VN-US: VN trade pact decision in deference to China (AFP) (fwd)

[Alexander H L Vu <vuh000@mail.Uni-Mainz.DE>]

Vietnam shys from US trade accord, saddles up to China

HANOI, Oct 17 (AFP) - Vietnam has held off signing a landmark trade
agreement with the United States out of deference to China and a desire to
distance itself from its former wartime enemy, analysts and diplomats say.
Hanoi's stalling on the deal comes as a blow for US negotiators who worked
hard to hammer out an agreement in principal that was signed, amid much
fanfare, in late July.

The US side was ready to sign the full text of an agreement within days, and 
ambassador Pete Peterson expressed confidence the deal would be ratified
by year-end.

But the euphoria proved premature. Just days before the mid-September
Asia-Pacific Economic Cooperation forum meeting in Auckland, where
President Bill Clinton and Prime Minister Phan Van Khai were expected to
sign the final agreement, the Vietnamese backed away.

Diplomatic sources say the deal broke down after comments by US Secretary
of State Madeleine Albright about Vietnam's poor human rights record to
party general secretary Le Kha Phieu in Hanoi on the eve of APEC.

"The meeting was less than cordial. After that, they (the US) had to do
some damage control," said one diplomat.

A planned Vietnam visit by US Defence Secretary William Cohen in late
September was cancelled. At a meeting of the communist party's all
powerful politburo on October 7, the decision to further delay signing the
landmark accord was made, say diplomatic sources.

A few days later, politburo standing committee member Pham The Duyet made
a high profile visit to Beijing where he and his counterpart Li Ruihuan
ratched up the Marxist-Leninist rhetoric.

This was interpreted by some analysts as a thinly veiled attack directed
towards Washington and illustrated that in the balancing act between the
United States and China, Hanoi has decided in favour of its communist
cousins to the north.

Vietnam has decided "it's more comfy with its ideological soulmates than with 
the foreign bombers," said one Asian diplomat.

Carlyle Thayer, professor at Honolulu's East Asia Pacific Centre for
Security Studies, says Duyet's visit was a continuation "of all this
kissing up to Beijing in recent months. Conservative ideology is rearing
its head again."

But equally important, say observers, is that Vietnam wouldn't risk
angering Beijing by signing a trade deal with the United States before
China joins the World Trade Organization (WTO).

As the Vietnamese deal is the most comprehensive and stringent ever
negotiated by the United States, it would raise the bar for all who
follow, including China.

"China is saying to Vietnam, let us go first, we can get a better deal," said 
Thayer.

While the China card is undeniable, Hanoi's footdragging also suggests a
major debate within the politiburo between communist hardliners and
advocates of economic liberalization.

By striking a trade deal with its former wartime rival, Vietnam would be
committing itself to the most fundamental changes since the doi moi policy
of market reforms were launched 13 years ago.

Conservatives feel the trade deal would blow Vietnam's economy wide open,
forcing inefficient, outmoded state-owned enterprises to the wall.

"There is a fear of losing control of the situation. It cuts too close to
the bone, particularly for military enterprises," says Thayer.

But ambassador Peterson says although the timing of the deal is uncertain,
it will happen.

"It's not a matter of if, it's a matter of when," he said.

But time is running out for this US administration. Congress, which needs
at least a 60-day notice so it can take action on a document, is set to
adjorn on October 29.

That means the earliest lawmakers could vote on the accord would be early
next year, taking the vote dangerously close to the beginning of the US
primary elections.

"If it carries over into next year Vietnam will have lost a golden
opportunity," says Thayer.

The costs to Vietnam of delaying the deal are enormous. Exports to the
United States were expected to nearly double to 800 million dollars in the
first year of the accord, which would enable Vietnam to enjoy preferential
tariffs under normal trading status.

In return it would allow US corporates to compete on an even footing with
domestic companies after a phase in period of several years, opening key
sectors of finance, telecommunications and distribution to the Americans.

The phased removal of import barriers would require Vietnam to essentially
abandon its import substitution policy, calling for fundamental changes in
the state sector.