AUSTR Weisel Visit to Hanoi: WTO Getting Closer

UNCLAS SECTION 01 OF 04 HANOI 002700

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STATE PASS USTR ELENA BRYAN AND GREG HICKS
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TAGS: ECON ETRD EINV PREL PHUM KIRF PGOV OVIP VM WTO ASEAN BTA IPROP SOE
SUBJECT: AUSTR Weisel Visit to Hanoi: WTO Getting Closer

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1. (SBU) Summary. In meetings with the Minister of Trade,
the Vice Chairman of the National Assembly Economic and
Budgetary Committee, and the Vice Chairman of the Office of
Government, Assistant U.S. Trade Representative Barbara
Weisel delivered the message that U.S. and Vietnamese WTO
negotiators were close on the issues and that bilateral
negotiations could be concluded in a few months if both
sides stay focused and maintain momentum. She stressed that
good bilateral and multilateral packages as well as complete
implementation of the U.S.-Vietnam Bilateral Trade Agreement
(BTA) would be essential to win Congressional support for
Permanent Normal Trade Relations (PNTR) status for Vietnam.
Her Vietnamese interlocutors assured her that they are
striving to pass legislation that is WTO and BTA consistent.
They urged the United States to lower its demands in light
of Vietnam's transition economy status and suggested that
negotiations be raised to a ministerial level. The
Ambassador accompanied Weisel to the Trade Ministry and the
Office of Government. End Summary.

Minister of Trade
--------------


2. (SBU) In his October 11 meeting with AUSTR Barbara
Weisel, Trade Minister Truong Dinh Tuyen said that that the
ASEAN Trade Ministers had recently decided to speed up the
liberalization of services with a focus on 11 sectors. Tuyen
commented that the United States focuses too much on its
bilateral relations with ASEAN member states and pays too
little attention to ASEAN as a whole. He urged the United
States to combine its efforts on bilateral and ASEAN
relations.


3. (SBU) Agreeing on the need for the United States to have
relations with ASEAN as well as with its members, Weisel
remarked that of the ASEAN countries, all of which are in
her portfolio, Vietnam is the country in which U.S.
businesses are most interested. Because of this interest
and the potential opportunities here, Ambassador Portman had
asked her to go to Hanoi to discuss WTO accession, BTA
implementation and the future vote on Permanent Normal Trade
Relations (PNTR) in Congress. Weisel handed the Minister a
letter from U.S. Trade Representative Portman.


4. (SBU) Noting that Vietnam's Working Party meeting in
Geneva in September had gone well, Weisel said she expects
progress to continue. However, to build support for the
PNTR vote, Congress must agree that BTA implementation has
been satisfactory. Since the spotlight will be on Vietnam
next year as it hosts APEC, this would be a good time to
conclude WTO accession. USTR wants to shepherd a smooth
PNTR process, so it is important that there be no surprises.
Although Vietnam's BTA implementation has generally been
good, there are five key areas of concern: trading rights,
distribution rights, IPR, investment and transparency.
Legislation in some of these areas still needs to be
enacted.


5. (SBU) Pledging that Vietnam would meet its BTA
obligations, Tuyen distinguished between implementing
obligations and exceeding them. For example, Vietnam had
not granted trading rights to Ford Motor Company because the
BTA does not yet provide such rights in the auto sector.
Tuyen said that he had received a paper from AmCham
outlining concerns with BTA implementation and plans to meet
with them in November after his trip to China. The Minister
stressed that the GVN is doing its best on IPR, but it is a
difficult issue in Vietnam and elsewhere in Asia. Vietnam
is perfecting its legislation, trying to implement laws
effectively, and enhancing awareness. The Vietnamese people
are now more aware of the benefits of IPR rights and
therefore more willing to respect the rights of others.
However, noting that IPR is connected with technological
development which takes time, Tuyen asked for understanding.


6. (SBU) Weisel explained that the concern on trading and
distribution rights was that implementing regulations impose
licensing requirements and fees, which roll back BTA
achievements. Tuyen assured her that this was a
misunderstanding. He had not yet seen the draft decrees in
question, but would make sure that any BTA inconsistent
language was removed and would listen to comments from
AmCham. On trading rights, the GVN is relying on advice
from the USAID-funded STAR program (Support for Trade
Acceleration),which would ensure that the decree met BTA
requirements. Expressing appreciation for the Minister's
assurances, Weisel said she looked forward to good
discussions on the IPR issue with the National Assembly
delegation in Washington the following week. She also noted
that she hopes to receive the latest draft of the IPR law's
implementing regulations before those discussions.


7. (SBU) Despite some significant improvements, some aspects
of the draft investment law raise concerns, particularly the
approval procedure for investments over USD 20 million,
Weisel said. This provision could discourage investment,
she stressed. USTR would provide detailed comments later.
Tuyen said that the law had to be in accord with BTA
investment chapter obligations without violating WTO rules
on trade-related investment measures (TRIMS). The GVN also
would like for the law to create a favorable climate for
investment, so it would welcome comments.


8. (SBU) Turning to Vietnam's WTO accession, Weisel said
that the U.S. side was waiting to hear from Vietnam on some
of the issues from the September Working Party meeting in
Geneva. The U.S. side owes the Vietnamese some background
on some issues as well. This work should be completed as
soon as possible so we can arrange the next meeting.
Pointing out that Vietnam has concluded bilateral
negotiations with 22 partners, the Minister urged the United
States not to set standards so high that Vietnam would lose
the incentive to negotiate. Weisel emphasized that the
United States shares Vietnam's desire to move quickly.
Following Geneva, the two sides have an agreed agenda to
follow and "we can get it done if we keep focused." The end
is in sight and a conclusion in the next few months would be
possible, but staying focused is important, she added.

National Assembly
--------------


9. (SBU) Weisel met with Tao Huu Phung, Vice Chairman of
the Economic and Budgetary Committee of Vietnam's National
Assembly. Phung stressed that the National Assembly is
actively making laws to meet all the requirements of the
United States and the WTO. In the last session, the
National Assembly had passed a number of laws including the
customs law, the law on export taxes, the competition law,
as well as laws on anti-dumping and on subsidies. In the
next session starting October 18, the Assembly plans to
enact 14 new laws and ordinances, including the common
investment law and unified enterprise law, as well as laws
on negotiable instruments, foreign exchange, and taxation.
These new laws are intended to create a level playing field
for foreign and domestic companies. The unified enterprise
law will replace separate laws on state and private firms
and will make state-owned enterprises (SOEs) more market-
oriented and independent from the Government. The tax law
will unify tax rates on domestic and imported products,
including autos, beer, distilled spirits and cotton. The
Government will adopt implementing regulations as the laws
are passed and the Assembly will oversee implementation. In
2006, the Assembly will pass another 16 laws and
regulations, including laws on electronic transactions,
telecom, property registration, land use, housing and
personal income tax. Such rapid activity demonstrates
Vietnam's efforts to meet WTO accession requirements.


10. (SBU) In response to Weisel's questions on the
investment law, the Vice Chairman said that the aim of the
law is to simplify administrative procedures by combining
business registration and investment licensing and by
creating a one-stop shop for businesses. The law and
regulations will be transparent about which sectors are
restricted for investment. It will set up a level playing
field for foreign and domestic business. Phung said that
the draft IPR law would be very detailed so that the
implementing regulations would probably add very little.
The latest drafts of the law and regulations are not yet
available since they have undergone major changes, he noted.
He was aware that a National Assembly delegation would soon
go to the United States to study IPR and that USTR would
need copies of the regulations for these discussions.


11. (SBU) On WTO accession, Weisel said that the United
States shares Vietnam's goal of accession and hopes to
complete bilateral negotiations in the next few months. She
observed that she receives more business inquiries about
Vietnam than about any other country in her portfolio.
After the recent productive working party meetings in
Geneva, both sides know where they need to go. Phung said
that the United States has high requirements for Vietnam,
but commented that Vietnam's ability to meet those
requirements is low. He urged the United States to lower
its demands. Weisel replied that the two sides were fairly
close and if the two negotiating teams could do their work,
negotiations could be completed. However, to persuade
Congress to pass PNTR for Vietnam, USTR will have to show
complete BTA implementation and a strong WTO accession
package. On BTA implementation, she noted that problems
remain with trading and distribution rights as well as with
licensing fees. The Vice Chairman said that the USAID-
funded STAR program is helping Vietnam on BTA implementation
and that USTR should bring implementation problems to STAR's
attention so that they could be resolved.

Office of Government
--------------


12. (SBU) Meeting with Vice Chairman Nguyen Quoc Huy at the
office of government, AUSTR Weisel repeated her message that
the "end is in sight" and both sides must redouble their
efforts to complete the bilateral negotiations. She hoped
to be able to schedule another negotiating meeting as soon
as both sides complete their "homework" from negotiations in
Geneva. She also emphasized the importance of BTA
implementation. Passage of PNTR will require both a good
bilateral and multilateral package and a good record on BTA
implementation. On the whole, BTA implementation has gone
smoothly, but a few areas of concern, such as trading
rights, remain. The interim solution for implementing
trading rights pending passage of new legislation is not
working well. This involves having an MOT point of contact
work with firms to ensure that the commitment is honored
even though the implementing regulations do not yet exist.
So far no U.S. company has received a general license to
trade, only licenses for specific shipments. Furthermore,
the implementing regulations for the draft trading and
distribution laws are likely to impose additional or new
licensing requirements or fees that would undermine rights
granted in the BTA.

13. (SBU) Huy replied that on the margins of the Prime
Minister's visit to Washington, the U.S. side had raised
some BTA implementation issues that the GVN is working to
resolve. He welcomed U.S. comments on the draft investment
law. All draft laws are available on the National Assembly
website and if the U.S. side discovers any provisions that
would violate BTA provisions, it should notify the GVN so
that the laws can be fixed. On IPR, Huy admitted that
Vietnam has difficulty enforcing IPR, but noted that,
compared with China, Vietnam is making progress. IPR is in
the interest of Vietnam as well as the United States;
Vietnamese musicians and artists are now interested in it.
On the bilateral WTO negotiations, Huy said that the Prime
Minister had just written to President Bush making two
requests: that, taking into consideration that Vietnam is a
transition economy, the United States should lower its
demands and that the two sides should hold another round of
negotiations in October.


14. (SBU) Weisel said that she looked forward to seeing the
letter to the President. The United States is eager to meet
again with the Vietnamese, but a meeting would be more
productive once Vietnam has submitted new offers on
agricultural and non-agricultural goods. On telecom and
financial services, the two sides still need to look at the
ideas they explored last month in Geneva to see whether they
can close. The U.S. goal is to conclude an agreement on
commercial terms that it can successfully present to
Congress.


15. (SBU) The Ambassador stressed the importance of BTA
implementation because of its effect on American attitudes.
The U.S. business community supports Vietnamese accession to
the WTO. However, as the end of the negotiation process
comes closer, businesses look to their own interests and how
these are reflected in the agreement. To be constructive,
the AmCham had drafted a position paper, which it shared
with the GVN. Suggesting that the GVN take the paper
seriously, the Ambassador commented that Trade Minister
Tuyen intends to meet with the AmCham, which is an excellent
idea. Ultimately, the attitude of American business will be
pivotal as Congress considers PNTR.


16. (SBU) The Ambassador also raised Boeing's problem in
getting paid. He said that he appreciated Huy's help in
getting the paperwork out of the Prime Minister's office.
However, two weeks later, Boeing has still not been paid due
to a delay in obtaining approval from Vietnam Airlines'
Board of Directors. The Ambassador asked Huy to help. Huy
responded that the GVN is still struggling with its poor
"administrative system." He said that this will be fixed in
time, but made no promise on the payment to Boeing.


17. (SBU) Returning to the issue of bilateral negotiations
on WTO accession, Huy suggested that it was time to raise
the negotiations to the ministerial level on both sides. He
said that Minister of Trade Tuyen was ready to go to the
United States to work out a deal this month and he hoped
that the U.S. side would support such a trip. The
Ambassador said that he saw no advantage for Tuyen to go to
the United States until Vietnam had submitted new offers.
AUSTR Weisel added that Vietnam wants a political-level
decision, but the U.S. position is that the agreement must
be on commercial terms. The agreement must have U.S.
business support in order to get PNTR through Congress.

MARINE