Quick deal sets pace in Vietnam-EU relationship

Date: 11/12/1997

VIETNAM and the EU have ended a stand-off over a new textiles accord by agreeing a fresh four-year deal, although a series of other disputes still cloud relations.

European officials are pushing Hanoi for trade restrictions against western goods in the insurance, pharmaceuticals and alcoholic drinks sectors to be lifted as soon as possible.

In insurance, the state-owned Vietnam State Insurance Company still has a monopoly over the whole industry, although European companies are clamouring to gain a foothold. The US is also negotiating to win favourable entry terms for its companies.

The Commission has taken up the complaints made by western pharmaceuticals companies about Vietnam's selective entry conditions for their products. Specialised pharmaceuticals, for which Vietnam has no local equivalents, are given relatively easy access to the local market.

However, more common drugs are often denied entry or face a long local certification process. This is particular irritating for European firms since EU tests are regarded as much more stringent than those in Vietnam.

The same protection for local products has been extended to alcoholic drinks, especially spirits, where European imports are discouraged by high import duties, although Vietnam has allowed European companies to set up their own manufacturing plants.

The textiles deal has, however, demonstrated that difficult disputes can be resolved speedily. The new agreement was put together in almost record time after serious negotiations were launched in September. The existing trade agreement expires at the end of the year.

The deal, which should be ratified by both sides by the end of the year or early in 1998, offers Vietnam a 30&percent; increase in its existing quota, although the number of items covered by quotas will be cut from 54 to 29.

Hanoi will also push through a programme of cuts in import duties on garments and textiles coming from the EU. It should also, say Union officials, open the way for European companies to enter into more joint ventures with local firms.

Textiles are a key export earner for Vietnam, with sales to the Union worth around 400 million ecu in valued hard currency every year - just under half of the country's export total to Europe.

Vietnam is currently running an annual trade deficit of around 2 billion ecu. It pushed the EU hard for a generous renegotiation of its textiles agreement despite concern among European producers, particularly in southern Europe, about the levels of third-world imports.