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36–309—PDF 2006

S. HRG. 109–940

U.S.-VIETNAM TRADE RELATIONS

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

ON

S. 3495

TO AUTHORIZE THE EXTENSION OF NONDISCRIMINATORY TREATMENT

(NORMAL TRADE RELATIONS TREATMENT) TO THE PRODUCTS OF

VIETNAM

JULY 12, 2006

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

on Finance ............................................................................................................ 1

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 3

Smith, Hon. Gordon, a U.S. Senator from Oregon ................................................ 4

ADMINISTRATION WITNESSES

Bhatia, Hon. Karan K., Deputy U.S. Trade Representative, Office of the

U.S. Trade Representative, Executive Office of the President, Washington,

DC .......................................................................................................................... 5

John, Eric, Deputy Assistant Secretary, Bureau of East Asian and Pacific

Affairs, U.S. Department of State, Washington, DC ......................................... 8

PUBLIC WITNESSES

Caspers, Jon, former president, National Pork Producers Council, Swaledale,

IA ........................................................................................................................... 26

Schlect, Christian, president, Northwest Horticultural Council, Yakima, WA .. 28

Shafer, Jeffrey R., vice chairman, Citigroup Global Markets, New York, NY ... 30

Tantillo, Augustine D., executive director, American Manufacturing Trade

Action Coalition, Washington, DC ...................................................................... 32

Seiple, Chris, president, Institute for Global Engagement, Washington, DC .... 38

Kumar, T., advocacy director for Asia, Amnesty International, Washington,

DC .......................................................................................................................... 39

Foote, Virginia B., president, U.S.-Vietnam Trade Council, Washington, DC ... 41

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

Opening statement ........................................................................................... 3

Prepared statement .......................................................................................... 47

Bhatia, Hon. Karan K.:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 50

Bunning, Hon. Jim:

Prepared statement .......................................................................................... 55

Caspers, Jon:

Testimony .......................................................................................................... 26

Prepared statement .......................................................................................... 56

Foote, Virginia B.:

Testimony .......................................................................................................... 41

Prepared statement with attachments ........................................................... 67

Grassley, Hon. Charles E.:

Opening statement ........................................................................................... 1

John, Eric:

Testimony .......................................................................................................... 8

Prepared statement .......................................................................................... 83

Responses to questions from committee members ......................................... 91

Kerry, Hon. John:

Prepared statement .......................................................................................... 93

Kumar, T.:

Testimony .......................................................................................................... 39

Prepared statement .......................................................................................... 95

Page

IV

Santorum, Hon. Rick:

Prepared statement .......................................................................................... 104

Schlect, Christian:

Testimony .......................................................................................................... 28

Prepared statement .......................................................................................... 105

Seiple, Chris:

Testimony .......................................................................................................... 38

Prepared statement .......................................................................................... 108

Shafer, Jeffrey R.:

Testimony .......................................................................................................... 30

Prepared statement .......................................................................................... 115

Smith, Hon. Gordon:

Opening statement ........................................................................................... 4

Prepared statement .......................................................................................... 119

Tantillo, Augustine D.:

Testimony .......................................................................................................... 32

Prepared statement .......................................................................................... 121

COMMUNICATIONS

American Apparel and Footwear Association ........................................................ 131

American Chamber of Commerce in Vietnam ....................................................... 132

American Council of Life Insurers ......................................................................... 136

American Potato Trade Alliance ............................................................................. 138

Bich, Nguyen Ngoc .................................................................................................. 139

Boeing Company ...................................................................................................... 148

Business Roundtable ............................................................................................... 149

Cargill, Inc. ............................................................................................................... 154

Catfish Institute ...................................................................................................... 156

CDM International, Inc. .......................................................................................... 161

Chevron .................................................................................................................... 162

Coalition of Service Industries ............................................................................... 164

Colgate-Palmolive (Vietnam) Ltd. .......................................................................... 167

Comtextile (HK) Ltd., Vietnam .............................................................................. 169

ConocoPhillips .......................................................................................................... 170

Dalpino, Catharin E. ............................................................................................... 171

Damm, Darlene ........................................................................................................ 173

Emergency Committee for American Trade .......................................................... 176

FedEx Corporation ................................................................................................... 181

General Electric ....................................................................................................... 182

Hoang, Loan ............................................................................................................. 183

Hoang, Ninh ............................................................................................................. 185

Hoang, Phan ............................................................................................................. 187

International Textile Group .................................................................................... 189

J.C. Penney .............................................................................................................. 191

Leadership Council for Human Rights .................................................................. 192

Liberty Mutual ......................................................................................................... 200

National Congress of Vietnamese Americans ........................................................ 203

National Council of Textile Organizations ............................................................ 204

National Electrical Manufacturers Association (NEMA) ..................................... 208

National Foreign Trade Council, Inc. ..................................................................... 209

National Retail Federation ..................................................................................... 210

Phan, Hang L. .......................................................................................................... 214

Phan, Khai ............................................................................................................... 217

Retail Industry Leaders Association ...................................................................... 221

Target ....................................................................................................................... 225

Tran, Nhan T. .......................................................................................................... 226

United Commercial Bank ........................................................................................ 228

United States Association of Importers of Textiles and Apparel (USA-ITA) ...... 230

U.S. Chamber of Commerce and American Chamber of Commerce in Vietnam ........................................................................................................................ 232

U.S. High Tech Trade Coalition (HTTC) ............................................................... 236

Vietnam Veterans of America Foundation ............................................................ 238

(1)

TO AUTHORIZE THE EXTENSION OF

NONDISCRIMINATORY TREATMENT

(NORMAL TRADE RELATIONS TREATMENT)

TO THE PRODUCTS OF VIETNAM

WEDNESDAY, JULY 12, 2006

U.S. SENATE,

COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 10:08 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Present: Senators Lott, Thomas, Smith, Bunning, Baucus, and

Lincoln.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. Thank you, everybody, for being here on a very

important issue.

This hearing provides our committee the opportunity to examine

a bill introduced by Ranking Member Senator Baucus and Senator

Smith to authorize the extension of nondiscriminatory treatment of

products from Vietnam. This treatment is also referred to as Permanent Normal Trade Relations (PNTR).

Under current law, we provide Vietnam ‘‘condition normal’’ trade

relations. It is conditional, because it has to be renewed annually.

Title IV is sometimes referred to as Jackson-Vanik.

The bill that Senator Baucus and Senator Smith introduced

would change that. It would allow the President to proclaim Jackson-Vanik no longer applicable to Vietnam, and then henceforth we

would extend unconditional normal trade relations to Vietnam.

The purpose of today’s hearing is to consider the merits of the

bill and explore the context of consideration. By context, I mean

the current state and direction of our bilateral relations, as well as

the pace and the direction of internal reforms within Vietnam.

The impetus for the Baucus-Smith bill is the recent conclusion of

our bilateral agreement on Vietnam’s accession to the WTO. Vietnam has been negotiating terms to do that since 1995. We still

need to complete multilateral negotiations on the Working Party

Report and Protocol of Accession that describes how Vietnam will

conform its laws and regulations to the rules of WTO.

Once those multilateral negotiations are completed and Vietnam

accedes, the United States must extend unconditional normal trade

relations to that country. If we do not, we will not enjoy the market

2

access benefits of our bilateral agreement with Vietnam, and those

benefits are very significant.

Vietnam’s current average applied tariff on agricultural imports

is 27 percent. Upon accession, tariffs on more than three-quarters

of U.S. agricultural exports to Vietnam will be bound at 15 percent,

or even less.

We will realize, also, significant reductions in duties on our exports of beef, pork, soybeans, fruit, and dairy products. More than

94 percent of U.S. exports of manufactured goods will face duties

of 15 percent, or even less. In particular, Vietnam will bind almost

90 percent of its tariff lines on agriculture and construction equipment at rates of 5 percent or less.

Vietnam will also provide significant market access opportunities

across the entire services spectrum: key areas of banking, insurance, telecommunications, energy, express delivery, distribution,

and computers and related services. So, the commercial merits of

accession of Vietnam to the WTO are amply demonstrated.

But that is not to say that there are not concerns. Now, as an

example, concerns have been raised that Vietnam does not adequately protect human rights and religious and political freedoms.

We are going to hear from some of our witnesses who will testify

about those concerns.

Others may say that the best way to address such concerns is to

engage Vietnam, to bring it into the community of trading nations,

because that will help the reform process and enhance accountability and respect for the rule of law by all concerned.

I received a letter of support from the U.S.-Vietnam WTO Coalition that raises that point. The letter is signed by a number of respected Democrats and Republicans who urge Congress to extend

permanent normal trade relations to Vietnam, and to do it as soon

as possible. The list includes Madeleine Albright, James Baker III,

Warren Christopher, Henry Kissinger, Robert Rubin, and Colin

Powell. That is among many people who signed the letter.

In addition to that letter, the committee has received numerous

statements in support, each of which will be made a part of the

record. We have also received statements expressing additional

concerns, such as the inadequate protection of intellectual property

rights by Vietnam. Those statements will also be made a part of

the record.

We have a diverse group of witnesses today, and I will take the

time to speak about them now and will not introduce them at the

time of the separate panels.

Panel one is Deputy U.S. Trade Representative Karan Bhatia

and Deputy Assistant Secretary of State for East Asian and Pacific

Affairs Eric John.

On our second panel, we have Jon Caspers, former president of

the National Pork Producers Council, a constituent of mine. We

have Christian Schlect, president of the Northwest Horticultural

Council; Jeffrey Shafer, vice chairman, Global Markets, Citigroup;

and Augustine Tantillo, executive director of the American Manufacturing Trade Action Coalition.

We have on panel three Chris Seiple, president of the Institute

for Global Engagement; Mr. T. Kumar, advocacy director for Asia

3

at Amnesty International; and Ms. Virginia Foote, president of the

U.S.-Vietnam Trade Council.

I would like to note that the committee also sought to have a

labor witness testify at today’s hearing. Committee staff reached

out to the AFL–CIO, to the International Brotherhood of Teamsters, and the Union of Needletrades, Industrial, and Textile Employees.

There could have been some scheduling conflicts and those organizations were unable to send a witness to today’s hearing, but I

would encourage them, even though they could not come, to submit

statements for the record.

Senator Baucus?

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Thank you, Mr. Chairman. Thank you very

much.

Reflecting on Vietnam’s victory in the year 1426 over China, the

Vietnamese Confucian poet Wen Chai wrote: ‘‘Peace follows war as

day follows night.’’

For America and Vietnam, those words once would seem only

wishful thinking. Now those words seem entirely appropriate. They

define the reconciliation between the United States and Vietnam.

Remember the Tet Offensive in 1968? Remember the Christmas

bombing at Hanoi in 1972? Remember the helicopters leaving Saigon in April of 1975? I remember those times. At those times I

would never have dreamed that I would be sitting here, sponsoring

legislation to take the final step to normalize U.S.-Vietnam relations. I am proud to play a small part in this journey from night

to day, from war to peace.

The journey began when President George H.W. Bush first

sought daylight. He presented Vietnam a road map to normalization in April of 1992. The journey continued when my Finance

Committee colleague, Senator John Kerry, along with other Senators, worked diligently in the early 1990s to account for prisoners

of war and persons missing in action.

The journey continued when President Bill Clinton lifted the

United States economic embargo on Vietnam in 1994, and normalized political relations the following year. That was 11 years ago

yesterday.

The journey pushed to its last mile when President George W.

Bush and his administration worked diligently to pave the way for

Vietnam’s entry into the World Trade Organization. President

Bush travels to Hanoi later this year, and we will continue to complete the journey by granting Vietnam permanent normal trade relations.

America’s relationship with Vietnam is no longer just about the

past. It is no longer about the night. It is about a hopeful present.

It is about an even more promising new day.

More than three out of five of Vietnam’s 83 million people were

born after the war. Vietnam is booming. Vietnam’s economy is

growing by more than 8 percent a year. Vietnam is committed to

economic reform, it is committed to opening markets, and it is committed to reducing poverty.

4

In the past 5 years, trade between America and Vietnam has

quintupled. It has grown from $1.4 billion in 2001 to $7.6 billion

in 2005. America trades more with Vietnam than we do with Peru,

Costa Rica, Guatemala, Morocco, Oman, Bahrain, and other free

trade agreement parties. Vietnam is America’s 44th-largest trading

partner.

Vietnam has reached these levels before it joins the WTO. When

that happens, and it will be soon, Vietnam will further open its

market to American farmers, ranchers, manufacturers, and service

providers.

The bilateral WTO accession deal that Vietnam and America concluded last May will yield significant benefits to Americans. Vietnam will reduce to 15 percent or less its tariffs on agricultural

goods that affect three-quarters of U.S. farm exports. Vietnam will

cut tariffs to 15 percent or less for 94 percent of all U.S. exports.

Vietnam will permit U.S. banks, insurance companies, and distribution companies to establish 100-percent foreign-owned subsidiaries immediately, or within a few short years.

Vietnam will eliminate BSE-related restrictions on all beef products and recognize the equivalency of U.S. food safety inspections.

Vietnam’s WTO accession is a big deal. It is a big commercial

win for the United States. It is the most economically significant

trade initiative in some years. Over 150 U.S. companies have written this committee letters in support. It commands broad political

support in both chambers of Congress.

But to get the benefit of Vietnam’s accession, we must come together to grant Vietnam PNTR. We must come together to give

Vietnam, permanently, what we already give it on an annual basis.

The time to do this is now, before the President travels to Hanoi

in November. The time is now, before other countries, like China,

beat us to the punch, benefitting first from Vietnam’s market opening commitments. Now is the time to complete the transition from

the past to the future.

Now is the time to step from day to night, and in so doing, may

America and Vietnam fulfill other words of blessing penned by Wen

Chai: ‘‘In so doing, may we regain tranquillity for 10,000 generations.’’

Thank you, Mr. Chairman.

[The prepared statement of Senator Baucus appears in the appendix.]

The CHAIRMAN. Since Senator Smith is a partner in this effort,

would you like to say something? We will depart from the normal

process of just having the two leaders speak.

OPENING STATEMENT OF HON. GORDON SMITH,

A U.S. SENATOR FROM OREGON

Senator Smith. Well, thank you, Mr. Chairman. I am very

pleased to be here. I appreciate you and Senator Baucus scheduling

this hearing on this important legislation. I am pleased to join with

Senator Baucus as a co-sponsor of this.

I want to also thank Chris Schlect from the Northwest Horticultural Council for testifying today about the importance of Vietnamese trade to fruit tree growers in Oregon, Washington, and

Idaho.

5

I would put my whole statement in the record, Mr. Chairman, if

I may.

Last December, Senator Lott, I, and others visited Vietnam. We

visited with President Luong and frankly were, I think, much impressed with the desire of the Vietnamese people and their government to get beyond the past and to look towards a future that has

strong linkage to the United States of America.

I think it goes without saying that we congratulate our ambassador, Ambassador Bhatia, and the USTR team for the work they

have done on this. I think it also is important to point out that

Vietnam has the fastest-growing economy in southeast Asia. Our

exports, after the bilateral trade agreement, last year alone rose by

24 percent. There is no telling how important this emerging market

is to U.S. producers. There are 83 million people there. I was

amazed at their desire for U.S. goods, specifically our agricultural

goods.

So whether it is apples, pears, boneless beef, or frozen french

fries, and specifically soft white wheat that is grown in the Pacific

Northwest, this is a tremendous opportunity for my State, and I

think the United States.

Oregon companies like Nike and Columbia Sportswear have long

used Vietnam as a source of production. The Intel Corporation has

a huge presence in Oregon. They have announced a new semiconductor plant in Ho Chi Minh City. Oregon has a number of important ties to Vietnam, and I believe it is in all of our interests that

Vietnam have the ability to accede to the WTO and be subject to

the rules of international trade.

So I think this is an important piece of legislation. It is timely,

with the President’s upcoming visit. I think it is a very important

message that we send to Southeast Asia, that America wants to be

included in their hopes and dreams, and commerce. Commerce

spreads peace, and I think that is the future we look forward to

with Vietnam. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

[The prepared statement of Senator Smith appears in the appendix.]

The CHAIRMAN. And I have already introduced our first panel, all

the panels, so we will proceed with you, Mr. Ambassador, then the

Secretary.

So, proceed.

STATEMENT OF HON. KARAN K. BHATIA, DEPUTY U.S. TRADE

REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON, DC

Ambassador BHATIA. Great. Thank you very much, Chairman

Grassley, members of the committee. It is a real privilege to be

here today to be able to testify on behalf of the Bush administration in strong support of S. 3495.

This legislation represents another milestone, frankly, in a process that began over 15 years ago when the U.S. restored diplomatic

relations with Vietnam.

We believe that WTO accession for Vietnam will benefit the

United States economically. It will promote reform in Vietnam and

6

it will support broader American interests in Southeast Asia. Accordingly, we ask for the committee’s support as we do take this

next step forward in this important bilateral relationship.

I would like, if I may, to note the importance of the economic dimension of that relationship and describe some of the benefits that

PNTR and WTO accession will offer American exporters and investors.

Let me, in that regard, begin by briefly describing the current

U.S.-Vietnam trade relationship. Since 2001, our two-way trade

has grown rapidly, from just under $1 billion to $7.8 billion, and

over that same period, U.S. exports have increased 150 percent, to

$1.2 billion, making Vietnam among the fastest-growing Asian

markets for U.S. goods.

This growth in trade, I believe, reflects, frankly, the rapid growth

in Vietnam’s own economy. Over the past 5 years, Vietnam’s GDP

has increased from about $31 billion to $52 billion, approximately

two-thirds. This year, Vietnam’s GDP is forecast to achieve about

8 percent growth, and frankly we do not see any sign of it slowing

down.

Now, the United States and its industrious companies, workers,

farmers, and ranchers have sought to support and participate in

this rapid economic acceleration. And whether you want to talk

about farmers in the Midwest exporting pork and soybeans, or

ranchers in the mountain West raising cattle, or fruit and vegetable growers in the Pacific West, manufacturers of industrial products ranging from aircraft to construction equipment, high-technology products, wine and spirits, even motorcycles, or certainly

producers of services, financial services, express delivery, and

many, many other services, Americans have embraced the economic potential of this country of 82 million people.

American companies have also increasingly seen Vietnam as a

platform for regional production, and in that regard as an attractive alternative to China.

Now, with these trends in mind as sort of the backdrop, let me

turn to the bilateral agreement that we have negotiated. A number

of members have already summarized some of the key features of

that, so I will be brief.

But that agreement, simply stated, builds on the progress that

we have achieved over the last 5 years, and I believe promises even

greater access to one of Southeast Asia’s most dynamic economies.

On industrial goods, tariffs on more than 90 percent of U.S. exports of manufactured goods will fall to 15 percent or less; on many

key U.S. exports, such as computers, telecommunications equipment, civil aircraft, engines and parts, tariffs will be eliminated entirely.

Tariffs on agricultural products of key interest to U.S. farmers

also will be substantially reduced in Vietnam as a result of our bilateral deal. Duties on almost 80 percent of all farm exports will

fall to 15 percent or less, including on cotton, beef and pork offals,

boneless beef, whey, grapes, apples, pears, almonds, raisins, cherries, frozen fries, and certain categories of chocolate. Vietnam will

also lock in low tariffs on other key U.S. farm exports such as poultry.

7

In the services area, Vietnam has agreed to provide substantial

market access across 114 services sectors, and among these are

areas in which U.S. firms are globally competitive, such as financial services, telecommunications, energy services, express delivery

services, engineering services, construction, wholesale, retail and

franchise services, as well as professional services.

Now, significantly, Vietnam has committed to the elimination or

phase-out of all WTO-prohibited industrial subsidies and agricultural export subsidies. Indeed, as part of our agreement, Vietnam

has already repealed its major subsidy program for its textile and

garment producers and, upon accession, will cease all prohibited

subsidies, which is an issue that our textile manufacturers, I

should point out, identified as a major goal in these negotiations.

It will also implement laws to fully comply with WTO intellectual

property rules, known as TRIPS, including providing data protection, and we are working closely with the Vietnamese government

to ensure that the law and implementing regulations meet these

obligations.

More broadly, accession will support our broader linkages with

the commercially and strategically critical Southeast Asian region,

whose 570 million people purchased $50 billion worth of U.S. goods

last year.

Granting PNTR to Vietnam, as Senator Smith observed, will

send a clear signal of commitment to Asia and to the Nations of

Southeast Asia, and I believe will complement other U.S. trade priorities in Asia, such as the FTAs we are negotiating with Korea,

Malaysia and Thailand, and the numerous other trade and investment dialogues we are pursuing across the region.

Of course, Mr. Chairman, as you recognized, we cannot realize

any of these benefits without the PNTR legislation before the Congress, which will allow the U.S. to establish WTO relations with

Vietnam at the time of its accession.

Because WTO rules require that members grant each other the

equivalent of permanent normal trade relations, this legislation,

PNTR, has to be enacted if we are going to obtain the benefits of

the bilateral agreement that I have just described, or, for that matter, the right to enforce WTO rules and disciplines upon Vietnam.

Before I close, let me touch, if I can, just for a moment on issues

of human rights and religious freedoms that have, rightly, been a

significant focus for the administration and for many in Congress.

While my State Department colleague, Deputy Assistant Secretary John, I know will address these issues in greater detail, I

do want to state that we believe that this bilateral agreement will

clearly help to encourage advances in Vietnam’s human rights

record.

Clearly, the prospect of WTO accession and Vietnam’s implementation of its BTA commitments have created momentum for improvement in these areas. In addition, many of the changes that I

described a moment ago will enhance the rule of law and promote

transparency, thereby buttressing broader principles of openness,

due process, and rule of law.

These changes alone will not cure the problems associated with

human rights and religious liberty, but they will allow new ideas

8

and information to flow into Vietnam that will encourage further

freedom and openness.

With that, Mr. Chairman, I would simply say to you, the administration strongly urges the Senate to move quickly to a vote on

PNTR. A PNTR vote this summer will not only allow us to lock in

the valuable market access commitments that Vietnam has made,

but will also, I believe, increase our leverage in the ongoing multilateral discussions where we still have important issues at stake.

Thank you very much.

The CHAIRMAN. Thank you, Ambassador.

[The prepared statement of Ambassador Bhatia appears in the

appendix.]

The CHAIRMAN. Now, Mr. Secretary?

STATEMENT OF ERIC JOHN, DEPUTY ASSISTANT SECRETARY,

BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF STATE, WASHINGTON, DC

Mr. JOHN. Mr. Chairman, thank you for the opportunity to testify before the Finance Committee today on permanent normal

trade relations for Vietnam. I would like to request that my full

statement be entered into the record today.

The CHAIRMAN. It will. Yes.

[The prepared statement of Mr. John appears in the appendix.]

Mr. JOHN. The Department of State enthusiastically supports

Congressional approval of PNTR for Vietnam. Vietnam’s accession

to the WTO comes in the context of a remarkable transformation

that has been under way in Vietnam for some time now.

I have been working on, and following, Vietnam for the past 17

years, and I can tell you that this transformation has brought

about dramatic positive change inside Vietnam, has enabled us to

improve our own bilateral relationship, and has turned Vietnam

into an increasingly responsible player and a potential partner.

When I first traveled to Vietnam for the State Department in

1989, the country was a Soviet client state, just beginning to move

away from doctrinaire Marxist policies that had produced economic

ruin.

The Communist Party and government rigidly controlled people’s

lives. In fact, I remember when my first flight landed there in

1989, the security services went through the plane before we could

disembark to collect all the foreign magazines and newspapers

from the flight so they would not be entering the country.

In the late 1980s, Vietnam’s leadership recognized the failure of

doctrinaire Marxism and abandoned it in favor of a policy of doi

moi, or renovation, designed to promote economic development. The

government began significant economic reforms and started to

reach out to the international community, including the United

States. Doi moi has been a significant success for Vietnam.

Bilaterally, we now work with the Vietnamese in a broad number

of areas that would have been unimaginable even a decade ago.

Our health experts are working intensively with their Vietnamese

counterparts to combat avian influenza and HIV-AIDS. We are beginning to engage regularly on regional issues, ranging from

Burma to North Korea.

9

Secretary Rumsfeld’s recent positive visit last month to Hanoi

imparted additional momentum to a growing bilateral military relationship that just saw two U.S. Navy ships make a well-received

port call to Ho Chi Minh City.

While we enjoy excellent cooperation from the Vietnam government on POW-MIA issues, we continue to press for even more access to sites and records to ensure the fullest possible accounting

of U.S. service members lost in the war in Southeast Asia.

To me, nothing highlights Vietnam’s change more than the

events of a couple of months ago. Vietnam held its first party Congress, a week-long, highly sensitive political event during which the

government traditionally puts off foreign—particularly American—

visitors.

Just before the Congress, however, Vietnam warmly welcomed

Speaker of the House Hastert, and smack-dab in the middle of the

Congress, it welcomed Bill Gates and accorded him celebrity treatment.

I go through all of this to make one basic point: for Vietnam,

WTO accession and PNTR status are only the latest chapter in a

long story of change and opening to the world that continues to be

written. Vietnam’s transformation and outreach to the world, including the United States, did not start with the WTO and will not

end with the WTO.

I will not suggest that WTO accession and PNTR status will be

magic bullets that bring about rapid or dramatic improvements in

human rights and religious freedom. They will, however, keep Vietnam committed to the very positive course on which they embarked

20 years ago. Helping Vietnam stay on that course is very much

in our interest.

As my colleague from USTR, Ambassador Bhatia, laid out in

some detail, there are some critical economic and commercial

issues, and PNTR status for Vietnam and its accession to WTO is

both good for Vietnam and for the United States.

While there are, indeed, many positive things going on in Vietnam and in our burgeoning bilateral relationship, there are some

remaining areas that are of concern.

These involve continuing deficiencies in Vietnam with respect to

human rights and restrictions on the ability of Vietnamese to freely

practice their religious beliefs.

Vietnam’s record on religious freedoms, up until only recently,

was abysmal. Its designation in 2004 as a ‘‘country of particular

concern,’’ or CPC, was well-deserved. That said, we have seen significant progress by Vietnam on this front.

Shortly after being designated as a CPC, Vietnam revised its

legal framework, governing the practice of religion. Vietnam also

proved receptive to U.S. overtures for formal agreement on religious freedom, which specifies areas for improvement.

On May 5, 2005, we concluded an agreement through a formal

exchange of letters. It was the first of its kind ever attempted, negotiated, or signed under the International Religious Freedom Act.

Vietnamese religious leaders now tell us that they are allowed

more freedom to conduct religious activities, that there is greater

acceptance of various types of religious activities, such as house

10

churches, and that they experience fewer difficulties with Vietnamese authorities.

To be sure, reports of violations continue in Vietnam. In Vietnam’s northern tier provinces, there has been insufficient progress,

and religious organizations find it difficult to register under the

Framework on Religion.

In recent weeks, Vietnamese authorities informed us that the

first two house churches have been registered in the Northwest

Highlands. Overall, reports of violations have sharply declined in

number, while evidence of positive developments has multiplied.

In the sensitive Central Highlands region, for example, over 400

‘‘meeting places’’ in the Gia Lai province have been registered—religious meeting places—and government pressure on house churches has eased significantly.

Incidentally, for the first time, in 2006, with the direct support

of the U.S. Congress, we are providing economic support funds to

increase opportunities for ethnic minorities in the Central Highlands region.

There are other examples. Catholic Church Seminary classes

have doubled in size, and 57 new priests were ordained in a public

ceremony in Hanoi in November of 2005. Unregistered Baptists

held their first Easter public revival prayer meeting earlier this

year, with government approval. Seventh Day Adventists, Grace

Baptists, and the largest of Vietnam’s Mennonite groups have registered in Ho Chi Minh City and are now seeking national-level

recognition.

In the broader area of human rights, Vietnam continues to restrict fundamental freedoms, and the Department of State’s 2005

Human Rights Report categorizes the country’s human rights

record as ‘‘unsatisfactory.’’

On the other hand, there has been progress in some areas. In the

last 18 months, 18 prisoners of concern to the United States have

been released. Only four people remain on our list of prisoners of

concern, including Dr. Pham Hong Son, whose case we have raised

repeatedly with Vietnamese authorities.

In February, we resumed the bilateral human rights dialogue

with Vietnam after a 4-year suspension and raised some tough

issues with the government in key areas where its human rights

record does not meet international standards.

The government of Vietnam engaged us substantively, and we

made it known that concrete follow-up needs to take place. WTO

membership will require Vietnam to continue to open its economy,

embrace transparency in commercial dealings, and abide by the

rule of law in the global trading system. It is no accident that these

same characteristics are most likely to contribute to further openings in Vietnam’s political outlook.

Building on the visit to the U.S. last year by Vietnam’s Prime

Minister, and culminating in the visit of our own President to

Hanoi this coming November, we are in the midst of a watershed

year for bilateral relations. The new leadership team in Vietnam,

in place since last month, seems well-disposed to continue and

build upon the reform policies of its predecessors, a positive sign.

A key element of our engagement with Vietnam is ensuring its

accession to the WTO, which will keep Vietnam on a positive overVerDate 11-MAY-2000 16:36 Jul 23, 2007 Jkt 095484 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 36309.000 SFIN1 PsN: SFIN1
11

all reform trajectory. An affirmative and early vote on PNTR—before the August recess, if it can be scheduled—would be a major

boost to the relationship and to reform in Vietnam and would create early opportunities and benefits for both nations.

Let me conclude by reiterating one fundamental point: Vietnam,

for its own internal reasons, is undertaking a significant transformation that has profound positive effects inside the country and

internationally. WTO accession and PNTR status are the logical

next steps in Vietnam’s transformation, and it is absolutely in our

Nation’s interest to support them.

Thank you.

The CHAIRMAN. Thank you very much.

We will have 5-minute rounds.

We have a communication of this question to both of you from

California Assemblyman Van Tran, who forwarded to this committee a statement for the record from one of his constituents, who

is a writer and publisher of books in English and Vietnamese.

His constituent has asserted that, despite our 2001 bilateral

trade agreement with Vietnam, we still do not enjoy two-way trade

in books, cassettes, DVDs, videos, movies, and films because U.S.

exports are effectively banned by the Vietnamese government. So,

your response, and how would such an allegation be handled if

Vietnam accedes to the WTO?

Ambassador BHATIA. Thank you, Mr. Chairman. The issue is one

that I am familiar with. As a matter of fact, a few weeks ago, Congressman Royce, over on the House side, convened a gathering of

a number of Vietnamese and Vietnamese-American authors, artists, and others to express a set of concerns on this front.

I think it is fair to say that the WTO accession and the bilateral

agreement that we have acknowledged do a couple of things that

are going to help in this regard. First of all, with respect to some

areas, it simply will open up greater opportunities for imports. So,

for instance, U.S. companies now are going to be able to form joint

ventures to open movie theaters, which is a step forward in the

right direction.

I think another commitment that has been obtained in this area

is a commitment by Vietnam that when it applies import licensing

policies in the area of books and periodicals and so forth, it will

happen through a state trading enterprise, and the policies that

will apply there will have to be done on a commercial basis, which

is the second important thing.

But I think, third, and perhaps most importantly here, WTO accession is going to require Vietnam to abide by the rule of law. It

is going to have to make clear what its policies are.

I think a lot of the concerns about censorship and so forth, in reality, derive from the fact that there is sort of an arbitrariness to

them. Indeed, right now within Vietnam there is no clear sense of

what can and cannot be done. Part of the problem that this group

has expressed to me is that there is simply a lack of predictability.

They just do not know.

What WTO accession, perhaps more importantly than anything,

does, is it establishes clear rules. It establishes a process that is

going to have to be followed to ensure that people know what policies will and will not apply with respect to importation of materials

12

like this. So I think, all said, is it a perfect solution? No. But it is

a significant step forward.

The CHAIRMAN. Do you have anything to add, Mr. John? You do

not have to, but if you do——

All right.

Just one point before I ask my last question. That is, I think we

all can be cynical about countries joining the WTO. China is still

playing us for a sucker in a lot of respects.

There are obligations of predictability, what we ought to expect

under the WTO. So we ought to be able to make clear to the Vietnamese what WTO is. It is about predictability, transparency, rule

of law in international trade. If you want the benefits of it, you

have to abide by it fully.

This question is also from the same constituent I referred to

there in California, and you talked a little bit about intellectual

property rights and the fact that Vietnam has numerous laws on

that, yet Vietnam still remains on the USTR’s Special 301 watch

list. Why is that? Do you expect the Working Party Report and the

Protocols of Accession to contain additional obligations with respect

to Vietnam’s enforcement of IPR?

Ambassador BHATIA. Mr. Chairman, you are right to observe that

Vietnam remains on our Special 301 list. Just to take a step back,

Vietnam was perhaps among our most concerning countries in the

world before the bilateral trade agreement was concluded. It was

a huge leap forward in terms of intellectual property, with many

not only TRIPS commitments, but TRIPS-Plus commitments that

they undertook.

I think the last 4 years, we have been in a process of working

with Vietnam as it, itself, has been pushing forward legislation.

And not just legislation, but also the instruments for ensuring that

IPR is effectively protected and enforced, everything from police

forces to having the rules and regulations in place necessary to

process them.

So I think that process has been ongoing, and we have actually

been quite pleased, I think, with what we have seen happening

there. That said, there continues to be a problem with piracy, for

instance, on the streets.

One of the things, with reference to what is happening in the

multilateral session, yes, absolutely IPR remains an issue there.

Principally the issue concerns whether there continue to be portions of the Vietnamese law that they have now enacted and are

moving forward with that need to be tweaked or need to be

changed to ensure that they come into compliance with TRIPS, and

that is an area that is very much a focus, not only of us, but frankly of many of our other trading partners in dealing with Vietnam,

and we will pursue that in the multilateral process.

The CHAIRMAN. Thank you.

Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

Mr. Ambassador, I have been pressing to get this PNTR legislation passed by the end of this month. After all, the President is

going to Hanoi in November for the APEC leadership meeting, and

it will be difficult to take this up, I think, in September, just prior

13

to elections, because at that point things get a little more political

and it is a little harder, sometimes, to get things done.

So I am asking you, how committed is the administration to getting this bill passed this month so we do not have to wait until

September?

Ambassador BHATIA. Senator Baucus, I think it is fair to say the

administration just, first of all, generally, is deeply, deeply committed to seeing PNTR enacted. I think that is reflected in everything that has been said, starting with the signing of the bilateral

market access agreement, to remarks that I made yesterday at a

U.S.-ASEAN Business Council. There is no question that we are

committed to doing it. As I said yesterday, we are committed to

working with the Congress to have it done quickly.

Ideally, yes, it would be done in July. It would be done before the

August recess. We do not obviously control the Senate’s or the

House’s schedule, and would not presume to, but we would be

happy to continue working with this committee and with the Senate and leadership of both Houses to get it done as quickly as possible. We believe it is a very important piece of legislation.

Senator BAUCUS. I think the administration’s role is very important here, because the more you are involved, the more likely it is

that the Majority Leader will allow the bill to come up, and it will

not take up a lot of floor time with a lot of amendments. But it is

going to take work from a lot of people, all the way around, to get

this passed right away.

Again, I am very concerned that if it is held over until September, it is going to be even that much more difficult to get

passed. So, I urge you to send the message to the administration—

some of whom are probably watching this hearing right now, undoubtedly—to get very engaged.

It is my experience with free trade agreements, or with this, that

it takes the active involvement of the administration. It took the

active involvement of President Clinton to get the North American

Free Trade Agreement passed, and it is going to take the active involvement, I think, of President Bush to get this passed as well,

particularly if he wants to get it passed quickly.

Ambassador BHATIA. I would only again reiterate, Senator, that

I know that the administration—and I include all the agencies and

feel comfortable in including the White House—has strong support

for seeing this piece of legislation move forward.

Senator BAUCUS. Would you tell this committee what the consequences would be if this were not enacted?

Ambassador BHATIA. Well, Senator——

Senator BAUCUS. And say if it were not enacted this year.

Ambassador BHATIA. I think, in general, to reiterate a point I

made in my testimony—and I will not talk about issues of human

rights, but just on the economic front——

Senator BAUCUS. Right.

Ambassador BHATIA. The danger, frankly, here, is that we do not

gain the benefits of Vietnam’s WTO accession, that we do not gain

the benefits—the reductions in tariffs, the commitments that they

made that go beyond tariff reductions, that we do not resort to dispute settlement, for instance, against Vietnam—all of the full

range of commitments would not be open to U.S. companies. I can

14

tell you, there is a great deal of support, frankly, for Vietnam’s accession among many of our trading partners.

Senator BAUCUS. But would other countries get the benefits?

Ambassador BHATIA. If Vietnam accedes to the WTO and we do

not enact PNTR, then we are unable to grant unconditional MFN

treatment to Vietnam and the situation there would be that Vietnam would be in a position not to grant MFN treatment to the

United States and its goods. So, I think we run a real risk of being

in a situation where our companies would be placed at a competitive disadvantage. Companies, workers, everybody would be at a

disadvantage.

Senator BAUCUS. What about China? Would that benefit China,

compared with the United States, if the United States did not

grant PNTR?

Ambassador BHATIA. China would be one of the countries, presumably, that might enjoy those other privileges, yes.

Senator BAUCUS. And India, as well.

Ambassador BHATIA. Yes, sir.

Senator BAUCUS. And virtually every other country.

Ambassador BHATIA. Yes, sir.

Senator BAUCUS. And the United States will be left out in the

cold.

Ambassador BHATIA. Yes. Without PNTR, yes.

Senator BAUCUS. And what signals will that send to the rest of

the world if the United States does not grant PNTR this year, particularly when the President is going to Hanoi for the APEC meeting?

Ambassador BHATIA. I think it would be a very troubling signal.

Not only with respect to the APEC meeting, but, frankly, also with

respect to negotiations that we have under way with other key

trading partners: Korea, Malaysia, and others. I think it would be

very troubling to be sitting here across the table from those countries and not have the support of the Congress for Vietnam.

Senator BAUCUS. Well, I agree with you, Mr. Ambassador, very

strongly. I am going to do all I personally can to get this enacted

this year, and hopefully this month, for all the reasons that you

have indicated.

Ambassador BHATIA. Thank you very much for your support,

Senator.

Senator BAUCUS. Thank you.

The CHAIRMAN. Thank you.

We will go to Senators Bunning, Lott, Smith, and Lincoln. That

is the order of attendance.

Senator BUNNING. First of all, Mr. Chairman, I would like to put

my opening statement into the record.

The CHAIRMAN. Yes. Everybody’s opening statement will be in

the record.

[The prepared statement of Senator Bunning appears in the appendix.]

The CHAIRMAN. And let me announce, for the second and third

panel, so they do not have to ask, your full statement will be put

in the record, and then we would ask you to summarize, each of

you, in 5 minutes.

15

Senator BUNNING. And I get an extra 15 seconds, since you just

took that.

The CHAIRMAN. Yes, you do.

Senator BUNNING. Thank you. Thank you, Mr. Chairman.

Mr. Bhatia, under the 2001 bilateral trade agreement between

the U.S. and Vietnam, an agreement I opposed, Vietnam agreed to

undertake a number of measures, including easing barriers to the

U.S. Services, committing to protecting intellectual property rights

and providing protection for foreign direct investments.

Critics have expressed concern that the Vietnamese government

has not implemented, in law or practice, many of these concessions

which should have been phased in by December of 2004.

In light of this, Mr. Bhatia, what guarantees does the Congress

have that Vietnam will follow through on future commitments?

Ambassador BHATIA. Senator Bunning, you are right. There are

many commitments contained in the BTA, really commitments that

run across the spectrum. We have just completed a BTA review

process, as a matter of fact, with Vietnam.

I have to tell you, when one looks at the amount of commitments

that were made back in 2001 and where they stand today, it really

is fairly impressive. Vietnam has passed more than 80 laws, it has

overhauled many sectors of its regulatory regimes. I think our

sense is, frankly, they have probably done better in many respects

than we could have expected there.

Senator BUNNING. But the point I am making is, they have

passed laws and they are on the books, but they are not enforcing

them. Intellectual property, particularly. I bring that up. China

promised, when they were going into the WTO, that they would enforce intellectual property rights.

Ambassador BHATIA. Absolutely.

Senator BUNNING. And they are not doing it.

Ambassador BHATIA. Yes.

Senator BUNNING. I made the same trip that Senator Smith did.

I was on the same trip. They are not enforcing their laws. What

makes you think they are going to enforce them once they get into

the WTO, when they are not doing it now?

Ambassador BHATIA. I guess I would point to a couple of things.

First of all, in the WTO setting, they are going to be party to multilateral agreements, and there are going to be multilateral dispute

settlement systems available to us to enforce those laws. Indeed,

with respect to China——

Senator BUNNING. We do not have them now with our agreement, our bilateral agreement?

Ambassador BHATIA. Yes. But the multilateral process, I think,

is much more effective in this regard, Senator, because it is not just

us enforcing them, it is the whole world enforcing them.

Senator BUNNING. The WTO dispute mechanism works how?

Ambassador BHATIA. Effectively, we, or any other country in the

world, are able to bring complaints, for lack of a better word,

against a country for non-compliance with——

Senator BUNNING. Then if we are ruled against or ruled for, what

is the enforcement mechanism?

Ambassador BHATIA. There are penalties that can be enacted if

people do not.

16

Senator BUNNING. Penalties.

Ambassador BHATIA. That happens all the time. It happens with

respect to us, it happens with respect to others. It is a rule of law

system.

Senator BUNNING. I understand what the rule of law is, Mr. Ambassador. But the fact of the matter is, if you walk the streets of

Beijing, if you walk the streets of Ho Chi Minh City, you can buy

on the streets things that are illegally and improperly manufactured and knock-offs of just about anything you want.

Ambassador BHATIA. Perhaps, Senator Bunning, I can point out

that, in addition to the laws, the other half of what needs to happen is the enforcement on the street. You are right. To that regard,

various parts of the administration have been working with Vietnam to beef up their enforcement, ranging from law enforcement,

to having the necessary rules and regulations. We are committed

to doing that.

Senator BUNNING. Thank you.

Mr. John, you indicated that the Vietnamese have made strides

in the area of religious freedoms over the last 18 months. That timing appears to coincide with Vietnam’s efforts to join the WTO. If

they succeed in that goal, how do we know that they will continue

to make improvements in this area?

A follow-up is, is it true that the Vietnamese government has the

right of refusal of bishops from the Catholic Church into Vietnam

now, right now?

Mr. JOHN. With respect to the first part of the question, whether,

if we passed PNTR, we would have that same type of leverage or

negotiating leverage with the Vietnamese, I believe that we would.

I believe that the reasons that Vietnam wants to engage with us

on issues of human rights and religious freedom—speaking to religious freedom, in your question—is because it wants, and needs, a

better relationship with the United States, a strong relationship

with the United States, not solely because it needs PNTR.

Vietnam is a middle-sized power in a tough, competitive region.

It has to balance its relationship with China, it has to balance its

relationship with the United States, and it needs that strong relationship with the United States.

I believe that, were we to pass PNTR, Vietnam still would need

to have that religious and human rights dialogue with us and to

make significant progress in those areas, as we define it, because

that is an inherent part of a good bilateral relationship with us.

Senator BUNNING. On the question with the Vatican?

Mr. JOHN. I would have to get back to you to give you the correct

answer.

Senator BUNNING. Well, the answer is that they do have refusal

of any bishop appointed by the Vatican. So you do not have to look

it up, I am telling you.

Thank you.

The CHAIRMAN. Senator Lott?

Senator LOTT. Thank you, Mr. Chairman.

I want to thank the two witnesses for their fine testimony. Some

of the questions I had, you answered during your testimony, so I

will spare you repetition. Thank you, Mr. Chairman and Senator

17

Baucus, for having a timely hearing. This is obviously an important

issue.

I agree with Senator Baucus, it would be very positive that we

could move aggressively on this and complete action in the next 3

weeks, and I will support that effort.

I must say, I was very impressed—surprisingly so—in many respects when I had the occasion last year to visit Vietnam personally as a part of the Congressional delegation led by Senator Gordon Smith.

Like a lot of Americans, I have had a lot of negative feelings and

hesitancies over the past 30, 35 years, but I was very much impressed with what I found. The change in the attitudes of the people on the street, as well as the government, was an amazing thing

to me.

So I am favorably disposed towards this effort. Of course, I have

generally been for free trade and fair trade efforts in my years in

the Senate, all the way from NAFTA, to CAFTA, to PNTR for

China, and bilateral agreements with Jordan, the Andean agreement, and so on. So, I am going to continue that practice.

I must say that on occasion I am very disappointed in the conduct of some of our trading partners. In the aftermath, Senator

Grassley mentioned China. We have been concerned about some of

their conduct. I personally have been extremely disappointed in

South Korea. Of course, I have been involved in an 8- or 9-yearold harangue with the Canadians over timber. So, it is not always

what it should be.

I emphasize to the Vietnamese and to our trading partners all

over the world: free trade is fair trade. It is equal trade, both ways.

When I look at a country, and the United States is the numberone export market, but when I look at the top five or six in terms

of imports into their country, the United States is nowhere to be

seen, there is something not right. But I do believe that it is in

everybody’s best interests to move toward fewer barriers, lowering

tariffs, prohibiting dumping, all kinds of invasions into our markets

that are not fair.

I must say, in the case of Vietnam, I have been particularly sensitive to the issues of shrimp and beso fish, which is not catfish.

Their fillets have been a real problem. Of course, we have had a

ruling in our favor in that area, so I would urge our trading partner of the future, Vietnam, to be sensitive to these, and all other

areas. Do the right thing: be free, open and fair. If you are not,

some day the American people and their representatives will say,

well, if everybody in the world is going to be allowed to cheat, or

does cheat, we are not going to do this any more.

So my only question this morning, I guess, would be—well, I

have two. One, you passed over somewhat lightly, Mr. Ambassador,

when you were talking about tariffs, how much tariffs were going

to be reduced. You did not say specifically how much tariffs on agricultural products would be reduced. What is the answer there?

Ambassador BHATIA. Senator, it varies a good deal product to

product, product line to product line. What I have said is, on average, or as a broader statement, what is fair to say is that, for 80

percent of our exports, the duties are going to fall to 15 percent or

less.

18

I can give you just a few examples, just illustrative kinds of

things here. Take everything from potatoes, where tariffs goes from

35 percent down to 13 percent, whey, where they go from 20 percent to 10 percent, ice cream, 50 percent to 20 percent, beef sausages, 50 percent to 22 percent. So it varies line to line.

But I think what is fair to say is that our agricultural products

are facing, in many, many categories, lower tariffs, and of course

also those tariffs now are going to be bound, in most cases, which

means that their ability to change them over the course of time

would be limited.

Senator LOTT. All right.

I do want a commitment from you, Mr. Ambassador, and from

the U.S. Trade Representative, that you will aggressively ensure

fair trade. Finally, I think the administration did show movement,

and the previous administration, in the Canadian timber thing.

Ambassador BHATIA. Yes.

Senator LOTT. It continues to this day. It looks like now maybe

we have found a solution, but it took us 8 years.

Ambassador BHATIA. Yes, sir.

Senator LOTT. It has been a difficult issue for a lot of us, including me, because the home builders in my State were saying, we

like cheap lumber, and I was saying to them, I do not care if it is

cheap, they are cheating.

Ambassador BHATIA. Yes.

Senator LOTT. And we have to find a solution. Well, I think we

did. So I just want a commitment that, under your leadership and

our new U.S. Trade Representative, you are going to aggressively

enforce this, and all, trade agreements.

Ambassador BHATIA. Sir, I am happy to give you that commitment. I know it is one that is shared by Ambassador Schwab, by

the President, and by the administration, generally, to vigorously

enforce our trade laws.

Senator LOTT. All right.

Thank you very much, Mr. Chairman.

The CHAIRMAN. Senator Smith, then Lincoln, then Thomas.

Senator SMITH. Gentlemen, obviously I am for this. But I would

like to pursue the issue that Senator Bunning has raised. It really

goes more to timing in terms of my own enthusiasm.

I appreciate what Senator Baucus raised about the importance of

the message we send, but I have a nagging concern about the issue

of religious freedom and our leverage on that if we proceed on a

time table that reduces our leverage, because freedom of conscience

is a very important value to our Nation. I do not know whether

they perceive the Catholic Church as a subversive political organization. It is not. It is an institution of faith.

Mr. John, you spoke of the Baptists and other religious minorities, evangelical Christians. You did not mention the Latter-Day

Saints or the Jehovah’s Witnesses. I am wondering, what is their

legal status? When will they be given State recognition, and what

does that mean? Can they build a church or do they just have to

meet in a home?

Mr. JOHN. I do not know the status of Latter-Day Saints. I can

get back to you on that.

But to get back to the issue——

19

Senator SMITH. How about the Baptists? Where are the Baptists?

Do they have legal recognition?

Mr. JOHN. I believe they can have house churches if they have

national status. I am not sure. I will have to get back to you on

that.

[The information appears in the appendix on p. 91.]

Mr. JOHN. But I think the larger question that Senator Bunning

was asking is, what happens if we were to pass PNTR next year

and we still have concerns about religious freedom, which we will?

How are we going to get the Vietnamese to move forward? I think

we do have leverage, for the very simple and fundamental reason

that the Vietnamese do want to have, and need, a good relationship

with the United States.

As you pointed out, it is at the core of our values and it is at

the core of having a good relationship with the United States. This

is not a bilateral relationship that is built around trade. This is a

bilateral relationship that is built around shared interests and values.

Senator SMITH. Built around values.

Mr. JOHN. To that extent, yes, we do still have interests and we

still are going to remain committed to working with the Vietnamese on these issues.

Senator SMITH. What does it mean to have state recognition?

Does that mean they can own property on which they can build a

cathedral or a church?

Mr. JOHN. You can own property. One of the difficulties that the

Catholic Church has faced, and it is beginning to make progress in,

for example, is delivery of social services, working with AIDS victims, being able to work with the community and own property,

build churches where you want to build churches.

So, State recognition is important to have a really vital, functioning church community, which is really what a church is. That

is something that Vietnam still falls far short on.

Senator SMITH. Do they understand that the free exercise of religion includes the practicing of one’s faith, openly, if one chooses?

Mr. JOHN. They understand that on the theoretical level, yes. If

you are going to talk about practical implementation——

Senator SMITH. I mean, will they receive missionaries? Can

Catholic Relief go in there and attend to AIDS victims? Can the

Baptists set up a soup kitchen?

Mr. JOHN. You can have religious NGOs go in, you can have missionaries. The level of activity is more circumscribed, I believe,

than we would like.

Another difficulty that we have with religious freedom is the implementation of the laws that Vietnam has right now under the religious framework. Some provinces, such as in the north and northwest, are not implementing.

Some provinces in the Central Highlands are not implementing

it as well as others. In the South, it is better. In the Hanoi region,

it is better. So we have seen progress, and I think that is something that Hanoi is committed to, but it has problems with control

of the provinces. In terms of implementation, I think it is going to

improve.

20

Senator SMITH. Well, I would just simply ask if you gentlemen

can give me the status of these various faiths, Christian minorities,

Jews, if they are there. How are they treated? What does free exercise of religion mean? What does state recognition include?

That is my only issue on timing. This is important to the American people, and we are going to hear about it if the status quo continues and we lose leverage that we ought to exercise, because we

are on the side of the angels on this one.

Mr. JOHN. Absolutely. It is important to us as well.

The CHAIRMAN. Yes. Tell them the Chairman of this committee

is a Baptist, and I am no conspirator or any threat to them. If they

want me to come over there and prove it to them, I will.

Mr. JOHN. I am sure they would welcome your visit, sir.

The CHAIRMAN. I do not want to travel, but if it takes that to

wake them up, I would be glad to do it.

Senator Lincoln?

Senator LINCOLN. Thank you, Mr. Chairman. Thank you again

for moving so quickly issues that are important. And while I am

generally supportive of the legislation that is currently before the

committee to grant permanent normal trade relations with Vietnam, I am concerned about a couple of things, as my colleagues

have been.

One, that U.S. consumers and certain U.S. industries are being

unfairly harmed by the trading practices of some of the Vietnamese

exporters. Most members of the committee, I think, are aware of

the long and difficult fight that the U.S. farm-raised catfish industry has waged against the illegal imports of certain frozen fish fillets from Vietnam into the U.S. market. My colleague from Mississippi brought a little bit of that up, but I would like to expand

on it.

We all remember the Truth in Labeling provision that was included in the 2002 Farm Bill that prohibits the imports of Vietnamese beso and trawfish from being falsely labeled as catfish.

We are also aware that in 2003, the Department of Commerce

and the International Trade Commission agreed that certain fish

products from Vietnam were being dumped into the U.S. market,

harming U.S. producers, and imposed antidumping duties of up to

63 percent.

Unfortunately, gentlemen, some Vietnamese exporters still do

not follow the rules, as Senator Bunning was mentioning, that we

have put into place to establish the basis upon which trade may

be conducted, and also to protect the health of consumers.

Mr. Chairman, I have been very concerned that a substantial

amount of imported fish from Vietnam has recently been found to

contain antibiotic residues that are prohibited in the U.S. because

they are carcinogenic. In fact, three States have initiated emergency orders to remove the product from commerce and destroy it:

Mississippi, Alabama, and Louisiana.

I am also concerned, Mr. Chairman, that substantial amounts of

frozen fish imports from Vietnam are being mislabeled and sold in

the U.S. as wild-caught grouper. It is just one other step that we

had to deal with in regard to catfish with the same fish in competition with another fish that we have here in the U.S.

21

The fish are neither wild, nor is the species indicated, but rather

they are the same beso or trawfish that are mislabeled for the purpose of commanding a higher price and to avoid paying antidumping duties. State agencies in five States have seized illegally

labeled shipments and have ordered them destroyed: Mississippi,

Alabama, Louisiana, Florida, and California.

These shipments, and more that we do know about, went

through the U.S. Government’s inspection process, they were approved, and then sold in this country, creating harmful conditions

for consumers and undermining the hard work and the investment

of U.S. fish producers.

So in my view, Mr. Chairman, that is certainly not acceptable.

I would like to get some assurances from the administration that

they are going to be taking steps to address this problem.

I would also like to reinforce some of my other colleagues, particularly in terms of the issues of human rights. I also hope that

we will see a continued improvement.

You have mentioned the improvements that exist, but to find

that the country of Vietnam still remains on the CPC list, I think

is of great concern, and that is going to be an enormous issue for

us to make sure that we are following through on.

But I guess my real question is, what is the U.S. Government

doing to investigate the incidents that I have mentioned here, and

the practices, and what are we going to do to prevent it from happening in the future?

Ambassador BHATIA. Senator, if I can address the issues of the

catfish, to begin with, then human rights.

Senator LINCOLN. Absolutely.

Ambassador BHATIA. First of all, I would point out, just to give

you and any other members of the committee who are concerned

about this reassurance, that the WTO accession process does not

have any effect on either the antidumping orders that are currently

in place or the ability to bring further antidumping actions going

forward in the future.

Senator LINCOLN. Hopefully it strengthens them.

Ambassador BHATIA. Well, I think it strengthens them in the

sense that it brings Vietnam into the international rule of law system and causes them to recognize that these are——

Senator LINCOLN. Well, that is the assurance you gave Senator

Bunning. I am hoping that it is still maintained.

Ambassador BHATIA. Absolutely. But antidumping is a domestic

trade remedy, obviously. The international trade remedies that we

would be able to pursue would be for violation of WTO commitments.

Senator LINCOLN. Right. And strengthening.

Ambassador BHATIA. The dumping issue is one that we would be

able to continue to pursue as a matter of domestic law, is all I am

saying. There is nothing that we are giving up in the WTO accession process that would preclude us from bringing those domestic

suits.

Senator LINCOLN. Right.

Ambassador BHATIA. Second, on the issue of the imports that

contain banned antibiotics or other chemicals and the mislabeling

issue, this did come to my attention.

22

My understanding is that the FDA is coordinating with a broad

range of agencies on this issue, both to work internally within the

U.S. Government to ensure that Customs and others do an effective

job in capturing these things and catching them at the border. Indeed, I think they are working closely in that front to inspect shipments, issue import alerts, and to prevent the entry of tainted

products into the United States.

The FDA is also working, frankly, with the Vietnamese to ensure

that the illicit exporters of these products, which are, as you describe, efforts to get around our antidumping duties, are prohibited.

I think what is fair to say is, the Vietnamese have tried to be engaged in this subject. It is not in their best interests, frankly, for

them to be perceived as a scofflaw in this area.

Senator LINCOLN. It has happened once.

Ambassador BHATIA. Yes.

Senator LINCOLN. The point I bring up is, fool me once, shame

on you.

Ambassador BHATIA. Absolutely. Absolutely.

Senator LINCOLN. But fool me twice, it is certainly our responsibility to make sure that, as we move into these agreements, that

it is understood that this is prohibited and it is not something we

are going to tolerate. It is unacceptable.

Ambassador BHATIA. We will communicate that. Yes.

Senator LINCOLN. Thank you.

The CHAIRMAN. Senator Thomas?

Senator THOMAS. Thank you.

Thank you, sir. First of all, let me say, gentlemen, that we appreciate the administration reaching out to the members as we go into

these trade agreements and providing a chance to talk about them.

Vietnam will soon enter into the WTO. It is my understanding

that, without this agreement, the United States will not benefit

fully from Vietnam’s compliance with WTO commitments, yet our

global competitors will benefit.

Can you elaborate on the impact that the failure to pass this

would have on U.S.-based export industries?

Ambassador BHATIA. Well, Senator, as I mentioned, if Vietnam

accedes to the WTO and we have not passed PNTR and we are not

in a position to extend unconditional MFN treatment to the Vietnamese, then all of the various benefits that we would gain—not

only from the bilateral accession commitments that we obtained,

but for those that were negotiated multilaterally or those that

other countries may have negotiated with Vietnam—will not be

available to our companies.

So in a very, very basic way, it means that our exporters may

face higher duties, our exporters may not have the same abilities

to establish businesses in the Vietnamese market. U.S. workers,

manufacturers, farmers, and ranchers are not going to have the

same opportunities in this fast-growing economic space that our

other major trading partners will have. It is as simple as that.

Senator THOMAS. So, if we do not pass this, is it fair to say that

U.S. investment in China and exports from China will probably increase?

Ambassador BHATIA. Well, I think it is certainly fair to say that

many U.S. companies that are looking for bases of regional producVerDate 11-MAY-2000 16:36 Jul 23, 2007 Jkt 095484 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 36309.000 SFIN1 PsN: SFIN1
23

tion and elsewhere that might look at Vietnam will not have that

as an option, and many of them will, in fact, retain China as a

base. Yes, I think that is fair to say.

Senator THOMAS. All right. Good.

Mr. John, I am sorry I missed your testimony, but I was in another committee. I read your testimony, and in two pages you outlined the non-trade progress that has been made in Vietnam. There

are several witnesses who challenge that much progress has been

made.

Given your opinion that significant progress has been made on

non-trade issues, why do we need, then, to pass this if that is the

case?

Mr. JOHN. Why do we need to pass PNTR?

Senator THOMAS. Yes. You indicated that a lot of non-trade

progress has been made. Yet, we say we will achieve non-trade

progress by passing PNTR.

Mr. JOHN. Right.

Senator THOMAS. How do you relate those two things?

Mr. JOHN. I think PNTR and WTO accession for Vietnam, just

as they help U.S. businesses sell to Vietnam, help the Vietnamese

economy and help enhance Vietnamese individual liberties.

I think that type of atmosphere and the context that those economic benefits create help other individual freedoms flow along

with that, such as human rights.

Senator THOMAS. So even though you think it has been doing

well, you think this would be an additional asset?

Mr. JOHN. Yes. It has been doing well, but it could do better, and

this would help it.

Senator THOMAS. All right. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. Yes. Senator Baucus wants a second round. Does

anybody over here want a second round? We have 35 minutes of

testimony from seven other witnesses.

Senator BAUCUS. And I will be brief, Mr. Chairman.

The CHAIRMAN. All right. Anybody else can have equal time, too.

Go ahead.

Senator BAUCUS. Thank you very much. I appreciate it, and also

the committee’s indulgence.

Mr. Ambassador, I would like to know what plans, sort of strategically, the administration has for pursuing the dynamic growth

that is occurring in Asia. I am talking about Asian countries other

than Japan, and also other than China.

I believe strongly that, as one of the most dynamic regions in the

world, and it will probably be even more dynamic from an economic

point of view in the future, that we must be pretty bold in the

United States and pretty aggressive, because there are opportunities there for the United States if we are, and there will be major

problems for the United States if we do not.

In addition to PNTR for Vietnam, and pursuing a Korean FTA,

as well as a Malaysia FTA, what is the administration thinking

about, what plans do you have, to capitalize on the momentum that

we are now starting to generate with Korea, Vietnam, and Thai

FTAs, and so forth, so we can take advantage of these opportunities?

24

Again, if we do not, I think it will be very much to our peril.

There are also national security implications here, as well as trade

implications, and a lot of foreign policy implications. So what are

we doing? What is your plan?

Ambassador BHATIA. Senator, I guess it was 7 or 8 months ago

when we were sitting here at my confirmation hearing and you

raised this subject at that time. I feel pretty good about where I

think we are at this point. Since that time, as you mentioned, we

have launched FTA negotiations with Korea, and Malaysia as well.

We have been engaged in a broad range of less than FTA, but

still very substantial, very robust, meaningful trade and investment sort of negotiation dialogues with countries throughout

Southeast Asia: Indonesia, Philippines, Brunei.

We have a number of sectoral sort of initiatives working under

those TIFAs which are strong. The President has laid out, in his

Enterprise for ASEAN initiative, a desire to basically build a network of FTAs throughout Southeast Asia—I am just focusing on

Southeast Asia right now—which, theoretically, could ultimately be

knitted together.

I completely agree with you, this is a very high-priority region

for the administration, not only from an economic perspective, but

as Secretary John can tell you, from a strategic perspective as well.

More broadly, we have a new institution with India, our Trade

Policy Forum, that has been working sector by sector to make trade

and investment progress with them. With the Japanese, we have

a deep regulatory reform dialogue. I just recently concluded a subCabinet-level meeting with METI and with MOFA on that front.

I think, big picture, what you are seeing us do here is, country

by country in East Asia, we are either working through an FTA,

through its structured TIFA-kind of dialogue, or through some

other form of meaningful dialogue to make sure that we are

present.

When our other major trading partners are in there, trying to establish their footprint, we are there first, we are there more

proactively, we are there more broadly. I can tell you that both at

USTR and at the other economic agencies, the amount of travel

that has been going on to this region, which means meaningful engagement on their own turf, has been going up a great deal. There

is more that could be done, there is more that should be done, but

I am pleased.

Senator BAUCUS. I find that very encouraging. But I must say,

in my travels to Asia, I still hear complaints that America is, if not

AWOL, just not sufficiently present, does not show up. Other countries do, but the United States does not.

Now, I sense that that is starting to change, and I very much appreciate that.

Ambassador BHATIA. Thank you.

Senator BAUCUS. As of a few months ago, I still heard some of

this. So I just encourage you, keep stepping it up.

Ambassador BHATIA. We will keep it up. Thank you.

Senator BAUCUS. Thank you.

Senator BUNNING. Mr. Chairman?

The CHAIRMAN. Yes. Senator Bunning?

Senator BUNNING. Thank you.

25

Mr. John, as recently as June 5, 2006, your State Department

issued a Report on Human Trafficking that cited Vietnam as a Tier

2 country. Tier 2, meaning Vietnam does not comply with the minimum standards for the elimination of trafficking.

Mr. John, are you aware of improvement efforts by the Vietnamese government to combat human trafficking since this report

was issued almost a month ago?

Mr. JOHN. We have an ongoing dialogue with Vietnam about improvements, what they need to do to improve their efforts in

human trafficking. In the last month—I cannot think of any specific improvements that they have made in the last month.

Senator BUNNING. Can you, for people who might be watching,

or just for my own information, define what ‘‘human trafficking’’

means?

Mr. JOHN. You are looking at two large, really bad categories.

One is that women are trafficked for sexual exploitation.

Senator BUNNING. Prostitution and other things.

Mr. JOHN. Right. And also a related category would be being

trafficked against their will as wives. A second category would be

trafficked for labor, illegal labor trafficking.

I think with Vietnam, the concern has been largely in that first

category. We have made improvements in terms of, there were allegations that Vietnamese women were trafficked to Singapore, as

well as Malaysia.

Senator BUNNING. But this is just 1 month ago that your Department of State said that Vietnam was not complying, that it was a

Tier 2 country.

Mr. JOHN. Yes.

Senator BUNNING. Is that correct?

Mr. JOHN. Correct. Out of the three tiers.

Senator BUNNING. All right.

Mr. Bhatia, can you provide more details on the textile and apparel provisions in his agreement? I understand that the Vietnamese have agreed to eliminate its non-WTO compliance subsidies to the textile and apparel industry within 1 year.

I also understand that if Vietnam fails to meet this commitment,

the U.S. can reimpose quotas. How long can these quotas be put

back in place?

Ambassador BHATIA. Senator Bunning, that is close to right. The

Vietnamese commitment actually is to eliminate all prohibited

WTO subsidies upon accession.

Senator BUNNING. To WTO status.

Ambassador BHATIA. Yes. I mean, upon accession. They will do

it upon accession. So it is not 1 year, it is upon accession. As a matter of fact, often people are given some sort of a phase-in period for

this. With respect to textiles and apparels, we did not permit them

a phase-in. We demanded that they be eliminated ab initio, and

they have already undertaken steps in that regard.

Second, the point you referenced really has to do with a special

enforcement mechanism that we built in. We heard our textile industry. They were concerned about a level playing field here.

Senator BUNNING. They still are.

Ambassador BHATIA. I understand that. I understand that. And

to take belts and suspenders, as it were, to address this problem,

26

because normally the remedy would be to bring suit in the WTO.

But we did more than that in this agreement.

What we have done is, we built in a mechanism where, if we see

that they have not complied or they somehow attempt to reinstitute illegal subsidies in this area, we have the ability to reimpose quotas on Vietnam at the level that exists under the BTA.

So, Senator, on the textile front, we heard our textile industry’s

concerns, which were about subsidies. We went as far as one can

conceivably go within a WTO accession agreement to get the elimination of the——

Senator BUNNING. I have one more question I want to make sure

I get in.

Ambassador BHATIA. I know this is of great concern, so I just

wanted to make clear that we have about as much security there

as we have ever had.

Senator BUNNING. Concerns have still been raised about alleged

existences of preferential interests and tax rates, wage controls,

and rent holidays in the textile industry in Vietnam. Is that true

or false?

Ambassador BHATIA. Those concerns have been raised, absolutely. What I can tell you, Senator, is that if there are WTO-prohibited subsidies, which include things, for instance, such as tying

subsidies, tying these kinds of benefits to exports or to the use of

domestic materials, those will be—those must be—eliminated by

the time of accession.

Senator BUNNING. Thank you very much, Mr. Chairman.

Ambassador BHATIA. Broader subsidies are a different issue.

The CHAIRMAN. Should I go on to the next panel? All right. We

thank the administration witnesses very much. Thank you for coming.

Now we turn to people I have introduced already, but I will mention them by name: John Caspers, National Pork Producers; Christian Schlect, president, Northwest Horticultural Council; Jeffrey

Shafer, Citigroup Global Markets; and Augustine Tantillo, executive director, American Manufacturing Trade Action Coalition.

So when you folks get seated, we are going to go in the order

that I introduced you. I think that is the same order in which you

are seated.

We did give the administration witnesses about 7 or 8 minutes;

we ask you—and I hope you have been informed—to modify your

statements to 5 minutes, even though the longer statement will be

put in the record.

So, Mr. Caspers, we welcome you here from Iowa. I noticed,

Mason City is getting plenty of rain compared to Waterloo. I hope

you feel you are very fortunate to be in the garden area part of the

State.

Mr. CASPERS. I do. That is good news, Senator.

The CHAIRMAN. Yes. Thank you, Mr. Caspers. Go ahead.

STATEMENT OF JON CASPERS, FORMER PRESIDENT,

NATIONAL PORK PRODUCERS COUNCIL, SWALEDALE, IA

Mr. CASPERS. Thank you, Chairman Grassley, Mr. Ranking

Member, and members of the committee. I am Jon Caspers, past

27

president of the National Pork Producers Council, and a pork producer from Swaledale, IA.

I operate a nursery-to-finish operation, marketing approximately

18,000 pigs per year. In 2005, U.S. pork exports set another record

for the 15th year in a row. Much of the growth in U.S. pork exports

is directly attributable to new and expanded market access through

recent trade agreements.

However, as the benefits from the Uruguay Round and North

American Free Trade Agreement are fully realized, the negotiation

of new trade agreements becomes paramount to the continued

growth and profitability of U.S. pork producers.

While the WTO negotiations clearly offer the single biggest opportunity to increase exports, the bilateral and regional negotiations also offer significant opportunities. We are pleased that the

United States and Vietnam signed a bilateral WTO accession

agreement on market access and that Vietnam’s PNTR bills were

introduced into the U.S. Congress.

The National Pork Producers Council strongly supports Vietnam’s accession to the WTO. U.S. pork exports have benefitted

from virtually all recent trade agreements, and the agreement with

Vietnam will be no different.

In Vietnam, a country of 84 million people, pork represents 72

percent of meat consumption and will be an excellent market for

pork and pork products. Tariffs on key pork and pork products will

be reduced by 50 percent over 5 years, including tariffs on hams

and carcasses, which will fall from 30 percent to 15 percent in that

time frame.

More important, tariffs on pork variety meats will be immediately cut from the MFN level of 20 percent to 15 percent, with

further reductions to 8 percent over 4 years. Rates on processed

pork products will be reduced from 20 percent to 10 percent over

5 years.

Vietnam has agreed to recognize that the U.S. meat inspection

system is equivalent to its own meat inspection system. Vietnam

has also agreed to implement the WTO agreement on sanitary and

phytosanitary measures, upon accession.

As a result, Vietnam will apply science-based sanitary and phytosanitary standards to all agricultural goods. This is critically important, because non-scientific barriers are used in many countries

to prevent meat and poultry product imports from the U.S., even

after tariffs are reduced in trade deals.

Additionally, Vietnam has made commitments to grant distribution and trading rights for all foreign-owned enterprises. It is,

therefore, relinquishing state control of essentially all agricultural

products, providing a meaningful opportunity for U.S. pork exporters to have many customers in Vietnam.

This is a very ambitious commitment, given that China took

years to phase out distribution and trading rights after its WTO accession.

Increased market access for U.S. pork, along with the elimination

of state-controlled distribution and trading rights, will add to the

bottom line of U.S. producers. According to Iowa State University

economist Dermit Hayes, U.S. live hog prices will increase by apVerDate 11-MAY-2000 16:36 Jul 23, 2007 Jkt 095484 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 36309.000 SFIN1 PsN: SFIN1
28

proximately 52 cents per pig when the agreement is fully implemented.

To put this economic impact in perspective on a farm like mine,

marketing approximately 18,000 pigs per year, PNTR for Vietnam

will mean over $9,000 in additional profits.

There are many other agricultural organizations in support of

Vietnam’s accession to the WTO. NPPC is coordinating the Agricultural Coalition for U.S.-Vietnam Trade, consisting of 36 organizations representing the vast majority of U.S. farmers, ranchers, food

producers, and exporters.

Three-fourths of U.S. agricultural exports to Vietnam will see

tariffs reduced and bound in in the WTO at 15 percent or less. This

is a substantial reduction from the current average tariff on agricultural products of 27 percent.

To realize the benefits of this agreement, the United States does

not have to reciprocate anything, other than to grant the same normal trading rights to Vietnam on a permanent basis that the U.S.

grants to virtually all of its trading partners and to all 150 WTO

member countries.

It is the same status that Vietnam already enjoys from us, but

which must be periodically renewed. Providing Vietnam normal

trade status requires no tariff concessions on the part of the United

States, no new access for products from Vietnam, and no new commitments on non-tariff measures.

Normal trade status for Vietnam has never been a big issue, and

making this relationship permanent should not be controversial

now. Congress has consistently authorized continuing Vietnam’s

status by overwhelming majorities.

NPPC strongly supports WTO membership for Vietnam and will

urge Congress to approve PNTR status for Vietnam as a necessary

step in the membership process.

Mr. Chairman and Mr. Ranking Member, members of the committee, thank you for the opportunity to present.

The CHAIRMAN. Thank you very much, Jon.

[The prepared statement of Mr. Caspers appears in the appendix.]

The CHAIRMAN. Now, Mr. Schlect?

STATEMENT OF CHRISTIAN SCHLECT, PRESIDENT,

NORTHWEST HORTICULTURAL COUNCIL, YAKIMA, WA

Mr. SCHLECT. Thank you, Mr. Chairman and members of the

committee.

The Northwest Horticultural Council supports this bill authorizing the extension of permanent normal trade relations to Vietnam.

My name is Christian Schlect, and I serve as president of the

Northwest Horticultural Council, which was founded in 1947 and

based in Yakima, WA. We represent the apple, pear, and cherry industry of Idaho, Oregon, and Washington. We work on Federal

issues and international trade policy for our members.

Orchards in the Pacific Northwest grow about 65 percent of the

fresh-market apples grown in the United States. They raise more

pears and sweet cherries than any other region in the country. For

29

example, Oregon, Senator Smith’s State, is in the top three in both

cherries and pears.

In terms of foreign trade, the Pacific Northwest exports about 30

percent of its annual fruit crop. Our industry’s economic health is

dependent upon opening and maintaining overseas markets.

Vietnam, with its population of over 84 million, is an important

future market for our fruit. With a tropical climate that does not

allow for the production of such deciduous tree fruits as apples and

pears, it will eventually join such strong existing Asian markets as

Hong Kong, Taiwan, and Singapore as an important destination for

the fruit of our orchards.

Even now, in the 2005 shipping season, U.S. apple exports to

Vietnam totaled 116,000 cartons. Upon accession to the WTO and

the grant of PNTR, importers in Vietnam expect these shipments

to jump by 40 percent.

When Vietnam does come within the ambit of the World Trade

Organization, it will lower its import duties and be bound by a new

set of international trade disciplines. In terms of the former, the

current applied duties on U.S. apples of 25 percent, pears of 25 percent, and cherries of 40 percent will each be reduced to 10 percent

over the course of 5 years.

As for disciplines, the most important for our traders is the sanitary and phytosanitary measures of the WTO. Vietnam has pledged

to apply science-based S&P standards to all agricultural goods. And

having a respected international forum in Geneva within which to

bring—and hopefully resolve—the all-too-common and vexing technical disputes involving agricultural trade is a valuable step forward.

Rejecting PNTR for Vietnam would be a critical commercial and

foreign policy misstep by our country. Instead, PNTR’s passage is

a quiet opportunity for the United States to further open doors of

understanding and trade to a country once a bitter enemy, which

is now actively seeking a more constructive and mature relationship.

When I first visited Washington, DC as the newly appointed

president of the Northwest Horticultural Council in 1980, one of

the first individuals my predecessor, Mr. Falk, introduced me to in

his final trip was his friend, going back to their law school days

at the University of Washington, Senator Henry Jackson, or as Mr.

Falk called him, ‘‘Scoop.’’ Together, they worked for over 30 years

in securing access to foreign markets for our growers’ fruit.

I believe Senator Jackson, if he were alive today, would understand and have adapted to the changing circumstances of history.

He would see that the valid political and moral impulses then behind his and Congressman Vanik’s 1974 trade amendment, aimed

primarily at protecting the right of emigration for Soviet dissidents,

no longer has reason to be applied by our country to today’s Vietnam, and he would still be helping our fruit growers open new export markets.

Thank you.

The CHAIRMAN. Thank you, Mr. Schlect.

[The prepared statement of Mr. Schlect appears in the appendix.]

The CHAIRMAN. Now, Mr. Shafer?

30

STATEMENT OF JEFFREY R. SHAFER, VICE CHAIRMAN,

CITIGROUP GLOBAL MARKETS, NEW YORK, NY

Mr. SHAFER. Mr. Chairman, members of the Committee on Finance, my name is Jeffrey Shafer, and I am vice chairman, Global

Banking at Citigroup. I have previously appeared before this distinguished committee in my current capacity and when I served as

Assistant Secretary, then Under Secretary, of the Treasury for

International Affairs.

The issue before the committee today, whether to grant Vietnam

permanent normal trade relations and thus pave the way for its access to the WTO, is of immense personal, as well as professional,

interest to me.

I served with the U.S. Army First Infantry Division in Vietnam

and have returned in recent years to advise government officials

and offer Citigroup’s support of their efforts to develop a market

economy, to fully engage in the global economy, and thereby to

offer a better future to their people.

The transition from conflict to cooperation between the United

States and Vietnam is one of the great achievements by any two

countries in my lifetime, as so eloquently highlighted by Senator

Baucus in his introductory comments.

Many in this room and across America have supported the arduous process of reconciliation between our two proud peoples in the

normalization of relations between our two great nations.

Today, the United States enjoys strong and mutually beneficial

ties with one of Asia’s fastest-growing economies. The country is a

growing market for U.S. exports. During the past year alone, we

saw an increase of 24 percent, and exports have reached $1.2 billion.

Citigroup congratulates U.S. and Vietnamese negotiators for

achieving a comprehensive WTO accession agreement that will provide broad market access across a range of U.S. goods and services.

Citigroup’s principal objective in supporting these negotiations has

been to achieve commercially significant liberalization for trade, financial, and payment services.

We believe that the agreement is a good one in this respect and

it will be an important step in securing broader U.S. national interests, and that it will contribute to economic modernization and

growth in Vietnam, a market of 85 million people.

The financial and capital markets in Vietnam are seriously

under-developed and inefficient. Liberalization through WTO accession, by opening to foreign institutions and accepting WTO disciplines, will help to change this.

I want to give a broad picture of what is being offered. As of

April of 2007, the U.S. and other foreign firms will be able to establish 100 percent foreign-invested subsidiaries.

Upon accession, foreign securities firms will be able to open joint

ventures with up to 40 percent foreign ownership, and after 5

years, own 100 percent of securities firms.

Cross-border market access commitments will be comparable or

superior to those of OECD countries. Vietnam will allow insurance

companies to open direct branches, offering non-life insurance after

5 years from accession.

31

With minimal limitations on scope of business, Vietnam will provide foreign insurance firms with full national treatment and implement a commitment for branching in the non-life area.

Now, Citigroup has been well placed to observe the developing

business and policy climate in Vietnam which have laid the basis

for WTO membership. Our largest subsidiary, Citibank, has been

operating in Vietnam since 1993, when President George H.W.

Bush eased trade restrictions and allowed U.S. companies to establish representative offices.

Shortly after President Clinton lifted the trade embargo,

Citigroup applied for a branch license in Hanoi and opened for

business in January of 1995.

In less than 13 years, we have become the largest foreign bank

in the country, and we believe the fifth largest bank of any kind.

We have also played a leading role in the American business community and have fully encouraged normalized relations between

our two countries.

We have helped provide critical technical assistance, and we believe that we have been a model corporate citizen as a visible representative of American business in the country.

We are hopeful that Congress will approve PNTR for Vietnam at

the earliest possible opportunity to ensure that Americans can benefit from the range of Vietnamese commitments made in the WTO

accession negotiations. We made significant progress in our bilateral relationship during the past decade, and we have done so with

the bipartisan support of the U.S. Congress.

The Vietnamese have worked diligently to address the many concerns that have been raised over the years in trade, and indeed in

some of the non-trade areas that have been discussed this morning.

We must do everything possible now to encourage and support

the efforts of the reformers in Vietnam who are advocating for

more openness, more engagement with the international community, more liberalization in economic affairs, and moving towards

a global standard, and not to pull the rug out from under them by

failing to move forward here.

Mr. Chairman and members of the committee, the decision the

Congress makes on this issue will have significant and lasting impact. Failure to maintain the forward momentum in this relationship would undermine U.S. interests in a large, strategically located emerging market.

The granting of PNTR represents an opportunity to complete the

final chapter of our reengagement with Vietnam and with the Vietnamese people, and to ensure that cooperation continues to be the

basis of our relationship.

On behalf of Citigroup, and as one ex-soldier, I urge you to move

forward on approval of PNTR for Vietnam in as expeditious a manner as possible this summer. Thank you.

The CHAIRMAN. Thank you.

[The prepared statement of Mr. Shafer appears in the appendix.]

The CHAIRMAN. Now we hear from American Manufacturing. Go

ahead, Mr. Tantillo.

32

STATEMENT OF AUGUSTINE D. TANTILLO, EXECUTIVE DIRECTOR, AMERICAN MANUFACTURING TRADE ACTION COALITION, WASHINGTON, DC

Mr. TANTILLO. Thank you, Mr. Chairman and members of the

committee. My name is Auggie Tantillo, and I appreciate this opportunity to testify at this important hearing. I am the executive

director of the American Manufacturing Trade Action Coalition.

AMTAC represents a number of industrial sectors, including

chemicals, tool and die, industrial mold and metal products, and

furniture. Our largest constituency, however, is textiles and apparel, and it is on their behalf that I have been asked to testify this

morning.

AMTAC strongly opposes granting Vietnam permanent normal

trade relations at this time. Our opposition is based on the belief

that granting PNTR to Vietnam would replicate the policy mistake

made by the U.S. Government in 2001, when we allowed China to

join the WTO prior to their transitioning from a non-market, staterun economy to a non-subsidized, more open, transparent, freemarket economy.

By permitting China to join the WTO prematurely, the U.S. forfeited its leverage to insist that China address critical issues, such

as its inability to enforce IPR violations, its under-valued currency,

and its rampant use of non-performing loans.

The inability to combat these unfair trade practices has resulted

in an unmitigated disaster for U.S. manufacturers attempting to

compete with the Chinese industrial juggernaut. In fact, China accounted for $202 billion last year of our overall trade deficit, a record $717 billion annual deficit. We believe it

would simply be unwise to ignore this painful lesson and allow

Vietnam to become a WTO member prior to substantial progress on

their part from a state-run economy to a much more open, marketdriven economy.

In regard to textiles and apparel specifically, Vietnam is a proven

capable and aggressive textile competitor. Since being granted conditional NTR in December of 2001, Vietnam’s textile and apparel

exports to the United States have soared by nearly 6,000 percent.

Over the past 12 months, Vietnam has shipped $3.1 billion of textiles and apparel to the U.S. alone.

The growth of these imports from Vietnam has come at the expense of numerous U.S. producers and has also come at the expense of many regional preference trading partners, such as those

in the Caribbean Basin, CAFTA, and, of course, Mexico, as part of

NAFTA.

During this same period, when Vietnam was granted conditional

NTR and their trade grew by 6,000 percent, imports of textiles and

apparel from Mexico and the CAFTA countries fell by $42.3 billion.

In 2005, textiles and apparel accounted for over 53 percent of the

total U.S. trade deficit with Vietnam, a deficit that would have

been significantly greater if the U.S. had not imposed textile and

apparel quotas in 2003.

So the question is, how did Vietnam grow so quickly and so demonstrably? The answer is, Vietnam subsidizes its textile sector

tremendously. It also benefits from the fact that Vietnam does not

allow its currency to float freely.

33

In terms of subsidies, the main state-owned textile company, by

the name of Venitex, has received $891 million in direct subsidies

over the past 5 years. They have also benefitted from wage controls, preferential interest rates, rent holidays, export subsidies,

preferential tax rates, and, again, direct investment from the Vietnamese government.

Noting this, the U.S. textile industry asked the U.S. Government

to ensure that there were adequate safeguards in place prior to

concluding the bilateral agreement, and of course prior to endorsing Vietnam’s accession to the WTO. What we were given is a completely inadequate safeguard mechanism that is almost impossible

to trigger.

It requires a WTO arbitrator to review whether or not Vietnam

is eliminating its prohibited subsidies. Even if we are to get the

WTO to agree with us on that claim, it only lasts for 12 months.

The quotas have to be eliminated after a 12-month period, and

even if Vietnam is not eliminating its prohibited subsidies, we have

no recourse at that point.

In conclusion, Mr. Chairman, we thank you for this time and this

opportunity. We are greatly concerned that granting Vietnam full

WTO rights prior to a significant movement on their part to eliminate their subsidies in advance and to deal with other key issues

such as IPR concerns, would be a replication of the same mistake

that we made with China in 2002.

Thank you.

[The prepared statement of Mr. Tantillo appears in the appendix.]

The CHAIRMAN. I think your last sentence emphasizes something

I said earlier, that we need to make sure that we are not played

for a sucker in the case of Vietnam like we have been with China,

and we could be with some other countries as well, but China is

the most visible.

Now, I say that, not speaking in agreement with everything you

said, but it is something that Uncle Sam needs to be cognizant of

so we are not ‘‘Uncle Sucker.’’

Mr. Caspers, in regard to the benefits of the agreement for the

pork industry, Vietnam has agreed to recognize our meat inspection system as being equivalent, which is important under this

agreement and under the WTO.

I want you to tell what that would mean in statistics of advantage to pork producers. But before you answer, I want to make this

comment. There are a couple of countries, of which Russia is the

only one I can now think of, where they are trying to do a plantby-plant authorization of our inspection system as opposed to the

entire system.

So I want to emphasize that, from the standpoint of practice,

Vietnam is doing it the way that it should be done in regard to

their approval of our system, as we would do in the approval of

their system. You approve of the process we do, not plant by plant.

So, Russia, as one example, is wrong in trying to circumvent the

traditional approach to approvals of inspection systems.

Mr. CASPERS. Well, absolutely. The approval of the U.S. meat inspection system is really the gold standard for trade agreements.

What we have seen is, in trade agreements where that has been

34

a part of that, trade then, in fact—because of the reduction in tariffs and the recognition of the meat inspection system—becomes

much more simplified, and in reality trade increases, as the intent

of the agreement is.

You mentioned plant-by-plant inspections. There is any other

number of means we see in countries around the world where they

put unfair disadvantages on exports of U.S. pork products out of

the U.S. In those places where they recognize our meat inspection

system, the trade agreements accomplish, by and large, the full intent, and trade then actually can take place.

The CHAIRMAN. And for Mr. Schlect, you anticipate that our exports of your products will increase significantly if Vietnam joins

the World Trade Organization.

In your view, what are the consequences if we do not extend permanent normal trade relations with Vietnam, and therefore will

not benefit from market access commitments that Vietnam has

made?

Mr. SCHLECT. Mr. Chairman, I think they fall into two categories. One is, on the technical side, where many of the trade disputes in all of agriculture kind of fall into, in the sanitary and

phytosanitary dispute resolution. We would not have access to that

set of disciplines or that venue to bring problems to the world community where Vietnam might throw up a barrier to our trade on

a technical front.

The other point is on the tariff side. If we do not get the same

reductions in tariffs as our competitors, the committee needs to

know that apples, pears, and cherries are grown worldwide.

Apples, for example, in this context. The People’s Republic of

China is the world’s largest apple-producing nation now, and they

already supply Vietnam with low-quality, less expensive apples.

That would continue and be magnified.

Upper-end apples, in terms of quality, would probably be supplied in greater quantity by our competitors in New Zealand and

Australia, so our market share would ebb and probably be destroyed by competitors who would have a tariff rate that we would

not enjoy.

The CHAIRMAN. Thank you.

Mr. Shafer, your group has been doing business there, as you

said, since 1993. Maybe some of the challenges that you faced in

those 13 years, if we have Vietnam in the World Trade Organization, will be minimized.

Mr. SHAFER. That is right. I emphasized the progress we have

made and how successful we have been, but there are many areas

of business that are now precluded to us that would be opened up

if we were to complete this agreement, including the capacity to

branch freely, to have 100 percent owned subsidiaries, and to offer

credit cards and other consumer services.

Right now, we have been very successful in serving the needs of

U.S. and other multinationals in the larger corporations there. We

think we can deal with the broad market in Vietnam and bring

state-of-the-art banking to the country.

The CHAIRMAN. All right.

Mr. Tantillo, I know you made it very clear about your opposition

and your fear of Vietnam in regard to textiles.

35

Let me ask you this question. Is there any possibility, or have

you thought about, Vietnam, with this agreement, could be taking

some textile business away from China once it would come into the

World Trade Organization, and, by so doing, could Vietnam’s accession end up not having as much of an impact on U.S. producers,

but could instead help reduce our trade deficit with China?

Now, maybe the overall difference to the American producer

might not change, but it could have that benefit of maybe spreading the jobs a little more worldwide where they tend to be concentrated now in China.

Mr. TANTILLO. Well, Mr. Chairman, we do fully expect Vietnam

to grow considerably once they get full WTO rights. In fact, it is

their projected claim that they will soon become the second-largest

supplier of textiles and apparel to the United States, second only

to China. They do offer a bit of a counterweight, mainly because

their wage rates are lower, if you can conceive of it, than the Chinese.

In terms of our view, what we are simply saying is, let us move

forward with our relationship with Vietnam. Let us establish a

healthy, strong, bilateral structure with them, but let us also be

logical. Vietnam is not going to transition from a state-run economy

to a more transparent, market-oriented economy overnight.

In that interim, there should be adequate safeguards for U.S. industry, which does not have the benefit of state-sponsored subsidies. Remember, USTR was very specific: they only dealt with socalled prohibited subsidies, subsidies directly focused on exporting.

Production subsidies are not necessarily covered by this agreement.

The agreement does not deal with Vietnam’s manipulated currency. Until they make progress in that area, our approach would

simply be, let us ensure that we have safeguards so that if they

do surge and they do disrupt the market, it does not come at the

cost of tens of thousands of U.S. jobs.

The CHAIRMAN. A final comment on my part. Going back to what

you said, in comparison to China, and your statement that it is obvious that Vietnam is not going to become a market economy overnight, whether it is China or whether it is Vietnam, the transition

ought to be according to what they tell us before they get in the

WTO.

China has not. We do not want to make the same mistake with

Vietnam. In other words, does Vietnam understand that they are

making a commitment, not to do it overnight, but they are making

a commitment to doing it, and are they going to do it on time? That

is what I want assurances of.

Mr. TANTILLO. Mr. Chairman, we agree with you totally. Our

view is that we ought to reserve some leverage to ensure that they

do make progress on those commitments, as opposed to being without any recourse 2, 3 years from now, noting that they are having

an amazingly disruptive effect on our market.

The CHAIRMAN. Now, to Senator Baucus.

Senator BAUCUS. Thank you, Mr. Chairman.

Is it Mr. Tantillo?

Mr. TANTILLO. Tantillo.

Senator BAUCUS. Tantillo. You use the American pronunciation,

not Italian?

36

Mr. TANTILLO. It is actually Italian, and I am very proud of that

this weekend, based on the World Cup. [Laughter.]

Senator BAUCUS. I will bet you are. Congratulations.

Mr. TANTILLO. Thank you very much.

Senator BAUCUS. I am just curious, in your view, why the United

States should impose safeguards on textiles from Vietnam into the

United States, when we do not with other countries. We do with

China, but that is because China is so large.

But there are so many other countries that export textiles to the

United States that we do not impose safeguards on, and also countries that export a lot more textiles than Vietnam does. So why do

you think we should put safeguards on textiles from Vietnam, but

not from other countries, but for China?

Mr. TANTILLO. Senator, I think the connection point is China.

When we allowed China to accede to the WTO, we had a very specific safeguard mechanism based on the fact that they are a nonmarket economy.

Senator BAUCUS. Right.

Mr. TANTILLO. We assumed that they were not going to transition to a more transparent, open economy overnight. Vietnam, unfortunately, replicates many of those same problems. There is a

state-owned textile company in Vietnam that received nearly

$1 billion in direct investment over the past 5 years.

It is now the tenth-largest exporter in the world, based on their

own acknowledgement. This company has also enjoyed rent holidays, tax holidays, and export rebates. In addition, Vietnam has a

manipulated and under-valued currency.

Our point is simple: the similarities are striking. The safeguard

that we have utilized with China was absolutely essential. What

we would like to see is, prior to going forward, an inclusion of similar-type safeguards that ensure that state-sponsored exporters in

Vietnam are not given an absolute advantage in our marketplace.

Senator BAUCUS. What is the size of the textile exports from

China, though, compared with Vietnam? What is the ratio?

Mr. TANTILLO. The Chinese exported about $22 billion worth of

textiles and apparel last year to the United States, and Vietnam

exported $3.1 billion.

Senator BAUCUS. And there are other countries, like Mexico, for

example, and Hong Kong, that are more than Vietnam.

Mr. TANTILLO. That is correct. Vietnam is our sixth-largest supplier at this point. There are five other countries that are larger

producers. However, those countries are from what we would deem

to be market-oriented producers. They have market-driven principles. As a result, we think that there is a bit of a difference there

that needs to be acknowledged in terms of how, and when, we

allow Vietnam to accede.

Senator BAUCUS. Thank you.

Mr. Shafer, I am just curious about Citibank’s views in Asia. You

are liberalizing now under this Vietnam PNTR. What other sort of

major opportunities or problems does your company see with respect to financial services liberalization in that part of the world?

Mr. SHAFER. We see Asia as a very important opportunity for us.

We have been in the region for 104 years. We operate in 16 counVerDate 11-MAY-2000 16:36 Jul 23, 2007 Jkt 095484 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 36309.000 SFIN1 PsN: SFIN1
37

tries, and we are seeking that as a major area of growth for our

business.

We do see restrictions on our business in most of the Asian countries that are greater than those we face elsewhere in the world,

so we look for every opportunity to see liberalization.

This agreement with Vietnam is an important one; the Singapore

Free Trade Agreement was another. The WTO agreement, if we

can get there in the Doha Round, is another very important front,

I think, in creating better opportunities.

Senator BAUCUS. But in Asia, what is the root of the problem for

financial services? Is it just the banking system? Is it protectionism? What is it? Cultural? What is it? What is the problem?

Mr. SHAFER. It is history. I first faced this when I was responsible for negotiating financial services agreements at the Treasury

in the 1990s, and I did find that there was more of a history of feeling that they needed to have control and have domestic operations

of their banks and their securities firms. That mind-set is changing, and the countries are moving forward. But I think it does take

continuous effort on the part of the U.S. to negotiate further opening.

Senator BAUCUS. What is causing the mind-set change?

Mr. SHAFER. I think, partly, opportunities. I think, partly, they

are beginning to reach the point where their banks are starting to

get big enough and strong enough to look abroad. They see the benefits that we bring. We employ 35,000 people in Asia, so we are important job creators for them. As they see the benefits, then they

are more prepared to move forward.

Senator BAUCUS. In what countries do you see the greatest potential?

Mr. SHAFER. I would say the entire region, and the biggest ones,

obviously, are China, India and Korea.

Senator BAUCUS. Besides China. I am talking about, in addition

to China.

Mr. SHAFER. We think India is very important. We have acquired

a major bank in Korea. We look at Singapore and Hong Kong as

important regional financial centers, and we see that business as

very important.

But I look very broadly at the Philippines, at Indonesia, and

every place where we have operations, and we see a region that is

going to grow. The ASEAN region has half the GDP of China—we

tend to lose sight of how important it is, because it is a number

of different countries—and it is growing nearly as fast, so we do see

the whole region as a very important part of our future.

Senator BAUCUS. What is the EU doing in Southeast Asia?

Mr. SHAFER. They are very active. I was thinking, as we were

talking about what if we do not pass this agreement and the EU

were to get all of these benefits, and HSBC and Deutsche Bank,

and Socie ́te ́ Ge ́ne ́rale would suddenly have opportunities that we

do not have. That would be really very damaging to the competitive

position of U.S. banks.

Senator BAUCUS. And you think that is serious? That is significant?

Mr. SHAFER. Oh, I think it is very serious. I mean, Vietnam is

not a very large economy today, but with 85 million people, and

38

growing the way it is, it is going to be a very important global player.

Senator BAUCUS. Thank you very much.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

We thank this panel. You may get some questions in writing

from me, or even members who cannot be here, so we would appreciate your cooperation.

Now the next panel: Mr. Seiple, Mr. Kumar, and Ms. Foote.

Maybe I should go back and say, Mr. Seiple, president, Institute for

Global Engagement; Mr. Kumar, advisory director for Asia, Amnesty International; and Ms. Foote, president of the U.S.-Vietnam

Trade Council.

So we are going to go in the order of: Mr. Seiple, so you can start

out right away, Mr. Kumar, and then Ms. Foote. I think you were

probably here, but let me remind you, we will put your entire long

statement in the record and ask you to summarize in 5 minutes.

Thank you.

STATEMENT OF CHRIS SEIPLE, PRESIDENT, INSTITUTE FOR

GLOBAL ENGAGEMENT, WASHINGTON, DC

Mr. SEIPLE. Certainly. Chairman Grassley, Senator Baucus,

thank you for the privilege of speaking with you about Vietnam.

This September marks my fourth trip to Vietnam since the U.S.

designated Vietnam as CPC in September of 2004. Over the course

of these visits, to include several meetings with Vietnamese officials visiting the United States, I have had the opportunity to meet

and observe many government and religious leaders in Hanoi, and,

more importantly, at the provincial level, especially in the northwest and Central Highlands.

These visits have also been punctuated by a July 1, 2005 agreement between our organization, the Institute for Global Engagement, and the Vietnamese USA Society to strengthen U.S.-Vietnam

relations by working together on religious freedom.

This agreement has already witnessed ground-breaking delegation visits to the United States and to Vietnam this year, and will

include the first-ever Conference on Religion and Rule of Law in

Vietnamese history in September in Hanoi.

While there are many technical and tactical issues to debate, I

believe that we can distill these discussions to two strategic questions: (1) Has Vietnam begun to move toward a rule of law system

that will preserve, protect, and promote religious freedom in Vietnam, as well as enhance the trade between our two countries?

(2) If so, how should the U.S. practically encourage Vietnam to continue moving in the right direction?

Irrespective of its origin, a strategic shift has taken place in the

Vietnamese mind-set regarding religious freedom. Evidence of this

shift began with the promulgation of national ordinances, instructions, and guidelines on religious freedom from November of 2004

through March of 2005.

Although significant discrepancies among these documents must

be clarified, the government has begun the unprecedented process

of training officials at all levels about these decrees and how to address religious freedom at the local level.

39

This shift has also created the space in which religious freedom

organizations like IGE, my organization, can contribute to an opening civil society by providing third-party accountability regarding

religious freedom.

Finally, there is increased awareness among government officials

that faith-based groups contribute to social society and social stability by providing for the poor and needy, alleviating the financial

responsibility of the state for those same folks, and by serving as

a moral bulwark against the increased corruption that inevitably

accompanies an economy in transition.

This evolution of word and deed among government officials at

the national and provincial levels marks the beginning of a new

pattern, I believe, in the history of Vietnam’s human rights.

To be sure, implementation of these changes is uneven. There

are too many examples of people of faith being harassed because

of their belief systems, in some places more than others.

Yet, these positive changes continue to take place, deepening and

broadening the opportunity for a rule of law system to take root

and permanently provide for religious freedom, as well as normal

trade relations.

In this overall context, I believe the U.S. should honor Vietnam’s

good-faith efforts on religious freedom, lift CPC, and then establish

PNTR. These two particular actions send a strong signal that we

both respect the efforts made thus far by the Vietnamese government, especially to protect religious freedom, and that we expect

the government of Vietnam to continue creating the rule of law

structure necessary to promote religious freedom and free trade in

a sustainable manner. If such efforts do not continue at a reasonable pace, the U.S. should be ready to re-designate CPC, possibly

with sanctions.

Perhaps most importantly, removing CPC and establishing

PNTR encourages the progressive elements among Vietnam’s leadership. Vietnam possesses many true patriots amidst its government’s bureaucracy. I have met many of these national servants

who want what is truly best for their country and for their citizens.

If we do not tangibly support them, hard-liners gain the advantage

and impede the progress that we all seek.

Progress is often not pretty, and never comes easy. In fact, it is

the direct result of difficult and long-term work of building relationships of trust and respect. Through relational diplomacy between states and between peoples, it is indeed possible to understand one another and, as a result, develop solutions that are sustainable, if only because we have developed them together.

Thank you again, Mr. Chairman, for inviting me to this vital conversation.

The CHAIRMAN. Thank you very much.

[The prepared statement of Mr. Seiple appears in the appendix.]

The CHAIRMAN. Now, Mr. Kumar?

STATEMENT OF T. KUMAR, ADVOCACY DIRECTOR FOR ASIA,

AMNESTY INTERNATIONAL, WASHINGTON, DC

Mr. KUMAR. Thank you very much, Mr. Chairman, for inviting

Amnesty International to testify at this important hearing. It reminds us of the testimonies we gave during China’s PNTR.

40

I will come back to China in the closing remarks, but before I

go into it, I want to give our position, Amnesty International’s position, on whether granting PNTR is good or bad for the United

States. We do not take a position, so our analysis is pretty much

an objective analysis about human rights in Vietnam.

So I stand out compared to other witnesses of not taking a position. I do not know about your position, but so far everyone has endorsed giving PNTR. So, it gives me added responsibility to highlight the reality on the ground in terms of human rights.

We have divided human rights practices in Vietnam into three

major categories. One is, of course, what is the current status of

human rights abuses that have been going on for years?

First is the restriction on freedom of expression, assembly, and

association. That goes directly to one of the issues you mentioned

in your opening remarks, of inviting labor organizations. Unfortunately, they did not show up. We feel that since there are restrictions, three unions may find it difficult to exist, given the current

reality. I will not emphasize that; we do not take a position on

PNTR. I just wanted to remind you of that.

Second, there are national security legislations that are in place

that have been abused to silence political opponents.

Third, continuing imprisonment of political prisoners. Political

prisoners include religious prisoners, civil society leaders, and, lately, Internet users, the freedom of people who have been using the

Internet.

Fourth, repressive practices against minority communities, especially in the mountain areas, in the hill areas of the Central Highlands.

Fifth, concerns about independence of the judiciary, which we

feel should be addressed because that should balance any abuses

that may be happening there.

Sixth, restrictions on religious freedom, which Mr. Seiple mentioned earlier, so I do not want to go into that.

Finally, is the death penalty. We know that even the United

States practices this, so I do not want to dwell on that.

There is one area where we feel the situation has deteriorated,

and that is freedom of the Internet. As you can imagine, recently

there was a lot of uproar in China about certain U.S. companies

helping China to restrict freedom of Internet access.

Fortunately, none of the U.S. companies are involved in assisting

Vietnam. Only 2 weeks ago, July 1, Vietnam introduced new regulations restricting Internet access to its citizens. That is extremely

disturbing.

Even though the Vietnamese know they are waiting for WTO accession, their steps are not encouraging. That is very disturbing for

us to see, that they have introduced new legislation. We are waiting to see how it is going to be implemented.

However, there are improvements, positive signs in Vietnam that

have been taken. First, political restriction appears to have eased

recently. We do not know the reason. You can guess that it is because of WTO or this PNTR debate, but we hope that is not the

linkage and that it is a genuine political will on the Vietnamese

government’s point of view to open it up, and we are happy about

that.

41

Second, recent debates about corruption, which is extremely

helpful for business leaders to see, opened up. The National Assembly basically had hearings on that, and that is a very encouraging,

very positive development in Vietnam.

Finally, the first time we have observed that National Assembly

members have basically spoken up in a different tune, or different

views from the Communist Party. These discussions were broadcast live on TV and radio. So these three issues, we feel, are extremely encouraging, and we hope, given PNTR, may encourage

them to open up.

But there was a question I noticed in the first panel about giving

PNTR to open up human rights and freedoms. We do not know

what will happen in Vietnam, but there is one area where we have

seen negative aspects, and that is in China. We did not take a position on PNTR for China at that time.

Unfortunately, after PNTR was given to China, they are in a different mode altogether. They are completely ignoring international

standards, even completely going against U.S. wishes and requests

for improvements of human rights. In religious freedom, political

freedom, you name it; false accusation, incarceration, and execution

of political prisoners is going on.

So our concern is whether giving PNTR will encourage or discourage Vietnam from going forward. We can only hope. But it is

your responsibility, Mr. Chairman, to make sure that the issues of

human rights, religious freedom and other rights are taken very seriously when you are debating this, because this is not about U.S.

businesses, more than about U.S. interests, this is about the people

of Vietnam.

So when you are giving this PNTR, make sure that you do not

inadvertently give the wrong signal to the people of Vietnam or to

the Vietnamese government, that you can do whatever you want.

So this is a great opportunity, and we urge you to take this opportunity and take it forward to make sure that the Vietnamese people enjoy full freedom.

Thank you very much.

The CHAIRMAN. Thank you, Mr. Kumar.

[The prepared statement of Mr. Kumar appears in the appendix.]

The CHAIRMAN. Now, Ms. Foote?

STATEMENT OF VIRGINIA B. FOOTE, PRESIDENT,

U.S.-VIETNAM TRADE COUNCIL, WASHINGTON, DC

Ms. FOOTE. Thank you. Chairman Grassley, thank you very

much for holding these hearings today. I am here representing the

U.S.-Vietnam WTO Coalition, which is a group of 120 companies

and associations who are very much in favor of Vietnam’s accession

to the WTO, and this vote on PNTR in front of you.

We are a group of farm organizations, trade associations, veterans groups, NGOs operating in Vietnam, and many companies

who are either doing business in Vietnam now, or are interested

in doing business there. This is an extremely important vote for us.

Vietnam has concluded the bilateral agreements that it needs to

join the WTO, including most recently the one with the United

States, and is now working to complete the multilateral process,

42

and looking to finish that process by October and have the General

Council procedures completed by mid-October.

The goal for Vietnam, and for all of us, is to see Vietnam be a

full member of WTO when they host the APEC Summit leaders

this year in November. We expect President Bush to attend those

meetings and have a bilateral meeting with the Vietnamese as well

at that time, and we hope that Vietnam is, in fact, a full member

of WTO by then.

If, by October, the U.S. has not had the PNTR vote, we are concerned that the U.S. would have to take the non-application clause,

and therefore the commitments that Vietnam makes in joining

WTO would not be extended to American companies.

The agreement that the U.S. reached, in particular, but that will

then be multilateralized, is of enormous importance to U.S. manufacturers, farmers, and agricultural businesses, as we heard in the

earlier panel. It opens up market access in goods and services, but

it also makes some very important commitments for Vietnam to adhere to the key principles of the WTO.

Unlike some of the trading partners that have been mentioned

earlier, Vietnam has had to work to get their laws and regulations

ready for implementation on accession.

These are not commitments that are going to be allowed to be

phased in. In the last year, Vietnam has either upgraded or added

new amendments to over 50 laws that will bring them into compliance with their WTO commitments on accession, not later.

PNTR is also important, I think, for all of us because it is part

of a continuing effort to normalize relations with Vietnam, our

former enemy, that began with the Reagan administration and has

been carefully shepherded by each administration since then, and

with bipartisan support from Congress.

As you mentioned earlier, we submitted a letter today, signed by

what we have called our ‘‘eminent persons list’’ of former Cabinet

officials, and that letter is signed in support of PNTR for Vietnam.

It includes: Henry Kissinger, James Baker, Madeleine Albright,

Bob Rubin, Colin Powell, and Tony Lake, to name just a few of the

distinguished members of Cabinets since the Reagan administration who are supportive of this.

It is because, since 1988, our bilateral relationship has brought

progress on all fronts, and I really want to emphasize on all fronts.

I think the panels that were here today from the administration,

private sector, and NGOs, each area that is important to the U.S.,

have had progress.

The MIA-POW work has gone extremely well, and continues to

go well. We have a counter-narcotics program in Vietnam now. Obviously, trade and investment have gone well. There has been a

growth in military cooperation.

We have had a labor dialogue with Vietnam, and we hope that

the labor MOU that expired earlier at the end of 2005 will be renewed soon. There has been the release of political prisoners in the

last year. There are four political prisoners left and we are working

on their release.

But overall, Vietnam is a country of great optimism. Our members are particularly interested in the future. It is a bustling counVerDate 11-MAY-2000 16:36 Jul 23, 2007 Jkt 095484 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 36309.000 SFIN1 PsN: SFIN1
43

try of 85 million; half of the population is under 25. It seems to

have a very promising future.

The growth rates there are enormous. Poverty reduction has

been historic. Vietnam’s economy, most of the economy and employment, is not in the state sector any more, but in a growing private

sector, and thousands of SMEs have been founded in the last several years.

Vietnam takes seriously its WTO commitments, and I can commit that the private sector will continue to be involved in programs

to get those laws implemented, to get the regulations addressed

and issued in ways that are compliant with the WTO. Again, the

bilateral commitments that they have made to the U.S. will be a

key part of that.

I want to just comment, briefly, on the textile area, in that 4 percent of the U.S. import market is coming from Vietnam, 25 percent

is coming from China. When the EU lifted quotas on Vietnam, the

imports did not increase. I think these safeguard regimes are very

tough on Vietnam, and the companies who are producing there will

keep them in mind.

This is an important agreement. It is an important time. There

are veterans, Vietnamese Americans, and business people traveling

to Vietnam in tremendous numbers: 350,000 Americans went to

Vietnam this year. Vietnam is on a time frame and an accession

program that we hope will be finished in October, and we very

much urge Congress to have looked at, and voted positively for,

PNTR by that time.

Thank you, sir.

[The prepared statement of Ms. Foote appears in the appendix.]

The CHAIRMAN. I have a few questions. I will not keep us long.

Mr. Seiple, I want to start out with some cynicism you heard expressed earlier today, I think, by Senator Smith and Senator

Bunning about religious freedom.

I do not in any way disagree with your analysis that maybe there

is some positive movement, but what is your expectation—and it is

in regard to, I think Senator Bunning used the word ‘‘leverage’’—

once Vietnam joins the World Trade Organization and we then

might lose leverage? Would you anticipate that the Vietnamese

government will remain committed to the goals that you have described?

Mr. SEIPLE. Thank you, Senator, for your question. I should also

note at the beginning that the Baptists are registered, so there is

no need for you to travel there any time soon.

The CHAIRMAN. All right.

Mr. SEIPLE. But we would love to take you over there.

The CHAIRMAN. Does being registered guarantee not being discriminated against?

Mr. SEIPLE. No, it does not, but it is a step in the right direction.

I think that is the key to answering your overall question: is Vietnam moving in the right direction or is it not? We are not going

to go rapidly from a state-controlled economy to a market economy.

We are not going to go from repression and persecution to openair gatherings and missionary work across the board. That takes

time to change, especially in Asia, especially in a group-based society.

44

That is not to excuse the wrongs that have taken place or the

wrongs that continue to take place sporadically in the country, but

they are moving in the right direction.

What leverage do we have? Well, I think there are a number of

things. One is that, if we remove CPC, we can still redesignate

them as CPC, with sanctions. There are 15 menu options that we

can bring back and say, if you do not move seriously on these

issues of religious freedom, we can do that.

The second thing that we have, at least until November, is the

APEC visit. That is very, very important to the Vietnamese in

terms of regional perception. Is that going to be a state visit where

the President also happens to attend APEC, or is it going to be an

APEC Summit that also happens to be in Vietnam?

That is something that the government can use to its advantage

to leverage and make sure that progress continues on and moves

forward, in the context of the exchange of letters of May 5, 2005.

The third thing that I would say, returning to Secretary John’s

comment about just cold-hearted realpolitik, Vietnam, in general,

needs us more than we need them. They are a medium-sized

power. They were invaded by China as recently as 1979. They

think about these things.

For them to be in a good partnership across all fronts in the bilateral relationship is in their best interests, it is in our best interests, and that is why we should stay engaged and continue to work

with them, and encourage and applaud the small steps, and expect

bigger steps, because we are partners in this together.

Mr. KUMAR. Senator, would you mind if I comment on the same

question?

The CHAIRMAN. Yes. Go ahead.

Mr. KUMAR. From our point of view, there are improvements.

Several religious leaders have been released, but there are quite a

few still in custody, especially the United Buddhist leader. He is

an 86-year-old Buddhist monk, and he is still in custody.

Apart from that, the disturbing development was about 2 months

ago, in May of 2006. A small Mennonite church was destroyed in

Ho Chi Minh City. We have confidence, we checked different

sources. It may be an isolated incident, but this is happening. That

is disturbing.

The other concern is about the sanctions. As I mentioned, we at

Amnesty do not get into sanctions. But if PNTR is given, this is

something that you should check anyway. If PNTR is given, any of

the sanctions that may be triggered by either trafficking or religious persecution that can be applied, that can intervene, that go

against part of the test that has been given, that is something you

have to check. So, I thought I should highlight that.

Thank you, Senator.

The CHAIRMAN. I think you answered the question I was going

to give to you right now, so I will not ask you a second time, but

the extent to which you agreed with Mr. Seiple. I think you have

answered that, so I will go on then to another question for you.

Eighty-five million people there, half of them are 25 years old or

younger. Joining the WTO is likely to increase the country’s trade

flow, and that is likely to create new economic opportunities and

prosperity for future generations there in that country.

45

To the extent that Vietnam joining WTO helps to grow its middle

class, do you see any potential spill-over benefit because the populace will become more demanding of human rights protections and

religious freedoms?

Mr. KUMAR. On the surface, we will say, yes, the possibility is

there. When engagement gets in in any form, that helps the community and the people to learn and to move forward. But if you

look at China, that is not the case. That is why it is disturbing us.

But we are not saying that Vietnam is going to be China. We have

to look openly and see that the chances are better that they may

move forward. It is a small country.

Our concern is about the Internet. I am coming back to that.

Half the population is less than 25. They cannot access the Internet freely. I am not talking about for criminal reasons or pornography, I am talking about just freedom of expression. That is disturbing.

That is why you have the responsibility at this time that these

three issues are raised, and we hope accession to the WTO will

help, there is no question about it. Even though we do not take a

position officially, I personally feel it will help.

Thank you, Senator.

The CHAIRMAN. Thank you.

Now, Ms. Foote, you and your organization take a little bit different view than Mr. Tantillo did. He was talking about the harm

that would come to the textile and apparel industry. I think your

response would be very helpful.

Ms. FOOTE. Well, as I mentioned, the imports from Vietnam now

are quite small. They are about 4 percent of the imports coming

into the U.S.; China’s, as I said, are 25 percent. The EU lifted

quotas on Vietnam about a year and a half ago now, and there was

no surge. In fact, the numbers have gone down a little bit into the

EU.

So, while I think Vietnam has been, and certainly the quote from

the Vice Minister that Vietnam will become the number-two importer, I think that is really wishful thinking. They will continue

to import to the U.S. They see us as an important market. They

are also buying a lot of our cotton, and that is an important source

for them, American cotton. I do not think the numbers will be that

dramatic.

But I would also say that the safeguard mechanism that has

been built into this agreement is unprecedented, it is tough, it is

severe. If Vietnam is found to be out of compliance with their commitments on prohibited subsidies, the hammer comes down hard

and fast, and there is no other agreement like this.

The CHAIRMAN. From that standpoint, you are saying it is a lot

stronger than what we enacted with China. Anti-surge is what you

were talking about, right?

Ms. FOOTE. This is the commitment that the U.S. got from Vietnam on the use of prohibited subsidies. So, it is a slightly different

mechanism than was used for China.

The CHAIRMAN. All right.

And you would say stronger, then?

46

Ms. FOOTE. I do not know that in the China agreement there was

any addressing of prohibited subsidies, and a safeguard mechanism

triggered directly to that.

The CHAIRMAN. Then my last question to you is in regard to their

commitment to implement disciplines, particularly including the

agreement on trade-related aspects of IPR. Do you anticipate the

need for continued capacity-building efforts in Vietnam in order to

see that commitment fully realized, and, if so, what types of efforts

does your organization suggest?

Ms. FOOTE. I absolutely do think it is important to continue the

programs on IPR enforcement. The laws basically are there now.

They just passed another amendment this summer, and there are

a few regulatory issues that need to be addressed to be fully compliant with TRIPS. But implementation is key, as it is in many

countries. I think there has been some progress there. There have

been some high-profile enforcement raids that have made the

press.

But I think there really does need to be more public relations

work, public awareness work in Vietnam, and quite a few American companies for whom this is important have been involved in

programs with U.S. AID on training government officials on the

benefits to Vietnam.

The channels for smuggling any product are the same channels

that narcotics and money laundering come through worldwide, and

there is an important border issue here for products coming in to

Vietnam, counterfeit products coming into Vietnam. Right now,

there is not a manufacturing and production problem in Vietnam,

but they need to be vigilant to make sure that does not happen.

The CHAIRMAN. All right. Thank you very much. Thank you for

your testimony.

Before you go, and for you and the previous panels, we have set

tomorrow afternoon, close of business tomorrow, for people on the

committee to ask questions for answers in writing. We would ask

that each of the panelists, all three panelists, could have their responses to us by Friday, July 21. It may not happen, but it usually

does happen.

So, thank you very much. We appreciate your fine participation.

[Whereupon, at 12:33 p.m., the hearing was concluded.]

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