh City. That includes the passage of more than 50 laws since 2004.

Blocker predicted that U.S. investment in Vietnam would rise sharply once WTO membership was finalized, given the country's attractive domestic market and low production costs. More than half of Vietnam's 84 million people are younger than 30, and they are enthusiastic consumers of U.S. culture, including products as varied as movies and mascara.

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