VIETNAM: AMBASSADOR'S CALL ON MINISTER OF TRADE

UNCLAS SECTION 01 OF 03 HANOI 002797

SIPDIS

SENSITIVE

STATE FOR EAP/BCLTV AND EB/TPP/BTA/ANA JBELLER
STATE PASS USTR FOR EBRYAN AND DSPOONER
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO AND OTEXA
TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: ETRD KTEX KIPR VM WTRO WTO BTA IPROP
SUBJECT: VIETNAM: AMBASSADOR'S CALL ON MINISTER OF TRADE
TUYEN

Ref: (A) HANOI 2620
(B) HANOI 2752
(C) HANOI 2697
(D) STATE 214134


1. (SBU) Summary: In a meeting October 12, Minister of
Trade Truong Dinh Tuyen told the Ambassador the GVN will be
well-prepared for bilateral market access negotiations with
the United States in October; that he hoped the United
States and Vietnam could close WTO negotiations in early
2005; and that although the GVN had closed its WTO bilats
with the European Union (EU) last week, the EU had "left the
hard negotiations for the United States." The Ambassador
reminded Minster Tuyen of upcoming Bilateral Trade Agreement
(BTA) obligations, urged the Minister to resolve impediments
to investment in the auto and insurance sector and briefed
him on the USG's new Strategy Targeting Organized Piracy
(STOP). End Summary.

WTO Accession Negotiations
--------------


2. (SBU) The Ambassador congratulated Minister Tuyen on
concluding bilateral WTO negotiations with the European
Union (EU) during the Asia Europe Meeting Summit (ASEM) in
Hanoi October 8-9. Minister Tuyen acknowledged that the EU
is an important trade partner for Vietnam and conclusion of
bilats with the EU will help speed up Vietnam's WTO
accession process. He asserted that although the EU
delegation made difficult demands of Vietnam during the
negotiations, the EU also took into account Vietnam's status
as a developing country. When the Ambassador said he hoped
the EU had not left the most difficult negotiations for the
United States, Minister Tuyen smiled and said he "thought
the EU had done just that."


3. (SBU) Minister Tuyen noted that while conclusion of
negotiations with the EU is significant, the United States
is Vietnam's most important trade partner. He assured the
Ambassador that the GVN is preparing carefully for bilats
with the United States at the end of October and would be
prepared to discuss both bilateral market access issues and
multilateral issues such as intellectual property rights
(IPR) and sanitary and phyto-sanitary (SPS) measures.
Minister Tuyen categorized the upcoming talks as a
"milestone" and expressed his hope that the United States
would have as "realistic" an attitude toward the
negotiations with Vietnam as the EU had. Minister Tuyen
told the Ambassador that he expects the GVN to conclude its
bilats with some partners, such as China and Japan, soon.
He noted that although initially he had not expected to
close with the EU so quickly, both sides had seized the
opportunity to close during ASEM. He expressed hope that
the United States and Vietnam could also come to an
agreement soon and not "miss the chance" to close in early

2005.

BTA Implementation
--------------


4. (SBU) Minister Tuyen assured the Ambassador that the
Ministry of Trade (MOT) is working to prepare for the next
round of BTA obligations that come due for Vietnam in
December. He noted that he had already assigned staff on
the Americas' Desk at MOT to summarize the upcoming
obligations and begin preparing for implementation. He said
that he believes implementation of the BTA is an important
step toward WTO accession.

Insurance and Autos
--------------


5. (SBU) The Ambassador reminded Minister Tuyen that U.S.
companies play an important role in the WTO accession
process and will have an important voice in the debate in
the United States Congress over Permanent Normal Trade
Relations status (PNTR) for Vietnam. The Ambassador noted
that American companies are interested in doing business in
Vietnam but are still cautious because they want the GVN to
improve the trade and investment climate. He specifically
highlighted the problems faced by American insurance
companies seeking investment licenses and automakers faced
with rising taxes and tariffs.


6. (SBU) On insurance, Minister Tuyen noted that European
insurance companies came to Vietnam earlier than American
companies and Vietnam's insurance market is still
developing. He also noted that the Vietnamese insurance
company (Bao Viet) still has limited capacity and there is
not a consensus among senior GVN officials on the issuance
of licenses to American companies. American insurance
companies are asking for a quicker phase-in of BTA
commitments on insurance. While noting that the GVN is not
obliged to implement the BTA faster, Minister Tuyen also
acknowledged that there is nothing preventing early issuance
of insurance licenses to American companies. Minister Tuyen
stated that he supports issuing insurance licenses to
improve the competitive environment in Vietnam, and is
working to develop a consensus among senior GVN officials.
However, he noted, it would be easier to persuade other
ministries to agree to issue licenses to the U.S. companies
if there were positive developments in the bilateral WTO
talks. Minister Tuyen reiterated a long-standing GVN
request that the USG choose which American insurance company
should receive a license first, and noted that it would be
easier if only one American company had applied for a
license. He asserted that if the GVN issued a license to
one company, the others would complain.


7. (SBU) The Ambassador responded that granting these
insurance licenses would provide a strong signal to foreign
investors that Vietnam's investment climate is improving.
In addition, it would help develop the financial services
sector in Vietnam, which will be critical to further growth
of the private sector. Although the best step would be for
the GVN to issue all the licenses, the Ambassador said, it
is likely that the U.S. companies would also accept phased-
in issuance of the licenses. The biggest problem right now,
the Ambassador added, is that there has been no movement
forward by the GVN on the issue of insurance licenses.


8. (SBU) On Vietnam's auto policy, Minister Tuyen explained
that the GVN is trying to balance conflicting interests.
The GVN has to protect the interest of investors, but also
needs to maintain an acceptable level of traffic in Vietnam.
At the moment, he said, the GVN is confused over how to find
a compromise that meets both of these needs. Vietnam's auto
policy is intended to foster investment in and development
of the auto sector, including both foreign and domestic
companies. However, the GVN also has significant concerns
about infrastructure, traffic and safety. More than 10,000
people are killed on the road each year, Minister Tuyen
said. (Note: The Minister noted that this is more than the
number of Americans that have been killed in Iraq. End
Note.) He also said that "quite a few" former Vietnamese
leaders have criticized the GVN for not improving road
safety. Minster Tuyen concluded by stating that the GVN
needs to develop a clear policy that both encourages
development of the auto sector and controls accidents.
However, he noted, a change in auto policy cannot happen
quickly as tax changes have to be approved by the National
Assembly.


9. (SBU) The Ambassador noted that he had just returned from
a trip to HCMC where he had spoken with many representatives
of the American business community who had all cited lack of
adequate infrastructure as an impediment to Vietnam's
economic growth. American automakers, including Ford, have
indicated a willingness to work with the GVN on the issues
of traffic and road safety. Ford, for example, has a safety
program and is willing to work with local and national
authorities. The best way forward is for the GVN to develop
its auto industry in partnership with foreign investors, not
to slow development by increasing taxes, he added.

Textiles
--------------


10. (SBU) Minister Tuyen confirmed to the Ambassador that
the GVN's investigation of corruption in the allocation of
U.S. textile quota (reftels A and B) had found "negative
acts and mistakes" by staff under his supervision. (Note:
The Vietnamese phrase "tieu cuc" translated as "negative
acts" is often used as a euphemism for "corruption." End
Note.) However, he added, the problems are not as serious
as the media has made it sound. Regardless, the Minister
acknowledged the need to fix the "mistakes" and ensure
allocation is done fairly and transparently. He said that
he had temporarily taken over supervising the quota
allocation procedures and MOT would announce the 2005 quota
allocation by October 15.


11. (SBU) The Minister reiterated a request (made during EB
PDAS Donnelly's visit to Hanoi September 28 and via dipnote
(reftel C)) for 1.8 percent additional carryforward from
Vietnam's 2005 quota in category 338/339. He argued that
the USG decision to reduce Vietnam's quota in May resulted
in over-allocation of quota by the GVN. This over-
allocation is causing problems for U.S. companies such as JC
Penney. The Ambassador assured Minister Tuyen that his
request had been conveyed to Washington and explained that
the Committee for Implementation of Textile Agreements
(CITA) would have to consider the request.

STOP
--------------


12. (SBU) The Ambassador briefed Minister Tuyen on the
Strategy Targeting Organized Piracy (STOP) announced by the
White House on October 4 and provided him with a copy of the
STOP Fact Sheet (reftel D). (Note: Although MOT is not the
primary GVN agency responsible for IPR, the Market
Management Board (MMB) of MOT does bear some responsibility
for enforcement. End Note.)


13. (SBU) Comment: Minister Tuyen did not display much of
his normally colorful personality in this meeting. Between
the textile quota corruption scandal and Vietnam's over
allocation of T-shirt quota, Minister Tuyen is clearly
feeling pressure over his management of Vietnam's second
largest export sector. Twice now he has categorized the
request for additional textile carryforward from the United
States as a "personal" request. On the other hand,
conclusion of WTO negotiations with the EU seems to have
increased his confidence in Vietnam's ability to make
progress in Vietnam's accession negotiations. Minister
Tuyen appeared more hopeful that Vietnam might be able to
conclude deals with the United States and other major
partners by early next year. End Comment.

MARINE