VIETNAMS FTAs NEGOTIATION PROCESS AND NEEDS FOR TECHNICAL ASSISTANCE IN NEGOTIATION AND IMPLEMENTATION OF FTA COMMITMENTS

Multilateral Trade Policy Department Ministry of Industry and Trade

1.

FTAs trend in the world and in the region

Since early the 1990s, together with globalization, regionalism has developed dramatically both in quantity and quality. Before then, regionalism was in the form of Free Trade Area but from the 1990s onwards, bilateral or multilateral Free Trade Agreements (FTAs) have become more popular with a greater cooperative scope, not only limited to the implementation of free trade but also help to facilitate investment liberalisation, technological exchange cooperation, custom procedure simplification, capacity building and new issues such as labour and environment. Regionalism now remains as an objective trend in parallel with the WTOs multilateral trade system. According to the statistics of the WTOs Secretariat, up to March 2008, there have been 209 Regional Trade Agreements (RTAs) informed to WTO, 119 of which are Free Trade Agreements (FTAs). Of 119 FTAs informed to WTO, there have been up to 96 FTAs (accounting for 81%) signed and taken effects during the period of 1995 2007. It is noticeable that 69 FTAs (accounting for 72%) were signed from 2001 to 2007, the period of Doha negotiation. Many countries and lands prove to be quite actively involved in signing and joining FTAs. Evens such nations as America, Japan and EU, which used to neglect FTAs and devoted more concern to WTO and the multilateral trade system, now show changes. The US, following years of forming North America Free Trade Agreement (NAFTA) and bilateral FTA with Israel only, now has added bilateral FTAs with Singapore and Chile (2003) and is negotiating with some other partners in Asia, Central AmericaJapan inked the first full FTA with Singapore in 2002, and then with a group of other AEAN members and now is negotiating bilateral FTAs with Vietnam and Switzerland. Japan has completed FTA with the whole ASEAN (together with separate bilateral FTAs with some other ASEAN members). EU also didnt stand outside by starting up negotiations with ASEAN from 2007. 2. Summary of Vietnams FTA process

So far, Vietnam has not yet signed and carried out FTAs with any country. However, Vietnam together with ASEAN inked and implemented 3 FTAs namely ASEAN Free Trade Area (AFTA), ASEAN China Free Trade Agreement (ACFTA) and ASEAN Korea Free Trade Agreement (AKFTA). Vietnam and ASEAN now have completed negotiation and signed the Agreement of ASEAN Japan Comprehensive Economic Partnership (AJCEP). The ASEAN Australia New Zealand Free Trade (AANZFTA) and ASEAN India Free Trade Agreements have finished negotiating and the signing is slated for the end of 2008. The ASEAN EU Free Trade Agreement is still on the way of negotiation. Besides, Vietnam is also negotiating the Comprehensive Economic Partnership Agreement with Japan, Vietnams first bilateral FTA, and is considering another bilateral FTA with Chile. 1

Following is a brief of important milestones in Vietnams international and regional economic integration, including the FTA negotiations in the framework of ASEAN and with outsiders cooperation: 1986: Vietnam started up the Doi moi policy, changing from the central planning economy to market economy, creating the basis for economic restructures and integration. 1994: Vietnam submitted to joining GATT and in the year of 1995, reaffirmed the determination to negotiating for WTOs accession. 1995: Vietnam became the official ASEANs member. 1996: Vietnam took part in the Common Effective Preferential Tariffs in the framework of AFTA. In 1996, Vietnam became the founding member of the Asian Europe Meeting (ASEM). 1998: Vietnam became the official member of the Asian Pacific Economic Cooperation (APEC). 2002: Together with ASEAN to start up negotiating ACFTA with China. 2003: Early Harvest Program in the framework of ACFTA is officially carried out. 2003: together with ASEAN started FTA negotiations with India (AIFTA) and Japan (AJFTA). 2004: together with ASEAN, started negotiating FTAs with South Korea (AKFTA), Australia and New Zealand (AANZ FTA). 2006: Joined the World Trade Organisation (WTO). 2007: together with ASEAN to start up FTA negotiations with EU, and bilateral FTA with Japan. 2008: started up bilateral FTA negotiations with Chile. 3. 3.1Some issues that Vietnam should take into full account when joining bilateral and regional FTA Objective factors

FTAs trend in the word and in the region: The delay of Doha negotiation has undermined countries trusts in the multilateral trade system. As a result, many countries are shifting to bilateral cooperation and regional integration. A wave of trade liberalisation is taking place effervescently with the establishment of so many bilateral and multiparty FTAs. This will lead to the fact that those countries not joining FTA or joining so late will be put outside of the trade game. This is a factor that Vietnam should take into full account as it is an official member of WTO. FTAs now are of higher quality, covering from basic areas such as goods, service trade to new issues namely governmental procurement, competition policy, environmental cooperation, labour etc., Therefore, joining FTAs of high quality will create favorable conditions for renovation of mechanism, policies, business climate, thus, enhance competitive capacity of the 2

economy. However, with economies of low development like Vietnam, we need to carefully consider both physical and human resources, in particular in identifying sensitive areas when negotiating. Diversifications and complexity of the Original rules in FTAs: This provokes difficulties for enterprises in implementation. Thus, studying and negotiating with partners of similar original rules is a factor that needs considering to facilitate the implementation of enterprises community and governing bodies. Comparative advantage similarities: In bilateral and regional FTAs, many nations are of the same advantages that they have strengths in manufacturing and exporting, they will then face a very fierce competition among members of a FTA. It, therefore, needs to consider choosing partners for negotiating and signing FTAs/RTAs. Development gaps between FTA signing partners: the so big development disparity is a barrier to complete a comprehensive FTA. It needs to identify negotiation modalities (a package or selective). Trade flow changes: The fact that some ASEAN countries join many free trade agreements (FTAs) with outsiders will pose threats of negative trade flow shifting to Vietnam as trade transactions are strongly diverged by external FTAs. 3.2Internal factors

Vietnams internal difficulties are mentioned in introduction documents or economic integration researches namely: (i) inadequate awareness and know ledges of economic integration; (ii) legal system, management policy is still on the way of completion; (iii) competitive capacity of enterprises and the economy is comparatively weak to that of the region; (iv) export capacity yet meets the demand of economic development and integration; (v) human resources yet meets the demands when negotiating FTAs etc., 4. Recommendations on capacity building

First of all, Vietnam and its sponsors should focus on following issues: + What strategies should Vietnam pursue to cope with the growing FTAs trend of higher quality, larger scope and deeper commitments? + What criterion should Vietnam adopt to choose FTA partners? (balance between geo-politic relations and trade benefits) + At which level are Vietnams manufacture and service industries capable of joining FTAs and what should we do to help these industries more actively involved in FTAs of high quality? + Assess capacity of negotiating, signing and implementing many FTAs at the same time (in aspect of management).

Study the most appropriate commitment modality for each kind of partners when negotiating FTAs: Normally based on the selective give modality like negotiations in the framework of WTO. However, some partners want the selective skip modality, based on the agreements or commitment models that they have signed with other partners. Vietnam should wisely and flexibly deal with this problem and ensure our benefits at the same time. Assist in organising training courses at the intermediate and advanced levels for Vietnams FTAs negotiators, field trips in countries of rich experience in negotiation and implementation of FTAs. Propagate/carry out researches on amendments of domestic mechanism policies when implementing FTAs. Full integration into the global economy, especially when joining FTAs, will certainly lead to restructure industries and resources. In that context, what does the state should do to facilitate labour and resource movements at the lowest cost? Researching on these issues play an important role in stabilizing the economy and social welfare when joining FTAs.