In January, 1995, Vietnam applied for its entry to the World Trade Organisation (WTO) after which the organisation set up a working board on Vietnam, that included members from 38 nations and territories around the world. After 10 years of negotiations, the working board has so far voiced its support for Vietnam’s bid to enter the WTO. However, integrating into the WTO will provide many opportunities while posing a lot of difficulties and challenges to Vietnam that will require full efforts to overcome.

The-148 member WTO is the world’s largest trade body, accounting for 85 percent of total global commodities and around 90 percent of total global trade and service.

National weaknesses

Vietnam is considered a country with an almost complete legal system prior to WTO membership. However, the system is unspecific, unsynchronized and restricted by principled regulations, and thus has a large impact on the implementation process.

Towards implementing global commitments, in the initial period, State budget collection has been sharply reduced while the State had to handle payment balance deficits, provide employment, improve labour standards and boost business reforms. These activities require huge capital resources, high technical standards and significant human capacity.

Most Vietnamese enterprises operate on a small scale with little capital and low labour productivity. In addition, low technological levels are considered the largest barriers to increase businesses’ competitive capacity.

Domestic enterprises have not yet seized good opportunities to gain access to markets and are weak in settling international trade disputes.

When Vietnam joins the WTO, the removal of trade barriers, and tougher domestic competition will create profit losses for weak businesses and possible bankruptcies. The loss of jobs may cause unforeseeable social burdens.

In order to launch trade-related investment measures (TRIM), the national economy will have difficulties maintaining targets for developing domestic resources, increasing export volumes and boosting to a number of industrial sectors which have sensitive impacts on industrialisation orientations.

Intellectual property rights will be adversely affected. Under the WTO’s trade-related aspects of intellectual property rights (TRIPs) agreement, invention users have to pay usage fees wherever they live. In fact, most inventions are now owned by developed countries and they will continue to hold copyrights on them in the future. Hence, Vietnam will find it difficult to access advanced technology, thus leading to higher product prices and declining employment.

Weak areas

In terms of agriculture, 67 percent of the national population earn a living through farming. Agriculture production makes up around 25 percent of the country’s GDP and one-third of the total national export turnover.

The biggest challenge for the agricultural sector when Vietnam enters the WTO will be the fierce competition between domestic farm products and high-quality imported ones.

To implement intellectual property rights, farmers will have to buy breeds, materials and production materials at higher prices, leading to high production costs. While rich countries put pressure to open up the market, they also continued to provide support and set hurdles for the farm produce market. Therefore, the agricultural sector will find it difficult to implement self-protective measures after Vietnam joins WTO.

The low competitiveness of the industrial sector is a top concern for Vietnamese enterprises after joining WTO. Meanwhile, the protection of domestic production can only be carried out under certain conditions. Therefore, the industrial sector must accept an unequal game. Unless Vietnam makes great efforts, it will become a consumption market for foreign rivals after it joins the WTO. Vietnam’s automobile industry is also confronted with a lot of challenges. With a requirement to eradicate localisation, the sector has not had opportunities to continue to implement the localisation programme.

The service sector accounts for only 40 percent of total GDP. Most service enterprises are newly established and are likely to fail to compete with foreign rivals.

Besides, when joining the WTO, due to the appearance of wholly foreign-invested banks, the establishment of national monetary policies will be subject to changes in the global economy. Price fluctuations will increase the number of capital transaction activities, as well as risks in the banking system.

Social impacts

Global trade liberalisation will have a great impact on the income of labourers and may widen the gap between the rich and the poor. After becoming a WTO member, the salaries for skilled workers will increase while the risk of unemployment will also rise.

Reducing farm produce subsidies and removing tariff barriers will directly affect farmers’ incomes. Besides, due to differences between labour productivity and technical qualifications, the income gap between the agricultural sector and industrial sector will tend to increase. The gap between the rich and the poor will get larger, particularly between urban and rural areas, leading to inequality in access to social services. Poor people in rural areas will suffer from the most disadvantages.

In a recent seminar, Head of the Vietnamese negotiation group for WTO accession Mr Luong Van Tu said Vietnam is recognised as a country of political and social stability and one of the safest destinations in the region. Along with advantages of geography, labour force, natural resources, and improvements to the business environment, after becoming an official WTO member, the opening up of markets and increase in FDI inflows will speed up the country’s international integration process and socio-economic development. Therefore, it is necessary to have technical solutions and synchronised measures at the national level to limit the above-mentioned shortcomings.