MCA Trade Indicator For Vietnam

UNCLAS HANOI 001056 SIPDIS STATE FOR E, EB, and EAP STATE PASS USTR FOR EBRYAN STATE ALSO PASS USAID ANE AFERRARA and LBRADY TREASURY FOR OASIA USDOC FOR 4431/MAC/IFP/OKSA/HPPHO BANGKOK FOR USAID SENSITIVE E.O. 12958: N/A TAGS: EAID EFIN ETRD ECON VM SUBJECT: MCA Trade Indicator For Vietnam SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY. ¶1. (SBU) In clearing the two-page Millenium Challenge Account Summary on Vietnam, we noted a problem with the data on Vietnam. On the Economic Freedom Indicator on Trade Policy, we note that Vietnam's indicator has not changed since 1999 despite significant changes in trade policy, e.g. signing, ratification and implementation of the Bilateral Trade Agreement. We found that this indicator is based on the Heritage Foundation's Index of Economic Freedom, which measures trade policy by using the World Bank's weighted average tariff rate for Vietnam. The Heritage foundation website contains data as of 2001. ¶2. (SBU) We have two concerns with this measure. First, the measure itself is static, not dynamic. It does not capture the significant shift from non-tariff barriers and quotas to tariffs in recent years. Such a shift shows clearly that the GVN is greatly improving the transparency of its trade regime. The publication last year of a tariff schedule is another major step forward for Vietnam. Although the Heritage Foundation Quick Study describes progress for Vietnam, this is not reflected in the index. Despite these significant changes, no progress is reflected in the quantitative data on the website or in what is presented as the objective criteria for Vietnam in the MCA brief which remains constant at a level of 5.0 (the lowest score possible on this indicator's scale). ¶3. (SBU) Tangible proof that Vietnam's trade policy under the BTA and other bilateral agreements as well as the ASEAN trade commitments is changing can be shown by the increase in trade. To cite the US example: Two-way trade between Vietnam and the U.S. has risen from about $1.5 billion for 2001 (the BTA took effect in December 2001) to $6 billion at the end of 2003. Vietnam imported $2 billion from the U.S. last year. As for overall trade, Vietnam imported about $25 billion and exported about $20 billion. Vietnam's trade regime may not yet be perfect, but it certainly merits a better score than others who receive 5.0 in this indicator such as North Korea, Libya and Burma. ¶4. (SBU) COMMENT: If we are to achieve the MCA's goal of convincing governments to change to fair, equitable and objective rule of law systems, we need strive to insure that our criteria are objective. END COMMENT. BURGHARDT