The accord knocks down remaining trade barriers between the two countries, which saw bilateral trade rise almost 22 percent last year to nearly $8 billion. The deal ends U.S. quotas on Vietnamese textiles and garments and gives American companies greater access to a growing Southeast Asian market.
The deal also was important to the Hanoi government because it wants to become a WTO member before it hosts the Asia Pacific Economic Cooperation summit in November, which President Bush is scheduled to attend.
A vote in the U.S. Congress still is needed for the trade pact to take effect.
U.S. trade officials have been active elsewhere in Asia. Talks opened this week between American and South Korean trade representatives, who are trying to hammer out a free trade agreement before the end of the year.
South Korea is America's seventh largest trading partner. Analysts say that makes a potential deal with Korea the most significant free trade pact since the U.S. signed the North American Free Trade Agreement with Canada and Mexico more than a decade ago.
Meanwhile, India announced it is pondering a significant cut in its subsidized wheat sale program by reducing limitations for wheat imports by two million metric tons. In India, the government buys wheat and rice from farmers and then sells the commodities to consumers at highly subsidized rates.
The change in the domestic program would further boost wheat imports by India.