U.S. - VIETNAM WTO ACCESSION NEGOTIATIONS, SEPTEMBER 15-

UNCLAS SECTION 01 OF 05 GENEVA 002203

SIPDIS


PASS USTR FOR DWOSKIN/KLEIN/HICKS
EB/OT FOR CRAFT
USDA FOR FAS/ITP/SHEIKH/CHATTIN, MTND/HENKE, FAA/SE/CONLON
USDOC FOR ITA/JACOBS

E.O. 12958: N/A
TAGS: VM ETRD WTRO USTR
SUBJECT: U.S. - VIETNAM WTO ACCESSION NEGOTIATIONS, SEPTEMBER 15-
17, 2005


SUMMARY AND COMMENT:
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1. U.S. AND VIETNAM CONDUCTED INTENSIVE NEGOTIATIONS ON THE
MARGINS OF THE ONE-DAY WORKING PARTY MEETING IN GENEVA, SEPTEMBER
14-17. NEGOTIATORS CONTINUED TO NARROW THE GAPS INALL AREAS,
LEAVING IN MOST CASES THE MOST SENSITIVE AND/OR POLITICALLY
DIFFICULT ISSUES. EXAMPLES: ABOUT 100 OR SO AGRICULTURE LINES,
ABOUT 700 OR SO INDUSTRIAL PRODUCTS (E.G., AUTOS, CHEMICALS, ETC)
AND FINANCIAL SERVICES, TELECOM AND A FEW OTHER HORIZONTAL
ISSUES. US SIDE RELATED ISSUES TO PNTR DEBATE, NOTING WHICH THAT
MANY OF THE REMAINING ISSUES WILL FEATURE PROMINENTLY IN ANY PNTR
DEBATE IN THE UNITED STATES. FOR EXAMPLE: IN AGRICULTURE, IT IS
UNTENABLE FOR THE US TO ACCEPT HIGH RATES OF DUTY ON BEEF AND
PORK, AREAS WHERE VIETNAM HAS GRANTED CHINA ZERO DUTY IN ITS
BILATERAL FTA AGREEMENT; IN SUBSIDIES WHERE VIETNAM IS TRYING TO
ADDRESS PROHIBITED SUBSIDIES, BUT STILL IS SOMEWHAT IN A "TRUST
US" MODE; OR IN THE TREATMENT OF PUBLISHING AND PRINTED MATERIAL
AND THE INTERSECTION OF SERVICES AND TRADING RIGHTS. WHILE
THERE ARE GAPS, MOST OF THE ISSUES APPEAR ON A PATH THAT COULD
LEAD TOWARDS SATISFACTORY RESOLUTION, WITH SOME WORK ON BOTH
SIDES. HOWEVER, WORRYING SIGNS ARE LACK OF PROGRESS ON NON-
TARIFF BARRIERS (PROHIBITIONS AND BANS ON MOTORCYCLES AND
ENCRYPTED PRODUCTS AND CONFUSION ABOUT LEGISLATION AND DECREES
WHICH COULD POTENTIALLY UNRAVEL BTA COMMITMENTS OR UNWIND WTO
CONCESSIONS (E.G., LIMIT THE FORMS OF BUSINESS THAT HAVE ACCESS
TO SERVICES COMMITMENTS.) U.S. SHARED THE SEPTEMBER 12 AMCHAM
PAPER WITH VIETNAMESE SIDE. VIETNAM HAS MADE IMPORTANT PROGRESS
WITH THE U.S. AND ITS TRADING PARTNERS, BUT U.S. IS NOT/NOT THE
LAST WTO MEMBER STILL IN BILATERALS WITH THEM ON GOODS AND
SERVICES. U.S. SIDE REITERATED ITS INTEREST IN MOVING AHEAD
EXPEDITIOUSLY ON THE BILATERAL NEGOTIATIONS AND NECESSARY
MULTILATERAL PROGRESS.


2. FOLLOW UP WILL BE IMMEDIATE, AND DEPENDING UPON PROGRESS AND
PREPARATIONS. ANOTHER FACE-TO-FACE NEGOTIATING SESSION MAY BE
SCHEDULED IN OCTOBER. NO DATES OR VENUES WERE AGREED BUT
NEGOTIATORS WILL STAY IN TOUCH. ON MULTILATERAL SIDE AS WELL,
THE WORKING PARTY CHAIRMAN EXHORTED DELEGATIONS TO COMPLETE THEIR
BILATERAL NEGOTIATIONS BUT HAS NOT/NOT SCHEDULED ANOTHER WP
MEETING. OUR SENSE IS THAT NEGOTIATORS UNDERSTAND THE WORK THAT
NEEDS TO BE DONE AND THAT THE PACE OF WORK GENERALLY IN THE WTO
AND DOMESTIC WORK NEEDED BY VIETNAM WILL TAKE THE NEGOTIATIONS
INTO 2006. CHIEF NEGOTIATOR KHANH AT CONCLUSION OF MEETING TOLD
AUSTR DWOSKIN THAT HE WAS PLEASED WITH PROGRESS AND FELT VERY
HAPPY ABOUT THE BILATERAL NEGOTIATIONS. END SUMMARY AND COMMENT.

U.S. HOSTED "FRIENDS" MEETING
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3. AS IS CUSTOMARY IN ACCESSIONS, US TEAM CONVENED KEY
DELEGATIONS TO ASSESS SITUATION AND MAXIMIZE POTENTIAL FOR
PROGRESS IN THE WP MEETING. MEETING INCLUDED AUSTRALIA, CANADA,
EU, JAPAN, AND NORWAY. ALL NOTED STEADY BUT INCREMENTAL
PROGRESS ON NEGOTIATIONS WITH THE VIETNAMESE. THE EU NOTED THE
CURRENT BAN ON IMPORT OF USED VEHICLES, WILL BE PROBLEMATIC.
JAPAN, EU, CANADA AND NORWAY NOTED THAT THEY HAVE CONCLUDED
BILATERAL NEGOTIATIONS, ALTHOUGH CANADA HAS NOT YET SIGNED ITS
AGREEMENT. AUSTRALIA RAISED CONCERNS ABOUT INVESTMENT, SOE/STE,
BUSINESS LICENSING AND REGISTRATION, SUBSIDIES AND INCENTIVES,
SALT TARIFF RATE QUOTAS, ADMINISTRATION OF TARIFF RATE QUOTAS
MORE BROADLY, THE DEFINITION OF PUBLIC GOODS/ GOVERNMENT
PROCUREMENT AND AGRICULTURE (SPS AND PROBLEMS RELATED TO THE
BILATERAL). U.S SHARED CONCERNS THAT SOME DRAFT GOVERNMENT
DECREES MAY HAVE THE EFFECT OF RE-REGULATING OR BUREAUCRATIZING
REGISTRATION AND LICENSING PROCESSES THAT HAVE BEEN SIMPLIFIED
AND STREAMLINED SINCE THE U.S.-VIETNAM BILATERAL TRADE AGREEMENT
(BTA) WAS IMPLEMENTED IN DECEMBER 2001. DRAFT DECREES ON TRADING
RIGHTS, MULTI-LEVEL SALES, FRANCHISING AND REPRESENTATIVE OFFICES
ARE OF PARTICULAR CONCERN. U.S. NOTED IMPROVEMENT ON CUSTOMS
VALUATION, IPR AND TRADING RIGHTS BUT THAT PROBLEMS REMAIN WITH
SUBSIDIES, STATE OWNED ENTERPRISES/STATE TRADING ENTERPRISES
(SOE/STE) AND EQUITIZATION. JAPAN AND THE EU SHARED U.S.
CONCERNS ON TRADING RIGHTS AND PROHIBITED SUBSIDIES. NOTE:
NEGOTIATOR KHANH RAISED CONCERNS THAT THE U.S. HAD CONVENED THIS
MEETING, SUGGESTING THAT WE HAD ORGANIZED A SESSION TO ENSURE
THAT VIETNAM WOULD NOT/NOT COMPLETE ITS WORK IN 2005. KHANH
KNOWS BETTER, IN FACT, AS U.S. HAS CONVENED FRIENDS IN THE PAST
TO HELP PUSH THE PROCESS. WE WOULD BE INTERESTED TO KNOW IF POST
HEARS ABOUT THIS. END NOTE AND COMMENT.

FORMAL WORKING PARTY MEETING
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4. VIETNAM'S WORKING PARTY ON ACCESSION RECONVENED TO REVIEW THE
REVISED DRAFT WORKING PARTY REPORT (WT/ACC/SPEC/VNM/5/REV.1),
DISCUSS THE STATUS OF THE LEGISLATIVE ACTION PLAN FOR WTO
IMPLEMENTATION, AND REVIEW THE STATUS OF BILATERAL NEGOTIATIONS
FOR GOODS AND SERVICES COMMITMENTS. VIETNAM HAS COMPLETED
BILATERAL NEGOTIATIONS WITH ARGENTINA, BRAZIL, BULGARIA, CANADA,
CHILE, CHINA, CHINESE TAIPEI, COLOMBIA, CUBA, THE EU, EL
SALVADOR, IRELAND, INDIA, JAPAN, KOREA, NORWAY, PARAGUAY,
SINGAPORE, SWITZERLAND, TURKEY, AND URUGUAY. ONLY TEN BILATERAL
AGREEMENTS ON GOODS AND SERVICES HAVE BEEN SUBMITTED FORMALLY TO
THE SECRETARIAT. NEGOTIATIONS CONTINUE WITH AUSTRALIA, HONDURAS
AND DOMINICAN REPUBLIC, MEXICO, NEW ZEALAND AND THE U.S.
DELEGATIONS IGNORED THE CHAIRMAN'S PLEA TO DROP OPENING
STATEMENTS IN EXCHANGE FOR ADDITIONAL TIME FOR SUBSTANTIVE
DISCUSSION OF THE ISSUES. WHILE VIETNAM DID NOT REPEAT ITS
FAMILIAR CALL FOR COMPLETION OF THE NEGOTIATIONS BY THE TIME OF
THE WTO MINISTERIAL IN HONG KONG, IN MID-DECEMBER, OTHER WP
MEMBERS DID, I.E., SINGAPORE, CHINA, CUBA, CHINESE TAIPEI, JAPAN
AND INDIA. THESE DELS HAD CLEARLY COORDINATED STATEMENTS,
STRESSING VIETNAM'S POVERTY AND NEED FOR TRANSITIONS TO IMPLEMENT
WTO PROVISIONS. AUSTRALIA, THE EU, NEW ZEALAND, SWITZERLAND,
MEXICO, CANADA AND THE U.S. DEMURRED, AND NOTED THAT MUCH WORK
REMAINED TO BE COMPLETED WHILE EXPRESSING STRONG SUPPORT FOR THE
ACCESSION.


5. OUTSTANDING SUBSTANTIVE CONCERNS IDENTIFIED BY DELEGATIONS
INCLUDED: INVESTMENT (EU, SWITZERLAND, NEW ZEALAND, AUSTRALIA,
AND U.S.); STATE-OWNED AND STATE TRADING ENTERPRISES (U.S. AND
EU); EQUITIZATION (AUSTRALIA, EU, AND US); TRADING RIGHTS
(AUSTRALIA, CANADA, EU, SWITZERLAND, U.S.); QUANTITATIVE
RESTRICTIONS/LICENSING (AUSTRALIA, EU, U.S.),SUBSIDIES
(AUSTRALIA, EU, U.S.); SPS (AUSTRALIA, U.S.); AND TRIPS (U.S. AND
SWITZERLAND). THE U.S. HAS WORKED THE MOST CLOSELY WITH VIETNAM
ON THE WP REPORT AND USED THE OPPORTUNITY FLAG QUESTIONS ON:
DIRECTED LENDING; FOREIGN EXCHANGE CONTROLS; DISCRIMINATORY
INTERNAL TAXES; CUSTOMS VALUATION; AND TECHNICAL BARRIERS TO
TRADE, WHICH SHOULD ENABLE US TO OBTAIN CHANGES TO THE WP RESULT.
WHETHER DUE TO BAD TRANSLATION OR UNWILLINGNESS, VIETNAM DID NOT
RESPOND SUBSTANTIVELY TO MANY DELEGATIONS' QUESTIONS. IMPORTANT
PIECES OF LEGISLATION WERE REQUESTED FOR REVIEW, INCLUDING THE
DRAFT ORDINANCE ON STANDARDIZATION, AMENDED LEGISLATION ON
CUSTOMS VALUATION, AND THE NEW INVESTMENT LAW.


6. NEXT STEPS: COMMENTS ARE TO BE SUBMITTED TO THE SECRETARIAT
BY OCTOBER 6, FOLLOWING WHICH VIETNAM WILL RESPOND AND THE
SECRETARIAT WILL REVISE THE REPORT. SIGNIFICANTLY, THE CHAIRMAN

SIPDIS
DID NOT ANNOUNCE DATES FOR THE NEXT WP MEETING IN HIS CLOSING
STATEMENT. RATHER, HE URGED DELEGATIONS TO INTENSIFY THEIR
BILATERAL NEGOTIATIONS FOR GOODS AND SERVICES MARKET ACCESS AND
FILE COMPLETED SIGNED AGREEMENTS QUICKLY FOR CONSOLIDATION IN
VIETNAM'S SCHEDULES. HE TOOK NOTE OF VIETNAM'S PROGRESS IN
ENACTING NEW LAWS AND URGED IT TO MAINTAIN THE PACE OF
IMPLEMENTING ITS LEGISLATIVE PROGRAM FOR WTO IMPLEMENTATION. HE
ASKED VIETNAM TO SUBMIT NEWLY ENACTED LAWS TO THE SECRETARIAT AS
SOON AS POSSIBLE. NOTE: WORK IN THE BILATERAL MEETINGS SHOULD
FACILITATE DRAFTING OF THE REPORT, A POINT FOR WHICH THE U.S.
DOES NOT SEEM TO BE RECEIVING CREDIT FROM THE VIETNAMESE. WE ARE
AS FAR AS WE ARE IN THE DRAFT REPORT DUE LARGELY TO THE WORK THE
U.S. TEAM HAS DONE WITH DRAFTING, RESEARCH AND REVIEW SINCE THE
LAST MEETING. END NOTE.

U.S. VIETNAM BILATERAL NEGOTIATIONS
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7. U.S. AND VIETNAM TEAMS CONDUCTED BILATERAL NEGOTIATIONS ON
AGRICULTURE MARKET ACCESS, INDUSTRIAL GOODS, SERVICES AND
MULTILATERAL ISSUES, MANY OF WHICH WERE THE SUBJECT OF OUR
APROACH PAPERS IN THE LAST BILATERAL ROUND. DISCUSSIONS WERE
VERY FRANK AND CANDID AND HOMEWORK WAS IDENTIFIED FOR BOTH SIDES
AS NOTED BELOW.

AGRICULTURE MARKET ACCESS
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8. THE TWO SIDES HAD A FRANK AND USEFUL EXCHANGE, HOWEVER THEY
REMAIN FAR APART ON THE TARIFF TREATMENT OF BEEF AND PORK, TWO OF
THE UNITED STATES' TOP PRIORITIES. U.S. NEGOTIATORS TOOK THE
OPPORTUNITY TO EXPLAIN IN MORE DETAIL U.S. INTERESTS IN THE
REMAINING AREAS, AND PROVIDED A FRANK ASSESSMENT OF THE
IMPORTANCE OF COMMITMENTS ON PRODUCTS, LIKE PORK, WHICH WOULD BE
LOOKED AT CAREFULLY IN A DEBATE ON PNTR. DISTILLED SPIRITS
CONTINUES TO BE A POINT OF CONTENTION, AS U.S. NEGOTIATORS INSIST
THAT VIETNAM ELIMINATE THE ELEMENTS OF ITS EXCISE TAX ("SPECIAL
CONSUMPTION TAX" OR SCT) THAT DISCRIMINATE AGAINST IMPORTS.
WHILE VIETNAM INDICATED IT HAD INTRODUCED LEGISLATION TO APPLY
THE SAME SCT LEVEL TO ALL TYPES OF WINE, AS IT PREVIOUSLY
COMMITTED TO DO WITH RESPECT TO BEER, IT INSISTED THAT ITS
TREATMENT OF SPIRITS MIRRORS THE PRACTICE OF SOME OTHER COUNTRIES
IN ITS REGION. U.S. NEGOTIATORS COUNTERED THAT A NUMBER OF OTHER
COUNTRIES IN THE REGION HAD INSTITUTED A SINGLE EXCISE RATE FOR
SPIRITS, INCLUDING AS A RESULT OF WTO LITIGATION. AT THE CLOSE
OF THE MEETING, VIETNAM INDICATED IT WILL PROVIDE A NEW TARIFF
OFFER TO THE U.S. THE TWO SIDES WILL ALSO CONTINUE DISCUSSIONS
ON THE SPIRITS TAX.

9. ACTION/FOLLOW-UP. VIETNAM WILL PROVIDE A REVISED TARIFF
OFFER, AND WILL FURTHER REFLECT ON SPIRITS EXCISE TAX. U.S. WILL
CONSULT FURTHER WITH INDUSTRY AFTER RECEIVING INPUTS FROM
VIETNAM.

INDUSTRIAL TARIFFS AND RELATED NTBS
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10. FURTHER PROGRESS WAS MADE ON NARROWING THE LIST OF PRIORITY
GOODS UNDER NEGOTIATIONS. THE SESSION STARTED WITH DIFFERENCES
ON CLOSE TO 2,000 LINES AND NOW LESS THAN 700 LINES ARE OF
CONCERN. THE TWO SIDES EXCHANGED INFORMATION ON BOTH PRODUCT
PRIORITIES AND PRODUCT SENSITIVITIES AND WERE ABLE TO FINISH
NEGOTIATIONS IN SIX ADDITIONAL PRODUCT SECTORS, BUILDING ON THE
THREE SECTORS COMPLETED IN EARLIER DISCUSSIONS. REMAINING
OUTSTANDING ISSUES INCLUDE PAPER, AGRICULTURAL AND CONSTRUCTION
EQUIPMENT, CIVIL AVIATION, PHARMACEUTICALS, CHEMICALS AND
AUTOS/AUTO PARTS. THE AUTO SECTOR CONTINUES TO BE A DIFFICULT
AREA, IN PART BECAUSE VIETNAM CONTINUES TO INCREASE ITS ALREADY
SUBSTANTIAL SPECIAL CONSUMPTION TAX (SCT) FOR THIS SECTOR. NOTE:
U.S. SIDE NEEDS TO REVIEW THE SITUATION WITH U.S. COMPANIES, AS
PRESENT OFFER OF 75% ON AUTOS WILL BE A TOUGH SELL FOR PNTR, BUT
VIETNAMESE SUGGEST THAT ONE REASON FOR HIGH RATES IS TO PROTECT
EXISTING INVESTMENTS.


11. WE REVIEWED FOUR MAJOR CATEGORIES OF NON-TARIFF MEASURES:
MOTORCYCLES WITH MOTORS LARGER THAN 175CC; ELECTRONIC IMPORTS
WITH ENCRYPTION TECHNOLOGY; REMANUFACTURED ELECTRONICS; AND
CHEMICALS THAT ARE PROHIBITED OR IMPORTED ONLY CONDITIONALLY. IN
EACH CASE, THE RESTRICTION WILL EFFECTIVELY BLOCK PROMISING U.S.
EXPORTS AFTER ACCESSION, E.G. LARGE MOTORCYCLES, VARIOUS ITA
PRODUCTS, AND CERTAIN CHEMICALS WHOSE USE IN THE UNITED STATES
AND ELSEWHERE IS CONTROLLED, BUT HARDLY PROHIBITED. VIETNAM
OFFERED ONLY TO CODIFY THE CURRENT BAN ON LARGE MOTORCYCLE
IMPORTS AND SHOWED SIMILAR RELUCTANCE TO REVISIT THE APPLICATION
OF THE OTHER RESTRICTIONS IN LIGHT OF U.S. CONCERNS. WHILE THE
DISCUSSION IMPROVED UNDERSTANDING OF THE BASIS FOR THE
RESTRICTION, THE WTO JUSTIFICATION FOR THE MEASURES IS POOR.
BOTH SIDES AGREED TO PROVIDE ADDITIONAL INFORMATION, CONSULT WITH
DOMESTIC INTERESTS TO HELP CLARIFY ISSUES, AND RESUME DISCUSSIONS
ON THESE AND OTHER NTBS. NEVERTHELESS, VIETNAM MADE IT CLEAR
THAT IT IS NOT READY TO ALTER ITS POLICIES ON THE FOUR CATEGORIES
REVIEWED AT THIS MEETING.

12. ACTION/FOLLOW-UP. VIETNAM: WILL PROVIDE REVISED OFFER.
U.S. WILL START CONSULTATIONS WITH INDUSTRY ON OUTSTANDING ISSUES
TO FURTHER ADDRESS/CLARIFY PRIORITIES AND POSSIBLE SOLUTIONS ON
NTBS. ONE AREA U.S. WILL NEED TO REVIEW IS WHAT ADDITIONAL
REGULATION MAY BE PLANNED WHERE VIETNAM IS ELIMINATING TRADING
RIGHTS, BOTH UPON ACCESSION AND AFTER TRANSITIONS, AND FACTOR THE
RESULT INTO TARIFF OFFER.

SERVICES
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13. NEGOTIATORS CONTINUE TO MAKE PROGRESS SINCE LAST BILATERAL.
IN ANOTHER INNOVATION, U.S. AND VIETNAM MANAGED TO HAVE EXTENSIVE
CONFERENCE CALL TO INCLUDE U.S. TREASURY NEGOTIATOR TO REVIEW
BANKING AND SECURITIES ISSUES. KHANH AND LEM WERE ORIGINALLY
SCEPTICAL THAT THIS COULD BE USEFUL, BUT AGREED THAT THIS WAS A
PRODUCTIVE MODE TO CONTINUE DISCUSSIONS.


14. NEGOTIATIONS WERE FRANK AND PRODUCTIVE. RESPONSIVENESS FROM
VIETNAM AFTER SINCE THE LAST BILATERAL DISCUSSION IN JUNE ALLOWED
US TO CLOSE SEVERAL (OF THE LESS IMPORTANT) SECTORS DURING THIS
MEETING. DIFFERENCES HAVE BEEN NARROWED TO A FEW DIFFICULT, BUT
IMPORTANT SECTORS SUCH AS TELECOMMUNICATIONS, FINANCIAL SERVICES
AND ENERGY SERVICES. FOR THESE AREAS, BOTH SIDES HAVE SHOWED
FLEXIBILITY AND HAVE AGREED TO WORK TOGETHER ON STRATEGIES TO
REACH A POSSIBLE FINAL PACKAGE. HOWEVER, IMPORTANT CHALLENGES
REMAIN, INCLUDING WHAT APPEARS TO BE A TROUBLING PATTERN OF USING
IMPLEMENTING DECREES THAT MAY UNDERMINE SOME BTA COMMITMENTS AND
NEW LEGISLATION DRAFTED TO IMPLEMENT VIETNAM'S WTO OBLIGATIONS.
WE HAVE ADDRESSED EXISTING DRAFT DECREES, BUT FURTHER LEGAL
DOCUMENTS WILL REQUIRE ACTIVE MONITORING.


15. ON FINANCIAL SERVICES, THE OFFER ON INSURANCE ONLY LACKS A
COMMITMENT FOR BRANCHING, SOMETHING THAT VIETNAM THINKS IS NOT OF
INTEREST TO U.S. INDUSTRY; U.S. SIDE SUGGESTED THAT THERE WERE
VARIOUS WAYS TO ADDRESS BRANCHING, INCLUDING USE OF TRANSITIONS.
ON BANKING AND SECURITIES, VIETNAM WILL REVIEW AGAIN SECURITIES
POSITIONS, INCLUDING IN PARTICULAR THE SITUATION FOR BRANCHING.
U.S. HAD BEEN UNDER THE IMPRESSION THAT BRANCHING WAS GOING TO BE
OFFERED AS A RESULT OF THE 2006 LEGISLATION. ON BANKING, THERE
WAS A USEFUL DISCUSSION ABOUT THE PROBLEMS AND CONCERNS ABOUT
FURTHER BRANCHING AND THE USE OF SUBSIDIARIES. ON TELECOM,
NEGOTIATIORS WERE INSTRUCTED TO CONSIDER POSSIBLE PACKAGE
BUILDING ON IDEA OF SEPARATING FACILITIES-BASED FROM NON-
FACILITIES BASED SERVICES AND IDENTIFYING PRIORITY SUBSECTORS
WITHIN THOSE TWO CATEGORIES.


16. ACTION/FOLLOW-UP. ON KEY ISSUES -- BANKING: U.S. TO
PROVIDE VIETNAM WITH INFORMATION ABOUT BRANCHING, INCLUDING
ACTIVITIES OF HEADQUARTERS AND SCOPE OF BUSINESS AND AUTHORITIES.
U.S. IS TO LOOK AT 30% ACQUISITION LANGUAGE OFFER A REVISION;
U.S. TO SUGGEST SOME LANGUAGE FOR THE WP REPORT. OTHER CLEANUP
AS AGREED. VIETNAM WILL COME BACK TO US SIDE REGARDING DECREES,
INCLUDING PUBIC SECTOR.

MULTILATERAL ISSUES


17. IMPORT LICENSING: REVIEW OF VIETNAM'S NEW IMPORT
LICENSING PROCEDURES QUESTIONNAIRE FOCUSED ON THE SCOPE OF
VIETNAM'S CURRENT AND PROSPECTIVE USE OF IMPORT LICENSING
MEASURES, E.G., WHEN CURRENT TRADING RIGHTS RESTRICTIONS ARE
PHASED OUT. THE U.S. SOUGHT ADDITIONAL INFORMATION ON LICENSING
PROCEDURES USED TO ADMINISTER TRQS AND THE ROLE OF LINE
MANAGEMENT AGENCIES IN GRANTING THE LICENSES. WHILE THE REVISED
QUESTIONNAIRE RESPONSES WERE HELPFUL, SPECIFICS ON HOW THE SYSTEM
OPERATED WERE THIN. VIETNAM AGREED TO PROVIDE MORE INFORMATION
ON PROCEDURES AND REQUIREMENTS FOR APPLICANTS. THE U.S. AGREED
TO PROVIDE WRITTEN COMMENTS AND QUESTIONS TO HELP IMPROVE THE
DOCUMENT FOR FURTHER REVISION.


18. TRADING RIGHTS: GOOD PROGRESS WAS MADE IN DISCUSSIONS ON
TRADING RIGHTS, BASED ON U.S. SUGGESTIONS ON AN APPROACH TO
ADDRESSING THIS SECTOR PRESENTED TO VIETNAM IN JUNE. WE REVIEWED
VIETNAM'S NEW TRADING RIGHTS RESTRICTIONS AS PRESENTED IN THE
REVISED DRAFT WORKING PARTY REPORT, AND ATTEMPTED TO DRAW OUT THE
DIFFERENCES BETWEEN TRADING RIGHTS AND STATE TRADING. VIETNAM
AGREED THAT SOME TRADING RIGHTS RESTRICTIONS NEEDED TO BE
REVIEWED AGAIN. WE ALSO USED THE OPPORTUNITY TO DISCUSS CONCERNS
ABOUT PRINTED AND PUBLISHED MATERIALS, AND THE ACTUAL SITUATION
IN VIETNAM, WHICH KANH PROMISED TO PROVIDE FURTHER DETAILS. THE
TWO SIDES ALSO DISCUSSED VIETNAM'S PROSPECTIVE BUSINESS
REGISTRATION SYSTEM NEEDED TO EXPAND TRADING RIGHTS AND
IDENTIFIED INCONSISTENCIES WITH GATT ARTICLES III AND XI IN THE
CURRENT PLAN, INCLUDING STIPULATIONS THAT ONLY FIRMS INVESTED IN
VIETNAM OR RESIDENTS OF VIETNAM WOULD BE ABLE TO OBTAIN TRADING
RIGHTS.


19. STATE-OWNED ENTERPRISES (SOE)/STATE TRADING ENTERPRISES
(STE): AFTER CONSIDERABLE DISCUSION INTENDED TO CLARIFY THE
CURRENT SITUATION, , THE U.S. AGREED TO USE THE INFORMATION
GAINED TO REDRAFT THE WORKING PARTY REPORT SECTION WHICH
ADDRESSES SOE/STE, INCLUDING DRAFT COMMITMENT LANGUAGE, WITH THE
OBJECTIVE OF REACHING COMPROMISE BETWEEN CUREENT U.S. AND
VIETNAMESE PROPOSALS. VIETNAM OFFERED TO MAKE A COMMITMENT THAT
THE STATE DOES NOT INTERVENE IN COMMERCIAL ACTIVITIES OF SOES,
ALTHOUGH WE ARE UNSURE AS TO HOW THIS RELATES TO REGULATING
PUBLIC UTILITIES. FURTHER WORK NEEDS TO BE DONE ON THE
DEFINITION AND IDENTIFICATION OF PUBLIC GOODS AND SERVICES.
PROGRESS WAS MADE IN UNDERSTANDING THE TERMINOLOGY ON CORPORATE
FORMS OF SOES, TRANSPARENCY AND RELATED ISSUES. VIETNAM AGREED
TO PROVIDE ADDITIONAL INFORMATION ON THE WAY IN WHICH SOES WITH
UNIQUE TRADING RIGHTS IN PARTICULAR SECTORS WILL OFFER FOREIGNERS
THE OPPORTUNITY TO PARTICIPATE IN THESE SECTORS. NOTE: THIS
WILL BE AN IMPORTANT ISSUE GIVEN THE U.S. REQUIREMENTS OF SECTION
1106 OF THE 1988 TRADE ACT.


20. INDUSTRIAL SUBSIDIES/NON-MARKET ECONOMY PROVISIONS: WE
REVIEWED ALL OF VIETNAM'S SUBSIDY PROGRAMS TO DETERMINE WHICH
PROGRAMS WERE PROHIBITED UNDER THE WTO SUBSIDIES AGREEMENT. THE
TWO SIDES AGREED THAT MOST PROHIBITED SUBSIDIES WILL BE
TERMINATED UPON ACCESSION, WHILES OTHERS ARE UNDER CONSIDERATION
FOR A TRANSITION PERIOD, THE TERMS AND LENGTH OF WHICH IS A TOPIC
FOR ADDITIONAL DISCUSSION. VIETNAM AGREED TO PROVIDE A NEW,
REFORMATTED SUBSIDIES NOTIFICATION WHICH WILL BE USED AS A BASIS
FOR FURTHER DISCUSSION. NOTE: VIETNAM IS WORRIED ABOUT HAVING
TO PROVIDE DATA HERE AND THAT THIS WILL SLOW THE PROCESS DOWN.
AS A PRACTICAL MATTER, GETTING A HANDLE ON THE SUBSIDY ISSUE WILL
BE ESSENTIAL FOR THE PNTR DEBATE AND FOR THE U.S. TO BE ABLE TO
JUSTIFY AGREEING TO TRANSITIONS OF ANY KIND RELATED TO SUBSIDY
PROGRAMS THAT ARE INCONSISTENT WITH THE WTO. ON A RELATED
MATTER, VIETNAM OBJECTED TO THE LANGUAGE IN THE U.S. SUBSIDY
APPROACH DEALING WITH NON-MARKET ECONOMY METHODOLOGY. U.S.
ADVISED THAT SOME LANGUAGE WOULD BE NECESSARY IN THIS REGARD AS
LONG AS VIETNAM WAS A NON-MARKET ECONOMY. NOTE: THE VIETNAMESE
SIDE ATTEMPTED TO ARGUE THAT UPON JOINING THE WTO VIETNAM WOULD
BE, BY DEFINITION, A MARKET ECONOMY. U.S. SIDE EXPLAINED
COMMERCE PROCESS CAREFULLY AND OFFERED TO PROVIDE RELEVANT NME
LANGUAGE FOR THE WP. END NOTE.

DELEGATIONS


21. VIETNAMESE TEAM INCLUDED:
LUONG VAN TU - VICE MINISTER OF TRADE
NGUYEN QUOC HUY - OFFICE OF THE GOVERNMENT
PHAN CHI THANH - OFFICE OF THE GOVERNMENT
VU HAI TRIEU - MINISTRY OF PUBLIC SECURITY
NGUYEN VAN PHUC - OFFICE OF THE NATIONAL ASSEMBLY
NGUYEN VAN LONG - OFFICE OF THE NATIONAL COMMITTEE FOR INT'L
ECONOMIC COOPERATION
TRAN QUOC KHANH - MINISTRY OF TRADE
HA HUY TUAN - MINISTRY OF FINANCE
HOANG PHUOC HIEP - MINISTRY OF JUSTICE
PHAN TAM - MINISTRY OF POST AND TELECOMMUNICATION
PHAM BAO LAM - NATIONAL BANK OF VIETNAM
NGUYEN VIET VINH - MINISTRY OF AGRICULTURE


22. U.S. TEAM INCLUDED

DOROTHY DWOSKIN - USTR
CECILIA KLEIN - USTR
GREG HICKS - USTR
MIKHAIL ZELDOVICH - USTR
DANIEL WATSON - USTR
JON MCHALE - USTR
ELENA BRYAN - USTR
SARAH ROGGE - USTR
ROY MALMROSE - USTR
KATRICE KELLY - USDOC
TOM FINE - USDOC
BARBARA CHATTIN - USDA
MARY ELLEN SMITH - USTR
CARA MORROW - USDOC
D.E. SONNEK - DEPT. OF STATE
WILLIAM TAGLIANI - USTR