Workshop on Vietnam’s WTO Accession

Demetrios J. Marantis

U.S.-Vietnam Trade Council

demetrios.marantis@usvtc.org

Ho Chi Minh City Bar Association

6 February 2004

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Overview

I. Key Facts

II. WTO Accession Process

III. Key Issues in Vietnam’s Accession

IV. Relationship Between WTO Accession and the BTA

I. Key Facts

WTO Accession

From 1995 to 2004

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WTO Members

WTO Members 146 current Members 18 have joined since founding of WTO in 1995

Ecuador first in 1996 Macedonia (2003), Armenia (2003), Taiwan (2002), China (2001)

most recent

Applicants for Accession 27 countries seeking to accede 2 completed accession process and about to join

(Cambodia/Nepal) Saudi Arabia likely to finish next Other applicants include Vietnam, Russia, Serbia, Ukraine, Laos

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Vietnam: Key Dates

Application for Accession: January 1995 Working Party Established: January 1995 7 Working Party Meetings

July 1998 December 1998 July 1999 November 2000 April 2002 May 2003 December 2003

ACCESSION: 2005??

II. WTO Accession Process

Legal Basis and Procedure

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Legal Basis for WTO Accession: WTO Agreement

Article XII

Accession

1. Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of other matters from provided for in this Agreement ... may accede to this Agreement, on terms to be agreed between it and the WTO ...

2. Decisions on accession shall be taken by the Ministerial Conference. The Ministerial Conference shall approve the agreement on the terms of accession by at two-thirds majority of the Members of the WTO

3. Accession to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.

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Process: The Four “Stages” of Accession

Stage 1: Establish Working Party/Engage in factfinding

Stage 2: Negotiate terms of accession with WTO Members

Stage 3: Finalize terms of accession

Stage 4: Obtain WTO approval and domestic ratification

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Stage 1: Factfinding

WTO establishes Working Party after country applies Working Party consists of those WTO Members that have an

interest in that particular accession Purpose of Working Party is to examine the application and

ensure that the applicant’s trade regime complies with WTO rules Members conduct comprehensive review applicant’s trade

and economic policies that relate to WTO agreements Applicant submits “Memorandum of Foreign Trade Regime,”

relevant laws and regulations, currently applicable tariff schedule, legislative action plans, etc.

Working Party members review materials, submit questions, and seek clarifications

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Stage 2: Multilateral and Bilateral Negotiations

2 parallel tracks of accession negotiations: multilateral and bilateral

Multilateral Track: Working Party ensures that applicant’s trade regime complies with all WTO rules Periodic Working Party meetings in Geneva Working Party report details steps applicant will take to comply

with the WTO agreements Bilateral Track: Parallel bilateral negotiations on tariff

rates for particular products and market access for particular services Different WTO Members have different interests MFN: whatever is negotiated bilaterally applies to all

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Stages 3 and 4: Finalizing and Becoming a Member

Stage 3: Working Party finalizes and adopts “package” of: Working Party Report, which contains the applicant’s commitments to

comply with WTO rules, Schedules of commitments on goods (tariffs) and services, and Protocol of Accession (i.e., the legal treaty between the applicant and the

WTO) Stage 4: Becoming a Member

WTO Approval: WTO General Council approves membership by 2/3 majority

Ratification: Applicant completes domestic ratification procedures (typically ranges from 2-11 months)

Membership: Applicant formally deposits acceptance and becomes a Member 30 days later

III. Key Issues In Vietnam’s Accession

Goods, Services, IPR, and the BTA

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Overview

Stage 1: COMPLETED Vietnam applied for accession on 4 January 1995 Working Party established on 31 January 1995 (chaired by Seung Ho) Submitted Foreign Trade Memorandum on 24 September 1996

Stage 2: ONGOING Multilateral Negotiations

Working Party has nearly 40 Members Working Party has met 7 times (most recently in December 2003)

Bilateral Negotiations Vietnam has conducted bilateral negotiations with roughly 20 Members on

tariff rates and market access for services None of these bilateral negotiations has closed

Cannot move to Stage 3 until Working Party members and Bilateral partners are satisfied “Quantum Jump”

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Multilateral Negotiations: Key Issues

Multilateral negotiations ongoing Vietnam has submitted information, including action plans, to

demonstrate how it will comply with the various WTO rules (particularly recently)

WTO Members continue to request more clear information

Key issues remain Customs Valuation: will Vietnam need extra time to apply WTO rules? Agriculture: will Vietnam continue to provide export subsidies? Trading Rights: will Vietnam provide full national treatment to allow

foreign companies to import and export goods in/out of Vietnam? Sanitary and Phytosanitary (SPS) Measures: when will Vietnam

institute a WTO consistent system? Intellectual Property: how will Vietnam enforce IPRs and when will it

join relevant multilateral IPR conventions?

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Bilateral Negotiations: Key Issues

Vietnam is negotiating bilaterally with more than 20 WTO Members Bilateral negotiations focus on 1) tariffs and 2) services Tariffs: Key issue is tariff reduction

Vietnam must negotiate tariff rates for individual products bilaterally (i.e., with interested WTO Members) and then apply these rates to all Members (remember MFN!)

WTO Members will expect Vietnam’s simple average tariff rate to approximate those of recently acceded Members (e.g., Armenia, China)

10 most recently acceded non-LDC countries had simple average rates of 8 – 17% for agricultural products and 4.8 – 8.9% for non-agricultural products

Vietnam’s most recent tariff schedule (dated 22 July 2003) has simple average tariff rates are approximately 29.37% for agricultural goods, and 17.03% for non-agricultural goods

WTO Members also seeking zero tariffs on key products (e.g., information technology products)

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Bilateral Negotiations: Key Issues (Cont.)

Services: Key issue is how much access Vietnam will grant to WTO Members in various services sectors (e.g., telecom, banking, insurance, professional, etc.) Vietnam must negotiate access for individual service sectors

bilaterally (i.e., with interested WTO Member) and then apply this access to all WTO Members (remember MFN!)

WTO Members will expect Vietnam to provide access similar to that of recently acceded Members (e.g., Armenia, China)

BTA Services Commitments (Annex G) are floor for negotiations Vietnam’s BTA commitments to U.S. roughly approximate level of

access provided by recently acceding WTO Members WTO Members will expect Vietnam give them at least what it gave

the United States in the BTA. So far, Vietnam has not done so. Members will also seek reduced phase-in periods (e.g., telecom)

IV. Relationship Between BTA and WTO Accession

BTA = Vietnam’s Best Friend

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From the BTA to the WTO

BTA: Foundation for WTO Types of Trade Agreements

Pre-WTO: MFN Trade Agreement (e.g., BTA) WTO: WTO Accession Post WTO: WTO Plus FTAs (e.g., U.S.-Singapore FTA)

Historical Context Necessary for U.S. to apply MFN tariffs to Vietnam Other countries have also gone through MFN agreements with U.S.

(e.g., Russia, Cambodia) Big Step to WTO

BTA based on WTO principles Through BTA, Vietnam has already committed to do many of the

things that will be required of it for WTO accession.

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Multilateral Negotiations:Many BTA Rules Equal or Similar to WTO Rules

Some BTA obligations incorporate WTO Agreements in full Ch. I, Art. 3(4): incorporates WTO Customs Valuation Agreement Ch. IV, Art. 11: incorporates substantive provisions of WTO TRIMs Agmt Chapter VI, Art. 8: incorporates WTO Import Licensing Agreement

WTO Accession will require Vietnam to apply such agreements to all WTO Members.

Some BTA obligations incorporate partial WTO obligations Chapter I: incorporates fundamental principles of SPS, TBT, and others Chapter II: incorporates most of TRIPS Agreement Chapter III: incorporates most of GATS Chapter VI: based on WTO transparency principles

WTO Accession will require Vietnam to assume full agreements,where relevant (i.e.., SPS, TBT, TRIPS, GATS), and apply to all Members.

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Bilateral Negotiations:BTA Is Baseline for WTO Negotiations

Some BTA commitments will form basis of negotiations with Members Ch. I, Annex E: tariff commitments Ch. III, Annex G: services commitments

WTO Members will expect Vietnam to “multlateralize” these commitments pursuant to WTO MFN obligations.

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BTA Implementation Facilitates 2005 WTO Accession

SUBJECT BTA TIMETABLE WTO 2005

Customs Valuation Ch. I, Art. 3(4): adopt WTO Customs Valuation Agreement (CVA) by Dec. 2003.

Implementation enables Vietnam to meet CVA requirements by 2005.

State Trading Ch. I, Art. 8 provides substantially similar obligations to GATT Art. XVII.

Implementation enables Vietnam to meet key GATT requirement by 2005.

IPR/TRIPS Phased implementation of BTA Chapter II (most TRIPS rules) ends in June 2004.

Implementation enables Vietnam to meet most TRIPS requirements by 2005.

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BTA Implementation Facilitates 2005 WTO Accession (Cont.)

SUBJECT BTA TIMETABLE WTO 2005

GATS, GATS Annexes and Telecom Reference Paper

Ch. III and Annex F incorporate most GATS obligations, 3 GATS Annexes and Telecom Reference Paper into the BTA.

Implementation enables Vietnam to meet key services requirements by 2005.

TRIMs Vietnam must eliminate trade balance and forex TRIMs by 12/01 and all other TRIMs by earlier of 12/06 or WTO accession.

Implementation furthers Vietnam’s ability to meet TRIMs obligations by 2005.

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February 2004