President Clinton's announcement that the United States will establish normal diplomatic relations with Vietnam has received criticism from veterans groups, mixed reactions from politicians and praise from many business leaders.
How much help will it be to American companies doing business in Southeast Asia? Will U.S. firms now do more business in Vietnam?
Spokesman, Mobil Oil Co.
For Mobil, the major event was the lifting of the trade embargo a year and a half ago. Once the embargo was lifted, we were able to enter into contracts with Vietnam to explore for oil and gas offshore, and we are actively doing that now. There is never any guarantee that you will find oil, and in fact the odds are against it. But if oil is discovered, the establishment of normal relations will have positive effects for us.
For one, it will open up financing of our projects through the Export-Import Bank, which makes much better borrowing rates available. For another, once we establish an income stream, it would allow us to claim a tax credit with the Internal Revenue Service for any taxes we pay in Vietnam, so that we would not be double-taxed. Both of those are potentially substantial benefits.
U.S.-Vietnam Trade Council
The president stated in his announcement that the economic side of the relationship now can grow more fully. We expect that the announcement will be followed by the negotiation of an overall trade agreement, by reciprocal granting of most-favored-nation trade status, and by Export-Import Bank financing of business projects.
There is a wide range of American business sectors that are either already active in Vietnam or preparing to become active. Oil and gas development, infrastructure development industries such as road construction, airports and seaports, telecommunications, the legal profession, accounting, building the insurance base, expanding the tourism facilities, all are greatly needed. In addition, general and commercial construction, consumer products and capital equipment such as locomotives, tractors and electrical power generators all are markets that will be very active as Vietnam's economy develops.
Ellicott Machine Corp.
Businesses are interested in Vietnam from three angles, importing, exporting and investment, and each is affected differently. Investors are interested in government-backed insurance for their investments. Exporters are interested in Export-Import Bank financing. Some exporters also need to have the Cold War restrictions on trade with Marxist-Leninist countries waived. Importers are interested in having Vietnam gain most-favored nation status for tariff and import regulations. So normalization of relations with Vietnam is the right thing, because it's a prerequisite to all of those steps. But it's only a prerequisite, and the specific steps are yet to come.
Practically speaking, Secretary of State Warren Christopher's visit to Vietnam in the first week of August will be a step toward all of those specifics. The export of dredges to Vietnam that we announced last month was not dependent upon normalization, but normalization will definitely help in our future transactions in Vietnam. Had Ex-Im Bank financing been available, that transaction might have come to fruition six months earlier. Given our market position in Vietnam, I'm confident that normal relations with Vietnam will add jobs at our plant in Baltimore.
U.S. Chamber of Commerce
The short-term implications of normalization are minimal, because the two governments still need to negotiate basic commercial agreements, reciprocal tax agreements to prevent double taxation and other fundamentals of international trade. The U.S. also needs to establish the availability of Export-Import Bank and other trade credit facilities for deals with Vietnam. So the importance of establishing diplomatic relations is that it enables the U.S. and Vietnamese governments to negotiate these agreements.
Vietnam is a country where half of the population is under age 25, which makes it important as a consumer. The country has a literacy rate of 89 percent, so it has a good work force. The U.S. has companies that will be very competitive in telecommunications, in engineering and construction services to build roads, dams, power generators of all kinds. The country needs to improve its internal transportation system, and American companies excel in roads, dredges and construction equipment.
Vietnam is now moving from a kind of planned economy to a kind of market economy. That transition will require $7-10 billion over the next seven years in infrastructure projects alone.