On December 8, 2006, the House passed legislation (212-184) to grant Vietnam permanent normal trade relations (PNTR) status as part of a more comprehensive trade bill ( H.R. 6406 ). Pursuant to H.Res. 1100 , the bill was then coupled with a tax-extension bill ( H.R. 6111 ) and sent to the Senate. The Senate passed the combined bills (79-9) on December 8. On December 20, 2006, President Bush signed the bill into law ( P.L. 109-432 ) and, per the law, proclaimed PNTR for Vietnam on December 29, 2006. The legislation also codified a provision of the U.S.-Vietnam bilateral agreement on Vietnam's accession to the World Trade Organization (WTO) authorizing the reimposition of quotas on imports of textiles or wearing apparel, if Vietnam subsidizes those industries in violation of WTO rules. On November 7, 2006, Vietnam completed the multilateral component of its WTO membership bid when the WTO General Council approved Vietnam's accession package, the core of which is a combination of all the bilateral agreements that Vietnam negotiated. On November 28, 2006, Vietnam's National Assembly ratified the deal. This move puts Vietnam on track to join the WTO on January 11, 2007. The United States was a major player in Vietnam's accession process. On May 31, 2006, U.S. and Vietnamese negotiators signed an agreement on the conditions for Vietnam's accession (entry) into the World Trade Organization (WTO). The agreement was just one in a number of steps that Vietnam had to take to complete its quest to join the multilateral trade body. However, the agreement with the United States was the last and, seemingly, the most difficult of the bilateral agreements that Vietnam had to negotiate with twenty-eight WTO members (including the European Union (EU) counting as one but representing twenty-five countries). The U.S. Congress has had no direct role in Vietnam's accession to the WTO. Congressional approval of the bilateral agreement was not required for it to go into effect. The agreement itself does not establish any new obligations on the part of the United States, only on the part of Vietnam. However, Vietnam's accession to the WTO will require the United States and Vietnam to adhere to WTO rules in their bilateral trade relations, including not imposing unilateral measures, such as quotas on textile imports, that have not been sanctioned by the WTO. On the other hand, the Congress had an indirect role to play. As has been the case with U.S. trade relations with most of the other communist and former communist states, U.S. trade relations with Vietnam had been governed by Title IV of the Trade Act of 1974, as amended, which includes the so-called Jackson-Vanik amendment (section 402). Title IV prohibits the President from granting those countries most-favored-nation (MFN), called normal trade relations (NTR) in U.S. law, unless the country has met certain conditions. However, the WTO requires its members to extend unconditional MFN (permanent NTR (PNTR)) in order to receive the benefits of WTO membership in their bilateral trade relations. In order for the President to gain the authority to grant Vietnam unconditional MFN/ PNTR status, Congress needed to enact legislation removing Vietnam from Title IV coverage. During the congressional debate on PNTR Members raised issues regarding the conditions for Vietnam's entry into the WTO and other issues pertaining to the U.S.-Vietnam economic relationship; in particular, the impact of increased imports from Vietnam on the U.S. textile and apparel industry. Members also raised issues pertaining to other aspects of the overall U.S.-Vietnam relationship, such as human rights in Vietnam. Accession to the WTO is important to Vietnam. It affords Vietnam the protection of the multilateral system of rules in its trade relations with other WTO members, including the United States. Vietnam will also participate in the Doha Development Agenda (DDA) round of negotiations to expand the coverage of the WTO. (Those negotiations have been suspended since July 2006.) PNTR from the United States provides more predictability to Vietnam's growing trade relations with the United States and sheds a legacy of the cold war. For the United States, PNTR is another in a series of steps the United States has taken in trade and foreign policy to normalize relations with Vietnam and place distance between current relations and the Vietnam War. It also places the United States on par with Vietnam's other major trading partners, all of whom have granted Vietnam unconditional MFN status. Vietnam's membership in the WTO requires it to conduct trade with the United States under a system of multilateral accepted rules. Vietnam's trading practices can be subject to challenges by the United States and other WTO members under the accepted dispute settlement mechanism. This report provides a brief overview of the U.S.-Vietnam economic relationship, an examination of the WTO accession process and Vietnam's status, an overview of the Jackson-Vanik amendment and PNTR, and an analysis of the issues that were raised during congressional consideration of PNTR for Vietnam. This report will not be updated. U.S.-Vietnam diplomatic and economic relations remained essentially frozen for more than a decade after communist North Vietnam's victory over U.S.-backed South Vietnam in 1975. Relations took major steps forward in the mid-1990s, particularly in 1995, when the two sides re-established formal diplomatic relations. Since then, the normalization process has accelerated and bilateral ties have expanded, particularly on the economic side of the relationship. The most important step toward normalization since 1995 was the signing of a sweeping bilateral trade agreement (BTA), which was approved by Congress and signed by President Bush in 2001 ( P.L. 107-052 ) Under the BTA, the United States and Vietnam extended mutual MFN (NTR) to one another, that went into effect on December 10, 2001. In return, Hanoi agreed to a range of trade liberalization measures and market-oriented reforms. The climate in trade relations between Hanoi and Washington has sobered considerably since the heady days after the BTA was signed, in part because of difficult bilateral negotiations over the terms of Vietnam's accession to the World Trade Organization (WTO) and anti-dumping duties the United States has leveled against imports of Vietnamese shrimp and catfish. In general, since the BTA was signed in 2001, U.S. trade officials have praised Vietnam's implementation of the agreement. As discussed below, in retrospect, Vietnam's contentious and prolonged debate over whether to sign the BTA was watershed event that helped break the logjam that for years had stalled economic policymaking. The decision to sign the BTA appears to have fashioned a new consensus in favor of a new economic reformist push. In short order after signing the BTA, the government enacted a series of measures, including passing a new Enterprise Law, passing constitutional amendment giving legal status to the private sector, reducing red tape, creating unprecedented transparency rules for prior publication of new rules and regulations, and, for the first time, giving party members the green light to engage in private business. Adhering to the BTA's implementation deadlines and achieving the government's goal of joining the WTO have helped galvanize the Vietnamese bureaucracy toward enacting many of these and other steps. Some U.S. industry officials have expressed concern that the government has not met deadlines to implement in law and/or in practice some of concessions, particularly in the services sector. Many of these critics, however, tend to accept the argument that the slippages often are due more to weak capacity than to protectionist intentions, and in 2005 Vietnam passed more than 20 laws and regulations that belatedly address some of these concerns. The belief that Hanoi generally is attempting to comply with its BTA obligations may explain why the Bush Administration appears not to have criticized harshly Vietnam in areas where implementation has been delayed or incomplete, with the exception of intellectual property rights (see below). From 2001 to 2005, bilateral trade has more than quintupled from $1.4 billion to over $7.6 billion (see Table 1 ). Almost all of the increase in trade since the BTA went into effect has been from increased U.S. imports of mainly apparel products from Vietnam, which rose from just over $1 billion in 2001 to over $6.5 billion four years later. The United States is now Vietnam's largest export market, and according to one study , U.S. firms constitute the single-largest source of foreign direct investment (FDI) in Vietnam. U.S. FDI has increased by an average of 27 percent a year from 2002 through 2004, compared to just around 3 percent a year from 1996 to 2001. Vietnam ranks 38 th as a source of U.S. imports and 58 th as a U.S. export market. In comparison to imports from Vietnam, growth in U.S. exports to Vietnam has been modest, and since 2003 they have been concentrated mainly in aircraft. Indeed, U.S. exports to Vietnam have fallen since 2003, largely because shipments of aircraft and aircraft parts have decreased. Imports of clothing from Vietnam have been a major issue for U.S. apparel manufacturers before, during, and after the negotiations over Vietnam's WTO accession. Nearly half of the increase in U.S.-Vietnam trade since 2001 has come from a sharp rise in clothing imports from Vietnam, which totaled $2.7 billion in 2005. This contrasts with less than $50 million in 2000 and 2001.