Joining WTO: Assessing the impacts

04/09/2007 12:00 - 1118 Views

Joining WTO, Vietnam has taken on commitments on opening the market and rules and regulations of WTO. Yet, because of various level of commitments as well as different competitiveness, each goods category and services industry face different opportunities and challenges.

Assessing WTO impacts is a current urgent need in order to give recommendations for improvement. We would like to introduce to all readers the very first result of assessment made by domestic and international consultants specializing in integration. This assessment stated impacts that Vietnam faced when joining into WTO and some recommendations to take the best use of opportunities brought by WTO.

Because this issue is also printed in some other newspapers, the ideas introduced here just reflect some aspects of impacts relevant to Vietnam’s exporting mechanism, trade environment, regulations on non-market economy, and food safety.

Vietnam should increase the exports of goods having competitiveness.

Mr. Vu Ba Phu, Deputy of Planning and Investment Department, Ministry of Industry said:

“As a full member of WTO, Vietnamese goods and services will face more challenges resulting mainly from the reduction of the Government’s direct subsidized support. Therefore, Vietnam’s categories of exported goods and services should move along the orientation of the Government, comparative advantages, world demands, and production trends between regions in the world.

Based on the above direction, up to 2010, policies that focus on the development of exporting the following goods and services are needed:

Regarding industrial and processing goods, the below goods should be highlighted to increase their exporting turnover:

Electronic goods and computers can be mass produced which take full advantages of available workforce with low cost but still meet the requirements of this industry for export. The structure of goods in this group should also concentrate on sophisticated products with high added value and exported price such as electronic chips, liquid crystal display (LCD), plasma television, and so forth. To produce those products, projects must have huge capital, modern machines and equipment. Thus, it is necessary to implement projects using capital from foreign direct investment (FDI).

Vietnam’s garment and footwear products can meet the orders requiring high sophistication. Therefore, the structure of this group should shift its concentration to design phase, FOB price orders, and development of projects on domestically producing materials and sub-materials to reduce the price of finished goods and improve competitiveness. We should also promote exports of interior furniture, kitchen appliances, bags, handbags, and other household appliances.

Processing food industry needs to solve some fundamental limitations in processing technology, PR and marketing. One of the core solutions is to attract more and more foreign investors to this industry.

Software products is diversified from ultra integrated circuit design, standardized application software package to commercial software as requirement of the customers and industrial software used in factories, and so on. To increase the exporting turnover of the industry, some current limitation should be resolved such as foreign language and internationalized level of computer programmers need improving.

For handicraft products, the decision to produce and export this article is one of optimal options of Vietnam in short and medium term. Thus, design phase and product model need to catch up with the demand of the market.

Regarding agricultural, forestry and aquatic products, in general, its structure of exporting goods as the orientation of the Government by 2010 is quite reasonable. It is recommended that this industry should focus on increasing the quantity of processed goods and reducing the quantity of exporting raw materials as much as possible. In the service industry, based on the current comparative advantages, the development orientation of the Government and the roadmap to open service market after joining WTO, in the list of exporting-oriented services of the Government, in the next period, exporting the following services should be boosted:

Air transport sector strive for achieving the growth of over 17% per year in exporting turnover in the period from 2006 to 2010. To achieve this target, this service industry should improve its competitiveness, build and advertise its famous and popular brand. Similarly, besides improving the competitiveness and build the brand, the sea transport industry should ensure to possess a strong infrastructure with the good throughput capacity. For telecommunication, to achieve the target of exporting turnover over 25% per year in the period 2006-2010, it is necessary to improve the competitiveness and aperture of the market in the coming time to attract new technology and decrease the price of services.

Achieving the target of growth over 15% per year requires tourist to develop its infrastructure and human resources to meet its development demand. Besides, brand of Vietnam tourist should be spread, too.

In short, the above recommendations are given in order to help the transition of goods and services mechanism exported under the direction of boosting the exporting turnover of goods and services which hold competitiveness, comply with the roadmap of WTO commitments, and meet the demand of the world market.”

Exporting aquatic products with the SPS methods

Ms Pascale Rouhier, an expert in international trade and development said:

”The Agreement on the Application of Sanitary and Phytosanitary Measures - also known as the SPS Agreement - is one of the most important international treaties of the World Trade Organization. Joining into WTO requires Vietnam to assure all the regulations, standards and assessment process complied with the standard of protecting plants animals that is applied corresponding to international standards at the time of joining. It is no transitional period for Vietnam.

In some cases, Vietnam has introduced its regulation based on international standards (Codex, FAO/WHO). The implementation of SPS Agreement bring Vietnam the ability to cite WTO dispute settlement body in case partners do not comply with SPS Agreement, and the ability to take part in works relating international standards. This is an opportunity for Vietnam because standards play an important role in economic development.

Applying these standards contributes to the concretization of valuable technological and scientific information related to products and the production line, which make favorable condition for transferring technological and scientific knowledge. Transference of producing know-hows and invaluable experience may reduce the concretized costs. Moreover, this application also promotes the effective of production and goods’ quality, enhances the involvement of Vietnam in international trade by reducing the incompatibility of the products and transaction expenses. SPS application also wins confidence of consumers by which economic growth is given the favorable conditions. However, this does not mean no challenge is putting ahead. Vietnam has to pay a large amount to modify the production complying with other regulations existing in domestic market, such as expense to conduct production test or assessment under standards, expense to participate in international organization to establish standard system. To become a member of Food Safety Committee, for instant, Vietnam must have a relevant financial source and human resources to participate effectively in the establishment and implementation of products’ standards.

Another challenge is that Vietnam’s exports will be applied checking measures at imported market. An example is that in 2001, EU has applied the checking measure at the frontier on 100% shrimp consignments imported from Vietnam, China, Thailand and Indonesia after detecting prohibited antibiotic residues. Measure applied by EU is various from destroying to sending back to exporters. The result is great damage on both importers and exporters. The exporting turnover of Vietnam to EU in the first six months of 2002 decreased 87% in comparison with the same period in 2001.

SPS measures are challenges, especially for small producers in aquatic industry who participate in through small and scattered market chain. However, they must be applied to ensure the competitiveness of Vietnam in the international market. In addition, these SPS measures can become the opportunity for Vietnamese enterprises: its competitiveness compared with other foreign exporters.

Vietnam is able to achieve the Mutual Recognition Agreement (MRA) with the EU. Licensing the permit to hatch shrimps will become popular all over the world, which answer the question of non-government organizations (NGO) and consumers about the existence of shrimp hatching farms. In the medium and long term, the awareness of environmental and social issue in importing countries will be improved.”

Non-market economy Statute in WTO commitment of Vietnam

Mr. Nguyen Son, Deputy Head of National Committee of International Economic Interaction said:

“Non-market economy (NME) issue exists in WTO, and Vietnam, China, and other countries considered as non-market economy have to accept and deal with as a challenge of integration.

To cope with this issue, there are three approaches. First, accept the challenges that a so-called non-market economy faces when participating in international commerce, especially in the trade relation with countries who regularly use anti-dumping tools. Second, define clearly difficulties that it can face when exporting overseas to prepare for solutions; boost the reform by market-oriented in company with actively lobby other WTO members to recognize its market regime and not to apply terms in the WTO joining protocol on non-market economy. Third, as a member of WTO, petition for revising and adjusting provisions related to non-market economy in the Anti-Dumping Statute of WTO.

Among those three approaches, the first one is in short term and at corporate level. The other two are longer and at national level. On those three, there are three specific recommendations for enterprises.

First, enhance the cooperative through the industrial associations. The role of associations in dealing and settling disputes related to price issue showed in two aspects: limit the risk of dispute occurrence, and cooperate with enterprises to settle. For non-market economy, it is very important to avoid involving in anti-dumping cases. If the price of the third country is calculated to define the input expense, the result does not truly reflect the reality in the market, particular competitiveness of each country, which leading to the distortion of the selling price. Therefore, once claim is made, certainly the investigation will conclude that enterprises dump, and the anti-dumping tax will be applied. Through these associations, enterprises can cooperate to avoid scrambling for exporting contracts resulting in price reduction, or negotiate the exporting quantity in order not to produce large fluctuation.

If there is any sign of lawsuit, the association can ask for negotiation with partner’s association to find out solution to avoid the risk of becoming defendant such as limiting the exports, setting the floor price, etc.

As enterprises in one non-market economy become defendants, the investigation often takes place in series of enterprises exporting the same article. At that time, the associations will coordinate the operation between enterprises and play a role as a bridge between enterprises and government authorities as well to demonstrate the market characteristic and minimize the damage.

Second, the enterprises should clearly understand and apply regulations on non-market economy of importing countries. In particular, if the exporting market is EU, its laws on non-market economy is various including regulations on granting market regime to a specific industry, company or each concrete case. Depending on specific circumstance, enterprises can apply these regulations to petition for market regime while Vietnam is still non-market economy. Although the request of market regime is not simple, it does not mean impossible.

Third, the enterprises should maintain transparent accounting books so that they can provide sufficient and accurate information in the investigation.”

Issues posed in multilateral commitment

Mr. Tran Hao Hung, Deputy Head of Legal Department, Ministry of Planning and Investment said:

“The concept of business right in WTO and in specific commitment of Vietnam is understood as the right to do business in the field of exporting and importing goods for foreign investors, or foreign capital enterprises.

Whereas, according to Company Law, the concept of business and business right has a much larger scale to modify. Doing business under the Company Law is interpreted as the activity of conducting one or more phases in investment process from production to consumption. However, according to WTO principle and specific commitment of Vietnam, the business right is limit to the activity of making specific commitment on the right to export and import of foreign investors.

In practice, the limitation of business right according to practice of members and regulations of WTO is reflected by the request foreign investors and entrepreneurs to have particular trade and investment representatives to conduct the business right, which includes restriction on articles allowed for the given categories traded by state-owned commercial enterprises, etc.

Enterprises make a lot of complaint about how to understand the term business right, whether it consists of the right to distribute goods in Vietnam. This issue is clearly mentioned in the commitment but current Decrees do not specify. Therefore, the enterprises are so nervous, and authorities can not understand to do their job.

Moreover, regulation on licensing the exporting and importing certificate in the Decree No. 23 is not so clear. In reality, it should be considered whether the regulation on licensing comply with commitment of business right of Vietnam or not.

Regarding state-owned commercial enterprises, Vietnam does not have separate commitment on these enterprises which is overall committed in the general state-owned enterprises. This is a very unique commitment of Vietnam. It might be only Vietnam and China made such a commitment.

According to it, Vietnam has expanded the scale which honors the commitment compared with the regulations in the Article No. 17 in the General Agreement on Tariffs and Trade (GATT) regulating the operation of state-owned commercial enterprises without mentioning general state-owned enterprises. In the negotiation process, however, Vietnam had to make commitment with much larger scale. That is overall commitment regarding state-owned enterprises which includes state-owned commercial enterprises.” Maintaining the stability of macroeconomic policies.

Mr. Ngo Van Diem, an economist, said:

“To fulfill WTO commitments and integrate into international economic, Vietnam should establish macroeconomic policies in post-WTO period in order to eliminate all kinds of subsidies, create environment for market to operate comprehensively and effectively, and ensure macroeconomic stability. To achieve it, first, it is necessary to eliminate all forms of subsidies including subsidizing through price, setting market price for all goods and services.

As to articles whose price is set by the Government, the roadmap for applying the market price should be made so that the enterprises could re-calculate its producing and trading projects. Vietnam should adjust, complement and build policies which support domestic production but do not violate WTO’s regulations such as development of infrastructure, education and training, research and development, market expansion, technology innovation, assistance for areas having economic and social conditions, information supply.

At the same time, it should also reform the taxation policy toward increasing the turnover from economic development, transferring its main turnover of indirect tax into direct tax, which ensures the tax source, fair, comprehension, ease and convenience to all trading entities. The mechanism of “self-declared, self-paid, and self-taken-responsibility” for trading entities should be popularized.

Currency policy and the operation of the Central Bank should be reformed continuously. The Central Bank should flexibly use interest rate tools, exchange rate to maintain the value of money, control the inflation, and ensure financial security for financial system, banking and other financial institutions against the shock of exchange rate and interest from outside.

One of the big policies to protect small and medium sized enterprises (SMEs), household against fierce competition as WTO commitment is applied is credit guarantee. This policy should be adjust and complement to diversify fund owners, permit enterprises and association to establish their own funds and trade under market mechanism, set up banks served for SMEs.

The Government should continue to increase and focus on economic and social infrastructure investment, ensure the combination between economic growth and social fair and improvement to develop stably. Moreover, it should promote to attract foreign investment, effectively use official development assistance funds in building economic-social infrastructure, training human resources, eliminating poverty, enhancing regulation and environment protection, and allow economic institutions to invest overseas, which focus on the field that Vietnam has competitiveness in order to ensure national power security and material source for domestic production.”

Thuy Trang

05/09/2007

Source: vneconomy
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