CORRECTED COPY: SOME COMMITMENTS ARE HARDER THAN OTHERS --

UNCLAS SECTION 01 OF 02 HANOI 001616 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/MLS and EEB/OIPE STATE PASS TO USTR DAVID BISBEE E.O. 12958: N/A TAGS: ECON ETRD KIPR VM SUBJECT: CORRECTED COPY: SOME COMMITMENTS ARE HARDER THAN OTHERS -- PRODDING VIETNAM ON WTO IMPLEMENTATION REF: A) HANOI 1212 B) HANOI 310 C) 06 HANOI 2602 (U) This cable is sensitive but unclassified. Not for Internet. This cable is a retransmission of Hanoi 1583, please disregard that copy. ¶1. (SBU) SUMMARY. Vietnam, widely praised for its progressive and aggressive approach toward opening its markets, is finding that fulfilling some of its WTO commitments may be harder than it thought. Recently published regulations impose new restrictions on foreign importers, potentially forcing them to disband their distribution networks and choose a single nationwide distributor. An eight month-overdue IPR criminal regulation is nowhere in sight, and the GVN now tells us that it will come next year at the earliest. State-sponsored piracy of U.S. broadcast content continues unchecked, despite Vietnam's trade commitments in its Working Party Report. Mission Vietnam continues to take every opportunity to press all levels of the GVN to its WTO obligations, warning that these lapses could erode the country's hard-won reputation as a reliable trading partner. END SUMMARY. BLINDSIDING IMPORTERS WITH A MARKET BARRIER -------------- ¶2. (U) There was an audible groan from the business and diplomatic communities when Vietnam finally issued long-awaited regulations in pursuance of its WTO trading rights commitments on July 17 of this year. Among other things, the Trade Ministry's "Circular 9" (akin to an Executive Order) forces foreign importers to reduce their distribution networks and rely instead on a single local distributor. Foreign importers are concerned that their market penetration will be limited if they are forced to rely on a single nationwide distributor. Some sectors, like chemicals, do not even have a reliable local distribution network, let alone a distributor capable of nation-wide business activities. Foreign-owned distributors are not allowed to operate in Vietnam until 1/2009. ¶3. (U) The restriction on distributorships could be inconsistent with Vietnam's WTO commitments since in the Working Party Report Vietnam pledged that importers "would be free to select a distributor or distributors of their choice" and that Vietnam "would not apply any restrictions on the choice of the distributor or distributors". (Note: The hierarchies of legal instruments in Vietnam are as follows: laws, which must be enacted by the National Assembly; Decrees, which are issued by the Prime Minister; and Circulars, which are issued by the relevant ministries to provide detailed guidance to implement the higher-level documents. End note.) ¶4. (SBU) Embassy Hanoi and Congen HCMC have met with U.S. importers, local AmCham representatives and the diplomatic community to discuss a strategy to urge Vietnam to clarify the meaning and intent of this restriction as well as its scope. Emboffs also met with the drafters of Circular 9 at the Ministry of Industry and Trade (MOIT) on August 12 and again on August 30 to raise our concerns. Working together with USTR, Mission submitted a list of 13 questions to the MOIT asking it to clearly explain how the existing implementing guidance fulfills Vietnam's WTO obligations, in preparations for an exhaustive review of Vietnam's recent trading right regulations during the third week of September. FROM A BAD CIRCULAR TO A MISSING CIRCULAR -------------- ¶5. (U) During bilateral WTO accession talks, the GVN promised that it would issue a circular criminalizing commercial-scale copyright infringement prior to WTO accession and then follow up later with a change in its criminal code to bring it into alignment with its WTO Trade Related Aspects of Intellectual Property (TRIPS) obligations. Eight months after WTO accession, the circular has yet to be issued despite repeated and extensive USG lobbying that even included USTR providing suggested language on multiple occasions (Refs A and B). ¶6. (U) Officials from the GVN organ responsible for preparing the circular, the Supreme Court (SPC),has informed the Embassy that they may not be able to take action until next year. SPC officials claim that they are unable to reconcile the TRIPS language with current domestic laws, and that they would prefer to enact the criminalization of large-scale IPR infringements once the criminal code can be redrafted -- a process that SPC will not begin until ¶2008. ¶7. (SBU) Coordination on WTO compliance issues are clearly a challenge for the GVN, as evidenced by the SPC's recent position which differs from its discussions with USTR's intellectual property HANOI 00001616 002 OF 002 expert during the Annual BTA Review in June (REF A). Mission continues to stress to the MOIT negotiators who made the commitment that they need to remain engaged with the SPC's drafters to reach an outcome that meets the obligations undertaken by Vietnam in its accession to the WTO. UNCHECKED SIGNAL PIRACY -------------- ¶8. (SBU) In another, even clearer example of the GVN's unwillingness (or inability) to stop local enterprises from violating Vietnam's international IPR commitments, the Television Technology Investment and Development Company (VTC) continues to pirate international broadcast content, including one U.S.-owned channel, and illegally distribute pirated content to an estimated 1.5 million customers. VTC's actions are all the more egregious because it is a state-owned company, under the control of the Ministry of Information and Communications. ¶9. (SBU) The Embassy, USTR and the broadcast industry have mounted a multi-year campaign to compel the GVN to stop VTC from pirating content. While these efforts have at times yielded temporary results (VTC removed most U.S.-owned content from its lineup shortly following the June BTA Review),VTC has resumed its illicit activities. Ambassador Marine raised this with numerous ministers and other GVN authorities over the past several years, as have industry leaders. In recent months, cease and desist letters issued by several U.S. companies have led to VTC removing those channels from its broadcast package. Although at the latest check, VTC was still illegally distributing foreign channels, including the last remaining U.S. channel, MTV. GVN officials told us on September 7 that had been removed from VTC's lineup, but industry contacts could not immediately confirm this report. NEXT STEPS -------------- ¶10. (SBU) Trade agreement compliance issues have featured prominently in Ambassador Michalak's initial consultations with Vietnam's leaders. The annual BTA review and the newly-formed TIFA Joint Council will both present additional opportunities to focus attention on these issues. Post will also continue to raise the criminal circular and signal piracy in our input into the annual Special 301 Review, a tool which has provided some traction with GVN authorities over the past several years. COMMENT: IS A PATTERN EMERGING? -------------- ¶11. (SBU) Although there is little evidence of a concerted agenda to skirt WTO obligations, it is clear that these cases are not the result of carelessness or failure to anticipate the implications of Vietnam's trading commitments. The MOIT drafters told Emboffs that there was much interagency discussion on the distributor restrictions and that former Minister Tuyen himself agreed to them. Although many of our contacts suspect protectionism, ironically the biggest losers of the new restrictions are the Vietnamese distributors. In the case of cable piracy, the reasons are clearer. GVN officials themselves have admitted that "powerful interests" are behind VTC -- hinting not-so-subtly at influential corrupt officials. ¶12. (SBU) The failure to criminalize commercial-scale IPR violations appears more to be a case of the negotiators and drafters being unable to get the necessary inter-ministerial "buy-in," although it does not seem to be for lack of effort. Moreover, the GVN remains willing to engage with the USG, and in many cases, U.S. industry members on these issues. Continued and persistent dialogue with appropriate GVN authorities should help us move closer to resolution on these cases and prevent the development of a more widespread pattern of Vietnam failing to meet its international obligations. ¶13. (U) This cable was coordinated with Congen HCMC and USTR. MICHALAK