EAP DAS Eric John Meets AmCham and MOT Vice Luong

UNCLAS SECTION 01 OF 03 HANOI 002547

SIPDIS

SENSITIVE

STATE FOR EAP/BCLTV AND EB/TPP/BTA/ANA GOODMAN AND WICKMAN
STATE PASS USTR ELENA BRYAN AND GREG HICKS
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: ECON ETRD EINV PREL PHUM KIRF PGOV OVIP VM WTO
SUBJECT: EAP DAS Eric John Meets AmCham and MOT Vice Luong
Van Tu


SENSITIVE - NOT FOR INTERNET DISTRIBUTION


1. (SBU) Summary: In a September 27 luncheon with AmCham
Board members and a separate meeting with Vice Minister of
Trade Luong Van Tu, Deputy Assistant Secretary Eric John
discussed Vietnam's WTO accession and BTA implementation.
AmCham members expressed growing concern about the draft
investment law's illiberal provisions on business licensing
for domestic and foreign firms, their lack of opportunity
for effective dialogue with the Vietnamese Government (GVN)
on business issues, and the public perception in Vietnam
that the United States is delaying Vietnam's WTO accession.
VM Tu urged the United States to accelerate Vietnam's WTO
accession, in fulfillment of President Bush's June
commitment to Prime Minister Phan Van Khai. He
distinguished Vietnam from China, stressing that Vietnam has
a much smaller volume of trade and that it imports from the
United States many of the inputs used in its exports. He
complained that the United States is expecting Vietnam to do
more than other countries. DAS John affirmed that the USG
wants Vietnam to accede to the WTO as quickly as possible,
but on acceptable commercial terms. End Summary.

AmCham Luncheon
--------------


2. At a September 27 luncheon hosted by the American
Chamber of Commerce in Vietnam (AmCham),EAP Deputy
Assistant Secretary (DAS) Eric John, accompanied the
Ambassador, Ho Chi Minh City Consul General Seth Winnick,
poloff and econoff, discussed business concerns. AmCham
Board members were worried about some of the legislation
that Vietnam is drafting to meet WTO accession requirements,
particularly the proposed law on investment. (Comment:
Under the current investment law draft, both domestic and
foreign companies would have to undergo onerous investment
licensing procedures that presently apply only to foreign
investors. U.S. businesses had expected the new law to
extend the current relatively simple registration procedures
for domestic businesses to foreign companies. The AmCham
representatives expressed concern that the current draft of
the investment law could choke off the growth of the private
sector in Vietnam. End comment.) According AmCham's
information, the Vietnamese National Assembly is likely to
pass the law on schedule rather than reconsider it.


3. (SBU) The Ambassador asked if the AmCham had lobbied
against the draft law. AmCham members admitted that they
had few contacts with National Assembly members, and those
few contacts tended to be for the Assembly to explain its
position rather than to work out problems. In general,
AmCham members felt they had few opportunities to bring
their concerns to the attention of Vietnamese authorities;
the meetings they did have offered no chance to follow up.
Many U.S. companies hesitated to bring concrete complaints
for fear of provoking unwanted attention from government
regulators. They noted an increase in regulatory
inspections since publicizing their paper on WTO concerns.
AmCham members stressed the importance of USAID's Support
for Trade Acceleration Project (STAR)(providing technical
assistance on trade related laws and regulations) as an
avenue to get good policy advice to the Vietnamese
government (GVN). However, they noted that STAR's focus is
on the implementation process of the Bilateral Trade
Agreement (BTA). Members were also concerned about the
public perception in Vietnam that the United States was to
blame for delaying Vietnam's WTO accession.


Vice Minister of Trade Tu: Speed Up
--------------

4. (SBU) EAP DAS Eric John, accompanied by ADCM Sam Watson,
poloff and econoff notetaker, met with Vice Minister of
Trade Luong Van Tu to discuss bilateral trade relations and
Vietnam's WTO accession. Warmly welcoming Mr. John, Tu
noted that 2005 is the tenth anniversary of the
reestablishment of bilateral relations and enumerated the
many successes in the relationship, such as the visits of
President Clinton in 2000 and Prime Minister Phan Van Khai
this year. DAS John said that it was wonderful to be back
in Vietnam, which he regarded as his home in Southeast Asia
since he had served two overseas tours related to Vietnam.
He was amazed at the pace of development of bilateral
relations. The bilateral issues that we are dealing with
now, such as WTO, are the kinds of issues that close friends
work on together.


5. (SBU) VM Tu made a strong pitch for the U.S. side to show
more flexibility on WTO. He pointed out that the BTA
duplicates many of the WTO's requirements and claimed that
Vietnam is ahead of schedule in implementing it. He also
stressed that President Bush, in his meeting with Prime
Minister Phan Van Khai, had made a commitment to Vietnam to
support Vietnam's WTO accession. Tu urged the United States
to consider Vietnam as a developing country that needs time
to adjust. Contrasting Vietnam and China, he argued that
Vietnam's services offer was as good as China's, and hoped
the United States would accept it, saying that it was beyond
Vietnam's capability to do more. He also hoped that the
United States would not ask Vietnam for WTO plus terms. He
argued that, compared with China, the volume of Vietnam's
trade is small. Furthermore, unlike China, which has its
own raw material resources, Vietnam imports U.S. raw
materials to produce its exports.


6. (SBU) The Vice Minister noted the progress made in
Geneva, but asked for help in persuading USTR to accelerate
the accession process, complaining that Vietnam had closed
with all countries except the United States, New Zealand and
Australia. He looked forward to the United States being an
example for other countries expanding trade relations with
Vietnam. Other WTO accession countries only had to show a
plan to come into compliance with WTO standards before
accession, but the United States and other working party
members expected Vietnam to have its laws in place before
joining. He thanked the United States for funding the STAR
project and noted that Vietnam's National Assembly has or is
in the process of passing some 27 new WTO-compliant laws.


7. (SBU) DAS John reaffirmed the U.S. commitment, expressed
by President Bush, to work with Vietnam to achieve WTO
accession as soon as possible. Vietnam has advanced towards
accession at a "world record" pace, but the toughest issues
now remain. It is unfortunate that there is a public
misperception that the United States is standing in the way
of Vietnam's accession. The United States is working
towards a "perfect" accession for Vietnam, which means that
Hanoi needs to improve its offer. The DAS also noted that
it is important to keep in mind the importance of full
implementation of the BTA for Congressional approval of
permanent normal trade relations (PNTR) for Vietnam. Under
the BTA, Vietnam was given a ten-year phase in, while the
United States had to comply immediately. Some U.S.
businesses are concerned that implementation under the BTA
may be falling off pace. BTA implementation is important
for three reasons: it is an obligation, it affects U.S.
business, and it affects U.S. political support for PNTR.


8. (SBU) VM Tu responded that the Vietnamese side is making
its best efforts to implement the BTA and had even gone
further than required under the BTA in granting market
access in some areas such as insurance, and was reviewing
requests by some U.S. companies seeking earlier phase-in of
rights. However, the Vietnamese side has concerns about
U.S. implementation of the BTA, such as the opening of bank
representation offices and establishment of
telecommunications companies in the United States. Tu also
noted that he would meet next week with the AmCham to
discuss their concerns.


9. (SBU) DAS John said that there was concern that the
proposed new investment law would increase rather than
decrease regulation and was contrary to the spirit of the
WTO. Tu emphasized that the draft investment law was still
under discussion and that the GVN was taking comments. He
also mentioned the draft IPR law and said that he believed
the U.S. side was satisfied with it. ADCM Watson pointed
out that there were still problems with IPR enforcement.


10. (SBU) VM Tu reiterated his concerns about U.S. BTA
implementation. U.S. banks, he said, had been allowed to
open 100 percent-owned banks in Vietnam, but Vietnamese
banks had not even been allowed to open a representative
office. The ADCM explained that the BTA did not exempt
Vietnamese banks seeking to open offices in the United
States from meeting U.S. regulatory requirements, including
the requirement that foreign banks operating in the United
States must come from countries that have effective anti-
money laundering laws. Despite repeated requests, Vietnam
had not given the U.S. side a chance to review and comment
on its recently issued decree on money laundering.


11. The Vice Minister also claimed that the United States
had not permitted market access for Vietnamese telecom
companies. The ADCM expressed some surprise at this
allegation and said that in his most recent visit to the
Ministry of Posts and Telematics (MPT) the issue had not
been raised. (Note: In Tu's September 6 letter to USTR
(received on September 12),he referred to the case of the
Vietnamese Telecommunication Company applying for the
establishment of a joint venture in the U.S. and not being
granted permission. Embassy forwarded this letter to
Department and USTR. End Note.)

MARINE