Impact of Vietnam s WTO Accession on the Foreign Trade & Investment Regime

Transcription

1 Am Cham: Impact of WTO Accession Impact of Vietnam s WTO Accession on the Foreign Trade & Investment Regime 23 January, 2007 Fred Burke, Baker & McKenzie LLP Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm.

2 Agenda I WTO Accession II Interface of WTO Commitments and new Laws III Impact on Existing Businesses IV Impact on New Businesses: New Opportunities and Challenges 2007 Baker & McKenzie 2

3 Vietnam WTO Accession! Big Emerging Economy " Economic Reforms underway " High GDP growth " 82,000,000 young population! Keen to integrate: " WTO Accession began in 1995 " ASEAN/AFTA Member " US Bilateral Trade Agreement 2001 " Japan Bilateral Investment Agt., etc.! Key Exports: " Textiles / Footwear " Seaproducts (shrimp, lobster) " Agriculture (rice, coffee) " Furniture " Crude Oil - Software too 2007 Baker & McKenzie 3

4 The Long Road to Accession PHASE 1 : ! Jan. 1995: Submitted Application! Sept. 1996: Delivered Memorandum! Mar. 1998: Questions and Replies! Jul. 1998: Working Party Meeting I! Dec. 2001: Initial Market Access Offer! May 31, 2006: Last Bilateral Signed! WTO General Council Vote 11/06! National Assembly Ratification ! Accession January 11, Baker & McKenzie 4

5 Significance of WTO to Vietnam 1. Garments : End of Quota System, but selfinitiation threat. 2. Recourse in trade disputes with big economies 3. End of Jackson-Vanick (PNTR) 5. Precondition for GSP in US 6. Symbol of legitimacy, rule of law 7. Reinforces domestic reforms 8. But: NME treatment in Dumping Cases? 9. And: Loss of Export Tax Incentives 2007 Baker & McKenzie 5

6 What is International Trade Law?! International Trade Agreements " World Trade Organisation (WTO) agreements currently 150+ Members Members need not be States : Hong Kong SAR is a member, separately from China. Russia, Ukraine, Laos are applicants AIM: Trade liberalization to unleash comparative advantages and stimulate growth " Regional / bilateral free trade agreements 2007 Baker & McKenzie 6

7 Sources & Scope of WTO Law?! Marrakesh Agreement Establishing the WTO (1995)! Trade in Goods (General Agreement on Tariffs and Trade - GATT)! Trade in Services (General Agreement on Trade in Services - GATS)! Intellectual Property Protection (Trade Related Aspects of Intellectual Property Rights - TRIPS)! Dispute Resolution (The Dispute Settlement Understanding - DSU)! Trade-related Investment Measures (TRIMS) 2007 Baker & McKenzie 7

8 Sources and Scope of WTO Law?! Agreement on Sanitary and Phytosanitary Measures (SPS Agreement)! Agreement on Technical Barriers to Trade (TBTs)! Agreement on Safeguards! Agreement on Subsidies and Countervailing Measures! Agreement on Rules of Origin! Agreement on Agriculture! Various Annexes: Financial Services, Telecoms 2007 Baker & McKenzie 8

9 Other Sources of WTO & Trade Law?! Plurilateral WTO Agreements: " Transparency in Government Procurement " Trade in Civil Aircraft " Dairy Agreement " Bovine Meat Agreement! WTO Singapore Issues " Competition Law " Trade and Investment, etc.! Regional & Bilateral Trade Agreements, Bilateral Investment Agreements 2007 Baker & McKenzie 9

10 General Concepts! Rules v. Market Access Commitments! Non-discrimination " National Treatment ( NT ) " Most Favored Nation ( MFN )! Elimination of quantitative restrictions! Conversion of non-tariff measures to tariffs! General & security exceptions! Transparency! Special & Differential Treatment! Progressive Liberalization : Rounds & Phase-Ins 2007 Baker & McKenzie 10

11 Trade in Goods! Measures affecting trade in goods " tariff reduction / elimination " customs procedures " non-discrimination viz-a-viz like foreign and domestic products " standards, testing, labelling requirements " anti-dumping / countervailing / safeguards " Trend from Tariff Issues to Tax & NTB Issues 2007 Baker & McKenzie 11

12 Trade in Services! Measures affecting trade in services " Cross-border consumption of services " Consumption of services abroad " Commercial presence abroad " Movement of natural persons! Global commitment to improve market access for foreign service suppliers from baselines in Schedules Baker & McKenzie 12

13 Trade in Services! Unlike Trade in Goods: Each Service Treated Separately for purposes of NT, and Market Access! Doha Round Requests & Offers Underway " business (including professional and computer) services " communication services " construction and related engineering services " distribution services " educational services, environmental services " financial (insurance and banking) services " health-related and social services " tourism and travel-related services " recreational, cultural and sporting services " transport services and others Baker & McKenzie 13

14 Investments! WTO - Trade Related Investment Measures " local content " trade balancing " WTO is NOT an investment agreement, but Vietnam has many.! BTAs/FTAs/BITs: further investment disciplines? " expropriation " repatriation of profits " investor - State dispute resolution " further Mode 3 commitments 2007 Baker & McKenzie 14

15 What s Next?! WTO - ongoing trade negotiations (Doha Development Agenda Round) " trade and the environment " Fair labor practices " GSP/duty exemptions for Least Developed Countries? " Agricultural subsidies being challenged successfully after death of the Peace Clause! # Will Doha revive? 2007 Baker & McKenzie 15

16 Putting Subsidies into Context! WTO Agreements are between Governments why should lawyers and businesses be concerned? " Business / financial impact of illegal subsidies " WTO SCM Agreement: Inter-government WTO disputes ALSO: implemented domestically by local legislation " Intel Vietnam US$650 million investment : Easy export tax break, or harder high tech tax break? 2007 Baker & McKenzie 16

17 Dispute Settlement Understanding (DSU)! Codifies experience gained & address shortcomings under GATT 1947 dispute settlement procedures! Provides an integrated system of dispute settlement! Strict time frames for each stage: Automaticity! Judicious, legal approach 2007 Baker & McKenzie 17

18 Agenda I WTO Accession II Interface of WTO Commitments and new Laws III Impact on Existing Businesses IV Impact on New Businesses: New Opportunities and Challenges 2007 Baker & McKenzie 18

19 Fitting into the World Trade System Key legal considerations:! Epochal Systemic Shift! Lingering Conservatism, Vested Administrative Interests! Capacity Challenges 2007 Baker & McKenzie 19

20 Rapidly Changing Landscape! New Enterprise Law, Investment Law, IP Law, Civil Code, Commercial Law, Competition Law! Securities Law, Franchise Decree, Technology Transfer Law, Personal Income Tax Law! Many Implementing decrees! Not ALWAYS WTO Compatible 2007 Baker & McKenzie 20

21 Transitional Arrangements! Implementation: 528 Paragraphs of Q&A on plans for implementation.! Phase in Periods for: " Services (e.g., banking, distribution) " Duty Rate Reductions " 1 Year for Removal of 30% cap on foreign investment in Equitized service SOEs listed in Services Schedule except for JSBs and as reserved Baker & McKenzie 21

22 National Assembly Ratification! Omnibus Bill concept used to amend several laws at one go.! Results mixed: only a handful of laws amended, not sure if all done correctly.! E.g., Enterprise Law reference to paragraphs of Working Party Report (vs ) 2007 Baker & McKenzie 22

23 Omnibus Bill also covers: Transparency, IP, Lawyers, Cinema,! Law on Laws " Public Consultation (impartial implementation)! IP Law " Royalties to Authors (impartial implementation)! Lawyers " No litigation by Vietnamese lawyers in foreign firms (violation of WTO market access commitment)! Cinema Law " Removes limit on quantity of Imported Films " MFN Exceptions in respect to Bilateral Agreements Reserved 2007 Baker & McKenzie 23

24 Phase-ins: Banking! 100% Foreign Owned Finance Companies allowed immediately. " US$10B requirement! Credit cards : Immediate for CIs! Quantitative Restrictions: " US$10B for Subsidiaries " US$20B for Branches! Full National Treatment for local deposit taking: Baker & McKenzie 24

25 Other BTA-Plus Commitments! Insurance 100% now! Veterinary Services! Urban planning and landscaping services! R&D Services on Natural Sciences! Management Consulting! Technical Testing! Sewerage, Waste Disposal! Entertainment! BUT: Most of these subject to some form of condition 2007 Baker & McKenzie 25

26 Franchising : Background! Disclosure Based System in new Commercial Law, Decree! Registration of Disclosure Statement and other documents with Ministry of Trade! Statutory protection for Franchisee, but allows for substantial party autonomy! But Baker & McKenzie 26

27 Phase-ins: Franchisee Ownership! JV at maximum 49% foreign share! No cap on JV after January 1, 2008! 100% as of Jan 1, 2009! Branching only 3 years after accession! And wait till we come to retail 2007 Baker & McKenzie 27

28 Some Disappointments! Trading Branches: Deletion of Draft 3 Commitment to allow by January 1. April?! Restricted List for IMPORT Trading Rights: Pharma, Downstream Petroleum, Periodicals, Film, Printers, Transmitters 2007 Baker & McKenzie 28

29 More Disappointments! New Restrictions on Movements of Professionals in Service Providers, e.g.: " Inter-company transfers need 1 year with employer " 20% minimum for local managers, executives and specialists subject to minimum of 3 foreigners in such positions. " 90 maximum for executives setting up a commercial presence Baker & McKenzie 29

30 OTHER SERVICES 150+ Service sub-categories Covered (cf., 60 in BTA). What s Missing? " Real estate agency and brokerage, property management " Security services " Translation, oil field services, etc Baker & McKenzie 30

31 Limits on Services Opened Licensed Partner Only Any Local Partner! Advertising! Facilities based and nonfacilities based telecoms services! Electronic Games! Motion Picture Production! Securities Services! Courier Services! Tourism Services! Distribution Services! Franchising! Education! Environmental Impact Assessment Services 2007 Baker & McKenzie 31

32 Agenda I WTO Accession II Interface of WTO Commitments and new Laws III Impact on Existing Businesses IV Impact on New Businesses: New Opportunities and Challenges 2007 Baker & McKenzie 32

33 Transitional Arrangements : FIEs! Moving from old Law on Foreign Investment to new Enterprise Law / Investment Law! Grandfathering for any already licensed foreign invested enterprises, but! Re-registration " JVCs, EFOCs to LLCs " Mandatory where change in scope of business, term Baker & McKenzie 33

34 Impact on Rep Offices! Decree 72 : Policy of encouraging conversion to Trading Branch! Hiccup with MOT on branch rules! Decree on Trading Activities of Foreign Invested Enterprises coming. When? 2007 Baker & McKenzie 34

35 Other Representative Office Issues! Re-registration Headaches " 1 year audited financials, tax finalization (HCMC) " Who can serve as CR? (HCM vs. Hanoi)! Other services " Securities, Investment Funds " Engineering, Architecture " Etc Baker & McKenzie 35

36 Agenda I WTO Accession II Interface of WTO Commitments and new Laws III Impact on Existing Businesses IV Impact on New Businesses: New Opportunities and Challenges 2007 Baker & McKenzie 36

37 Post-WTO Investment Process! State approval and/or registration! 100% Foreign Ownership Allowed in all but conditional and Prohibited areas! Conditional Lists Pending " Tourism " Land & Property Development " Distribution Services " Culture & Education " Financial Services, etc Baker & McKenzie 37

38 Market Access: Trading & Distribution! Import Trading vs. Distribution Services! Decree 72: Representative Offices vs. Branches! Catch-22 for those on restricted lists (e.g., pharmaceuticals) Courtesy: VIETNAM ECONOMIC TIMES 2007 Baker & McKenzie 38

39 Retail! Limit to One Foreign Owned Shop! Further shops subject to an Economic Needs Test! Whose needs? 2007 Baker & McKenzie 39

40 Foreign Exchange Controls! Capital accounts controlled " Capital contribution accounts " Foreign loan registration " Repatriation of capital! Current accounts liberalized, but subject to verification " Export proceeds, dividends " Service fees " Import payments " Salaries and consultancy fees " Royalty/dividend remittances " Note: Some contracts require registration with other authorities 2007 Baker & McKenzie 40

41 INTELLECTUAL PROPERTY! The Civil Code amended 2005! The New Criminal Code 1999! Decree No. 63/CP 1996 on Industrial Properties! Decree No. 76/CP 1996 on Copyright Protection! Decree No. 11/CP 2004 on Technology Imports (bad)! Decree No. 12/1999/ND-CP on IPR Enforcement! Decree No. 54/2000/ND-CP 2000 on Trade Secrets, etc.! Decree No. 06/2001/ND-CP 2001 Amending Decree No. 63/CP 1996! Berne Convention on Copyright (2004)! Intellectual Property Law (2006)! BUT WHAT ABOUT ENFORCEMENT? 2007 Baker & McKenzie 41

42 Technology Transfers Regulated! New Law, Decree Pending! Rewards for SOE inventors! Government approval and/or registration! Broadly defined! Mandatory, prohibited and freely negotiable clauses! Applies to inbound and outbound transfers 2007 Baker & McKenzie 42

43 Conclusions! WTO Entry already Having an Impact! Transitional Impact on Existing Investments! New Opportunities and Challenges: Broader Legal Market Access vs. Increasing Red Tape and Protectionism 2007 Baker & McKenzie 43

44 Baker & McKenzie Contact HCMC Office Branch 12/F, Saigon Tower 29 Le Duan Blvd. District 1, HCMC Vietnam Tel: Fax: Hanoi Office Branch 13/F, Vietcombank Tower 198 Tran Quang Khai St. Hoan Kiem District, Hanoi Vietnam Tel: Fax: Website: Baker & McKenzie 44