DPM VU KHOAN MAKES URGENT WTO POINTS TO AMBASSADOR

UNCLAS SECTION 01 OF 05 HANOI 001888

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: PREL ETRD VM WTRO WTO AFLU HIV AIDS
SUBJECT: DPM VU KHOAN MAKES URGENT WTO POINTS TO AMBASSADOR

REF: A) HANOI 1863 B) STATE 133130


1. (SBU) Summary and Comment: On July 25, the Ambassador
met with Deputy Prime Minister (DPM) Vu Khoan to discuss
Vietnam's bid to join the World Trade Organization (WTO).
The Prime Minister is becoming concerned about the
possibility that Vietnam will not be able to accede to WTO
by its self-imposed December 2005 deadline, and is
pressuring his ministers to work with the USG and the
Embassy to accelerate the conclusion of negotiations. The
GVN would like to have another negotiation session in July
or August (and offered to come to Washington),but will
settle for a more formal session on the margins of the
September 15 working party session in Geneva. The
Government is concerned about the possible reaction by the
public and the senior political leadership if Vietnam is
unable to conclude negotiations with the United States in a
timely fashion, but the experts on the trade side understand
the reality of the situation and are preparing for the
possibility that accession will not occur until early 2006.
After discussing WTO, the Ambassador highlighted the
importance of developing an Avian Influenza contingency plan
and asked for the GVN's assistance in addressing issues
regarding disbursement of HIV/AIDS assistance connected with
the President's Emergency Fund for AIDS Relief (PEPFAR).


2. (SBU) The GVN, particularly the Prime Minister, has been
actively selling the concept domestically of a 2005
accession to the WTO, despite the more sober assessments of
the actual trade experts in the GVN, including DPM Khoan.
DPM Khoan and officials at the Ministry of Trade and the
Office of the Government have a more realistic view of the
timetable, as evidenced by their more pragmatic suggestions
for next steps in the negotiation process. At this point
the USG can strengthen the pragmatists' position by
negotiating in good faith, keeping up the pace of work set
by the GVN, and seriously considering the GVN's offer to
come to Washington for a round of negotiations in August.
End Summary and Comment.

PM VISIT: EVERYONE VERY HAPPY
--------------


3. (SBU) At DPM Khoan's request, the Ambassador met him July
25 at Government House to discuss the current situation of
Vietnam's effort to join the WTO. DPM Khoan was joined by
Americas Desk Assistant Minister of Foreign Affairs Nguyen
Duc Hung, Tran Quoc Khanh from the Ministry of Trade and
Phan Chi Thanh from the Office of the Government. A/DCM,
Poloff and Econoff accompanied the Ambassador.


4. (SBU) DPM Khoan thanked the Ambassador on behalf of the
Prime Minister and the people of Vietnam for the success of
the Prime Minister's visit to Washington in June. Public
opinion and the delegation's private assessment were both
very positive. The visit developed the expectation among
the Vietnamese public that U.S.-Vietnam relations will
develop further and that there will be new breakthroughs.
To satisfy that expectation, the United States and Vietnam
should work hard to follow up the commitments made during
the visit. In Vietnam, the Prime Minister has already
instructed relevant agencies (the Ministries of Planning and
Investment, Trade, Foreign Affairs, Public Security and
National Defense) to implement the agreements reached during
the visit. Khoan said he looks forward to working together
with the Ambassador and the U.S. Embassy on the
implementation of concrete activities and outcomes from the
visit.

WTO: THE REAL ISSUE
--------------


5. (SBU) The most important component of the high-level
agreement reached between President Bush and Prime Minister
Phan Van Khai is that the two sides will resume negotiations
on Vietnam's accession to the WTO, the DPM stated.
Vietnamese officials and people are both encouraged by the
commitment shown by President Bush to supporting Vietnam's
accession to the WTO. Upon returning to Vietnam, the GVN
did its best to provide feedback on outstanding issues such
as taxation, services, multilateral issues, etc. Vietnam
extends a formal invitation for the U.S. negotiating
delegation to resume negotiations in Vietnam at the end of
July. If this is a problem, Khoan said, Vietnam is willing
to send its negotiators to Washington. So far, he noted,
Vietnam has received no response from the office of the U.S.
Trade Representative (USTR) with regard to questions
concerning the timing and agenda for the next round of
negotiations.


6. (SBU) The DPM said he has heard informally that it is
unlikely the U.S. Delegation will come to Vietnam in July or
August, which worries the Prime Minister. The Prime
Minister had asked Vu Khoan to meet the Ambassador, express
the GVN's concern, and seek assistance in arranging another
formal negotiation session as soon as possible.


7. (SBU) Vietnam has greatly increased the priority it
attaches to the acceleration of WTO accession, Khoan
explained. The United States plays the dominant role in the
process and so Vietnam needs its cooperation. Internally,
Vietnam will embark on a "new plan" in 2006, he added.
(Note: the Tenth National Party Congress, held every five
years to set the economic and political direction for
Vietnam, is scheduled to begin in June 2006. End Note.) To
prepare Vietnam's economic and foreign policy plan for
consideration, the GVN needs to know the prospects for WTO
accession. Externally, Vietnam attaches great importance to
relations with the United States and hopes the United States
will be "among the countries soon to conclude negotiations
on Vietnam's WTO entry." Khoan listed the countries who
recently concluded bilateral negotiations with Vietnam,
including Japan, Korea, Canada, Colombia and China.

COMMUNICATION FROM USTR
--------------


8. (SBU) Mr. Khanh of the Ministry of Trade received a
letter July 25 from Assistant U.S. Trade Representative
Dorothy Dwoskin. In response, Khoan said that he has
instructed the negotiating team "to work hard to provide the
necessary feedback to all requests from USTR." Vietnam is
committed to doing everything possible to ensure progress in
the negotiation process with the United States. For these
reasons, Khoan said, and because the GVN is concerned about
disappointing public opinion, the GVN is counting on the
Ambassador to contribute to negotiations and ensure
progress.


9. (SBU) The Ambassador assured DPM Khoan that prospects for
Vietnam's eventual accession to the WTO remain bright and
that the United States firmly supports accession as soon as
possible. He stressed that negotiators are working hard not
just in the context of the formal negotiating sessions but
also in the exchange of letters and positions and in the
informal and internal deliberations between the two sides.


10. (SBU) On the bilateral side, the Ambassador expressed
appreciation that the DPM had instructed his team to be as
responsive as possible to U.S. requests. Until now, the
United States has been disappointed not to receive responses
on some of the issues that have been outstanding since the
June negotiation session. The proposals that Vietnam has
submitted have been received and are being analyzed; a lack
of formal scheduled negotiation sessions does not imply a
lack of work or progress towards accession, the Ambassador
stressed.


11. (SB) Vietnam's multilateral negotiations with the
Working Party in Geneva would be a tougher job to finish
than the bilateral negotiations with the United States, the
Ambassador explained. The December deadline Vietnam set for
itself (accession by the scheduled December WTO ministerial
in Hong Kong) is extremely ambitious and has required
cramming two years of work into a nine- to ten- month
period. The Vietnamese National Assembly has worked hard
and focused intensely on building the necessary legislative
framework for Vietnam to meet its WTO commitments. Though
the Ambassador is optimistic that the National Assembly will
pass the necessary legislation, it has yet to occur, and
that means that the necessary legal changes in Vietnam
remain hypothetical.


12. (SBU) Even more troubling for the December deadline is
the necessity in the United States of the U.S. Congress
approving Permanent Normal Trading Relations (PNTR) before
the United States considers Vietnam to be a member of the
World Trade Organization. Before the Administration can
approach Congress and say "we need to have a PNTR vote for
Vietnam this year," it will need to be ready to demonstrate
that the full package of necessary prerequisites, including
required legislation on the Vietnamese side and conclusion
of bilateral and multilateral negotiations, is complete.
Looking at the current state of this "package," it is clear
that Vietnam is not ready and the earliest it will be
possible to schedule a PNTR vote is the beginning of 2006.
There is no reason a country must accede to the WTO during a
ministerial; the bimonthly WTO General Council meetings also
offer an opportunity. So if Vietnam misses the December
deadline, February 2006 is still possible.


13. (SBU) The United States remains very interested in
seeing Vietnam's proposed solutions on telecommunications
and industrial subsidies, the Ambassador continued.
Industrial subsidies are relevant to Vietnam's multilateral
negotiations and the working party beginning September 15,
during which the U.S. team will also be available to meet
bilaterally on the margins. The United States is not ready
to send a team to Vietnam in July for formal negotiations,
and has not yet fully absorbed all of the Vietnamese
responses and suggestions. The United States wants to
conclude negotiations, but forcing the teams together at
this time would be unproductive. On the issue of
agricultural tariffs, for example, the United States is
still looking for evidence of a Vietnamese move. Exchanges
continue, the Ambassador noted. He explained that he had
accepted Vice Minister of Trade Luong Van Tu's request for a
meeting the previous week, and had obtained guidance from
Washington. Thus while the response had been oral, its
contents had reflected USTR's position. The United States
owes responses to two letters, he acknowledged, but the two
sides should continue these practical exchanges.

GVN: STILL FOCUSED ON JULY/AUGUST, THEN DECEMBER
-------------- ---


14. (SBU) DPM Khoan emphasized that Vietnam wants to
continue to try to accomplish accession by the December
meeting in Hong Kong. He reiterated Vietnam's request for a
visit by the U.S. side to Vietnam in July or August and
confirmed that if the United States team cannot travel, the
Vietnamese team will go to Washington. He also urged
keeping up the exchanges and pace of work "intensely" until
the next formal negotiating session so that when the two
sides meet again conclusion of negotiations is possible.


15. (SBU) In the event a formal negotiation is not possible
in July or August, Khoan conceded, the Vietnamese side hopes
to have a meeting with the United States side on the margins
of the working party meeting in Geneva in mid-September.
However, that meeting should be substantive, productive and
very well-prepared, and not "informal."


16. (SBU) DPM Khoan is confident that Vietnam will be able
to resolve all multilateral issues in time to conclude the
Working Party negotiations in September. Vietnam is
currently working with all the countries in the Working
Party and has all of the submitted questions and requests
and is preparing responses. Vietnam is aware that new
issues will come up during the Working Party meeting in
September, but will do its best to respond favorably to
those issues.


17. (SBU) Vietnam understands that December may not be
possible, but it remains a target "we are trying to get to
and achieve," the DPM stressed. The results of the
multilateral Working Party session in Geneva will provide
valuable information on when and how Vietnam's accession can
go forward. Khoan said he understands the constraints on
the United States side as the Ambassador explained them, but
hopes that the United States will not completely rule out
the possibility of accession by December. Khoan admitted
that he does not know the procedures involved in completing
the PNTR vote, but understands they will be addressed upon
the conclusion of bilateral negotiations.

AMBASSADOR: IT WILL BE TOUGH TO GET IT DONE BY DECEMBER
-------------- --------------


18. (SBU) The Ambassador said the timing for a PNTR vote is
not fixed, but must occur before the United States considers
Vietnam to have acceded to the WTO. It cannot occur before
the multilateral and bilateral negotiations are complete;
the U.S. business response has been reviewed; and, an
assessment of the Bilateral Trade Agreement (BTA) has been
concluded. The BTA so far has been a success, though some
areas remain where the United States would like to see
further progress, such as distribution rights and IPR. The
upcoming National Assembly session may address some of these
issues, he suggested.


19. (SBU) The Ambassador told the DPM that the Vietnamese
approach of focusing intensely on work that can be done now
to enable both sides to complete negotiations quickly is
exactly right. "We can see the finish line," the Ambassador
said, "but we are not there yet." He advised Khoan that a
July negotiation session is impossible, but the Embassy will
convey the August suggestion to USTR. However, he
cautioned, a new negotiation session is "absolutely not
possible" unless there is evidence on both sides that it
will be fruitful.


20. (SBU) Khoan clarified that his delegation handed over an
offer on agricultural tariffs, and is looking for a
response. The United States has said that Vietnam has made
no changes in its offer, but for the Vietnamese side the
ball is in the U.S. court. Khoan said the Vietnamese side
has handed over the same offer several times because it is
still waiting for a U.S. response; its offer will not change
in the absence of U.S. feedback, he said. The industrial
(non-agricultural) tariff issue is the same. Vu Khoan said
USTR told the GVN it will respond soon to the Vietnamese
offer, and Vietnam will then have a "substantive offer"
after seeing the United States' feedback. This represents
possible disparities in the working approach on both sides,
but not an insurmountable difficulty. Once again, the DPM
stressed, "Vietnam will do whatever it can to promptly
settle the issues outstanding."

OTHER ISSUES: HIV/AIDS AND AVIAN INFLUENZA
--------------


21. (SBU) The Ambassador noted that a joint USG team from
USAID, the Centers for Disease Control (CDC),the
Departments of Health and Human Services and Agriculture was
in Vietnam recently to meet with key GVN officials and see
how the United States could best be helpful. The USG is
encouraged by the leadership of Minister of Agriculture Cao
Duc Phat as he works across ministries to put into place an
emergency pandemic preparedness plan. Having a well-crafted
plan in place and made public as soon as possible and
certainly no later than the end of September would be both
prudent and send a strong signal to the international
community that Vietnam has taken the right preventive
measures, the Ambassador said. To that end, the United
States is prepared to assist. Vu Khoan thanked the
Ambassador for the offer and said he had spoken to Deputy
Prime Minister Pham Gia Khiem about the U.S. offer. DPM
Khiem had met with the relevant agencies in the GVN to
instruct them to cooperate fully with the international
community.


22. (SBU) The Ambassador also noted that U.S. assistance to
Vietnam in combating HIV/AIDS through the mechanism of the
President's Emergency Fund for AIDS Relief (PEPFAR) could go
as high as USD 40 million the next year, depending on actual
disbursement performance, and urged the DPM to focus on this
important aspect of the issue. Khoan agreed that
disbursement was an issue with so many international donors
involved.


23. (SBU) Comment: This meeting was triggered by the Prime
Minister's concerns regarding the perceived delay in U.S.-
Vietnam WTO negotiations following the Ambassador's July 19
meeting with Vice Minister Tu. The Ambassador spoke with
Deputy Foreign Minister Vu Dung on July 24 and heard that
the PM is agitated about what he perceives as U.S. foot-
dragging in scheduling the next negotiating session. It is
not clear that the PM's staff has been completely honest
with him about the probable timeline for Vietnam's accession
to the WTO.


25. (SBU) Comment continued: At the same time, the GVN has
been trumpeting the December target for WTO accession to the
public in Vietnam, and implying significant, swift and
practical economic results from Vietnam's accession. One of
the outcomes of the PM's visit to Washington most heavily
publicized in the Vietnamese media was the President's
promise to the Prime Minister that the United States
supports Vietnam's WTO entry and will work to make it
happen. Having built up expectations so high, GVN officials
have an obligation to deliver to the Prime Minister and the
PM feels he has the obligation to deliver to "public
opinion" according to an arbitrary and unrealistic deadline.


24. (SBU) Comment continued: Fortunately, we are also
dealing with pragmatists in the form of DPM Vu Khoan and
Vice Minister Tu. They understand much more clearly the
realities of negotiating Vietnam's WTO entry, and their
presentation of the offer to negotiate on the margins of the
working party in Geneva as an alternative to the July or
August formal negotiation sessions, as well as the
acknowledgement that an early February entry might be more
realistic than December, demonstrate that understanding. To
strengthen the position of these pragmatists, the USG needs
only to negotiate in good faith and match the pace of work
set by the GVN side. However, it could prove hard for us to
justify not meeting in August since the GVN team is willing
to come to Washington. End Comment.

MARINE