VIETNAM: Legalities Dampen Enthusiasm for WTO

By IPS Correspondents Reprint | | Print |

Tran Dinh Thanh Lam

HO CHI MINH CITY, Jun 4 2006 (IPS) - Now that the path has been cleared for Vietnam’s accession to the World Trade Organisation (WTO) this year, traders in this communist country fear that they are unprepared to meet the challenges of a market economy.

On Wednesday Deputy Trade Minister Luong Van Tu and U.S. Deputy Trade Representative Karan Bhatia signed a bilateral market access deal in this city that would facilitate Vietnam’s entry into the trade body.

But the arrest for trade fraud of the deputy director of An Giang Fish Exports (Afiex), Buu Huy, in Belgium on May 10 has dampened excitement over the deal.

“The good news is the world market is now open for us, and the bad news is that many of us are still not ready and feel very vulnerable,” Nguyen Minh, who runs a garment company here, told IPS.

In May, Florida state’s attorney general filed a lawsuit against two U.S. importers and four Vietnamese seafood companies – Afiex, Mekongfish, Cafatex and Coseafex – for alleged trade fraud in catfish trade between the two countries. A warrant was issued for Huy’s arrest.

Afiex was accused of exporting 454 tonnes of catfish to the United States using different appellations to avoid the high dumping tariffs that the U.S. department of commerce had levied on Vietnamese catfish.

The Vietnam Association of Seafood Exporters and Producers (VASEP) has appealed for Huy’s release.

“We need to state clearly that Vietnamese seafood exporters are not responsible for paying taxes to the U.S. authorities, so they mustn’t be considered as trying to avoid U.S. taxes,” VASEP General Secretary Nguyen Huu Dung said May 23. “The people who have to pay tax there are the U.S. importers.”

Huy faces fines of 250,000 U.S. dollars and a five-year jail term. Other exporters could be fined 500,000 dollars and forced to pay all the necessary taxes, including the high dumping tariff levied on the volume of catfish exported from May 2002 – April 2005.

A director of a private seafood company (who refused to be named) told IPS that U.S. importers were to be blamed in the Afiex case since they had provided the Vietnamese seafood exporters with the labels and packaging.

Yet speaking to local journalists, the president of the Association of Seafood Exporters and Processors (AASEP), Nguyen Huu Khanh, said his organisation had tried many times to persuade Huy to “do business in the right way”.

“I think they know of the need for clear, legal business operations so as to avoid regrettable results,” Khanh added.

Trade between the United States and Vietnam has steadily increased since the two countries signed a bilateral agreement in 2001, reaching nearly eight billion dollars in 2005.

But many people here are warning about Vietnam’s post-WTO challenges, including economist Le Dang Doanh. “The main question now is to reform our economy. WTO will not allow earning good money by turning out false products.”

Experts at VASEP admitted that the new trade scandal had shaken them up but objected to the criminalisation of disputes or mistakes that occur in international trade. “The safety of businessmen working in foreign countries must be ensured, as this is a necessary condition for maintaining international trade activities,” Dung said.

As Huy could be detained in Brussels for at least 30 days – the time for courts to consider the legality of his extradition – VASEP experts advised Afiex to hire a lawyer in Brussels to defend Huy, and another one in Florida should he face trial there.

“Huy is not the sole exporter to adopt that way of doing things,” Minh said. “They export products made in Vietnam with trade-marks given by foreign importers.” Garment and footwear manufacturers, who are mostly subcontractors to foreign suppliers, follow similar methods, added Minh.

“Doing business in the time of globalisation is not an easy game and many Vietnamese are yet to understand it. Even though everything seems fine, you must be ready for some misadventures, dumping charges for instance,” Minh said.

In July 2005, the European Commission imposed high anti-dumping tariffs against Vietnam’s leather shoes, saying the volume of Vietnamese products had increased by over 95 percent since 2001. China was also accused of dumping after shoe exports grew 1,000 percent in the same period.

The EC said the increased imports caused local footwear production to drop by 30 percent putting 40,000 European workers on the streets.

The president of the Vietnam Leather and Footwear Association, Nguyen Gia Thao, estimated that with the new tariffs more than 500,000 workers employed by footwear makers would be affected and about 90,000 would lose their jobs.

“Not having a market economy appears to be Vietnam’s fault in most of the dumping price cases,” Minh said, pointing out that both the United States and the EC have charged Vietnamese firms with not obeying market economy mechanisms.

Lawyer Nguyen Van Dai said that even after Vietnam joins the WTO, it would only be recognised as having a market economy after 12 years. “The market economy issue remains a kind of Damocles’ sword that will be hanging over Vietnam for the next 12 years and Vietnamese companies should be aware of that,” Dai said.

According to Olivier Massmann, a member of the European Chamber of Commerce (Eurocham) executive committee and a lawyer, Vietnam’s legal system still has “shortcomings in fields such as dispute resolution and protection of intellectual property rights”.

“It will be certainly a great challenge for the country to compete in the global market and comply with its commitments in the future,” Massmann added.

For Khanh of AASEP, the on-going trade scandal will serve as a lesson for businesses that “evade the laws of the game”. His association will do everything possible to assist Huy and seafood companies involved in the catfish case. “We should also learn to do some lobbying,” he added.

“The trade scandal is not settled yet. Maybe Huy and companies could prove they are not guilty, and side-step the trial. But the prestige of Vietnam’s fish and of Vietnamese companies will suffer,” Khanh said.

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