The Asian Wall Street (Journal Editorial) Sept. 06, 1999
The hoopla surrounding U.S. Secretary of State Madeleine Albright's visit to Hanoi this week and the expected trade agreement between the U.S. and Vietnam is understandable, given the two former enemies tragic history. Sadly, however, the normalization of trade relations will have little immediate effect on the flagging Vietnamese economy. Because the biggest beneficiaries of increased trade with the U.S. will be money-losing state-owned firms, the agreement may actually slow the already glacial pace of reform in Vietnam 's public sector.
Nevertheless, the agreement is being hailed by Clinton administration and Vietnam officials as a major breakthrough in bilateral relations. Yet the closer the U.S. and Vietnam come to closing the deal, the louder the criticism of Hanoi's human-rights record becomes and rightly so. Prisoners of conscience, including journalists, poets and religious leaders, still number in the hundreds. And basic human rights, such as freedom of speech, assembly and religious expression, are routinely denied. As Dr. Nguyen Dan Que , a medical doctor who spent nearly 20 years in Vietnamese prisons for his democratic beliefs, writes nearby, "Power remains concentrated in the Politburo in Hanoi, and the people have been largely helpless to resist. The natural outcome of this monopoly of power is that the people and the country have been reduced to poverty."
We sincerely hope that an open trade agreement with the U.S. will help relieve the suffering of the Vietnamese people and break the stranglehold the Communist Party has had on the economy for the last 25 years. But given Hanoi's proven resistance to meaningful reform, we remain skeptical. Ms. Albright and other Clinton administration representatives should do everything in their power to see that the Vietnamese government honors the agreement once it has been approved. If all goes as planned, the agreement will pave the way for Washington to award Hanoi Normal Trade Relations status, formerly known as Most Favored Nation status. This will allow Vietnamese goods to enter the U.S. at the same low tariff rates accorded to most other countries. The agreement also will lower Vietnamese tariffs and commit Hanoi to a broad range of measures to open its markets to U.S. goods, services and investment.
In the past, the word of Vietnamese officials has been anything but reliable, and there are no guarantees that the government will live up to its end of the bargain on this occasion. It would not be surprising to see officials lower tariffs, for example, only to create other obstacles to imports such as consumption taxes and new licensing procedures. Indeed, the country's leadership has backtracked or stalled on nearly every major reform promised before the "Asian Crisis" struck in July 1997. The result has been a mass exodus: foreign direct investment is expected to plummet from an already low $1 billion in 1998 to less than $300 million in 1999. Tired of false promises, even those companies that scaled back their operations but kept a lone representative in the country are pulling up stakes and heading home. Corruption, always a problem in a "market oriented" socialist economy where foreigners must find a local joint-venture partner, has reached epidemic proportions.
"Every foreigner in Vietnam was looking for the nice clean state company," says Robert Templer, a former Vietnam correspondent and author of "Shadows and Wind," a book on contemporary Vietnam . "Nobody ever found one."
While we favor free and open trade, there are reasons to doubt that normalizing trade relations with the U.S. will make it any easier for foreign firms to find trustworthy joint-venture partners in Vietnam . In fact, because state firms have the most to gain from increased exports to the U.S., the trade agreement may actually reduce the economic pressures that might push them toward reform. Strengthening the power of the state sector is not a prescription for advancing political and economic freedoms. The same is true of financial backing from the U.S. Export-Import Bank and the Overseas Private Investment Corp. The agreement calls for Hanoi to provide sovereign guarantees to the Ex-Im Bank, which in turn would provide export credit insurance, loan guarantees and loans to support exports to Vietnam 's public sector. Because these subsidies turn unprofitable deals into profitable ones at least temporarily -- they insulate the government from the need to remedy the rampant corruption and inefficiency that is currently driving many businesses out of Vietnam.
At the same time, government-backed assurances may lead U.S. companies to believe that Vietnam is less risky than it actually is a mistake that may come back to haunt American taxpayers. As U.S. Commerce Secretary William Daley said last month when the details of the deal were being hammered out, "There is great expectation and great excitement. But I think American investors {and} American businesses have to look at a country like that with eyes wide open." Given the uncertain state of the Vietnamese economy, he would seem to have a point.