The Vietnam-U.S. Bilateral Trade Agreement

On July 13, 2000, U.S. and Vietnamese negotiators signed a sweeping bilateral trade agreement (BTA).Under the deal, which requires Congressional approval, the U.S. will extend temporary most-favored nation (MFN, also known as normal trade relations [NTR] status) status to Vietnam, a step that would significantly reduce U.S. tariffs on most imports from Vietnam.The World Bank has estimated that Vietnam's exports to the U.S. would rise to $1.3 billion -more than double 1999 levels -in the first year of MFN status, as U.S. tariff rates on Vietnamese exports would fall from their non-MFN average of 40% to less than 3%.In particular, Vietnamese garment exports are expected to record a tenfold increase in the first year after receiving MFN treatment.In return, Hanoi agreed to undertake a wide range of market-liberalization measures, including extending MFN treatment to U.S. exports, reducing tariffs on goods, easing barriers to U.S. services (such as banking and telecommunications), committing to protect certain intellectual property rights, and providing additional inducements and protections for inward foreign direct investment.Vietnam is the world's 13 th most populous country, with 78 million inhabitants, roughly equal to the population of Germany.The U.S. and Vietnam reached an agreement in principle in July 1999, but for nearly a year Vietnam delayed finalizing the deal because of intense divisions among the Vietnamese Communist Party (VCP) leadership.The Clinton White House, citing the crowded Congressional calendar, did not transmit the BTA to the 106 th Congress.Once the President transmits the agreement, it is subject to special "fast-track" procedures, under which amendments are not permitted and under which Congress must vote on the measure within 75 sessiondays.Under the requirements of Title IV of the Trade Act of 1974 -Section 402 of which is commonly referred to as the "Jackson-Vanik amendment" -signing a bilateral trade agreement is a necessary step for the U.S. to restore MFN treatment to certain non-market economies, including Vietnam.Should Congress approve the agreement, the President would then be able to extend MFN treatment to Vietnam.Such MFN status would be conditional because -as with all Title IV agreementsit would require annual Presidential extensions, which Congress could disapprove.This report outlines the terms of the BTA, identifies U.S. and Vietnamese motivations for entering into the deal, analyzes the reasons for Vietnam's delay in signing the agreement, and explains Congress' role in the process of restoring normal trade relations treatment to Vietnam.This report will be updated periodically.Further information on U.S.-Vietnam relations is available in CRS Issue Brief IB98033, Vietnam-U.