REVIEWING THE TRADE AGENDA: TRANSPAC, BIT, IMPORT

UNCLAS SECTION 01 OF 03 HANOI 001139 SENSITIVE SIPDIS STATE FOR EAP/MLS MBROWN SINGAPORE FOR TREASURY TREASURY FOR SCHUN USTR FOR DBISBEE E.O. 12958: N/A TAGS: ETRD EINV ECIN ECON PGOV VM SUBJECT: REVIEWING THE TRADE AGENDA: TRANSPAC, BIT, IMPORT LICENSING, GSP, U.S. VISITS AND DISTRIBUTION REF: A) Hanoi 1127 (GVN Discusses Economic Situation"); B) Hanoi 1072 ("Pharma, IPR and Market Access Top TIFA Agenda"); C) Hanoi 871 ("Vietnam Not Rushing Trade Deals"); D) Hanoi 345 ("DNSA Price's Visit to Vietnam") HANOI 00001139 001.2 OF 003 ¶1. (U) This cable is sensitive but unclassified. For official use only, not for dissemination outside USG channels or posting on the internet. ¶2. (SBU) Summary: Embassy Hanoi discussed a number of trade and investment agenda items with Government of Vietnam (GVN) officials from the ministries of Industry and Trade, Planning and Investment, Justice and Foreign Affairs. From those conversations, Vietnam seems to be moving fast in its consideration of the Trans-Pacific Strategic Economic Partnership Agreement (Transpac, previously known as P4),but has decided that, for the time being, it will only observe. On BIT, the Vietnamese are concerned that they are not ready for negotiations, even though they continue to provide assurances that there will be a first round before the end of the year. The GVN also says it is focusing on overcoming Generalized System of Preferences (GSP) hurdles, and on easing business concerns on import licensing and distribution. End summary. TRANSPAC -------------- ¶3. (SBU) The Government of Vietnam (GVN) appears to be moving fast on Transpac. The Ministry of Industry and Trade (MOIT) is leading inter-ministerial discussions on Vietnam's position, and appears ready to formally state its interest in the pact. Our MOIT contacts told us that on October 2, Minister Vu Huy Hoang would write to the Vietnamese Embassy in Washington with instructions to approach the United States to indicate that Vietnam wants to join Transpac as an observer. ¶4. (SBU) Vietnam has already asked the Mission-funded STAR program for assistance in analyzing the impact of joining Transpac. The STAR advisory team is holding off for now, at least until Assistant USTR Barbara Wiesel, who is slated to visit Vietnam in mid-October, has had a chance to brief the Vietnamese in full about the program. ¶5. (SBU) When Vietnam may issue its first public statements on Transpac is still being debated internally. Although a contact from the Ministry of Foreign Affairs speculated that Vietnam may go public as early as mid-October during the APEC Symposium in Singapore, MOIT officials assured us that a decision has not been made and that Vietnam also has a long way to go before it commits itself to participating more fully. NAILING DOWN BIT DATES -------------- ¶6. (SBU) While concerned ministries have told Post that Vietnam will hold first-round BIT negotiations before the end of the year (REF A),nailing down dates has proved elusive. The Ministry of Planning and Investment (MPI),which has the lead on the BIT, has told post that it is not prepared to negotiate -- "we're not even 10% ready," the lead negotiator told us. On October 2, Econoff talked to two other negotiating team members, from the Ministries of Foreign Affairs and Justice, and they acknowledged not having held any discussions on BIT since the two sides committed to launching negotiations on June 2 during Prime Minister Dung's visit to Washington. ¶7. (SBU) On September 25, the Ambassador wrote letters to MPI Minister Vo Hong Phuc and Office of the Government Minister Nguyen Xuan Phuc, apprising them of the need to move on scheduling negotiations. The lead negotiator and some members of the Vietnamese BIT negotiating team left on September 27 to Canada for BIT negotiations with the Canadians. On October 2, the number two BIT negotiator told Econoff that he hoped to be able to offer concrete dates "soon" after the group returns from Canada. GSP: MOVING ON LABOR -------------- ¶8. (SBU) GVN contacts continue to ask post for the latest updates on GSP. In addition to reviewing the public comments, we have told them to pay special attention to the upcoming Labor Dialogue in Washington on October 17. The Vietnamese said they are looking HANOI 00001139 002.2 OF 003 forward to addressing labor and IPR areas of concern in order to be able to get GSP approval by the end of the year. IMPORT LICENSING "MESS" -------------- ¶9. (SBU) Our MOIT counterparts acknowledged that the "automatic" import license system that the GVN has put in place (REF B) was "a mess." Despite having removed a significant number of imported goods from those subject to licensing (most significantly to U.S. business concerns, those on auto assembly parts were removed in September),they told Econoff that import licensing was giving Vietnam "a bad image." There have been significant industry complaints, they told us, and suggested that we concentrate our fire in ensuring that the scheme is not extended beyond its sunset date of December 2008. We shared with the MOIT a list of questions that USTR is considering raising in Geneva at the WTO Import Licensing Committee. DISTRIBUTION: CENTRAL-PROVINCIAL GOVERNMENT DISCONNECT -------------- ¶10. (SBU) At a meeting with MOIT officials on October 1, Econoff and Post Commercial Officer raised business complaints about disparate regulatory interpretations between the central government and the provinces. (Septel) The MOIT officials advised any U.S. business to "go directly to the MOIT" or other central government ministries if they ever find themselves in this quandary. We cited the example of Ho Chi Minh City authorities, whom a U.S. law firm complains are citing difficulties in issuing distribution sector licenses because they lack guiding regulations from the central government. "They have all the guidance that they need, if they [HCMC licensing authorities] are timid, come directly to us," the MOIT official told us. ¶11. (SBU) Responding to post concerns, the MOIT officials also assured us once again that there would be no problems with the so-called "Economic Needs Test" (ENT) that applies to large retailers, when the distribution sector opens to fully foreign-owned businesses in 2009. The only firms that have been subject to something akin to an ENT have been European or Asian, but they do not appear to be facing significant problems with its application, and the EU trade counselor told us on September 26 that this was not among his mission's top concerns. Although this is of no immediate impact to prospective U.S. businesses in Vietnam, Mission Vietnam continues to follow the application of this regulation closely. VISITS TO THE U.S. AND VIETNAM -------------- ¶12. (SBU) Deputy Prime Minister Hoang Trung Hai, who oversees the GVN's trade and investment ministries, is mulling a visit to the United States in early November, post has been told. The visit would be built around his participation in a Harvard University Kennedy School event, but will include a visit to Washington. MOIT officials told us that, if the trip takes place, DPM Hai would want to meet with counterparts at State, the NSC, USTR and Commerce. ¶13. (SBU) The MOIT officials also told us that MOIT Minister Hoang will officially invite USTR Schwab to visit Vietnam before the end of the year. "She could bring GSP," they said, half jestingly. Indeed, on October 3, Embassy Hanoi received a letter from Minister Hoang to USTR Schwab inviting her to visit and discuss "trade and economic cooperation issues of mutual conern". (Septel) ¶14. (U) Finally, MOIT informed us of a trade promotion visit to Houston, Florida and Washington, DC from October 10 to 22. The mission would apparently be headed by MOIT Americas Department Deputy Director General Nguyen Hong Duong and officers from Vietnam Trade Promotion Agency (VietTrade),the GVN trade promotion body. The group will focus on improving trade promotion, and liaise with the Department of Commerce, pursuant to the June 24 Memorandum of Cooperation between Commerce and VietTrade COMMENT -------------- ¶15. (SBU) Comment: Despite continuing macroeconomic difficulties, the GVN continues to push its trade agenda. On September 26, the MOIT announced that Vietnam and Japan had finally breached the HANOI 00001139 003.2 OF 003 impasse in their FTA negotiations and would sign one shortly (REF C, Septel),coming weeks after sealing pacts with New Zealand and Australia. With the United States, GSP remains at the top of the list, but Transpac is moving up fast. Embassy will continue to push for scheduling the first round of BIT talks. GVN visits to the U.S. and the Labor Dialogue present excellent opportunities for us to encourage the Vietnamese to keep it up, but also to guide the direction of our future engagement. End Comment. MICHALAK