US agrees to deal for Vietnam to join WTO

WASHINGTON, May 14 : The United States and Vietnam have reached an agreement in principle paving the way for the communist-run country to join the World Trade Organization this year, US and Vietnamese officials said today.

The pact lowers Hanoi's tariffs on US industrial and farm products and removes other barriers that block U.S. companies in sectors such as telecommunications, retailing, banking, insurance and energy from doing business in Vietnam, the US Trade Representative's office said.

US officials hailed it as a milestone in a two-decades-old process of normalizing relations severed by the 1957-75 Vietnam War and said it would boost US exports in one of the fastest-growing markets in Asia.

In Hanoi, the state-run Tuoi Tre (Youth) newspaper quoted an official at the Vietnamese Embassy in Washington as saying the two countries were expected to sign the agreement in early June.

Vietnam's ability to reach a deal with the United States, stands in contrast to Russia, which has been pushing for years to join the world trade body but remains at odds with Washington over the terms of its accessions.

''Vietnam recognises that broad-based reform and economic liberalisation are essential to its integration into the global economy,'' outgoing US Trade Representative Rob Portman said.

''We intend to work hard with Vietnam to complete the process of its full accession to the WTO.'' Once a deal is completed, the US Congress must vote on giving the Southeast Asian country of 83 million people Permanent Normal Trade Relations Status. Then Vietnam would submit its final request for WTO membership later in 2006.

Sen. Max Baucus, a Montana Democrat whose constituents could see increased beef exports under the deal, said he would push for approval of PNTR before August.

TEXTILES SUBSIDY

Vietnam agreed to eliminate WT0-prohibited industrial subsidies as part of the pact, including in its textile sector, US trade officials told reporters in a conference call.

That is enforced through a special mechanism allowing the United States to reimpose quotas on Vietnam's textile and clothing shipments if it does not abolish the prohibited subsidies before joining WTO, they said.

The actual amount of Vietnam's textile subsidies are nowhere near ''the billions of dollars that have been bandied around,'' a senior U.S. trade official said.

''We believe ... it's a very small programme. But whatever it is, it needs to be eliminated and the Vietnamese have committed to us that it will be eliminated,'' he told reporters on condition he not be identified.

However, US textile producers said the pact was too weak and would lead to American job losses by allowing Vietnam to flood the US market with heavily subsidised exports.

The two countries could sign a final agreement when Vietnam hosts the annual APEC (Asia Pacific Economic Cooperation) trade ministers meeting in early June.

US trade officials said they did not expect the congressional vote on establishing permanent normal trade relations with Hanoi to be contentious.

The United States and Vietnam restored diplomatic relations in 1995, 20 years after the end of the Vietnam War.

Since the countries signed a business deal in 2001, Vietnamese exports to the United States have grown to more than 6.5 billion dollas in 2005. The United States exported more than 1.2 billion dollars of goods to Vietnam last year.

Hanoi wants to be a WTO member by the time it hosts US President George W. Bush in November for the annual summit of the 21-member APEC forum.

Vietnam has completed deals needed to join the Geneva-based WTO with all of its other leading trade partners, but still needs to finish work on a multilateral agreement bringing its overall trade regime in line with global rules.

Reuters