Press Release

Press Conference – Hanoi, Vietnam
Daniel M. Price, Assistant to the President and Deputy National Security Advisor for International Economic Affairs

21 March 2008

Mr. Price: Thank you all very much for coming here.

I had excellent discussions today with the Minister of Planning and Investment, the Minister of Industry and Trade, the Vice Minister of Finance, and the Chairman of the Office of Government.

The purpose of my trip to Vietnam was three-fold. First, I wanted to underscore the importance my government attaches to our relationship with Vietnam. Second, I wanted to discuss and emphasize our commitment to continue to work with Vietnam to develop and deepen that relationship and assist Vietnam with its continued integration with the global economy. Third, we wanted to underscore the importance we attach to ASEAN and our commitment to play a leadership role in regional economic integration.

Let me offer some observations on each of these three points. First, the state of U.S.-Vietnam economic relations. These relations have expanded very rapidly since we reestablished diplomatic relations in 1995. President Bush’s trip to Hanoi in November 2006 for APEC and President Triet’s visit to Washington in June 2007 reflect the advances in this relationship. The foundation for those economic relations are the trade and investment agreements we have concluded together.

As you know, in 2001 Vietnam and the United States signed the Bilateral Trade Agreement. In January 2007 Vietnam completed its accession to the WTO. And in June 2007 Vietnam and the United States concluded a Trade and Investment Framework Agreement, or TIFA, to support the implementation of the BTA and Vietnam’s WTO commitments.

Under these agreements our trade and investment relationship has flourished and grown. In 2007 our two-way trade was $12.5 billion, up 29 percent from 2006. The United States is Vietnam’s second largest trading partner after China. We are Vietnam’s largest export market. Vietnam is an important market for the United States as well. U.S. exports to Vietnam increased 73 percent between 2006 and 2007 and the United States is the seventh largest foreign investor in Vietnam.

So what are we doing now to deepen and strengthen this relationship? First, let me say a word about the TIFA Council. The first meeting was held in Washington in December and we just completed consultations here in Hanoi today. We have intensified our discussions under TIFA and are discussing the range of issues on investment, trade and WTO implementation.

The United States is also providing significant technical assistance to Vietnam to assist in the reform effort to modernize the economy with a particular focus on transparency. In this regard we congratulate the Prime Minister on his bold initiative to move forward with a major administrative reform effort known as Project 30. This project will engage 22 Ministries and 64 Provinces to inventory, review and recommend simplification of administrative procedures during the period between now and 2010. This project holds great promise to improve the investment climate for everyone, both domestic and foreign investors. The United States is providing support for this project through our two principal technical assistance programs, the so-called Support for Trade Acceleration or STAR project, and the Vietnam Competitiveness Initiative.

What else are we doing? We are now beginning discussions of a Bilateral Investment Treaty. This is the next logical step in deepening our economic relationship. The successful conclusion of a Bilateral Investment Treaty would send a signal of Vietnam’s openness to foreign investment and the impressive domestic reforms it has undertaken in recent years and show that those reforms are serious and enduring.

In particular the BIT would extend the non-discrimination or national treatment obligation to such key sectors as telecommunications, financial services, and distribution services that are drivers of economic growth. It would also strengthen rules that permit investors to transfer capital more freely into and out of the country. It would also strengthen rules against measures that distort trade such as export quotas and local purchasing requirements. In short, it would enhance stability and predictability by placing our investment relations at the level of an international treaty.

Let me turn now to the third issue we discussed which is our commitment to regional economic integration. U.S. ASEAN relations are robust and have the potential for enormous growth. ASEAN is the United States’ fifth largest trading partner and fourth largest export market. The United States is ASEAN’s largest trading partner. Trade in goods now amounts to approximately $170 billion. The investment figures are equally impressive. United States investment in ASEAN is almost $100 billion and that figure exceeds the combined U.S. investment in China, Hong Kong and Taiwan.

So what is it that we are doing to advance regional economic integration? First, the United States is negotiating Free Trade Agreements with a number of transpacific countries. The United States has already concluded FTAs with one-third of the APEC economies. We have seven FTAs in the APEC region. We are also continuing our FTA negotiations with Malaysia. All of these FTAs have very high standards and have generated significant new flows of trade and investment. We also are supporting the important work that lies ahead in shaping what we hope will become the Free Trade Area of the Asia Pacific of FTAAP.

The APEC leaders commissioned a number of important projects including a project on so-called model measures or model chapters of an FTA, and we are working very hard with the other APEC leaders and we appreciate Vietnam’s support for these APEC efforts.

At the same time we are working diligently to fulfill this vision of FTAAP we are also exploring participation in regional Free Trade Agreements. New Zealand, Singapore, Chile and Brunei have been involved in a multilateral Free Trade Agreement negotiation, the so-called P4 negotiations, and the United States has decided to join in these negotiations with respect to the issues of investment and financial services. We view the P4 negotiations as holding great promise to establish multilaterally high standard FTAs in the region.

Let me conclude by saying a word or two about the Doha Round of WTO negotiations. While there are many benefits to be derived from bilateral and regional integration, the largest gains could come from multilateral liberalization through the WTO. That is why the successful conclusion of the Doha Round, the successful reaching of a strong agreement that creates new trade flows is our President’s highest international trade negotiating priority.

As the President said in his address to the United Nations General Assembly, the Doha Round offers us a once in a generation opportunity to promote economic growth, create opportunity, and lift tens of millions of people out of poverty. We are at a critical juncture in the Doha Round. As our President said recently, now is the time for leaders to make the tough political choices that will allow these negotiations to advance to a successful conclusion. It is the developing countries who stand to gain the most from a successful Doha Round. The World Bank estimates that mid and low income countries would receive two-thirds of the benefits, two-thirds of the gains in global income from elimination of trade barriers.

The Doha Round negotiations are often incorrectly characterized as a north/south issue. In fact developing countries have the most to gain from tariff reductions by other developing countries. Approximately 70 percent of tariffs paid by developing countries are paid to other developing countries. And trade between developing countries is growing at a rate that is 50 percent faster than overall global trade. So an agreement, a Doha Round agreement that successfully creates new trade flows in industrial products, agricultural goods and services holds the promise for a win/win situation.

Let me conclude by saying that I’m very grateful for the opportunity to have met with senior government officials here in Vietnam, and I was very gratified and pleased by the mutual commitment I saw to deepen relationships and to take the next step.

Thank you very much. I think we have time for a couple of questions.

Question: My name is Jason Folkmanis, I work for Bloomberg.

One area that’s been of particular interest in Vietnam recently in the economic sphere has been the currency locally. I’m aware, obviously, that your area of responsibility is not currencies, but I wondered if this subject at all came up in your meetings today. As you know, the dollars is down in relation to other currencies. I’m aware that the U.S. has sort of a standing line on the dollar. I’m not asking you to repeat that. But I just wondered if anybody brought this up, particularly in the context of whether the Vietnamese currency has been effectively de facto linked to the dollar for a long time. I wondered if anybody brought up perhaps the future of that and if there are any concerns about where the dollar was heading.

More broadly speaking, I wondered if there were any questions about, obviously the U.S. economy is also going through something of a rough patch. In the past week we’ve had a lot of problems in the financial market. We at Bloomberg had a quite senior executive here this week and we [inaudible] the Central Bank yesterday. I was struck by the fact that they actually wanted to ask him what did he think was going to happen in the U.S. recession, financial market volatility and how did he think that might affect Vietnam.

So I wondered if anybody asked you about these issues and if you had any thoughts on the subject yourself. Thank you.

Mr. Price: I’m afraid I’m going to disappoint you. Our discussions really focused on the bilateral economic trade and investment relationship and our joint efforts towards regional economic integration. Thank you.

Question: I’m from Than Nhien newspaper.

You were an advisor for Vietnam and the U.S. in the negotiation of the Bilateral Trade Agreement and also in the WTO negotiations, so would you please tell us what should Vietnam do so that it can streamline and perfect its legal system in order to pave the way for it to integrate into the international economy successfully?

Mr. Price: Thank you. I think Project 30 is an excellent project. As I had explained, this is an initiative to do precisely what your question asked. It has as its focus the simplification of administrative procedures and enhanced transparency. This is certainly an important piece of the puzzle. It is also important that Vietnam continue its efforts to permit the private sector to play an increasingly greater role in the economy. As Vietnam implements its commitments to permit increasingly levels of foreign ownership in key sectors, and as it pursues its equitization program of state enterprises we will see, I believe, some quite significant results. Thank you.

Question: I think you know that the Vietnam economy is having a lot of difficulties. Prices have been soaring and inflation is getting worse too. At the same time the stock exchange is going down. So what advice do you have for the Vietnamese government?

Mr. Price: You flatter me by asking me that question. Certainly the government of Vietnam is facing a number of challenges. It will have to make decisions for itself on the best approach to resolve these issues. I suppose if my advice were asked one observation I might make is to be alert not to over-react to any current situation. I have no reason to think, I have no reason to believe that there is or has been an over-reaction. I just know that when economies are experiencing stresses governments need to be sure to take measured and deliberate steps. I would say based on my consultations with senior members of the economic team today, I think the people of Vietnam can have confidence that the talent is in place to deal with these issues deliberately and carefully.

Thank you very much.

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