"It's an agreement on trade, certainly, but it is, for this country [Vietnam] and ours [United States], much more than that. It is a normalization agreement. It is the completion of the circle of the process, of which economics is the missing link. A great deal has been placed in the hands of that document relative to whether our two countries are going to hold hands or hold each other at arm's length. It is a very important document in stating that our two nations want to have relations, not only on trade."---U.S. Ambassador to Vietnam Pete Peterson

It is May 2001, and the cover of Newsweek, the international news magazine based in the United States, is plastered with the face of former U.S. Senator Robert Kerrey, who has recently revealed more of the horrors of his tour of duty during the Vietnam War. Twenty-six years after the United States officially pulled out of the Vietnam War (or the American War, as it is referred to in Vietnam), and the healing process is still fresh in people's minds. The war that caused some much bloodshed, from both sides, and socially split the United States in half for an entire decade, will last in the minds of the individuals involved for the rest of their lives. The two governments, however, are pursuing a comprehensive rapprochement, including a Bilateral Trade Agreement that was signed in 2000 surrounding the monumental visit of President Bill Clinton to the former enemy state. The hope is that through bilateral exchanges, diplomatic, social, and economic, the healing process for those individuals so effected by the war will be made that much easier.

In an era of globalization, including economic liberalization, political reforms, and social mobility, the people of Vietnam are in a prime position to accept the foreign capital, have access to the largest market in the world for the nation's exports in the form of the United States, and potential for the freedoms that are celebrated in countries around the globe. The government of Vietnam realizes this opportunity and hopes to bring in the economic reforms, while maintaining social stability. Specifically, Vietnam is looking to the People's Republic of China, and the reforms that largest country in Asia is making in order to enter the global market, as an example. On the flip side of the coin, the United States will gain increased market access to people of Vietnam for American exports, as well as the opportunity for investment and infrastructure building. The Agreement, signed in July 2000, will yield significant economic benefits to both nations.

Furthermore, through increased trade with the United States, Vietnam will bring greater stability and economic strength to the nations of South-East Asia. As Vietnam brings in sweeping reforms, so too, it is hoped, will Vietnam's neighbors, including Laos, Cambodia, and Myanmar (Burma). After the 1997 Asian financial crisis, the people of these nations are in need of increased foreign investment and international interaction. Through this increased level of globalization, the possibility of having another financial crisis will hopefully be lessened.

This paper will analyze the U.S.-Vietnam Bilateral Trade Agreement and the effects that the Agreement will have on both nations. The paper will initially review the recent historical relationship between the two nations, including the events that led up to normalization of the relationship. The body of the paper will detail the actual benefits that will come from increased trade between the two nations, in reference to specific questions that have arisen regarding the potential of the trade Agreement. In the end, this analysis will provide a comprehensive look at the future of commercial relations between the United States and Vietnam and will make a strong recommendation to the U.S. Congress to ratify the trade Agreement immediately.

The history of Vietnamese relations with the countries of the western world is not a particularly pleasant one. Even more unpleasant is the historical relationship that Vietnam has had with the United States, up until the last few years. Vietnam has a strong history of rebellion against foreign rule. Unfortunately, another foreign nation was always ready to take the place as controller of the South-East Asian nation.

After about 1000 years of Chinese rule over what was called the Red River Delta, the Vietnamese people ruled themselves, or at least the king/emperor was of Vietnamese decent. The first contact between Vietnam and the west, in recent times, began in the 16th century, when European Catholic missionaries arrived in South-East Asia. In 1858, a combined military force from France and the Philippines (a Spanish colony at the time) stormed Danang, Vietnam, and later took Saigon. Within a few years, Vietnam's emperor at the time, Tu Duc, signed a treaty that gave the French control of part of the Mekong Delta. The French took over Vietnam as a colony in 1883.

Under the French, the Vietnamese were often treated as second-class citizens in their own nation. Resistance grew over the years, with the strongest of the revolutionary movements coming in 1925 in the form of the Marxist group led by Ho Chi Minh, the Vietnam Revolutionary Youth League. During the Japanese occupation of Vietnam during WWII, the only revolutionary organization that provided significant resistance, in the name of the Vietnamese people, was the Communist-led Viet Minh, with Ho Chi Minh at the helm. At the end of WWII, Ho Chi Minh declared Vietnam to be independent. This, of course, angered the French, and the French attempts to regain control led to full-scale war. In May 1954, Ho Chi Minh's forces defeated the French in numerous major battles, and half-way through the year, the Geneva Accords were signed that created a temporary division of the nation into two zones, split at the Ben Hai River.

The next problem that arose was an internal political struggle between Ho Chi Minh's factions and the anti-Communist regime in the southern part of the country. In 1960, the Communist military, known as the Viet Cong, with the backing of Ho Chi Minh's government in Hanoi, was founded to fight against the southern anti-Communists. In 1961, President John F. Kennedy first sent American troops as training advisors to the South Vietnamese military. By 1964, the Viet Cong had infiltrated the south, and the anti-Communists seemed to be without hope. The next year, the United States committed combat troops to the region, in order to fight off the Communist threat to the region. Over the next eight years, the Viet Cong and the U.S. soldiers engaged in some of the worst bloodshed of any recent war. Millions of Vietnamese were killed, and the losses of the Americans, although much less than the Vietnamese, were significant enough to cause a loss of domestic support for participation in the war. After the Tet Offensive of early 1968, the Vietnamese changed the course of the war and pushed south toward Saigon. In 1973, the Paris Agreements were negotiated to enact a ceasefire, the total withdrawal of American troops, and the release of American prisoners of war. By 1975, the anti-Communist, Vietnamese forces were beaten, and on April 30th, the Saigon government surrendered to the North Vietnamese Army.

The subsequent unification of the country meant liberation from over a century of colonial repression. Unfortunately, internal repression came soon after, as the Communist government sought to quell any political or social opposition to its power. For the next twenty years, the United States and Vietnam remained at odds, with the United States imposed economic sanctions restricting any major capital inflow into the nation. With the end of the Cold War, however, Vietnam has attempted to follow in the footsteps of their socialist Chinese neighbors in calls for economic reforms and rapprochement with many former western enemies of the Vietnamese state, including the United States.

The process of normalization has been accomplished in a step-by-step manner over the last decade. The following timeline of events have led to the bilateral trade Agreement:

1989&emdash;Vietnam withdraws from Cambodia and seeks admission into regional organizations, including ASEAN and APEC. This sends a clear message that Vietnam intended to play a positive role in regional security and economic liberalization;

1991&emdash;The collapse of the Soviet Union gives way to sweeping political, social, and economic reforms throughout the former Soviet bloc countries. This also allows post-Soviet socialist nations to pursue greater options and interaction with western, Democratic nations;

1993&emdash;President Bill Clinton authorizes the United States to support international financial lending for Vietnam, through the World Bank and the International Monetary Fund, and allows U.S. firms to join in development projects in Vietnam;

1994&emdash;President Clinton lifts the economic embargo to allow U.S. firms to export to Vietnam and compete for business opportunities in Vietnam that had formerly been closed to the prospect of trade with the United States;

1995&emdash;Vietnam joins the Association of Southeast Asian Nations (ASEAN). Also this year, the United States opens normal diplomatic relations with Vietnam signalling a further step along the path of rapprochement;

1996&emdash;The United States begins negotiations with Vietnam on a Bilateral Trade Agreement that would improve the trade opportunities available to U.S. and Vietnamese firms;

1997&emdash;For the first time in almost twenty-five years, the two nations exchange ambassadors. President Clinton appoints former U.S. Congressman and prisoner-of-war, Douglas "Pete" Peterson to be the U.S. Ambassador to Vietnam;

1998&emdash;Vietnam joins the Asia Pacific Economic Cooperation (APEC) forum;

1998&emdash;The United States grants the first waiver of the Jackson-Vanik amendment extending U.S. export promotion and investment support programs to Vietnam. The waiver was then renewed in 1999 and 2000;

1999&emdash;Through intense trade negotiations, the United States and Vietnam reach an Agreement in principle on key provisions of the Bilateral Trade Agreement;

2000&emdash;The United States and Vietnam reach final Agreement on the Bilateral Trade Agreement, fulfilling the goal of negotiating a comprehensive trade Agreement with Vietnam that would advance reform by leading to significantly more open markets and to Vietnam's committed integration into the global economic community.

2001&emdash;The world continues to wait as the U.S. Congress holds off on passing the Bilateral Trade Agreement.

As liberal economist Adam Smith would have said and economist today do say, trade is the key to prosperity. Economists have long known trade between nations increases wealth within nations. This is specifically due to the fact that trade encourages cities, regions, and nations to specialize in those goods they can produce relatively efficiently, for which they have what is called a comparative advantage. A country's comparative advantage can come from many places within its society: from its work force, in its natural endowments, in its culture, and in its local knowledge. All countries have a comparative advantage in some products or ability. Developing countries where labor costs less often concentrate on industries which employ many people, or "labor-intensive," such as textiles and toy manufacturing. Countries where labor is expensive tend to concentrate on products which require investments in technology. As a basic principle, when nations trade, they tend to buy products from overseas which are relatively difficult and expensive for them to produce at home and to sell products to other countries which are relatively cheap and easy for them to produce. This two-way trade lowers costs and increases production, employment, incomes, and welfare in both countries. It is a fact that trade never benefits only one country at the expense of the other.

It may be hard for some to believe, including many anti-globalizationists, that free trade really does increase incomes and wealth of all countries, but the history of the world proves this to be correct. In fact, every wealthy of the world achieved their position due mainly to the fact that they were great trading nations. Thus, no nation can achieve continued economic growth without lowering its own trading barriers. If one country shuts off its market to foreign investors and competition, its industries, laborers, and economy will suffer losses and decline. Recognizing this fundamental truth, the ASEAN countries have agreed to open their regional market, just as large regional markets have been opened in Europe and North America.

Within South-East Asia, Vietnam's annual per capita income is only approximately $300, far below that of many neighboring countries. Vietnam cannot hold off until local economic conditions have improved to open its markets. Trade is the best way to improve those conditions. Furthermore, Vietnam's companies will be made stronger by forcing them to compete with international companies. The only proven way for Vietnam to industrialize and modernize is to expose its industry to domestic and international competition and obtain access to new markets and better technology through trade with the rest of the world.

The Bilateral Trade Agreement is the result of months of haggling on the specific reforms that will be implemented by Vietnam to allow American investment, as well as the access that will be given to Vietnamese exporters to the United States market. First and foremost, the most important benefit to Vietnam will be America's granting of Normal Trade Relations status. With Normal Trade Relations, Vietnam's exporters will have access to the massive U.S. market on a competitive basis, greatly enhancing Vietnam's ability to export and to attract foreign investment. This will ultimately lead to the development of new industries in Vietnam. Many U.S. companies and individuals in a large variety of industries have expressed interest in doing business in Vietnam. This Agreement will further send a positive signal to those interested investors about Vietnam's commitment to integrating into the global economy. The resulting growth of new industries will create millions of new jobs for the Vietnamese people, which in turn will improve the quality of life in Vietnam. Furthermore, and most monumentally, the implementation of the U.S.-Vietnam Bilateral Trade Agreement will mark the complete normalization of the two countries' economic relationship. From the point of view of the Vietnamese, this Agreement is the economic ingredient needed to establish a secure, competitive, and prosperous Vietnam for the future.

It is important to understand why the Bilateral Trade Agreement is even necessary for bilateral trade to commence. Under U.S. law, the United States cannot extend Normal Trade Relations to countries in transition like Vietnam without a Bilateral Trade Agreement (BTA). The purpose of the Agreement is to ensure trade rules are clear, to stimulate and increase trade, and to help Vietnam achieve economic integration, including accession to the World Trade Organization (WTO).

This Agreement provides the same arrangements that the United States has with other nations with Normal Trade Relations status, including developing economies such as Bulgaria, Mongolia and Kyrgyzstan. In fact, only Iraq, North Korea, Cuba, and Vietnam don't currently have NTR status. These relations are based on international norms including those standard to entry into the WTO. Thus, this Agreement will further Vietnam's path toward formal accession to the WTO. Moreover, the United States recognizes that Vietnam will require transition years to meet some of these standards that would be easier for a developed nation and has built those years of transition into the Agreement.

Of the two nations, Vietnam has the most to gain. After decades of isolation from the global market, the nation has the opportunity to build its infrastructure to a level unprecedented in Vietnam's history. First of all benefits, new industries will be built up to fill the demands of the huge American market. Estimates prepared for the World Bank suggest Vietnam could increase its exports to the United States by nearly eight hundred million dollars in the first year of the trade Agreement. There will also be other positive effects on Vietnam's economy. By stimulating competition and its associated domestic reforms, the Agreement will lower costs to Vietnamese consumers and promote modernization throughout the country.

Furthermore, the new industries would create thousands of jobs within Vietnam. Vietnam's manufactured exports are currently a small part of its economy (only $30 per capita vs. $660 per capita in Thailand). Obviously, there is enormous potential to expand this sector of the economy. Also, Vietnam's workers will be exposed to advanced technology and modern management, which will bring greater access to job training and more opportunities for economic advancement (upward mobility). Vietnam will gain greater access to financing and market information. The Agreement will also help establish a fair and level playing field for all established Vietnamese businesses and will expand opportunities for all businesses, established and future, to take advantage of the large ASEAN market.

Within the Agreement, Vietnam has committed to a strong protection on intellectual property. This will encourage the flow of new technology and international financing to Vietnam. Thus, Vietnamese businesses will be able to use more modern technology in manufacturing processes, thus increasing the nation's output ability.

As most of Vietnam works in the farming industry, the Agreement will stimulate agriculture and raise farmers' incomes. For example, by lowering import tariffs on components of animal feed, production will be increased and lower costs of animal products will be gained. Agricultural exports will increase, and profits will be maximized. Further, established farms will be able to compete on a global scale. Farmers outside of Hoi An, in central Vietnam, will be able to sell rice to restaurants in Atlanta, Georgia.

As business profits and individual incomes rise, the cost of many goods and services will decline in Vietnam as a percentage of average worker income, just as it has in every other trading nation. Government tax revenue will increase as business profits increases, enabling increased government spending for education, health care, roads, water purification plants, and electric power to benefit the people.

The Agreement with the United States is a guide for making practical changes gradually over a number of years to the Vietnamese economy. Of course, Vietnam must make these changes anyway to integrate economically and join the WTO, where it now only has "Observer" status. Furthermore, trade liberalization will be implemented and lead to other types of reforms. The changes will be beneficial in number of ways to the future economy and society of Vietnam. The Vietnamese citizens will be able to buy higher quality goods at lower prices. New marketing methods will be implemented in Vietnam with the introduction of capitalist principles. An efficient financial system will channel savings to the most productive uses, including education and healthcare. More people will open bank accounts, domestic savings will rise, and obtaining loans for start-up businesses and homes will be at lower interest rates. Laws and regulations will be more open and transparent. Government officials will be better paid and educated. Industries will demand and support the development of an educational system appropriate to the needs of a modern economy and a highly trained workforce. The emphasis will be on skills like languages, mathematics, science, and also social studies like government, law, economics and finance. Universities will have more money to increase their enrolment, allowing many more Vietnamese students to go to college. In the end, with Vietnam's economic liberalization will come social stability and eventual political reform.

On its ratification by the U.S. Congress and Vietnam's National Assembly, the Agreement will create a remarkable new set of export opportunities for Americans&emdash;farmers, high-tech manufacturers, financial services, and telecommunications providers will all be able to enter into competition with previously state-run industries. Furthermore, the Agreement will make Vietnam more attractive as a site for investment, by promoting modern regulatory policies in a wide range of industries, strengthening intellectual property rights in coherence with WTO standards, helping to ensure equitable treatment for foreign investors, and strengthening transparency and consistency in law, administration, and regulatory policy.

The policy of normalization with Vietnam has led to strengthened cooperation on the fullest possible accounting of U.S. soldiers missing from the war. Since 1993, the United States has undertaken 39 joint field activities with Vietnam, repatriated 288 possible sets of remains, and identified the remains of 135 formerly unaccounted for American servicemen. Over 500,000 Vietnamese have emigrated as refugees or immigrants to the United States and only a small number of refugee applicants remain to be processed. This is a sign that tight political controls of the government have been decreased through Vietnam's interaction with the United States. Enhanced cooperation in combating narcotics trafficking, promoting human rights and religious freedom, and expanding economic linkages are all a result of this bilateral relationship. The human rights dialogue between the two nations, which began in 1993, has led to the release of many political prisoners and some improvements in the overall situation for the Vietnamese people. These are all in the interest of the United States, as a secure and open Vietnam will lead to a more secure Asia. As Vietnam has entered into ASEAN and APEC, the nation's ability to strengthen the economic viability and overall security of South-East Asia has increased dramatically. With the addition of the Bilateral Trade Agreement, the United States will gain more of a strategic foothold in the Asian region, economically, militarily, and politically. It is necessary for the United States Congress to pass the U.S.-Vietnam Bilateral Trade Agreement as soon as possible.

Currently, the Bush Administration is pushing to include the Agreement in a comprehensive trade package that will be open to modifications and amendments. The addition of this Agreement into that package would essentially kill the opportunities mentioned above. If amendments were made, the United States would have to go back to the Vietnamese to renegotiate on each term. This could upset, not only economic, but complete bilateral relations that negotiators and diplomats have worked so hard to achieve. The current Agreement is signed, sealed, and needs to be delivered by the United States Congress immediately.

The people of Vietnam vastly need economic liberalization, political reforms, and social mobility. With the signing of the U.S.-Vietnam Bilateral Trade Agreement, the South-East Asian nation is in a prime position to accept the foreign capital, have access to the largest market in the world for the nation's exports in the form of the United States, and develop potential for the freedoms that are celebrated in democratic countries. The government of Vietnam realizes this opportunity and hopes to bring in the economic reforms, while maintaining social stability. Like its neighbor to the north, China, it is understood by Vietnam that trade with the United States will be a good thing for the previously commercially isolated nation. Furthermore, the United States will gain increased market access to people of Vietnam for American exports, as well as the opportunity for investment and infrastructure building. The Agreement, signed in July 2000, will yield significant economic benefits to both nations.

Furthermore, through increased trade with the United States, Vietnam will bring greater stability and economic strength to the other members of ASEAN. As Vietnam brings in sweeping reforms, so too, it is hoped, will Vietnam's neighbors, including Laos, Cambodia, and Myanmar (Burma). Through this increased level of globalization, the possibility of having another financial crisis, like the one in 1997, will hopefully be lessened. The benefits are clear, and the hold-up in the United States Congress must end immediately. As the legacy of the war in Vietnam continues to plague its many unfortunate participants, the Bush Administration must realize that the passing of this Agreement, on its own merit, will provide economic growth for both Americans and Vietnamese, as well as complete a long path toward full normalization of relations between two former enemies.

Far Eastern Economic Review website, http://www.feer.com

The History Place website, http://www.historyplace.com/unitedstates/vietnam.

The New York Times Online, http://www.nytimes.com.

Republic of Vietnam Embassy in Washington, D.C. website, http:// www.vietnamembassy-usa.org.

"South-East Asia on a shoestring," Lonely Planet Guidebooks, 2000 ed.

United States Department of State Information website, http://usinfo.state.gov.

The United States Embassy in Hanoi website, http://usembassy.state.gov/vietnam/wwwhhome.html

The World Bank Website, http://www.worldbank.org/eap/vietnam.html