Congressman Chabot Meets with Ministries of Trade,

UNCLAS SECTION 01 OF 03 HANOI 003313

SIPDIS

SENSITIVE

STATE FOR EAP/BCLTV and H

E.O. 12958: N/A
TAGS: ECON ETRD EINV OTRA PREL VM WTO IPROP
SUBJECT: Congressman Chabot Meets with Ministries of Trade,
Planning and Investment, and Finance

REF: Hanoi 3301


1. (SBU) Summary: During a visit to Hanoi, Congressman
Steve Chabot met separately December 13 and 14 with Vice
Minister of Trade Luong Van Tu, Vice Minister of Planning
and Investment Nguyen Bich Dat and Vice Minister of Finance
Le Thi Bang Tam. DCM accompanied the Congressman to the
Ministry of Finance as well as a dinner hosted by the Hanoi
Amcham. GVN officials highlighted the positive state of
U.S.-Vietnam economic and trade relations, asked for support
for Vietnam's WTO accession, and identified GVN efforts to
improve the climate for foreign investment.
Congressman Chabot highlighted upcoming important milestones
in U.S.-Vietnam relations, acknowledged the importance of
WTO accession and explained the impact Vietnam's business
climate will have on Congressional debate over Permanent
Normal Trade Relations for Vietnam. As reported reftel,
Congressman Chabot also met separately with representatives
of the Foreign Ministry and the National Assembly.

U.S.-Vietnam Relationship Marks Positive Milestones
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2. (SBU) Vice Minister of Trade Tu opened his meeting with
Congressman Chabot by noting that U.S-Vietnam bilateral
economic relations are in a "good period." Three years of
implementation of the Bilateral Trade Agreement (BTA) and
increased cooperation in other areas - including the signing
of a bilateral aviation agreement in 2003 that had resulted
in the recent initiation of direct flights between San
Francisco and HCMC - have taken the bilateral relationship
to "new heights." Vice Minister of Planning and Investment
Dat also stressed the positive state of the relationship and
highlighted the growth in bilateral trade since entry into
force of the BTA in December 2001. VM of Finance Tam
welcomed Congressman Chabot's visit and categorized
bilateral relations as "better and better." However, she
also added that there are still "areas that need
improvement" and she requested Congressman Chabot and other
members of Congress "help Vietnam in this process."
Congressman Chabot noted positively the growth in bilateral
relations and pointed out that the two countries would mark
several important milestones in 2005 including the thirty-
year anniversary of the end of hostilities, the tenth
anniversary of the normalization of relations and the 4th
anniversary of the entry-into-force of the BTA.

GVN asks for support for WTO Accession
--------------


3. (SBU) All of Congressman Chabot's GVN interlocutors asked
for his support for Vietnam's WTO accession. Trade Vice
Minister Tu highlighted that accession will bring both
opportunities and significant challenges for Vietnam,
because Vietnam is a "developing country with a low level of
economic development." Most Vietnamese businesses are small
and medium-sized, he said, and they will face tough
competition from U.S. companies. While some aspects of
Vietnam's economy "meet the requirements" of a market
economy, other areas are still "in transition." Vietnam
needs time to prepare to meet the challenges posed by WTO
accession, VM Tu said. The BTA includes phase-in periods
for Vietnam and the GVN is hoping for similar treatment in
the WTO.


4. (SBU) MPI VM Dat highlighted that Vietnam is fully
engaged in the process of carrying out legal reform to open
its markets on a gradual basis and remove trade barriers in
compliance with WTO requirements. The GVN has eliminated
dual pricing, reduced infrastructure costs, passed a new
Competition Law, and is working to finalize unified
investment and enterprise laws (Note: These laws are
intended to harmonize the rules for domestic and foreign
enterprises and investment. End Note). The GVN has
concluded bilateral WTO negotiations with several WTO
members, including the EU, and believes it will make "new
progress" at the ninth Working Party in Geneva on December
15, VM Dat said. Vice Minister of Finance Tam emphasized
that the United States is one of Vietnam's most important
partners in the WTO process.

Business Community Sentiment, Congress and PNTR
-------------- --


5. (SBU) Congressman Chabot acknowledged the importance of
WTO accession for Vietnam and explained that members of
Congress will have to decide whether or not to grant Vietnam
Permanent Normal Trade Relations (PNTR). The Congressman
noted that during the debate on PNTR, members of Congress
will get input from their business community constituents
regarding their experiences in Vietnam. U.S. companies are
concerned about the need for better protection of
intellectual property rights (IPR),improved transparency,
and fair adjudication of investment disputes by Vietnamese
courts. They also are concerned about delays in GVN
approval of business licenses and the negative impact of
high auto taxes and tariffs on the auto sector. The views
of the business community will influence how individual
members of Congress vote on PNTR for Vietnam, the
Congressman added, and so it is important that the GVN talk
to U.S. companies and resolve these issues. Congressman
Chabot noted that during his four days in Hanoi and HCMC he
would have several opportunities to discuss business climate
issues with U.S. companies, including at events hosted by
the Hanoi and HCMC Amchams and during a tour of the Proctor
& Gamble factory in HCMC later in the week.


6. (SBU) Regarding the business community and PNTR, VM Tu
responded that he has had a lot of opportunity to meet and
talk to representatives of U.S. businesses. Some companies
want Vietnam to liberalize faster than the phase-in schedule
established in the BTA. In fact, he said, the GVN has done
that, issuing some 100 percent foreign-owned licenses ahead
of schedule. The GVN is "looking at the requirements" and
is "considering acceleration" of its BTA commitments in the
insurance sector and other areas such as telecommunications.
However, VM Tu noted, in some sectors where there has been
faster liberalization, U.S. companies have not taken
advantage of the opportunities. In the banking sector, for
example, he said, three U.S. banks used to operate in
Vietnam, but now there are only two.


7. (SBU) Both MPI VM Dat and MOF VM Tam asserted that the
GVN is committed to improving IPR, including through
accession to international IPR conventions. (Note: Vietnam
joined the Berne Convention in October. End Note.) On
taxes and tariffs, VM Dat explained that the GVN is
struggling to balance the domestic producers needs for
higher taxes and tariffs to protect their industry with
Vietnam's international commitments.

Insurance Licenses
--------------


8. (SBU) Finance VM Tam responded directly to Congressman
Chabot's point on the issuance of licenses to U.S.
companies, focusing particularly on the insurance sector.
She acknowledged that the GVN has been "stricter" about
issuing licenses in the banking and insurance sectors but
said that the GVN had informed U.S. insurance companies that
it would grant them licenses to operate according to a GVN
"roadmap." When pressed for more specifics by the DCM, VM
Tam responded that in 1999, MOF had issued a 100 percent
foreign license to AIG for life insurance services and MOF
had recently decided to issue Marsh & McLennan Insurance a
100 percent license for insurance brokerage services.
(Note: However, VM Tam also said the license for Marsh is
pending resolution of Marsh's legal issues in the United
States - perhaps referring to the New York Attorney
General's fraud and anti-trust complaint recently filed
against Marsh. End note.) With respect to the long-pending
life insurance license applications of New York Life and Ace
INA, VM Tam said that the MOF has informed these companies
of the specific dates of the licensing process and "they all
agreed on the process."

MIA and PNTR Linkage
--------------


9. (SBU) In the context of the discussion of PNTR,
Congressman Chabot also highlighted the importance of GVN
efforts in the fullest possible accounting of MIA's.
Veteran's groups in the United States often contact members
of Congress regarding this issue, he said. The Congressman
expressed appreciation for GVN efforts in this area and
noted that these efforts have had a positive impact on the
bilateral relationship.

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


10. Vice Minister Tu raised the issue of textile quotas and
told Congressman Chabot that both the European Union and
Canada have agreed to lift quotas on Vietnam's exports of
textiles and garments beginning January 1. (Note: The EU
lifted the quotas in exchange for other market access
concessions from the GVN. End Note.) After the expiration
of the WTO Agreement on Textiles and Clothing, only the U.S.
will continue to place quotas on Vietnam's exports. These
quotas are a disadvantage to both the United States and
Vietnam, the VM asserted. Most U.S. importers and
distributors support the removal of quotas on Vietnamese
exports because they want Vietnam to be able to compete with
other countries such as China and India, but quotas will
make that more difficult. (Note - Vietnam does not
automatically benefit from the phase out of the ATC because
it is not yet a member of the WTO. End Note.) The VM
pointed out that Vietnam's production of textiles and
garments has resulted in significant imports of U.S. cotton
(nearly 50,000 tons annually) and other U.S. products such
as chemicals used in textile production. He also noted that
the income earned from the sale of textiles and garments has
enabled Vietnam to purchase Boeing aircraft.

MARINE