WTO Accession: Opportunities and Challenges

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1 WTO Accession: Opportunities and Challenges Business Club 09 Nov 2006 Herb Cochran Executive Director, AmCham Vietnam (HCM City)

2 Recent WTO-related business news Nov 7 WTO General Council approved VN Microsoft Texas Pacific Group and Intel - FPT investment

3 Agenda Roadmap: how we got here - BTA & WTO Key issues: opportunities & challenges Vietnamese adjustment policies What this means for your business

4 Roadmap: how we got here BTA - WTO Jan 31, first meeting of WP U.S.-Vietnam Bilateral Trade Agreement negotiations started Jul initial agreement Jul final agreement Dec BTA entered into effect

5 Positive Impact of the BTA U.S. imports from Vietnam 2001 US$ 1.1 billion 2006 US$ 6.6 billion

6 VN-US Trade before BTA (US$ billion) $12.0 $10.0 $8.0 $6.0 VN Imports VN Exports Total Trade $4.0 $2.0 $ Source: US Department of Commerce

7 VN-US Trade after BTA (US$ billion) $12.0 $10.0 $8.0 $6.0 VN Imports VN Exports Total Trade $4.0 $2.0 $ Source: US Department of Commerce

8 U.S.-Related Investment

9 Intel chose Vietnam for $1 billion semiconductor assembly and test factory Walter Blocker Chairman, AmCham Vietnam - HCM City Chapter

10 WTO Agreement is VERY complex Trade in Goods (560 pages) Trade in Services (60 pages) Working Party Report (260 pages) Vietnam s trade and investment framework

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12 Opportunities Quotas on apparel eliminated 2005 $2.9 billion exports to USA 2006 $3.6 billion exports to USA

13 Opportunities Vietnam import duties lowered 15% or less (for 94% of US manufactures) 15% or less (for 75% of US agriculture)

14 Opportunities Vietnam import duties lowered 15% or less (for 94% of US manufactures) 15% or less (for 75% of US agriculture) Services market access Telecommunications Information technology Financial (banking, insurance, etc.) Trading and distribution

15 Challenges Export Subsidies and the Tax System Immediate elimination for apparel industry 5-year phase out for other industries

16 Challenges Apparel = about half of total exports 2005 $2.9 billion of $6.6 billion 2006 $3.6 billion of $8.4 billion

17 Challenges Sep 28 Letter from USTR/Commerce Monitor & review apparel imports from Vietnam Self-initiate anti-dumping investigations If dumping exists If material injury is caused

18 Challenges U.S. importers and retailers Prudent course = withdraw orders from Vietnam US$ Hundreds of Thousands or US$ Millions for Anti-Dumping Preparations Impact on FDI and Vietnamese exporters, workers Request clarification by USTR/Commerce before a vote on PNTR

19 Adjustment Policies Revise taxation policies

20 Adjustment Policies Revise taxation policies Accelerate infrastructure investment Ports, roads, electric power, other infrastructure

21 Demand vs. Supply 18,000 16,000 14,000 TEU numbers in Thousands Constant Volume 12,000 10,000 8,000 6,000 TEU Capacity TEU Demand 4,000 2, Year Shipment delays expected in 2007

22 Adjustment Policies Revise taxation policies Accelerate infrastructure investment Ports, roads, electric power, other infrastructure Welcome international investment like the Saigon Port - SSA Marine International Terminal Joint Venture Project at Cai Mep

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24 Impact on Your Business Key export sectors Apparel, furniture, footwear, seafood, etc.

25 Impact on Your Business Key export sectors Apparel, furniture, footwear, seafood, etc. Vietnam a non-market economy

26 Impact on Your Business Key export sectors Apparel, furniture, footwear, seafood, etc. Vietnam a non-market economy Hire good lawyers

27 Impact on Your Business Key export sectors Apparel, furniture, footwear, seafood, etc. Vietnam a non-market economy Hire good lawyers Investment opportunities U.S. companies have invested $300 billion in Asia Only $2.4 billion in Vietnam

28 WTO Accession: Opportunities and Challenges Business Club 09 Nov 2006 Herb Cochran Executive Director, AmCham Vietnam (HCM City)