WASHINGTON ?Vietnam has agreed to abolish "prohibited" subsidies to its textile and apparel industry as part of a trade deal it reached with the U.S. here Sunday, marking a major step in the Southeast Asian country's bid to join the World Trade Organization.
The U.S. and Vietnam announced an agreement in principle Sunday after five days of talks here and expect to sign the deal in the near future, possibly as early as June.
Vietnam is trying to become the 150th member of the WTO, which would bring it into the mainstream of global commerce, lowering tariffs, attracting foreign investment and eliminating quotas on its apparel exports. The U.S. would receive substantially lower tariffs on its industrial and agricultural exports as well as more market access in services as the country becomes more market driven.
One of the sticking points in the trade negotiations between the two countries centered on Vietnam's subsidies to its apparel industry and the potential threat unrestrained imports pose to the U.S. textile industry.
Apparel and textile imports from Vietnam are now limited by quotas that will be removed if the country's bid to join the WTO succeeds.
Textile groups were pushing U.S. negotiators for continued restrictions on Vietnam, either through an extension of existing quotas or a special textile safeguard mechanism similar to the one with China, while import representatives argued that the goods should be unrestrained.
"First, we secured a very tough commitment from the Vietnamese that they will completely abolish all prohibited subsidies to the textile industry before they accede to the WTO," said a senior U.S. trade official, who briefed reporters with another official in a conference call on Sunday. "Secondly, we have built in an unprecedented enforcement mechanism ... and have the ability to reimpose quotas for a period if they don't comply with their obligations within the first 12 months of accession."
If the U.S. believes Vietnam has not complied by eliminating all prohibited apparel and textile subsidies by the date it joins the WTO, it will first seek consultations with Vietnam and if the consultations do not yield results, the U.S. reserves the right to seek a determination by a WTO arbitrator on an expedited schedule of 120 days. If the WTO arbitrator determines Vietnam is in violation of its WTO commitments, the U.S. has the right to reimpose quotas on Vietnamese apparel and textile exports for a year at the level provided for in the current textile quota agreement, the U.S. trade official said.
