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Posted on 10/04/2001 3:48:36 AM PDT by Cagey

HANOI, Vietnam (AP) - Vietnam praised the U.S. Senate's passage of a historic trade agreement that will give this small communist nation access to the world's largest market.

By removing the last commercial vestige of the Vietnam War, the pact also completes the process of normalization that started five years ago with the establishment of diplomatic ties between the former foes.

In the immediate future though, it's unlikely there would be a flood of American or foreign investment. And some worry that economic gains for Vietnam - chiefly in the export of manufactured goods - will be curtailed in the wake of terrorist attacks in the U.S. last month.

"We welcome the U.S.'s ratification of the Vietnam-U.S. trade agreement and consider this an encouraging point in the normalization of bilateral relations," said Foreign Ministry spokeswoman Phan Thuy Thanh.

Under the agreement passed by the U.S. Senate in Washington on Wednesday, Vietnamese goods and services will be given the same low tariffs enjoyed by most nations - dropping from an average of 40 percent to about 4 percent.

In return, Hanoi will implement wide-ranging liberalization measures to open up its state-controlled markets to U.S. companies. The deal would introduce an unprecedented level of competition and financial openness.

But overall, Vietnamese exports are already taking a hit in the wake of the attacks. The year's export target of $16.6 billion has been revised to $16.1 billion, according to the Ministry of Planning and Investment.

The World Bank had originally estimated that the trade pact could double Hanoi's annual export revenues to the U.S. by an extra $800 million in the first year alone.

But given the current economic downturn in the U.S. as well as the impact from the terrorist attacks, it becomes clear those figures are unlikely, said Kazi Matin, chief economist for the World Bank in Vietnam.

"We'll get some growth - mainly in manufactured goods - but nowhere near what we might have expected. Still, we believe that Vietnam is highly competitive. It can do well if it finds a niche market," Matin said.

Others agree, saying that Vietnam can still count on growth to be 20 percent to 30 percent.

"Even with the world situation, Vietnam will still see some growth because most of the products we export will have much lower tariffs," said Do Duc Dinh of the Institute for World Economy in Hanoi.

The trade agreement still needs to be ratified by Vietnam's National Assembly, which is scheduled to meet in November. Recent tensions had surfaced over a proposed human rights bill, which Hanoi had felt was linked to the trade bill.

"In our opinion the fact that the U.S. Senate did not bring to vote the so-called `Vietnam Human Rights Act' was a positive step," said Thanh.

The U.S. businesses community in Vietnam expressed satisfaction that the deal had finally been ratified.

"A lot of work went into this over a long period of time. We feel this is a big step in moving forward relations between the two countries," said Adam Sitkoff, director of the American Chamber of Commerce in Hanoi.

"It does present a framework that makes it a more favorable climate for American businesses to come to Vietnam."

Economist Dinh said it could be a few years before the full economic benefits of the market-liberalization pack kicks in.

"You'll see a lot of preparation rather than actual action. American companies have been exploring the market, but not acting. A lot has to be done before actual trade takes place," he said.

Still, the ratification of the U.S.-Vietnam trade pact can't come soon enough for some Vietnamese companies who have waited for years to cash in on the world's largest market.

Phan Dinh Do, chairman of Vietnam Leather and Footwear Association, said he expects to see exports to the U.S. double within the first year. Currently, Vietnam only ships $120 million a year in shoes to the U.S.

Footwear giants such as Nike, which employs about 45,000 people at its five subcontractor factories, have indicated that they would increase orders from Vietnam once the trade agreement is implemented, Do said

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