VIETNAM WTO BILATERALS: THE VIEW FROM HANOI

UNCLAS SECTION 01 OF 04 HANOI 003015

SIPDIS

STATE FOR EAP/MLS 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

SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD VM WTRO WTO APEC
SUBJECT: VIETNAM WTO BILATERALS: THE VIEW FROM HANOI

SENSITIVE - DO NOT POST ON INTERNET

REF: A) Hanoi 2967 B) HCMC 944 C) Hanoi 2645


1. (SBU) Summary: Our bilateral negotiations on
Vietnam's accession to the World Trade Organization
have not moved forward since September. Senior GVN
officials, including DPM Vu Khoan, have recently begun
expressing their frustration publicly in the press and
laying the blame on the United States and, to a lesser
extent, Australia. The usual din in the press that
surrounds any major negotiation is being exacerbated in
Vietnam by the pressures from a missed deadline, an
upcoming Party leadership meeting and the imminent
arrival of the APEC mantle to Vietnam.


2. (SBU) Ministry of Foreign Affairs (MFA) Vice
Minister Le Cong Phung made a measured appeal to the
Ambassador November 8 for progress in the negotiations.
While Vietnam is frustrated, so is the United States
over the lack of movement by the Vietnamese side since
mid-September. The danger is that this frustration
could spill over into and begin to affect other aspects
of our relationship. While we are not yet there, we
may be getting close. Less than six months ago, the
President and Prime Minister committed to raise this
relationship to a higher plane. In about a year, the
President plans to come to Hanoi for APEC. The sooner
we can finish these negotiations, the better. Setting
a definite time for a next meeting would be a useful
way to reengage. End Summary.

Little Progress Since September
--------------


3. (SBU) Our bilateral negotiations on Vietnam's
accession to the World Trade Organization have not
moved forward since the productive meeting in Geneva in
September. We have provided documents to Vietnam, but
are still awaiting revised offers. Vietnam has not yet
closed with the United States, Australia, New Zealand,
Mexico, Honduras and the Dominican Republic. No date
has been set for the next Working Party Meeting or for
another round of bilaterals. The Australians confirm
that they are also not making progress with the GVN.
(In the press and privately, the GVN claims that it is
making progress in its negotiations with Australia and
is close to completion.)

GVN Acknowledges It Will Not Meet its Goal
--------------


4. (SBU) The GVN has been forced in recent weeks to
acknowledge publicly that it will not meet its December
2005 accession target. Missing the important and long-
set goal of joining the WTO by December is embarrassing
to those in the Government who have pushed for economic
reform and international integration. Their failure to
achieve this important goal may have weakened them and
other reformers in the run-up to the Tenth Party
Congress late next spring.


5. (SBU) Earlier this fall, the well-placed editor of a
leading Party daily in HCMC, who is also in the reform
camp of the Party, indicated that reformers feel
defensive since they have not been able to deliver an
agreement with the United States on WTO accession.
Internal Party maneuvering in advance of the Tenth
Party Congress may be impacting the negotiating
strategy of the Vietnamese (Ref A). HCMC officials
foreshadowed this possibility in September (Ref B).


6. (SBU) Apart from losing face, the delay has a more
practical effect. Vietnam's assumption of the APEC
leadership mantle in January will increase pressure on
the already over-extended and limited number of English-
speaking officials who are dealing with WTO issues.
The longer Vietnam's WTO accession negotiations drag
on, the greater the potential to diminish the overall
effectiveness of Vietnam's APEC chairmanship.
Blame the United States
--------------


7. Earlier this fall, MOFA Vice Minister Le Van Bang
told the Ambassador that some in the GVN saw the United
States as the culprit in Vietnam's failure to meet the
December target (Ref C). In separate private meetings,
some key members of Vietnam's negotiating team have
expressed frustration with the lack of progress and
indicated that they are not sure what to do next. They
say that the GVN's September offer was meant to close
the gaps on everything but telecom, and there is little
left to give. Maintaining motivation for their staff
is difficult with no sign of imminent closure or a next
meeting. They have also expressed frustration about
the need for written offers before proceeding since
this was not how other partners such as the EU had
negotiated.


8. (SBU) Whether a tactic to divert blame from
themselves, a negotiating ploy or a sign of genuine
frustration, or all of the above, senior GVN officials
have recently begun expressing their unhappiness
publicly in the press and laying the blame on the
United States. In an October 22 interview, Tuoi Tre
newspaper quoted Vietnam's Ambassador to the WTO Ngo
Quang Xuan as saying that the U.S. negotiating position
reflected a "lack of good will" since demands are
"beyond Vietnam's capability." He said that
difficulties at the negotiating table with the United
States and Australia are currently the biggest
obstacles to Vietnam's accession to the WTO and would
prevent accession in December in Hong Kong. Vice
Minister of Trade Luong Van Tu, who heads Vietnam's
negotiating team, echoed the "lack of good will" theme
in remarks that appeared in the press on November 3.
He noted that "the difficulties at the negotiating
table are now sensitive matters such as too high
standards in banking, telecommunications and cultural
services (a reference to audio-visual issues)." On
November 5, Deputy Prime Minister Vu Khoan told
reporters that the major obstacle preventing Vietnam
from joining WTO is the trading partners of whom the
United States is the most difficult one." He said: "if
we cannot join this year, it is not our fault. We exert
maximum efforts, but we are not prepared to accept at
any price. We cannot accept things that may break our
economy. The Government has requested a more improved
offer to better approach the U.S. requirements."

U.S. Business Feeling Some Heat
--------------


9. (SBU) In reaction to the media blitz and to their
conversations with GVN officials exhorting them to tell
the U.S. team to close out, U.S. business
representatives have privately expressed concern that
they may face difficulties until the deal is closed.
They have cited some minor irritants, but cannot point
to anything major as a consequence, though Boeing
representatives speculate that there is a relationship
between the WTO negotiations and their continuing
difficulty in getting the deposit for aircraft sold in
June.

Meeting at MOFA on WTO
--------------


10. (SBU) The latest official discussion of WTO
accession in Hanoi came November 8 when the Ambassador
met Vice Minister Le Cong Phung at MOFA's request.
Phung offered the following summation of Vietnam's view
of the status of the negotiations. Bilateral relations
have developed well over the past ten years,
culminating in the Prime Minister's visit to the United
States during which President Bush had pledged to
support Vietnam's WTO accession. In October, the Prime
Minister had written to the President asking for his
help in fulfilling that pledge and proposing to upgrade
the negotiations to the ministerial level. Having
closed bilateral negotiations with 22 out of 28
countries, Vietnam's accession to the WTO now depends
mainly on the United States and on U.S. goodwill. It
will be difficult for Vietnam to chair APEC discussions
on WTO and the Doha Round next year if it is not a WTO
member.


11. (SBU) In response, the Ambassador described Phung's
clear and nuanced message as more helpful than some
recent comments in the press, particularly those of
Vietnam's Ambassador to the WTO. He assured Phung that
a response to the Prime Minister's letter would come
soon, although he could not predict the contents. The
United States wants to finish the bilateral
negotiations so that Vietnam can join the WTO, but the
content of the bilateral agreement is a commercial, not
a political, question. The U.S. side has provided some
items owed to Vietnam from the September Working Party
Meeting and will provide more this week, but has
received nothing from Vietnam. USTR Portman is very
busy with other bilateral negotiations and preparations
for the Doha trade talks, but there is a need to close
the gaps even if the next meeting is not at the
ministerial level. The Ambassador cited two examples
of areas where Vietnam ought to accept the U.S.
position: binding tariffs at applied rates and lowering
tariffs on certain agricultural products where China,
Vietnam's main competitor, already has or will soon
have zero tariffs. The United States needs Vietnam's
contribution to schedule the next meeting. Once
received, the U.S. side would need about three weeks to
analyze the materials. Noting that the end of the year
is coming, the Ambassador stressed the need to move
quickly.


12. (SBU) Phung stated that he hopes that Vietnam's
counteroffer, now in preparation, would move closer to
the U.S. request. While not a negotiator, Phung looks
at the framework of the negotiations. He hopes that
the Ambassador would convey Vietnam's concerns to
Washington, as he would convey the Ambassador's points
to the Ministry of Trade and others involved in the
negotiations. WTO accession is necessary to move the
bilateral relationship to a higher level, but for
Vietnam's accession to be achieved, the two sides must
resolve commercial issues, the Ambassador responded.
Noting that he and Assistant USTR Barbara Weisel had
met with Trade Minister Tuyen the previous month, the
Ambassador offered to see the Trade Minister again
after USTR receives Vietnam's submissions.

Comment
--------------


13. (SBU) No doubt the usual din in the press that
surrounds any major negotiation is being exacerbated in
Vietnam by the pressures from a missed deadline, an
upcoming Party leadership meeting and the imminent
arrival of the APEC mantle to Vietnam. In addition,
Vietnam is looking for a political solution to its
economic integration quest, an approach that has worked
with the EU, China, Japan, Korea and the ASEANs, but
not with the remaining partners. Of course, that is
not how the United States conducts WTO negotiations.
While Vietnam is frustrated, so are we over Vietnam's
public carping and its failure to provide revised
offers. The danger is that frustration could spill
over into and begin to affect other aspects of the
relationship. While we are not yet there, we may be
getting close.


14. (SBU) Interest among potential U.S. investors in
Vietnam is climbing and the pace of economic
interaction is accelerating. Closing the WTO deal
would only serve to enhance prospects for U.S.-Vietnam
trade and investment. Without question, however, the
deal must be complete. For example, two significant
sectors not yet resolved, telecom and financial
services, are critical to U.S. firms, to the commercial
viability of any PNTR package, and to the
attractiveness of Vietnam as a business environment.
The question is where to go from here to ensure that
the hard work of the past year pays off soon. Less
than six months ago, the President and Prime Minister
committed to raise this relationship to a higher plane.
In about a year, the President plans to come to Hanoi
for APEC. The sooner we can finish these negotiations,
the better.

A Way Forward
--------------


15. (SBU) The United States and Vietnam need an
accession package that is strong on the substance both
to ensure that PNTR will pass Congress and to create a
solid basis for future development of our economic
relationship. However, because we need to be firm on
substance, we should make every effort to accommodate
Vietnamese concerns in other respects and demonstrate
that we continue to negotiate seriously. The visit of
Barbara Weisel was helpful in showing high-level U.S.
interest in the negotiations. GVN officials' clear
expectation, based on their experience with the BTA and
other negotiations, is that a high-level meeting is
needed to conclude negotiations. What they are failing
to understand is that such a meeting can only occur
when the two sides have narrowed the issues to a few
key points. The Vietnamese believe that it is hard to
motivate their bureaucracy without a timetable. We
might be able to use their need for a timetable and
desire for a high-level meeting to our advantage, by
pointing out the possible times for such a meeting and
urging them to work towards making such a meeting a
reality, though only if there were substance (i.e.,
revised offers) to justify it.

MARINE