VIETNAM: EAP DAS HUHTALA DISCUSSES BILATERAL TRADE AND INVESTMENT

UNCLAS SECTION 01 OF 04 HANOI 002882

SIPDIS

STATE FOR EAP/BCLTV, NP AND EB/TPP/BTA/ANA JBELLER
STATE PASS USTR FOR EBRYAN, BWEISEL, DSPOONER
TREASURY FOR IA/Asia Office
USDA FOR FAS/ITP/SHIEKH
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO
USDOC also for OTEXA
GENEVA PASS USTR

E.O. 12958: N/A
TAGS: ETRD EINV ETTC KIPR VM WTRO APEC MNUK BTA IPROP WTO
SUBJECT: VIETNAM: EAP DAS HUHTALA DISCUSSES BILATERAL TRADE
AND INVESTMENT


1. (SBU) Summary: On October 22, EAP DAS Ambassador Marie
Huhtala, accompanied by the Ambassador, met separately with
Vice Minister of Trade Luong Van Tu and Vice Minister of
Finance Le Thi Bang Tam. DAS Huhtala encouraged the GVN to
ensure full implementation of all parts of the U.S.-Vietnam
Bilateral Trade Agreement (BTA); stressed the importance of
transparency and strong enforcement of intellectual property
rights in attracting foreign direct investment; conveyed
strong USG support for Vietnam's WTO accession; and urged
the GVN to take the actions necessary to implement the Asia-
Pacific Economic Cooperation (APEC) Leaders' Bangkok
commitments. GVN officials noted that a majority of the
National Assembly's time is currently spent reviewing trade
and investment-related legislation; expressed interest in
further expansion of the trade and investment relationship
with the United States; and acknowledged the importance of
taking steps to prevent the proliferation of weapons of mass
destruction (WMD). VM Tam previewed the upcoming bilateral
WTO negotiations and agreed to consider an exchange of
visits on EXBS. End Summary. DAS Huhtala was accompanied
by the Ambassador, Econ/C and other Embassy officials.

Strong Cooperation on BTA and WTO
--------------


2. (SBU) In her meeting with Trade Vice Minister Tu, DAS
Huhtala applauded the success of the BTA in rapidly
increasing the level of bilateral trade between the United
States and Vietnam. She urged VM Tu to ensure full
implementation of all parts of the BTA and noted that
implementation will make Vietnam more attractive to American
investors. DAS Huhtala also expressed strong support for
Vietnam's efforts to accede to the WTO and the need for
Vietnam to fully comply with all WTO regulations.


3. (SBU) VM Tu noted his satisfaction with the results of
the BTA and expressed appreciation for U.S. support for
Vietnam's WTO accession. He informed DAS Huhtala that the
GVN is focused on speeding up the process of creating a
legal framework for foreign and direct investment and WTO
accession. Towards this end, the National Assembly is
dedicating two-thirds of its time on discussions of trade
and investment related legislation. The GVN hopes to
finalize the legal changes required for WTO accession by
early 2006. VM Tu told DAS Huhtala that Vietnam is very
interested in attracting additional U.S. investment. He
also said that representatives of U.S. companies have told
him that, aside from some minor problems, their businesses
in Vietnam are doing very well. VM Tu highlighted his
pleasure with the signing of the U.S.-Vietnam bilateral
aviation agreement (in December 2003) and expressed his hope
that there will soon be direct flights between the United
States and Vietnam. (Note: On October 18, the Civil
Aviation Administration of Vietnam granted United Airlines
the authority to begin direct flights between Ho Chi Minh
City and San Francisco (via Hong Kong) starting December 10.
End note.)


4. (SBU) In her meeting with Finance Vice Minister Tam, DAS
Huhtala expressed hope that the remaining BTA elements would
be accomplished in a timely fashion and indicated the strong
support of the United States for Vietnam's WTO accession
efforts. In response, VM Tam expressed appreciation for
this support which she had seen in her recent visit to
Washington in her meetings with DUSTR Shiner and Treasury
DAS Loevinger. She noted that the bilateral market access
negotiations in Washington starting October 25 would be very
important, especially now that the EU and Vietnam have
concluded their bilateral agreement. She said that her
Ministry had carefully prepared the GVN offers on tariffs,
customs and financial services. The goal would be to show
progress from what Vietnam had proposed the last time and to
garner support from the United States. She opined that the
United States was holding Vietnam to a higher standard than
other recent entrants like China or Cambodia. Huhtala
interjected that the United States held all WTO entrants to
a high standard. She went on to say that the United States
would particularly like to discuss financial services
liberalization and tariffs. Since there are some issues
pertaining to BTA implementation involved, she hoped Vietnam
would soon accede to WTO.


5. (SBU) VM Tam noted that the BTA was generally being
implemented in accordance with commitments. There was, she
said, an issue related to a BTA obligation to harmonize the
special consumption tax (SCT) rates on domestic and imported
automobiles. She recognized that harmonizing SCT rates
would be hard for Vietnam's domestic auto industry
(including U.S. and other foreign investors.) (Note: The
GVN's plan is to harmonize the SCT rates up closer to the
level currently applied on imported autos, significantly
increasing the rate currently applied to autos produced
domestically from imported kits. This, according to Ford
and other investors, will increase the retail price domestic
manufacturers must charge and drive down sales. End Note.)
VM Tam said that the MOF had made preparations so that the
two sides could find the optimal solution for the auto
industry in the WTO negotiations.


6. (SBU) VM Tam went on to express her appreciation for
technical assistance provided by the United States both on
WTO and on integration into the world economy. Singling out
the USAID-funded Support for Trade AcceleRation Project
(STAR) for praise, she said she hoped the Department of
State would continue this support. During her recent visit
to USTR, she had enumerated five areas that her ministry was
focusing on: taxation, customs, capital market development,
stock market development and treasury operations.

IPR and Transparency Key for Investment Climate
-------------- --


7. (SBU) DAS Huhtala highlighted to VM Tu the need for the
Government of Vietnam to pay attention to two issues that
impact Vietnam's investment climate and are of particular
interest to the United States: IPR and transparency. She
pointed out that IPR protection is critical for attracting
the high technology investment that Vietnam requires.
However, although Vietnam has moved forward with key IPR
legislation, the United States remains concerned about
enforcement. IPR violations are a problem throughout Asia
as well as in the United States, but all governments must
work to protect IPR. Additionally, DAS Huhtala noted, the
publication of laws and decisions and the opportunity for
public comment on draft legislation is very important for a
country's investment climate. Noting that Vietnam had made
a lot of progress in the area of transparency, DAS Huhtala
encouraged VM Tu to ensure that Vietnam continues its
efforts.


8. (SBU) VM Tu assured DAS Huhtala that Vietnam is concerned
about the protection of IPR and is determined to fight
violations. He characterized Vietnam's decision to become a
signatory to the Berne Convention for the Protection of
Literary and Artistic Works as a very important step forward
and noted that Vietnam's accession became effective on
October 20. VM Tu also asserted that the GVN is "very
active" in making legal documents and decisions public and
stated that the Prime Minister requires all ministries and
industries to consult with businesspeople and other
interested parties before making decisions. He also noted
that after legal documents are approved, ministries and
government agencies publish them on their websites.
Comment: The GVN continues to focus its efforts on revising
the legal framework for IPR, but has done very little to
improve enforcement or reduce the quantity of pirated and
counterfeit goods on the market in Vietnam. End Comment.

Expanding Ties across the United States
--------------


9. (SBU) VM Tu expressed strong interest in working with the
USG to expand bilateral trade and investment. Although the
total volume of bilateral trade in 2003 reached USD six
billion, there is still a lot of potential for growth, he
said. In America, many states are not yet familiar with
Vietnam or the potential business opportunities there. DAS
Huhtala agreed, but also pointed out that many states have
trade promotion offices in Asia which could be used as a
gateway to Vietnam. Additionally, she encouraged VM Tu to
send trade delegations to areas of the United States they
have never visited before. The Ambassador also encouraged
VM Tu to take advantage of official trips to the United
States to see new parts of the country and offered to help
facilitate the planning of such trips.

Implementing APEC Security Commitments
--------------


10. (SBU) DAS Huhtala urged VM TU to ensure the GVN takes
action this year to implement the APEC Leaders' Bangkok
Commitments on security by agreeing to sign an International
Atomic Energy Agency (IAEA) Additional Protocol and
supporting the development of APEC export control best
practices and Man-Portable Air Defense System (MANPADS)
control guidelines. She noted that terrorist acts such as
the shooting down of an airplane or the proliferation of WMD
would have a terrible impact on all countries' economies.


11. (SBU) VM Tu responded that he had participated in the
APEC meetings last year and understood these issues. He
noted that many different measures are necessary to prevent
terrorist acts, including steps to prevent the proliferation
of WMD. He explained that Vietnam's experience hosting the
Asia Europe Summit (ASEM) earlier this month had also given
the GVN a better understanding of the need to ensure
security at international meetings.

EXBS Assistance
--------------


12. (SBU) DAS Huhtala raised the issue of proposed USG
assistance on export controls and border security (EXBS) to
VM Tam. (Note: The Ministry of Finance is the parent
agency of Vietnam's General Department of Customs. End
Note.) Noting that the United States and Vietnam shared a
common interest in preventing proliferation of weapons of
mass destruction, DAS Huhtala said that the United States
had set aside funds to explore assistance to Vietnam. The
Embassy had proposed an exchange of expert visits between
Vietnam and the United States as an initial step, DAS
Huhtala explained, and was still awaiting a response from
the General Department of Customs. The Vice Minister
responded that Vietnam welcomed this proposal in principle.
Vietnamese Customs would study the proposal and make a
recommendation to the government. There was a need for more
discussion on specific activities because EXBS was "a new
program to the GVN." The GVN, VM Tam said, was "ready" to
host U.S. experts in order to learn more about the program.
She suggested that the Customs Department work with the
Embassy to follow up. (Note: since July, the Embassy has
been in contact weekly with Vietnam's General Department of
Customs to press for an answer on an EXBS visit. This is
the first concrete positive result. End note.)

Oracle Procurement
--------------


13. (SBU) Ambassador Marine asked for a status report on the
Ministry's procurement of a software package that Oracle
would like to provide. Noting that the project was designed
to run until 2010, the Vice Minister said that the
feasibility study for the project was still underway. Upon
completion of the study, the MOF will open the bidding
process and announce this in the media. MOF will welcome
Oracle's bid, she said.

Millennium Challenge Account (MCA)
--------------


14. (SBU) VM Tam noted that she had discussed the MCA
program to provide assistance based on a range of qualifying
criteria with U.S. Treasury officials and asked whether
there was a way to help Vietnam. DAS Huhtala responded that
the MCA assists countries that meet criteria on ruling
justly, economic freedom and investing in people. The
countries are carefully evaluated. Few countries in East
Asia had qualified. The problem for Vietnam is that just
and democratic government provisions include human rights
and political rights. The Millenium Challenge Corporation
would be happy to consider Vietnam as the situation in these
areas evolves. The Vice Minister responded that these were
very sensitive matters involving not just an economic
aspect, but also a political aspect. The focus on these
matters was sharper in the midst of the elections in the
United States. DAS Huhtala responded that it was not just
related to the election. She closed by noting that the
United States had recently decided to provide Vietnam with
USD 25 million to combat HIV/AIDS.


15. (U) EAP DAS Huhtala cleared this cable.

MARINE