	Background

On July 13, 2000, after nearly five years of bargaining, the U.S. and Vietnam announced theyhad signed a bilateral trade agreement (BTA). It entered into force on December10, 2001 when the two countries formally exchanged notices of acceptance. The BTA is a major step toward fully normalizing U.S.-Vietnam commercial relations, as it restores reciprocal most-favored-nation (MFN, also known as normal trade relations [NTR])treatment between the two countries, and commits Vietnam to undertake a wide range ofmarket-oriented economic reforms. tariffs on most imports from Vietnam. Restoration of Temporary MFN Status to Vietnam. Under Title IV of the Trade Act of 1974, MFN treatmentmay be restored to NME countries after two requirements have been met: 
a) The President issues a determination that the country is not in violation of the freedom-of-emigration requirements of the Jackson-Vanik amendment. (7) Such anagreement requires approval by the Congress(and by the Vietnamese National Assembly). The approval of the BTA allows thePresident to extend temporary MFN tariff treatment to Vietnam. Additionally, each extension will require a presidential determination that Vietnam is satisfactorilyextending reciprocal MFN treatment to U.S. exports. Vietnam and the World Trade Organization (WTO). Vietnam's Path to Commercial Normalization with the United States

	U.S. and Vietnamese Interests in a Bilateral Trade Agreement

U.S. Moresectors will be open to U.S. multinationals. The World Bank has estimated that Vietnam's exports to the U.S. will rise to $1.3 billion- more than 60% over 2000 levels - in the first year of MFN status, as U.S. tariff rates onVietnamese exports would fall from their non-MFN average of 40% to less than 3%. In particular, Vietnam's clothing exports are expected to increase dramatically. Banking Services. Telecommunications. 4) Investment

Regarding investment , the U.S.-Vietnam trade agreement includes guarantees of MFN treatment, national treatment, transparency, and protection against expropriation. Comparison with the 1999 "Agreement in Principle"

In July 1999 the U.S. and Vietnam announced an "agreement in principle" on a BTA, but for nearly a year Vietnam delayed finalizing the deal because of intense divisions among the VietnameseCommunist Party (VCP) leadership (see the following section for an analysis of the reasons forVietnam's hesitation). The U.S. agreed to this concession, but in exchange received significantlyshorter phase-in periods. (27)

	Vietnam's Ambivalence toward Economic Integration

Though the U.S. and Vietnam reached an agreement in principle on the BTA in July 1999, fornearly a year Vietnam delayed signing the deal.
On July 13, 2000, U.S. and Vietnamese negotiators signed a sweeping bilateral trade agreement (BTA). Following affirmative votes in Congress and the Vietnamese National Assembly, the BTAentered in into force on December 10, 2001, when the two countries formally exchanged lettersimplementing the agreement. Under the deal, the U.S. will extend temporary most-favored nation(MFN, also known as normal trade relations [NTR] status) status to Vietnam, a step that willsignificantly reduce U.S. tariffs on most imports from Vietnam. The World Bank has estimated thatVietnam's exports to the U.S. will rise to $1.3 billion - 60% higher than 2000 levels - in the firstyear of MFN status, as U.S. tariff rates on Vietnamese exports will fall from their non-MFN averageof 40% to less than 3%. In particular, Vietnamese garment exports are expected to record a tenfoldincrease in the first year after receiving MFN treatment.
In return, Hanoi agreed to undertake a wide range of market-liberalization measures, including extending MFN treatment to U.S. exports, reducing tariffs on goods, easing barriers to U.S. services(such as banking and telecommunications), committing to protect certain intellectual property rights,and providing additional inducements and protections for inward foreign direct investment. Vietnamis the world's 13th most populous country, with 78 million inhabitants, roughly equal to thepopulation of Germany. The U.S. and Vietnam reached an agreement in principle in July 1999, butfor nearly a year Vietnam delayed finalizing the deal because of intense divisions among theVietnamese Communist Party (VCP) leadership.
Under the requirements of Title IV of the Trade Act of 1974 - Section 402 of which is commonly referred to as the "Jackson-Vanik amendment" - signing a bilateral trade agreement isa necessary step for the U.S. to restore MFN treatment to certain socialist countries, includingVietnam. Congressional approval of the BTA will allow the President to extend MFN treatment toVietnam. Such MFN status will be conditional because - as with all Title IV BTAs - it will requireannual Presidential extensions, which Congress could disapprove.
This report outlines the terms of the BTA, identifies U.S. and Vietnamese motivations for entering into the deal, analyzes the reasons for Vietnam's delay in signing the agreement, andexplains Congress' role in the process of restoring normal trade relations treatment to Vietnam. This report will be updated periodically. Further information on U.S.-Vietnam relations is available inCRS Issue Brief IB98033, Vietnam-U.S. Relations . Further information on the legislative and legalprocedures for handling the BTA is available in CRS Report RS20717 , Vietnam Trade Agreement:Approval and Implementing Procedure .