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

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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