I was really stunned by the “American-style draft”

The impact of the US-Vietnam Bilateral Trade Agreement (BTA) has been analyzed from different angles in the mass media. In this article, part of the series about the 20th anniversary of normalization of Vietnam-US relations, VietNamNet introduces the perspective of an "insider" - Mr. Nguyen Dinh Luong, the former chief negotiator for the BTA.

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The stuck road

vn-us relations, 20th anniversary of normalization of vn-us ties

President Bill Clinton met with Mr. Nguyen Dinh Luong, Vietnam chief negotiator for the BTA at the White House on July 13, 2000. Photo provided by the author.

Negotiations of the BTA started in late 1995. Until then, Vietnam joined ASEAN and normalized its relations with the United States in the spirit "Vietnam’s policy is to expand multi-sided, bilateral and multilateral cooperation with countries and territories, willing to be friends with all nations, peoples, striving for peace and development".

At that time Vietnam had no guidelines for economic integration. Resolution 07 on economic integration was issued by the Politburo in November 2001, more than a year after the BTA was signed.

Vietnam, after having failed with the subsidized, centrally planned economy realized that it must accept the market economy to develop and the market economy is the product of human society, not the individual product of capitalism.

Vietnam began a process of "breaking" all the things with the color of "subsidy", the things that were not the market economy. It was easy to destroy, but there was still a debate how to build a market economy inside the socialism.

I still remember that the Commerce Law was rewritten and issued in 1995, but ten years later I did not see any provision of it going into life. Protection of intellectual property rights is stipulated in three chapters, 80 articles of the Civil Code in 1995, but a shop selling music CDs on Trang Tien Street, next to the building of the Trade Ministry, sold fake products but nobody could do anything about it. It was because the law did not specify enforcement clauses.

An American-style draft

After a few meetings in both Hanoi and Washington DC to learn about the rules, mechanisms and policies of the parties, on the morning of April 12, 1997, the 4th round of negotiation at the Ministry of Trade’s guestrooms, 31 Trang Tien Street, Hanoi Mr. Jozeph Damond, US chief negotiator gave me the BTA draft, which includes four sections: Trade in goods, intellectual property, investment relations, trade and services, and told us that the draft was designed on the principles of the World Trade Organization (WTO).

After reading the draft I was really stunned because it "reeked of America", it was so new, with a series of concepts that I had not been approached before:

Firstly, the draft was designed on the WTO principles, but at that time, in Vietnam we only heard about it, did not know about its content. Even the contents of the General Agreement on Tariffs and Trade (GATT) were not conveyed in the media because they are the rules of the "capitalist camp", which is alien to the socialist rules.

Secondly, in the draft, the US launched the regulation of national treatment, equal treatment between domestic and foreign goods, between domestic and foreign investment, between domestic and foreign enterprises. The Vietnamese Dictionary in Vietnam did not have those words. It is contrary to the socialist views, guidelines and policies in Vietnam.

Thirdly, the US requested removal of all barriers to trade under WTO rules, implementing a free trade platform. This violates the principle of independence and self-reliance rights of Vietnam.

Fourthly, the US asked Vietnam to reduce import tariffs. It was also difficult, because in the US the import-export taxes made up less than 2% of the budget revenue and they had other taxes such as VAT, personal income tax, corporate income tax, property tax ... Meanwhile, in Vietnam, as in other socialist countries, the import export taxes were the primary revenue for the budget, accounting for nearly 20% of the budget.

Fifthly, the Service-Trade chapter is the new one of the WTO, which the GATT did not have.

While in the world, especially in the US, the service sector flourished, with complete laws to regulate, in Vietnam the services such as banking, transport ... were still considered the stage between production and consumption and there was no law regulating service activities. The US required Vietnam to open even sensitive service sectors that Vietnam at that time considered the fields related to national security, the restricted areas such as finance, telecommunications ...

Sixthly, in the investment relation chapter: the content which the US put for negotiation was based on the Model Investment Treaty that the US had signed in the North America Free Trade Agreement (NAFTA) and with other developed countries. The content was completely different from the investment protection agreements that Vietnam had signed with dozens of countries, including developed ones. It consisted of the new and tight rules, such as: Concept of investment, of the investor, the provisions on the issue of requisition, nationalization, compensation, use of international arbitration to settle disputes ...

Generally, the principles that the US wanted to add into the BTA to make the legal framework for the trade and economic relations between the US - Vietnam are:

The principle of equality: Equality and no discrimination between domestic and imported goods; Equality and no discrimination between domestic and foreign investment, between domestic and foreign investors.

Open economic principle: Enterprises are free to import, export all kinds of goods that the law does not prohibit. Investors are allowed to export the goods they produce and import the goods to serve their production; Open the door for foreign investment into Vietnam, implementing transparent investment policies and protecting investors' interests, protecting intellectual property rights, carrying out an open investment mechanisms consistent with international practices.

Legal principle: It must be open and transparent, consistent and easy to understand, easy to implement, citizens and businesses must be involved in the process of law making.

Accepting such commitments means breaking nearly all of the existing legal frameworks. That was unprecedented in any international negotiations.

But then, realizing the development trend of the times, the profound changes in the world economy, along with demand for full normalization of relations with the US, and on the basis that the society had also recognized that the legal system of Vietnam at that time were hindering the development and all innovative ideas, we went to the conclusion: To integrate, to develop we have to renovate the legal system.

The two sides gradually learned about each other's laws, sought ways to move closer together and finally the BTA was signed and became effective from December 2001.

After the BTA was signed, the Vietnamese government assigned the Ministry of Justice to review the entire legal documents and compared them with the BTA commitments and proposed to the National Assembly the law construction program.

vn-us relations, 20th anniversary of normalization of vn-us ties

The two sides gradually learned about each other's laws, sought ways to move closer together and finally the BTA was signed and became effective from December 2001.

The National Assembly considered and issued the Resolution NQ48/2001-QH10 on amendment and supplement of legal documents in accordance with the US-Vietnam BTA. Accordingly, the National Assembly in the term 2001 - 2005 had to newly build and amend 137 draft laws, ordinances and resolutions, in all fields of economy, society, science and technology, defense and security, criminal, civil and administrative.

According to the above resolution, the National Assembly made a new law building program with a new spirit, a new approach:

Firstly, Vietnam supplemented and amended almost the entire legal system, first of all modifying and refreshing the basic laws such as the Civil Code, the Penal Code, the Law on Intellectual Property, Investment Law, Commercial Law ... in a modern approach.

For example, if in the Civil Code of 1995, the basic principle that the law stipulated was "respect the interests of the State, public interests ..." and then it came to respecting individual interests, then at the beginning, the Civil Code of 2005 (amended in the spirit of the BTA) said: the first basic principle is "The principle of freedom, voluntary commitments and agreements... the principle of equality before the law "; and then "The freedom of business of individuals is respected and protected by law, individuals have the right to select the form, the fields of business, to establish business, to be free to sign contract, to hire labor and have rights in conformity with the law "(the Civil Code); and "The principle of equality before the law of traders of all economic sectors" (Commercial Law); and "Investors are entitled to conduct business, investment operations in the fields that this law does not prohibit" (Law on Investment).

From here, the laws of Vietnam are designed on the principles of respect of the people’s freedom, and that's the essence of a modern market economy, and that is also the "American color".

Secondly, we have turned the service activities in the economy into economic sectors.

Before the signing of the BTA, the service sectors such as banking, insurance, transport, and post-telecommunications were merely the services to serve production and consumption so we did not have separate laws to regulate these activities.

After the signing of the BTA, on the basis of a new awareness of the significance of the service sector in the economic development process, and according to the commitments in the BTA, Vietnam has to open up the services sector, to design specialized laws to regulate the service activities.

A variety of specialized laws were issued, creating a legal framework for the people to freely do business as the Law on Credit Institutions, Securities Law, Insurance Business Law, the Law on Air Transport,... and the service industry is developing rapidly, making a greater role in Vietnam's economy, especially telecommunication services, financial services, tourism, land and air transport.

Thirdly, creating conditions to form a large contingent of businesses and businessmen. The example of business success of American entrepreneurs, along with the rules and regulations in the legal documents that were developed and revised after the signing of the BTA such as Ensuring freedom of business, successful businessmen are honored and encouraged, opening the domestic market,... have urged the formation of a series of enterprises of different economic sectors. The provisions of the BTA and the law require equality, transparency and disclosure so State-owned enterprises have to change the way of doing business for mutual development.

In addition, a large part, especially young entrepreneurs, eye the US market and they want to learn how to do business, how to manage the business from American businesses. They think that once they can play with the US, they can play with anyone. The country will have the opportunity to develop; it has a big and growing team of businesses and entrepreneurs.

Nguyen Dinh Luong

Former chief negotiator for the BTA

vn-us relations, 20th anniversary of normalization of vn-us ties