Vietnamese Regulation Violates WTO Commitment, U.S. Group Says

A Vietnamese government regulation on trading and distribution violates the country's commitments as part of its accession a year ago to the World Trade Organization, a U.S. business group said.

``Recently the entry into effect of a circular regulating trading and distribution activities has raised serious concerns,'' the American Chamber of Commerce in Vietnam said in a position paper distributed yesterday by e-mail by the group's Ho Chi Minh City branch.

The document ``imposes new market access obstacles for American providers of goods and services, some of which are inconsistent with Vietnam's bilateral trade agreement and WTO commitments,'' the U.S. group said. The bilateral accord between the U.S. and Vietnam took effect in 2001.

Vietnam became the 150th member of the WTO in January 2007, after a more than decade-long process. The accession helped spark a surge in foreign investment commitments last year into the Southeast Asian nation and coincided with the start of a first-quarter 2007 bull run on the country's main stock market.

Specifically, the government circular permits foreign companies or foreign-invested importers to sell to only one Vietnamese distributor for a given category of goods, the American business group said. The same restriction doesn't apply to Vietnamese importers, according to the group.

Hoang Thi Tuyet Hoa, a deputy director at Vietnam's Ministry of Industry and Trade's planning department who helped draft the circular, declined today to comment.

`Clear Breach'

The circular ``is a clear breach of Vietnam's WTO commitments,'' the U.S. group said. Under those pledges, ``foreign-invested firms are entitled to freely choose their distributors, including more than one.''

The restriction ``does not reflect the realities of international business practice and will undermine Vietnam's competitiveness,'' the Chamber said, arguing that companies need flexible distribution arrangements and that ``a market economy can only compete if businesses have the freedom to choose their business partners.''

The U.S. had a $7.3 billion trade deficit with Vietnam through the first 10 months of last year, with American exports to Vietnam totaling $1.38 billion while Vietnamese shipments to the U.S. reached $8.68 billion, according to figures from the U.S. International Trade Commission.

``Clearly this hurts U.S. exporters because it limits their access to the Vietnamese market, but it also makes the local supply chain less efficient, which pushes up prices,'' said Fred Burke, a partner in the Ho Chi Minh City office of the law firm Baker & McKenzie.

``This issue seems quite straightforward, and although we haven't got a very clear response from the government on it yet, the Ministry of Industry and Trade has offered to meet to discuss it,'' Burke said by telephone during a trip to Hanoi. (Bloomberg)