Lawyer in Vietnam Oliver Massmann Impact of WTO Accession - An analysis

1. Lawyer in Vietnam Oliver Massmann
Impact of WTO Accession - An analysis
Question: How would you generally describe the impact of the Vietnamese WTO
accession on the country?
Answer:
Generally speaking, the WTO accession has created more opportunities and advantages
than disadvantages to the Vietnamese economy.
However, without appropriate macroeconomic policies and necessary reforms, these
opportunities sometimes did become challenges to Vietnam.
Accordingly, appropriate policy measures following the accession, especially in training and
education, migrations, regional and social protection policies were of great importance.
- Macroeconomic impacts:
+ When Vietnam joined the WTO, the world was facing the Great Recession. After the
accession, impacts from the global market have become greater due to close connections
with other markets, creating more risks to the Vietnamese economy. However, the increase
in economic growth is also considerable due to great amount of investment.
+ The import of the heavy industry in Vietnam accelerated after the accession.
+ Vietnam switched from exporting primary commodities to exporting goods produced
with high technologies.
+ Since the accession, Vietnam has diverted from agriculture-driven economy to focus
more on developing industrial sectors. Areas requiring high technologies have become very
attractive.
- Impacts on agriculture:
+ Although the share of agriculture in GDP in Vietnam is decreasing, this field remains
crucial to the Vietnamese economy. Agriculture is facing several issues after the accession
including quality and competitiveness.
- Impacts on the society:
+ The WTO accession has created several working opportunities for unemployed
people.
+ It has also lessen the gap between the rich and the poor and eradicated several
gender inequlities in Vientnam.
+ The number of juvenile laborers has largely decreased.
Question: How would you describe the impact of the accession on politics and the
economy of Vietnam?

2. Answer:
a) Impact on the Economy:
+ Positive impacts on economic growth:
 Trade liberalization was promoted following the accesion.
 Market access was also improved for the country’s exports.
 After Vietnam joined the WTO, foreign capital flows strongly poured into the
economy and improved the economic growth of Vietnam.
 Import clearly has a greater growth due to increase in investment as well as
higher average income, allowing access to foreign goods.
 Approximately 5.7 million jobs were created prior to the accession (2000-2006).
 The annual growth rate of the economy of Vietnam gradually increased from
2001 until 2005 and remained stable, reaching over 8% until 2007.
 Limiting poverty. For instance, in the Red River Delta area, the figure for
poverty decreased from 62.7% in 1993 to 8.8% in 2006.
+ Negative impacts on economic growth: inequalities among the citizens
b) Impact on the Politics:
- Market opening and international economic integration has put Vietnam’s economy
right at the door of opportunities and challenges.
- Vietnamese law has become more transparent and uniform.
- There has been a reduction in administrative procedure, creating flexibility in the
market.
- WTO accession has laid a good foundation for Vietnam’s deeper integration into the
world’s economy.
- The process of economic integration, particularly since Vietnam joined the WTO,
however, revealed the immanent weaknesses of the Vietnamese economy.
- The current situation requires an effective import-export strategy to improve efficiency
of resource allocation, improve competitiveness of the economy and macroeconomic
stability.
- In this context, it is important to focus on macroeconomic stability, growth paradigm
shift towards quality and efficiency as outlined in the Strategy of Social - Economic
Development in the period from 2011 to 2020.
Question: In which domains was this impact particularly strong?
- One of the crucial terms of the WTO agreement is trade liberalization.
- After the WTO accession, Vietnam has made a commitment to open markets for
services sector. Thus, Vietnam are obliged to open the market (allowing foreign investors to
participate in the provision of services in Vietnam or to organizations and individuals in
Vietnam) at least at the levels of the commitment. This is one of the main reasons leading to

3. the rise in investment in this sector. Particularly high investment growth in the property
business was derived from the transfer of capital from investors from risky markets to the
emerging markets with higher returns.
- In the first few years of joining the WTO, the sector has the strongest investment
growth in the economy was the property and business consulting services (an increase of
263.0% in 2007 and 15, 0% in 2008); market sectors open to foreign investment, such as
finance and credit (up 87.4% in 2007 and 5.8% in 2008); transport, storage and
communication (29.5% in 2007 and 5.8% in 2008).
- Growths of this sector are mainly due to the contribution of foreign investments and
economic sectors outside the state.
Question: How important would you say is compliance to international trade law –
represented through the WTO – in policy making in Vietnam?
Answer:
- WTO is a community which allows easier trading terms among countries with fewer
barriers and this was reinforced by international trade law set forward by the WTO.
- Therefore, being in compliance with the international trade law is one of the crucial
requirements in joining the WTO as it promotes the integration of the Vietnamese economy
into the international economy and it also creates similar opportunities for Vietnam in order
to further develop its economy.
Question: Would you say that organizations such as the American Chamber of
Commerce or the European Chamber of Commerce in Vietnam gained more leverage in
representing their interests through the legal WTO commitments?
Yes.
Part 2: Questions about a concrete policy case in Vietnam
Case description:
In February 2014, the Vietnamese Ministry of Finance set up and amendment draft to
the Law on Special Consumption to impose a 10% tax on sugar-sweetened, non-alcoholic
carbonated beverages. This caused resistance by different parties, such as the Ministry of
Trade and in particular, the American Chamber of Commerce, representing foreign
producers of soft drinks. One of the main arguments of the opponents to the tax was that
Vietnam could violate its commitment to the principle of “national treatment” because 88% of
the products that would be affected by the tax are foreign branded. In the monthly resolution
of the government in July 2014 (Document Number: No 56//NQ-CP, point 8), the
government declared to not include the proposed tax within the Law on Special
consumption.
Letter of the American Chamber of Commerce to the Vietnamese Prime Minister:
http://36mfjx1a0yt01ki78v3bb46n15gp.wpengine.netdna-cdn.com/wp-
content/uploads/2014/06/140602-Letter-to-PM-Nguyen-Tan-Dung-re-proposed-excise-tax-
on-CSD-En.pdf

4. Questions:
Are you familiar with this case? Did you hear about it when it happened?
- Yes.
How would you generally describe this case? Is rather ordinary or more special?
- The main reason that the Ministry of Finance proposed such amendment was its
concern about the health impacts of sugar-sweetened, non-alcoholic carbonated
beverages, such as causing diabetes, obesity, stomachache, gout or even cancer.
Concern about health leading to the authority’s decision to impose higher special
consumption tax rate is quite ordinary. Many other countries in the region such as
Thailand or Cambodia also impose higher tax rate for certain types of beverages
not good for public health. In Vietnam, goods such as beer, cigars or alcoholic
beverages are also subject to very high special consumption tax rate.
Would you say that the claim of a violation of the principle of “national treatment” is
justified?
- I believe you are referring to Article III:2 of the GATT 1994. Generally speaking,
this Article prohibits members from treating imported products less favourably than
like domestic products once the imported product has entered the domestic
market.
- As you can see, the objective of this article is imported products vs. domestic
products. The discrimination in this article is not a discrimination of nationality of
investors. For your information, in the Vietnam’s market, most of sugar-sweetened,
non-alcoholic carbonated beverages are produced or imported by foreign invested
companies in Vietnam. All locally produced and imported goods are subject to this
type of tax. However, I agree with the AmCham position paper that despite this
equal application, the overall effect of the measure benefits local producers at the
expense of foreign producers. Thus, a violation of the NT principle could be
established.
Would you say that compliance to WTO law was one factor that caused the tax
proposal to fail? If so, how important was that factor compared to others?
- Yes. WTO has a dispute resolution regime for any members violating its
commitments. If there is any dispute arising and the disputing parties have to go to
the Dispute Settlement Body, it will not only harm trade relations but also political
relations between the parties. Vietnam always wants to comply with the
commitments it made for its own sake.
Would you say that the tax – if applied – could have justified a claim through the WTO
dispute settlement mechanism?
- Vietnam could use Article XX GATT 1994 to make its claim, but it will be hard for
Vietnam to meet strict requirements under this exception, especially when there is
no established scientific-based evidence available at that time.
***

5. Please do contact the author Oliver Massmann under omassmann@duanemorris.com if you
have any questions. Oliver Massmann is the General Director of Duane Morris Vietnam.
THANK YOU !