SECRETARY GUTIERREZ AND MINISTER OF INDUSTRY AND TRADE HOANG

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001144

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS
STATE PASS TO USTR DBISBEE
COMMERCE FOR 4431/MAC/AP/OPB/HPPO
EEB/TPP/BTA/ANA

E.O. 12958: N/A
TAGS: ECON EIND ETRD BEXP KTEX OTRA OVIP VM
SUBJECT: SECRETARY GUTIERREZ AND MINISTER OF INDUSTRY AND TRADE HOANG
TALK TRADE

REF: Ho Chi Min 1131

HO CHI MIN 00001144 001.2 OF 002



1. (SBU) U.S. Secretary of Commerce Carlos Gutierrez met the
newly appointed Vietnamese Minister of Industry and Trade of
Vietnam Vu Huy Hoang on November 7 to explore commercial
opportunities in a rising Vietnam. The Vietnam Apparel Import
Monitoring program and current anti-dumping orders topped the
Minister's list if concerns, while Secretary Gutierrez raised
trading and distribution rights, IPR and project licensing --
issues that were foremost on the minds of the 22 U.S. companies
in his trade delegation. Looking forward, Minister Hoang asked
for the Secretary's support for Generalized System of
Preferences (GSP),a bilateral investment treaty (BIT) and
market economy status. End summary.

Textile Monitoring and Antidumping
--------------

2. (SBU) Minister Hoang opened by thanking the Secretary, on
behalf of producers in the garments and textiles sectors, for
Commerce's help in allowing Vietnamese companies to continue
exporting to the United States. Vietnam appreciates the recent
announcement that Commerce found no evidence of dumping and will
not self-initiate an anti-dumping case on garments imports from
Vietnam. He asked the Secretary to help abolish this mechanism
because it causes uncertainty among buyers, and because it is
not appropriate under the WTO. If the mechanism cannot be
totally abolished, he called for the reduction of the number of
line items under monitoring, especially those not produced in
the United States.


3. (SBU) The Secretary reassured his counterpart that the
textile monitoring mechanism was a necessary accommodation the
Administration made with Congress to approve Permanent Normal
Trade Relations (PNTR) for Vietnam, and the program will expire
at the end of the Administration in 2009. He added that the good
news is that the first of three reviews found no evidence of
dumping and pledges that the process will remain a transparent
legal process, not politically driven.


4. (SBU) The Minister expressed his hope that Commerce will
start analysis soon to reduce the number of line items under the
monitoring mechanism. The Secretary promised to explore the
possibility for reducing the number of product line items
subjected to monitoring, currently 468 in five categories.


5. (SBU) Secretary Gutierrez proposed to Minister Hoang holding
a trade remedy exchange program aimed at providing Vietnamese
officials with a better understanding of this complex set of
issues and asked Assistant Secretary David Spooner to brief the
Minister of the status of the frozen fish fillets and shrimps
anti dumping cases. Minister Hoang told the Secretary as many as
9 to 10 million people depend on the seafood industry for their
livelihoods. He asked the Secretary to help facilitate and
reduce measures that limit Vietnamese exports of shrimps and
frozen fish fillet to the United States.

Trading and Distribution Rights
--------------

6. (SBU) The Secretary next raised trading and distribution as
an area of critical importance to U.S. companies where there is
still much confusion. Minister Hoang said he understands that
U.S. exporters' position is that they should not be limited by
the number of distributors. However, according to the Minister,
implementation of distribution rights should be done
step-by-step to increase the number of distributors in Vietnam
and he is listening to suggestions from foreign distributors.
His Ministry is working with USTR and learning about the U.S.
experience in distribution. The Minister indicated that Vietnam
will adhere to the provision of paragraph 147 (the portion of
the WTO working party report providing for multiple
distributors).

Major Project Licensing
--------------

7. (SBU) The Secretary then mentioned the sizeable trade deficit
and the letter he sent to Prime Minister Nguyen Tan Dung
expressing hope for contract signing for key projects. He
briefly mentioned major advocacy projects including the Boeing
contract for 12 Dreamliners, GE Capital's interest in a 20
percent stake of state-owned Vietcombank, AES's Mong Duong
coal-fired power plant, SSA Marine's joint venture to develop
and operate a port, Gannon's proposed power project to supply
industrial zones in Dong Nai province. On Gannon, the Secretary
specifically raised Gannon's difficulty in obtaining a meeting
with Electricity of Vietnam.

HO CHI MIN 00001144 002.2 OF 002




8. (SBU) Minister Hoang carefully responded to every advocacy
projects raised by the secretary. The Boeing deal will be
finalized soon. MoIT supports GE Capital's project with
Vietcombank. SSA marine's services are much needed to improve
Vietnam's logistical efficiency for export. Gannon has received
guidance on their proposed power project and has just turned in
a revised proposal using oil as fuel.

Encouraging More on IPR
--------------

9. (SBU) The Secretary raised the importance of IPR protection
to foreign investors, saying that countries that protect IPR
will enjoy a competitive advantage in the future. He recognized
Vietnam's good progress in building the legal framework for IPR
protection, and cited the Microsoft contracts as good examples
of implementation.


10. (SBU) Minister Hoang cited a range of statistics intended to
show increased enforcement for both administrative and criminal
cases. The Minister admitted that IPR enforcement need stronger
measures to be effective. He informed the Secretary that a draft
circular on criminal enforcement has been sent to the U.S. side
for review and that the Vietnamese Supreme Court will formally
issue the circular after full consultation with all stake
holders.

The Road Forward: GSP, BIT and NME Status
--------------

11. (SBU) The Minister assured the secretary that no one can
dampen progress in Vietnam and offer to work together to resolve
obstacles. Minister Hoang asked for Commerce support in the
process of preparing its petition for Generalized System of
Preference (GSP) status. Minister Hoang also asked for market
economy status for Vietnam as soon as possible, and earliest
possible negotiation of a bilateral investment treaty (BIT). MPI
has the lead on BIT negotiations, but MoIT coordinates very
closely with MPI on investment issues. The Minister told the
Secretary that Vietnam supports the Doha round, but indicated

SIPDIS
that Vietnam is not ready to take higher obligations than its
WTO accessions commitments.


12. (SBU) He added that President Bush and his administration
highly value the growing friendship and relationship between our
two countries. The Secretary said will convey Vietnam's interest
in GSP and BIT to the USTR, which is responsible for those
issues. On the Doha round the Secretary will ensure USTR is
aware of Vietnam's request and that Vietnam is treated fairly.


13. (SBU) The Secretary explained that market economy status has
six criteria. If interested, Vietnam should make a formal
request for review under this quasi-judicial (rather than
political) decision process. Minister Hoang suggested that the
U.S. takes a similar approach to the EU in assessing Vietnam's
market economy status, recognizing market economy qualifications
one measure at a time.


14. (SBU) The Secretary thanked Minister Hoang for the candid
discussion of issues and invited the latter to visit when in
Washington.

Comment:
--------------

15. (SBU) During his visit, Secretary Gutierrez clearly laid out
the range of issues that U.S. business identified as impediments
to further U.S. exports to and investment in Vietnam. The
Minister argued that a year after WTO entry, Vietnam is
implementing its WTO commitments in a serious manner, but it is
not unusual for some issues to arise. Still, the Minister's wish
list of future activities ensures that the United States
continues to have considerable leverage to exert to help resolve
trade and investment issues. End comment.


16. (U) This cable was drafted and cleared by the delegation.
FAIRFAX