Challenges in WTO Accession —The case of Vietnam

1. Challenges in WTO Accession —The case of Vietnam By Cristina Hernandez (UNDP-MPI Project VIE/02/009) World Bank Training Course “ Trade in Services and International Agreements”

2. Technical Challenges to Prepare for and Conduct Services Negotiations • Lack of a comprehensive and integrated development strategy for the services sectors to ensure efficient inter-agency and cross-sector coordination • Lack of reliable data and information on services and trade in services • Limited research & analytical capacity to assess impacts of services liberalization • Lack of human resources and capacities in dealing with services issues

3. Conditions for successful market access negotiations in services • As an economy liberalizes market access for trade in services, care is needed so that the role of foreign firms stimulates rather than depresses national competitiveness in service exports. • To achieve this, performance requirements need to be noted in the acceding country’s conditional WTO offer (according to GATS Article XIX:2, developing countries have the right to attach such conditions). • In addition, there should be correlation between the liberalization offers being made and the reality of the country’s current services export activities

4. Objectives to be achieved through international integration • Vietnamese services exporters gain improved access to foreign markets • Vietnamese service enterprises retain a level domestic playing field with foreign competitors • Vietnamese consumers are assured of quality services • Vietnam’s social objectives are met regarding poverty alleviation • Vietnam gains capital inflows and technology transfer from market opening • Vietnam’s balance of payments in services improves

5. Vietnam’s Existing Commitments on Services • Vietnam is signatory to two international trade agreements covering services, and is conducting bilateral trade discussions with Australia, Japan, and the UK • The two existing trade agreements are: the ASEAN Framework Agreement on Services (AFAS) and the VN-US BTA

6. Vietnam’s Existing Commitments on Services (cont.) • AFAS: GATS-Plus agreement intended to eliminate restrictions on trade in services within ASEAN • VN-US BTA: Has much more extensive services coverage and more binding commitments • Other bilateral agreements necessary for accession to the WTO (e.g. with the EC)

7. Vietnam’s GATS conditional offer • Responding to demands of its trading partners, Vietnam’s GATS conditional offer is even more far-reaching than its commitments under the BTA • Covers all sectors included in the BTA (except higher education), plus all transport services • Vietnam has followed an approach contrary to most other countries

8. Vietnam’s rights in WTO accession Purposes of the GATS as per its Preamble: • “..promoting the economic growth of all trading partners and the development of developing countries;” • “..giving due respect to national policy objectives;” • “Desiring to facilitate the increasing participation of developing countries in trade in services and the expansion of their services exports…”

9. Vietnam’s rights in WTO accession Other special provisions in GATS for which Vietnam would qualify: • The particular need to introduce new regulations, in keeping with Article VI provisions • The liberalization of market access in sectors and modes of supply of export interest to Vietnam (Art. IV:1(c)) • Appropriate flexibility to open fewer sectors, liberalize fewer types of transactions, and attach market access conditions (i.e., performance requirements) aimed at achieving the objectives of Article IV (Art. XIX:2) • As WTO acceding country, Vietnam will have the right to participate in the Doha round and make requests of trading partners

10. Vietnam’s Options in Services Trade Liberalization Before opening the domestic market further, is critical to have a strong regulatory framework in place, including: • Establishing service industry standards & professional credentials accreditation • Standards for appropriate skills and/or qualifications required of services suppliers where these do not exist or are vague • Ensuring adequate enforcement capability for quality standards and professional licenses • Strengthening existing licensing and standards agencies, where necessary

11. Vietnam’s Options in Services Trade Liberalization (cont.) In terms of services trade negotiations, the following guidelines may be useful: • Mode 1: Use domestic regulation to protect consumer interests • Mode 3: Commitments in higher education and technical training might be useful to attract FDI; enact performance requirements for foreign investors, generally • Mode 4: Seek for the elimination of undue visa restrictions for temporary business travel • Consider alternative to create export-oriented employment through outsourcing contracts

12. General Approaches to Liberalization • Services with high export potential and low capital costs: reserve all modes of supply in order to maximize capacity development, while making requests of trading partners for market access via Modes 1 and 4 in particular • Services with high export potential and high capital costs: attract FDI to offset capital costs but ensure that they enter as joint venture partners in order to strengthen national service capacity

13. General Approaches to Liberalization (cont.) • Services with low export potential but high job creation potential: protect the job creation potential through mechanisms such as ENTs • Services with low export potential and low job creation potential: open the market to foreign service suppliers in exchange for concessions in services falling in the first two categories

14. Thank You