By Philip Newswanger, Inside Business - Hampton Roads, December 4, 2006

House Republicans stalled a vote on normalizing trade relations with Vietnam on the eve last month of President Bush’s tour of Southeast Asia and his attendance at the Asia Pacific Economic Conference, to which America belongs.

The delay puts in question whether Congress will give the president “fast-track” authority to negotiate trade deals, a provision that gives the executive branch carte blanche in negotiating trade deals with other countries or creating regional trade blocs.

Even so, the World Trade Organization has accepted Vietnam as a member. The global body is supposed to arbitrate trade disputes between countries and reduce regulatory and tax barriers to trade.

However, its biggest members, the United States and the European Union, squabbled over farm subsidies, deadlocking trade talks since 2001 in Qatar, known as the Doha Round.

Jim Flinchum, managing principal of Bay Capital Advisors in Virginia Beach, asserts that the deadlock over farm subsidies is misguided.

“The political problem is that politicians assume the farmers will get sacrificed for the benefit of everybody else,” said Flinchum, a free-trade economist. “There is something sentimental about farmers in the American psyche.”

Because of that sentiment, the House delay on approving normal trade relations with Vietnam will make it impossible to extend Bush’s fast track authority, which expires next summer, Flinchum said.

“Without that, he will have to submit any trade agreement he negotiates to Congress for ratification,” he said.

The odds of Congress ratifying any trade agreement are slim, he said.

“Any agreement results in losers, who hire lots of lobbyists,” Flinchum noted.

The U.S. and Vietnam negotiated a bilateral trade agreement in 2001, giving both sides access to lower tariffs and fewer restrictions. The agreement, subject to certain conditions, must be renewed by Congress every year. Normalizing trade relations would have meant that the agreement would not have to be renewed every year.

Vietnam struggles beneath the shadow of China, similar in physical size to America but with a population of 1.3 billion. The communist party governs Vietnam, the size of New Mexico with a population of 84.4 million.

Normalizing trade gives Vietnam an edge over its neighbors and competitors in its trade with America.

Trade between the U.S. and Vietnam increased to $6 billion in 2005, according to the U.S. State Department, though trade tilted in favor of Vietnam, which sold six times more goods to America than America sold to Vietnam.

Vietnam exported $5.93 billion of goods to the U.S. and imported $0.86 billion of U.S. goods.

This is a fraction of the $285.4 billion trade The People’s Republic of China enjoys with America. U.S. trade deficits with this communist-governed country have become standard since China joined the WTO in 2001.

Trade with Vietnam doesn’t register nearly as high as trade with China with state and port officials. Rarely do state officials bent on economic development and trade trek to Vietnam.

Virginia’s port trade with Vietnam is less than 1 percent of the port’s total business. In 2005, U.S. firms exported 2,506 20-foot container units to Vietnam, according to figures supplied by the Virginia Port Authority. U.S. firms imported 6,748 container units from Vietnam, mostly coffee, spices and crude rubber.

The U.S.-Vietnam Trade Council says that Virginia firms exported $12 million worth of goods to Vietnam in 2005. Wood products accounted for 23 percent of Virginia’s exports to Vietnam.

The council, a booster for U.S.-Vietnam trade, says that the tariff on Virginia’s wood products will be reduced to 4 percent if Vietnam attains normal trade relations with the U.S. and becomes a member of the WTO.

The council warned that Virginia exporters will lose if Vietnam doesn’t attain normal trade relations with the U.S.

“Foreign competitors will get the benefit of the lower trade barriers required by the WTO as Virginia companies and workers watch from the sidelines of an uneven playing field,” the council said in a position paper.

Flinchum feels that globalization is good for the world in the long run and there is no turning back to protectionist policies.

“If we ignore it, we will get run over by it; we need to manage this risk, not ignore it, and the Doha Round is our best opportunity,” Flinchum said. “Without this, globalization will proceed with bilateral agreements or maybe regional agreements, albeit more slowly.”

“This bilateral approach is far less efficient and more likely to get bogged down in tangential issues, such as security alignments,” Flinchum said.

Flinchum asserts that there is a substantial peace dividend to globalization.

“Economic interdependence makes war less likely,” he said. IB