AMBASSADOR'S MEETING WITH MOT VM TU ON WTO

UNCLAS SECTION 01 OF 05 HANOI 001863

SIPDIS

SENSITIVE

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

E.O. 12958: N/A
TAGS: ETRD VM WTRO BTA WTO
SUBJECT: AMBASSADOR'S MEETING WITH MOT VM TU ON WTO

SENSITIVE BUT UNCLASSIFIED

Ref: State 133130

Sensitive -- Do not post on the internet.


1. (SBU) Summary: On July 19, the Ambassador met with Vice
Minister of Trade Luong Van Tu at the VM's request. Both
agreed on the need to maintain the momentum on Vietnam's WTO
accession following the great progress made in the June
talks as well as during Prime Minister Phan Van Kai's visit
to Washington. However, Tu acted very surprised to hear
that the U.S. side would not be able to come to Hanoi in
July or August and requested that the Ambassador convey
Vietnam's offer to come to Washington. The Ambassador
agreed to do so, but cautioned that tight schedules of key
USTR negotiators offered little hope of a bilateral session
before September. Tu was clearly stunned to learn that the
United States now believes that Vietnam should work toward
an early 2006 accession date. Both he and the Ambassador
acknowledged the importance of synchronizing timetables and
staying in touch on the issues. Since Tu stated that a
number of issues, particularly on the multilateral side, had
been covered in the documents submitted earlier in the week,
it would be helpful to analyze the contents so that we can
provide feedback quickly to the Vietnamese. On July 21,
Deputy Prime Minister (DPM) Vu Khoan requested a meeting
with the Ambassador on July 25 without indicating a specific
topic for discussion. We believe that the DPM's request may
in response to the Ambassador's meeting with VM Tu. End
Summary.


2. (U) The Ambassador, accompanied by Acting DCM, attended
a lunch hosted by Vice Minister of Trade Luong Van Tu on
July 19. Also present from Ministry of Trade (MOT) were
Director General of the Americas Department Nguyen Cam Tu,
Director from the Office of the National Committee for
International Economic Cooperation Nguyen Van Long and
Deputy Director for Multilateral Affairs Luong Hoang Thai.


3. (SBU) The Vice Minister began by thanking the Ambassador
and Embassy staff for their support in the successful visit
of Prime Minister Phan Van Khai to the United States. He
expressed the desire that the momentum achieved on Vietnam's
accession to the World Trade Organization, both in the
bilateral negotiations preceding the visit and in President
Bush's statement of support to the Prime Minister, would
continue. In that spirit, Vietnam had sent documents for
the next Working Party (WP) to the Embassy the previous day.
These documents had included the responses from the June
negotiations on key issues including trading rights,
industrial subsidies, and state owned enterprises and
equitization. VM Tu noted that he had sent letters both to
the Ambassador and to Deputy USTR Josette Shiner seeking
dates for another round of bilateral negotiations in July
"as the United States had proposed," but so far, had
received no response.


4. (SBU) Confirming the receipt of both of those letters,
the Ambassador explained that he had conveyed both of them
to USTR. The Ambassador noted that the two sides,
especially Vietnam, had been working very hard on these
negotiations and at a very high pace. In the midst of these
efforts, lines of communication had become twisted and he
welcomed this opportunity to try to straighten them out.
After the progress achieved in the entire relationship in
the past year, it is important that the two countries not
end up with misunderstandings that cause problems. For
example, USTR has not yet had time to digest and understand
the new documents for the next WP. USTR acknowledges the
receipt of the WP comments and revised offers on goods and
services. USTR is working on a revised tariff request that
it hopes to send soon to Vietnam.


5. (SBU) Stressing that the United States wants Vietnam to
become a WTO member as soon as possible, the Ambassador
noted that President Bush had made clear to the Prime
Minister that the United States is prepared to be Vietnam's
advocate in this process. An accession approval for the
United States has many aspects including a vote by the U.S.
Congress on Permanent Normal Trade Relations (PNTR). To
ensure a successful outcome, before submitting anything to
Congress, the U.S. Administration needs to ensure that there
is a complete package that will not attract opposition.
This means that implementation of the Bilateral Trade
Agreement (BTA) must be clean and complete. Vietnam must
have brought all of its relevant laws and regulations into
compliance with the WTO. Moreover, Vietnam's WTO
commitments must exceed the current BTA commitments. The
U.S. Administration must be able to show progress beyond the
BTA. The WTO commitments must also be acceptable to the U.S.
business community whose support Vietnam will need for the
PNTR vote. USTR has consulted with Congress and believes
that the best time to present the PNTR package would be
early in 2006.


6. (SBU) The Ambassador noted that the two timetables of the
two sides were not synchronized and said it is important to
consider how to solve this. Vietnam has been using the Hong
Kong Ministerial as its accession target date. This target
has been very effective and admirable. The progress made
so far would not be possible without such an ambitious
target. The United States estimates that two years of work
have been compressed into nine months, thanks to this
target. He added that this achievement had entailed a high
price in terms of hard work and effort for the Vietnamese
government staff involved. However, there is no technical
reason to link an accession to a Ministerial meeting, he
explained. In fact, accessions can be granted at WTO
meetings that take place every two months. Thus, if the
United States and Vietnam can sustain the current pace of
work and Vietnam can deliver its commitments, there is no
reason that Vietnam could not accede early in 2006, he
concluded.


7. (SBU) The Ambassador went on to say that at the last
bilateral wrap-up meeting in June, USTR had said it would
try to come to Hanoi, but both Deputy USTR Shiner and ASUTR
Dwoskin had pointed out that it would be hard to do.
Although they tried to make it happen, they had asked the
Ambassador to inform the Vice Minister that coming to Hanoi
in July will not possible. USTR also considered coming in
August, but that is the worst possible month in Washington
because of summer holidays and it will not be possible for
them to come at that time. Instead, they would like to
propose a meeting in Geneva in September at the time of the
next WP meeting. At that time, the two sides would hold
intense bilaterals and work on the text of WP report with
other WP members. The pressures that make a meeting in July
and August difficult will not be as severe in the fall so it
will be easier for USTR to consider times for follow up
meetings then. In the meanwhile, the lead U.S. negotiators
for various issues would be willing to meet for sector
discussions in Washington, Geneva, or elsewhere.


8. (SBU) Pointing out that the BTA covers eight sectors and
62 sub-sectors, the Vice Minister noted that Vietnam's WTO
offer had included more by covering ten sectors and 114
subsections on services. On goods, the BTA includes 300
tariff lines, whereas the WTO offer includes 10,000 lines.
Moreover, Vietnam had accepted a number of sectoral
commitments in such areas as the Information Technology
Agreement (ITA),chemicals, and civil aircraft. In
contrast, the Chinese had made WTO commitments in only nine
sectors and 90 to 92 subsectors. Thus Vietnam's offer had
exceeded that of China, he stressed. He implored the
Ambassador to understand that the Government of Vietnam had
made great efforts to open its market to U.S. business.


9. (SBU) The Ambassador acknowledged that Vietnam's
expansion into other sectors was impressive. He stressed,
however, that the concern was in areas such as
telecommunications and financial services where the two
sides disagreed and hence the scope of Vietnam's offer was
not satisfactory. The Vice Minister replied that he hoped
the two sides could narrow the gap and reach a conclusion.
The Ambassador agreed that the June talks had narrowed many
gaps in service sectors such as energy and environment.
Ambassador Shiner had said that the end was in sight and the
finish line was visible, he noted. At this point, the U.S.
side believes that reaching a bilateral agreement would not
be as difficult as closing out the multilateral
negotiations. For that reason, it would be important to
focus on making September's WP meeting a success.


10. (SBU) Turning to a more detailed presentation on the
June bilateral discussions, the Ambassador said that there
was more to do on telecom and financial services. As for
goods, the two sides have agreed to 85 percent of the
agricultural tariffs under discussion. But the remaining 15
percent includes the issues critical to the United States
where a show of flexibility by Vietnam would be useful. The
United States intends to send a revised request soon. As
for non-agricultural goods, there was a good exchange on
priority and sensitive areas that should help both sides
understand their differences. The United States is
analyzing Vietnam's last offer and hopes to be able to
narrow the differences once this has been completed. It is
also very important for Vietnam to bind its tariffs at low
applied rates.


11. (SBU) Enacting legislation for the WTO is an essential
step since it would take care of BTA implementation
requirements, form the basis for a successful PNTR vote and
set the stage for successful WTO entry, the Ambassador
continued. Vietnam has an ambitious schedule that it must
adhere to as much as possible. The United States needs to
be able to get comments on draft laws to Vietnam in a timely
manner, he acknowledged. U.S. experts have provided
comments on Vietnam's draft laws on IPR and investment.
They are currently working on comments on additional
legislation. Noting that the United States had provided a
draft checklist of the status of legislation to Vietnam in
June, the Ambassador asked for confirmation that it was
accurate. He solicited input on whether there were ways to
improve the format to make it more useful.


12. (SBU) The Ambassador then took up four specific
multilateral items, which he acknowledged might have been
addressed in the draft WP documents Vietnam had submitted
the previous day. In June, the United States had noted that
the transitions for trading rights were longer than those in
the BTA and thus would not be viable for a successful PNTR
package. Good discussions in Washington on SOES and STES
had helped clarify our outlook on them considerably. As a
result, the United States is in a better position to
understand the key issues involved and looks forward to
receiving Vietnam's comments on the paper provided in June.
Resolving the prohibited subsidies issue is essential and
the United States will look for suggestions in the WP
documents. The United States has also provided comments on
Vietnam's draft IPR law. Discussions with U.S. firms and
the Congress have made clear that full TRIPs implementation
by accession is essential.


13. (SBU) The Ambassador said that he had been urging
Washington to have this kind of conversation because he was
not sure that the two sides had spoken this directly on
timing before this. He pledged to do all that he could to
be sure that this sort of clarity is maintained and that
each meeting will lead to a clearer view of what the two
sides need to do. In that spirit, he called on the two
sides to use the next six to seven weeks to exchange
information and narrow their differences to a point where
the next round could perhaps be the final round. However,
having negotiations take place before doing the necessary
preparatory work is sure to lead to frustration, he
cautioned. Progress in these negotiations is not just a
question of sitting down and talking, he stressed. Based on
his understanding, the U.S. team has been working more
intensely with Vietnam than with anyone else over the past
year. That demonstrates the U.S. commitment to Vietnam's
accession, which USTR Ambassador Portman had reaffirmed
during his meeting with PM Khai, will be maintained.


14. (SBU) The Vice Minister responded that it was helpful
to exchange information and to speak frankly. He agreed
that the U.S. team had made great efforts with Vietnam in
the seven rounds. Regarding multilateral issues, he noted
that Vietnam was committed to full TRIPS implementation
after accession and had received useful comments from the
U.S. side for the final draft of the IPR law that were being
taken into consideration in revisions. He noted that
Vietnam intended to complete the WTO laws and decrees this
year and had completed some 25 already with another 14 set
for the October-November legislative session. One advantage
is that the National Assembly and the government both agree
on the agenda. He interjected his expression of
appreciation for the good work that the USAID-funded Support
for Trade Acceleration (STAR) project is doing to help with
this legislative review. On trading rights, he noted that
there had been progress in the new offer submitted in July,
which now is better than the BTA. Regarding SOEs, he
pointed out that only about one quarter of Vietnam's GDP
comes from SOEs while the joint ventures, private firms, and
foreign direct invested enterprises contribute the rest.
(Note: Official GVN and other estimates put this at over 30
percent. End Note.) Noting Vietnam's commitment to
implement fully the BTA, he said that one or two issues were
not yet implemented, but a diplomatic note expressing a
commitment to full implementation had been sent to the
Embassy. (Note: We are checking on what he was referring
to. End note.) He pledged to assign a point of contact for
trading rights issues the following week and provide this
information to DUSTR Shiner, as promised during the June
bilateral meeting.


15. (SBU) Tu went on to say that USTR's new negotiation
schedule is very "delayed." While he had understood the
Ambassador's explanation, he wished to express Vietnam's
desire to hold the negotiations sooner and offered to fly to
the United States if the U.S. side was too busy to go
elsewhere. Keeping the negotiations going continuously
could lead to a quicker conclusion, while prolonging the
process and seeing changes in personnel could delay closing.
Therefore, in the spirit of the close bilateral relationship
between Vietnam and the United States and the support
expressed by President Bush in June for Vietnam's WTO
accession, he requested that the Ambassador convey a
proposal for Vietnam to go to Washington later in July for
another round of bilateral negotiations. The Ambassador
replied that he would be happy to convey the request, but he
held little hope that it would be possible. Tu responded
that he understood the U.S. difficulties, but still
requested that the United States give Vietnam priority.
While Vietnam was small for the United States, these
discussions were very important to Vietnam.


16. (SBU) The Ambassador replied that the issue was not
small for the United States. If it were, the U.S. team
would not be working as hard as it is. The United States
views Vietnam's accession as important because it is setting
the stage for the trading relationship of the future. The
comments on timing that he had conveyed are very measured
and serious, the Ambassador added. He went on to say that
the United States would continue to work very hard with
Vietnam, but that there is a need to look at and adjust
Vietnam's schedule. He stressed that this did not mean in
any way that the United States would stop working on the
accession. The Ambassador noted that he would be in Hanoi
all summer and available to have further conversations such
as this one, but he can be a conduit, not a negotiator.


17. (SBU) Reminding VM Tu that passing new legislation was
one of the biggest hurdles remaining, the Ambassador
underscored the need for WP members to see drafts of laws
for the fall session in advance so that they can have time
to provide comments. Tu promised to provide draft laws to
the WP and noted that as required in the Law on Laws Vietnam
would solicit public comments and invite legal experts from
the United States and European Union to participate. He
expressed confidence that Vietnam's lawmaking process, which
involves international experts, was better than that of
China.


18. (SBU) The Ambassador reiterated that there was no way
around the PNTR legislative issue. The Administration is
not ready to give a PNTR package to Congress, so there is no
way to complete Vietnam's accession until early in 2006.
Asked whether there was any way to advance this schedule, he
replied that an earlier date was very unlikely because of
the other demands on Congress. Acknowledging that the issue
was very important for Vietnam, the Ambassador pointed out
that just as USTR has to deal with other negotiations and
trade issues, the U.S. Congress has to deal with other
issues. The United States believes that by the time the
package is ready, there will be no space on the legislative
calendar until early 2006. He cautioned against trying to
save space in the calendar since that would risk losing
credibility to Members of Congress if, in the end, the
package is not ready in time.


19. (SBU) VM Tu agreed to synchronize coordination with the
U.S. side and wanted more help in getting Vietnam's message
out since Vietnam was weak in "propaganda." The Ambassador
observed that the Prime Minister's trip had gone a long way
towards changing that by increasing America's understanding
of Vietnam today. More progress in this area will be needed
before the PNTR vote occurs, he noted. That vote will be an
occasion to review the trade relationship and other aspects
of the relationship so it will be a chance for people to
express viewpoints that may affect the vote. Because of
this, having a well-coordinated and complete PNTR package is
vital. A solid package will help garner support from the
U.S. business community, Congress and others, thus making it
easier to neutralize opponents. Some are certain to oppose
PNTR because of their concerns that progress on human rights
and religious freedom has been inadequate, but it is
important to ensure that there is no opposition on issues
like IPR or trading rights. Since the issue of PNTR for
Vietnam comes at a time when there is considerable debate
about U.S. trade policy, many in Washington will look at any
new trade agreement with a critical eye. The Ambassador
said he was confident that the Vice Minister would report on
this conversation to others in Vietnam who are interested
such as Deputy Prime Minister Vu Khoan. He called for close
coordination with Vietnam on these issues in the coming
months.


20. (SBU) Comment: The Vice Minister and his staff looked
stunned both when we noted that there would be no meeting in
July and when we outlined a timetable for an early 2006
accession. It would be helpful to look carefully at the
latest tranche of documents to determine whether what
Vietnam has done is close or not to what is needed. We will
continue to try to maintain close touch with our Vietnamese
colleagues. On July 21, Deputy Prime Minister Vu Khoan
requested a meeting with the Ambassador on July 25 without
indicating a specific topic for discussion. We believe that
the DPM's request may be in response to the Ambassador's
meeting with VM Tu. End Comment.

MARINE