Foreign Countries' Policies and Programs

U.S./Vietnam Bilateral Trade Agreement -
What's in it for Grain and Feed Commodities?

Recently, the United States and Vietnam concluded a bilateral trade agreement (BTA) after several years of on-and-off negotiations. There are few near-term benefits for grain and feed commodities, other than improved transparency and predictability of import procedures. Rice is still heavily protected, as would be expected for such a sensitive sector.

Here are highlights for grain and feed commodities. Note that tariff lines are maximum bound (not necessarily applied) rates and that the agreement applies to U.S./Vietnam trade only.

Wheat - Current duties on wheat remain at zero (see table below), although wheat (and corn) bindings are not part of the BTA. Foreign participation in importation and distribution is prohibited--and apparently will remain so--although local representatives of foreign companies often act as proxies for Vietnamese companies. State enterprises such as VINAFOOD II (Southern Vietnam Food Corporation) are joint venture partners and handle imports but other parastatal companies and government agencies have significant involvement and oversight. However, most purchasing decisions are made by the mills themselves. In fact, state importers often do not even "import;" instead, they become a party to the transaction by signing documents in exchange for a small (1-2%) percentage of the contract value.

There is no domestic production of wheat, but wheat-based foods are popular and well-established. The EU and Australia normally provide about 40-60% of total wheat and wheat product needs which have historically been predominately flour. In the last three years, however, there has been a significant shift to wheat imports as milling capacity expanded to its current level of about 750,000 tons. Total imports are estimated at 600,000 tons in 2000/01 (July/June) on a wheat equivalent basis.

A donation of 25,000 tons of U.S. wheat under Section 416(b) in FY 99 was generally well-received, but the only recent commercial purchases of U.S. wheat were 10,300 tons in August 1997, and 11,000 tons in January 1999.

Rice - There are no concessions in the agreement for rice so import, export, and trading rights and state trading enterprises remain heavily protected. Vietnam is the world’s second-largest rice exporter behind Thailand, and is expected to export 4.0 million tons in 2000. The country has recently begun to import small quantities of low-quality Cambodian rice for consumption.

Corn - Corn tariff bindings are not part of the BTA although the current applied rate on corn is already low at 5%. Licensing and transparency have been issues, however. Corn and other feed grain imports have so far been regulated through licensing and quotas, rather than by Government or state enterprises. A quota and license is required for each shipment, although it appears that some importers have sometimes received annual quotas and merely obtained licenses as needed.

"Quantitative restrictions" (understood to be licensing requirements) are phased out over four years. Restrictions on import trading and distribution rights are phased out over three and five years, respectively, after joint ventures are permitted (which itself is three years after entry into force of this agreement).

Vietnam produces about 1.6 million tons of corn and is expected to import 100,000 tons this year. In years past, the country had been a small but steady exporter. Some sources are optimistic that the country will be a sizeable importer of corn in the future, given the ongoing development of the livestock sector and given reports of aflatoxin in local corn. Imports of U.S. corn have totaled less than 10,000 tons the last three years.

Commodity	Current Applied Tariff	Tariff Binding after Three Years
Dried pulses	30%	Not covered in agreement
Wheat and durum	0%	Not covered in agreement
Rye, barley, oats	3%	3%
Corn	5%; also license requirement	Not covered in agreement; "quantity restriction" phased out
Rice	20% but import restrictions	Not covered in agreement; nontariff restrictions preserved
Sorghum	10%	5%
Wheat flour	15%	20%
Barley malt	5%	Not covered in agreement
Pet food (HS 2309.10.00)	10%	10%

Foreign Investment - Restrictions on foreign investment will still apply to some agricultural ventures (including those involving rice), as well as port development projects.

The BTA (and Normal Trade Relations, NTR) will come into effect upon ratification by both countries’ legislatures. It is subject to an exemption from the Jackson-Vanik Amendment (JV), a limitation on economic relations with non-market economies that limit emigration. Formal authority to annually recommend a waiver of JV lies with the President, although Congress has the right to disapprove it. Vietnam first received a waiver in early 1998, permitting it to be eligible for GSM credit packages and food aid programs, and so far the waiver has been successfully renewed by the President each year.

NTR would require annual renewal unless and until Vietnam and the United States complete negotiations for WTO accession. At this point there is no timetable for such a process. Unlike this particular agreement, which covers comparatively few items--similar to the U.S./China BTA of 1979--WTO accession negotiations would be comprehensive and cover all tariff lines.

The United States and Vietnam have completed an important step in furthering agricultural trade. How the agreement is implemented by Vietnam will, of course, be the "proof" of its effectiveness.

For further information, please contact Rick O’Meara at (202) 720-4933 or omearar@fas.usda.gov .