Proposal for a Council Decision establishing the Community position within the General Council of the World Trade Organisation on the accession of the Socialist Republic of Viet Nam to the World Trade Organization
Date: 2006-10-27
Institutions: European Commission
Subjects: Viet Nam, World Trade Organisation, customs duties, market access, trade policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 27.10.2006 
COM(2006) 659 final 

2006/0215 (ACC) 

Proposal for a 

COUNCIL DECISION 

establishing the Community position within the General Council of the World Trade 
Organisation on the accession of the Socialist Republic of Viet Nam to the World Trade 
Organization 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

Overview of the Terms of Viet Nam’s Accession to the WTO 

I 

Introduction 

Members  of  the  World  Trade  Organisation  (WTO)  and  the  Socialist  Republic  of  Viet  Nam 
have reached the concluding stage of agreement on the terms for Viet Nam’s accession to the 
organisation. This comes after almost 11 years of negotiations, which began when Viet Nam 
submitted  it  application  to  join  the  WTO  1995.  There  must  now  be  a  Council  Decision 
approving  the  terms  of  Viet  Nam’s  entry,  before  the  EU  can  formally  support  Viet  Nam’s 
entry. 

A summary of the terms of the accession is set out below. 

II 

Summary of terms of Viet Nam’s WTO Accession by Sector 

Industrial goods 

The simple average of Viet Nam's Applied Tariffs for industrial and fisheries goods are at the 
level  17.5%.  With  the  date  of  accession  to  WTO  Viet  Nam  will  set  its  initial  bound  rates 
(IBR) at 16.2% on average. The average of final bound rates (FBR) will be reduced to 12.4 
%. 70% of all tariff lines will be below 15% duty rates. Only 7% of the lines will remain at 
peak level above 25%. All tariffs will be bound. Implementation periods range from 0 to 12 
years with an average of 4.4 years.  

Industrial tariffs in detail  

Tariffs on Medical equipment and ITA 0/0 will be eliminated, and tariffs for Pharmaceutical 
will go down from 3.6 % (applied) to 2.6% (FBR) in 3 years. 

On  Machinery  and  Appliances  which  are  of  important  interest  for  European  Industries,  the 
average tariffs will go from 10.50 % (applied) to 9.2 % (FBR) within 3.7 years.  

Average duty rates for Steel 0/0 will be reduced from 17.3% (applied) to 16.4 % (IBR), to go 
down  to  11.5  %  (FBR)  within  3  years  (average),  while  the  chapter  Steel  (Non  MSA)  will 
remain on higher level, going up from 16.9% (applied) to an initial bound rate of 21.8% to be 
then reduced to 17.8% (FBR) within 3 years (average). 

Duties in the chemical sector will go from 11.9% (applied) to 7.4% (FBR) within average of 
4.6 years; Paper from 18.8% (applied) to 12.8 % (FBR) in 4.4 years.  

Vehicles  and  parts  with  few  exemptions  go  down  from  53.3%  (applied)  to  40.7%  (FBR)  in 
average of 5.7 years. 

Agriculture 

On  market  access  for  agricultural  goods,  Viet  Nam  will  cut  its  tariffs  on  the  most  exported 
products  from  average  applied  rates  of  27%  to  annual  average  final  bound  rate  of  21%. 
Specifically,  significant  reductions  have  been  achieved  on  tariffs  on  products  such  as:  meat 
preparations (down from on average 50% applied to 27% final bound rate), cereal and pasta 

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preparations (down from 43% to 27%), alcoholic beverages (down from 88% to 46%, spirits 
to 45%), and cocoa preparations (down from 33% to 18%). 

As from the date of accession, Viet Nam does not intend to use quantitative or other import 
restrictions on any agricultural product, except for measures allowed under the provisions of 
WTO Agreements. 

In relation to domestic support, Viet Nam will not bind any AMS, because its support does 
not reach the 10% de minimis level. The majority of Viet Nam's domestic support measures 
are  Green  Box  measures  concerning  general  services  (mostly  infrastructure),  payments  to 
producers as disaster assistance and payments for regional assistance.  

Vietnam has committed to eliminating export subsidies applied to agricultural products by the 
date of accession. 

Trading rights and liberalisation of state trading enterprises 

Viet  Nam  has  made  considerable  improvements  in  the  areas  of  State  Trading  and  trading 
rights. The sectors/products subject to State trading have been reduced to the following: crude 
oil, refined petrol and gasoline, aircraft spare parts and aviation equipment, film, newspapers 
and cigarettes and cigars. As regards trading rights, Viet Nam will grant all enterprises with 
foreign  direct  investment  full  trading  rights  no  later  than  1  January  2007,  except  for  the 
products subject  to State trading. For  specified products  however,  full trading rights will be 
granted  two  years  later,  on  1  January  2009.  These  products  are  pharmaceuticals, 
cinematographic film, calendars, post cards, industrial printers and print machinery, TV and 
radio transmission apparatus and video camera recorders. There are no restrictions as regards 
the right to choose a distributor in Viet Nam. 

Services 

A large part of the accession negotiations focused on services, of paramount importance to the 
EU  as  the  world’s  leading  exporter  in  this  field.  Foreign  equity  limitations  are  in  many 
instances  only  temporary,  as  part  of  a  gradual  phase-in  to  100 per cent  foreign  ownership. 
European  services  suppliers  will  overall  enjoy  considerable  additional  market  access 
opportunities coupled with guarantees that they will not be discriminated against Vietnamese 
companies. Legal security regarding the conditions under which European companies are able 
to operate in a range of sectors will be greatly improved. Upon the EU's request, Viet Nam 
has  also  made  specific  pledges  in  the  Working  party  report  on  its  licensing  procedures  and 
conditions (including transparency, fees, time for consideration and information) that were a 
source  of  concern  for  companies  in  several  sectors.  Viet  Nam's  commitments  cover  a  wide 
range of service sectors, including key sectors of interest to the EU such as:  

Professional  services:  the  commitments  of  Viet  Nam  on  accounting,  auditing,  bookkeeping, 
taxation,  architectural,  engineering  services  are  extensive  with  almost  no  restrictions. 
European law firms will be able to establish foreign law firms, branches and partnerships in 
Viet Nam. Consultation on Vietnamese law is possible under certain conditions.  

Courier services: express delivery operators will be able have 100% ownership 5 years after 
accession and will be granted a treatment no less favourable than Viet Nam Post. 

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Telecommunication services: Operators providing non-facilities-based services will be able to 
establish  joint  ventures  with  up  51%  or  70%  foreign  capital,  depending  on  the  service.  For 
facilities-based services, Viet Nam has bound foreign ownership up to 49%. Viet Nam has also 
pledged that licensing decisions for both facilities-based and non-facilities-based services would 
be made in accordance with transparent and objective criteria. A specific clause was included to 
ensure  that  existing  Business  Cooperation  Contracts  of  EU  operators  would  be  converted  in 
other  forms  with  conditions  no  less  favourable  or  renewed.  Viet  Nam  will  also  apply  the 
reference paper on telecommunication services.  

Construction services: the whole sector will be open, with the possibility of direct branching. 

Distribution  services:  although  some  products  are  excluded  (e.g.  processed  and  crude  oil, 
books, pharmaceutical products and drugs), foreign ownership will be fully allowed as of 1st 
January 2009. 

Environmental  services:  wastewater  treatment,  waste  management  services  (except  direct 
collection  of  household  waste),  cleaning  of  exhaust  gases  and  environmental  impact 
assessments are committed, with foreign ownership allowed up to 100% four years after the 
accession.  

Tourism: there is a full opening of hotel and restaurant services, with a transition period of 8 
years  during  which  the  provision  of  services  needs  to  be  associated  with  investments  in 
hotels.  

Financial  services:  Viet  Nam  is  binding  the  possibility  for  foreign  insurance  companies  to 
establish with up to 100% ownership. Five years after the accession, the establishment of non-
life  branches  will  be  authorised  as  well.  Viet  Nam  also  offers  extensive  commitments  for 
cross-border supply of insurance and reinsurance services, including intermediation. Foreign 
banks  operating  in  Viet Nam  are  granted  full  MFN  and  national  treatment  in  the  placement 
and operation of Automatic Teller Machines (ATMs). A few months only after its accession 
(April 2007), Viet Nam will authorise up to 100% foreign ownership for banks.  

Maritime  Transport  services:  Viet  Nam  has  undertaken  far-reaching  commitments  that  will 
secure the possibility for European companies to hold the full 100% ownership stake in their 
operations  in  Viet  Nam  within  5  to  7  years  from  accession  for  most  maritime  transport 
services and key auxiliary services.  

Protocol commitments 

In the final, multilateral stage of the accession process, WTO Members collectively sought to 
ensure the basic compatibility of Viet Nam’s trade laws and institutions with WTO rules and 
agreements,  setting  these  out  in  the  Protocol  of  accession  and  Working  Party  Report.  The 
following issues are of particular interest to the EU: 

Excise taxation of spirits  

The current Vietnamese system of excise tax on spirits sets a tax of 30% for spirits with an 
alcohol content between 20% to 39%, and tax of 65% for spirits with alcohol content of 40% 
or more. Viet Nam will change its system within 3 years from accession, and will apply, to all 
distilled spirit beverages with alcohol content of 20% or more, a single rate of excise tax per 
litre of pure alcohol contained in a finished product.  

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Import and export restrictions 

Viet Nam will replace the current import ban of used motor vehicles with an import quota that 
will be phased out within three years of the accession. Viet Nam will also replace the current 
import  ban  of  large  motorcycles  with  engine  capacity  exceeding  175  cm3  with  a  non-
automatic licensing system by 31 May 2007. As regards export duties, Viet Nam will reduce 
its current export duties of 35% on ferrous scrap to 17% within 5 years of the accession, and 
its current export duties of 45% on non-ferrous scrap to 22% within 5 years of the accession. 

Subsidies  

Vietnam  will  eliminate  all  prohibited  subsidies  upon  accession.  Export  subsidies  based  on 
existing investment licences granted under two specific programmes will be phased out within 
5  years  of  accession,  and  the  programmes  terminated.  As  regards  export  processing  zones, 
companies  establishing  themselves  in  these  zones  will  not  be  required  to  export  their 
production as a condition for being eligible to operate in these zones. Vietnam will provide a 
subsidy notification to the WTO Committee of Subsidies and Countervailing measures by the 
date of accession. 

V 

RECOMMENDATION 

In submitting the terms of Accession of the Socialist Republic of Viet Nam to the WTO for 
approval by the Council, the Commission commends these terms as representing a balanced 
but ambitious package of market opening commitments, which will bring substantial benefits 
to Viet Nam and her WTO trading partners alike. 

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2006/0215 (ACC) 

Proposal for a 

COUNCIL DECISION 

establishing the Community position within the General Council of the World Trade 
Organisation on the accession of the Socialist Republic of Viet Nam to the World Trade 
Organization 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Articles 
133(1) and 133(5) in conjunction with the second subparagraph of Article 300(2) thereof 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

On 4 January 1995 the Government of the Socialist Republic of Viet Nam applied for 
accession  to  the  Agreement  establishing  the  World  Trade  Organization  (WTO), 
pursuant to Article XII of that Agreement. 

A  Working  Party  on  Viet  Nam’s  accession  was  established  on  31  January  1995  in 
order to reach agreement on terms of accession acceptable to the Socialist Republic of 
Viet Nam and all WTO Members. 

The Commission, on behalf of the Community, negotiated a comprehensive series of 
market opening commitments on the part of the Socialist Republic of Viet Nam which 
are of particular importance to the Community, provided for in the bilateral agreement 
between  the  Socialist  Republic  of  Viet  Nam  and  the  Community  authentified  by 
signature on 9 October 2004. 

These  commitments  are  now  embodied  in  the  Protocol  of  Accession  of  the  Socialist 
Republic of Viet Nam to the WTO. 

Accession to the WTO is expected to make a positive and lasting contribution to the 
process of economic reform and sustainable development in the Socialist Republic of 
Viet Nam. 

It will also bring trade relations between the Socialist Republic of Viet Nam and the 
Community into a stable and legally binding framework. 

(7) 

The Protocol of Accession should therefore be approved. 

(8) 

Article  XII  of  the  Agreement  establishing  the  WTO  provides  that  the  terms  of 
accession are to be agreed between the acceding Member and the WTO, and that the 
Ministerial Conference of the WTO approves the terms of accession on the WTO side. 

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Article  IV.2  of  the  Agreement  establishing  the  WTO  provides  that  in  the  intervals 
between  meetings  of  the  Ministerial  Conference,  its  functions  shall  be  conducted  by 
the General Council. 

(9) 

Accordingly,  it  is  necessary  to  establish  the  position  to  be  taken  by  the  Community 
within the General Council. 

HAS DECIDED AS FOLLOWS:  

Sole Article 

The position to be taken by the Community within the General Council of the WTO 
1. 
on  the  accession  of  the  Socialist  Republic  of  Viet  Nam  to  the  WTO,  is  to  approve  the 
accession. 

2. 

This position shall be expressed by the Commission on behalf of the Council 

Done at Brussels, […] 

For the Council 
The President 

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