SCENESETTER FOR CODEL MCCAIN'S VISIT TO VIETNAM

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SUBJECT: SCENESETTER FOR CODEL MCCAIN'S VISIT TO VIETNAM

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OVERVIEW
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1. (SBU) Your April 6-8 visit to Vietnam comes at an opportune
moment. Our bilateral relationship with Vietnam has progressed much
since your last visit to Hanoi in April 2000 and is arguably at its
highest point since relations were normalized in 1995. Propelled by
a series of senior bilateral visits, the United States and Vietnam
have deepened cooperation in areas ranging from public health and
MIA issues to higher education and technical assistance designed to
support Vietnam meet its WTO and Bilateral Trade Agreement
obligations. The United States is Vietnam's largest export market
and third largest overall trade partner, and U.S. investment in
Vietnam continues to grow. Conservative voices in Vietnam's
leadership remain wary of U.S. intentions, but their influence is
waning as the country's young population -- the first generation in
memory to live without war -- looks to the West. Strategically,
Vietnam increasingly views the U.S. presence in the region as a
force for stability, a perspective evident in the first-ever
bilateral political-defense talks and policy planning talks in
October 2008. Vietnam is also taking a more active role in
multilateral diplomacy, both as a non-permanent member of the UN
Security Council and as an emerging leader in ASEAN.


2. (SBU) Profound differences remain, however, particularly in our
approach to human rights. While Vietnam has made strides in
improving religious freedom -- resulting in the country being
removed from the list of "Countries of Particular Concern" -- there
has not been a corresponding improvement in political rights or
press freedom. Suspicion over our human rights reporting and
advocacy are part of the reason for the cumbersome restrictions that
the GVN continues to place on our HCMC consulate operations. We
have our differences too on how Vietnam approaches international
issues. While taking its UNSC obligations seriously, Vietnam's
non-interventionist line has caused it to align with Russia and
China on issues such as Georgia and Darfur. China, understandably,
remains Vietnam's strategic obsession and provides the subtext for
Hanoi's "friends to all" foreign policy -- an approach that can at
first seem naive, but which is firmly rooted in realpolitik.

VIETNAM'S FOREIGN POLICY PRIORITIES
--------------


3. (SBU) Vietnam professes a "friends to all" foreign policy,
guided by a non-interventionist ethic that is fundamentally
pragmatic. While the overriding strategic concern remains China,
Vietnam is under no illusions that it can somehow "balance" China
with the United States, Russia, or Japan. Mistrust of China runs
deep, fed by historical animosities and simmering resentment over
what is widely viewed as a weak position on South China Sea
territorial disputes. Vietnam's leadership appears to realize,
however, that confrontation with China is not in the country's
interest. Nor is it a position that the Party could sustain
domestically: once unleashed, nationalistic sentiment, though
initially directed at China, could easily turn toward the Party
itself.


4. (SBU) Instead, Vietnam seeks to maintain as cordial and stable a
relationship with China as possible, while also cautiously
cultivating a diverse range of bilateral friendships and enmeshing
these in a framework of multilateral engagement. In this context,
Vietnam's bilateral relationship with the United States enjoys pride
of place; however, our relationship is but one of several, and
Vietnam is wary of pushing the agenda with the United States too
far, too fast, lest it antagonize China.


5. (SBU) Multilaterally, Vietnam puts great store in ASEAN. It has
voiced support for enhancing both the association's internal
capabilities and its relationships with ASEAN's dialogue partners.
Similarly, Vietnam looks at a number of regional issues such as
Burma and the Thai-Cambodia border disputes largely, though not
exclusively, through an ASEAN lens. Thus, while Vietnam's natural
impulse is not to interfere in Burma's internal affairs, Hanoi
recognizes the obstacles that Rangoon's continued intransigence
poses for ASEAN's credibility and relations with the West. At the
UNSC, Vietnam has been professional and well-briefed, but cautious.
Vietnam's UN mission has been eager to join in consensus, when
possible, voting for example to support sanctions on Iran. But
where there has been disagreement, Vietnam has tended to follow a
non-interventionist line.

HUMAN RIGHTS AND RELIGIOUS FREEDOM
--------------


6. (SBU) For Vietnam non-interference is not just an abstract
principle, but also a reflection of narrow self-interest. Vietnam
continues to have a poor record on human rights and still reacts
defensively to criticism, though it has learned to be more

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responsive to international calls for dialogue, engaging the United
States and others in annual formal human rights discussions.
Vietnam's sensitivities notwithstanding, promoting human rights,
religious freedom, and the growth of an active civil society remain
top U.S. priorities. For its part, the MFA seems to have fixated on
the possibility of a Vietnam Human Rights Act in Congress, and you
are likely to hear objections to its passage.


7. (SBU) The human rights picture is not all bleak, to be sure.
Economic growth has brought with it an enormous expansion of
personal freedoms, and government is much less intrusive than it was
twenty, ten, or even five years ago. While much remains to be done,
religious freedoms continue to expand, with most religious groups
reporting improved conditions and growing memberships. We see this
progress as continuing. We have not, however, seen corresponding
progress in political rights, and the government continues to
severely restrict freedom of speech and assembly. Political
dissident groups such as "Bloc 8406" are banned and their members
subject to harassment and arrest. Similarly, the October 2008
conviction of two correspondents reporting on a major corruption
scandal (universally referred to here as the "PMU-18" scandal) and
the firing of several senior newspaper editors has had a chilling
effect on the recently emerging field of investigative journalism.
Vietnam's internet blog scene, particularly in HCMC, has been a
source of spirited debate. But here too, the government is feeling,
clumsily thus far, for a way to curb what it considers to be overly
sensitive discussions; in September 2008, a prominent blogger
critical of Vietnam's "soft" stance toward China was sentenced to
two and a half years in prison. We have been pressing Vietnam to
amend its draft media law and to provide whistle-blower protection
for journalists and their sources.

ECONOMIC SUCCESS AND CHALLENGES
--------------


8. (U) Trade and investment have played a central and expanding
role in our improved relations. After a decade of isolation and
failed economic policies, Vietnam is determined to catch up with the
Asian Tigers. Vietnam's market-oriented reform program ("doi moi,"
renovation) spurred export-led economic growth that averaged 7.5%
over the past decade. The global economic crisis is testing
Vietnam's ability to maintain this momentum. GDP growth of 6.2% in
2008 was the lowest since 2000, and is expected to be even lower in
2009, with most projections below 5%. Foreign investment and export
numbers are unlikely to reach the milestone levels of 2008.


9. (U) Trade with the United States remains important to Vietnam.
Bilateral trade in goods was up 25% from the previous year, and
stood at an all-time high of $15.7 billion by the end of 2008. U.S.
exports are a success story and, despite the crisis, they were still
higher in January 2009 than the same month in 2008. U.S. exports to
Vietnam grew by 47% from 2007 to 2008 to $2.79 billion and the
growth in agricultural exports (up 83%) was extraordinary. Exports
of meats and poultry went up by 166% to $263 million, becoming the
U.S.'s second highest value export to Vietnam after vehicles (which
also went up by 18% to $258 million). Thirty two other agricultural
commodities experienced growth of three digits or higher.


10. (U) We are seeking to keep up the momentum with negotiations
toward a new Bilateral Investment Treaty (BIT). Vietnam also joined
the Trans-Pacific Partnership free trade negotiations, a step we
hope you will also encourage. The two sides recently agreed to open
up completely their air cargo markets under a revised civil aviation
agreement. Inadequate intellectual property protection and,
especially, deficiencies in protecting labor rights remain major
problems, which stand in the way of Vietnam's request for GSP
status. In 2008, we also held the first meetings of the Market
Economy Status Working Group, an initiative that Vietnam wants to
continue (the BIT and the Working Group were jointly announced
during the Prime Minister's visit to Washington in June 2008). We
are pushing Vietnam to open its market further to U.S. beef.


11. (U) Despite rapid economic growth, Vietnam's economy continues
to face substantial challenges, including underdeveloped
infrastructure; a shortage of skilled workers, managers, and
engineers; and chronic misallocation of state resources to
inefficient, but politically powerful state-owned enterprises.
Poverty reduction efforts have been extremely successful -- a recent
World Bank study described Vietnam's poverty reduction rate as one
of the most significant in history. That said, corruption is
endemic and disparities of wealth have widened. Further, GVN lacks
the technical capacity and systems to ensure consumer safety of
products and exports, as evidenced by recent struggles dealing with
melamine, seafood, and cholera.


12. (U) The global financial crisis has not directly affected
Vietnam given its limited integration into the world financial
system. However, the slowing global economy has affected Vietnam's

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exports and foreign investment inflows. It has revised its 2009 GDP
growth estimate down to 6.5%, a figure that many local economists
argue is still too high. Recent developments come on top of
significant macroeconomic difficulties at the beginning of the year,
including high inflation, a ballooning current account deficit, and
pressure on the currency caused by high money supply and credit
growth. After tightening monetary and fiscal policy in response to
these earlier difficulties, the government has been forced to
quickly change tacks to cutting interest rates and implementing
stimulus plans. Its primary concerns are now maintaining economic
growth and stability and supplying jobs for its young and growing
workforce.

THE MILITARY RELATIONSHIP AND TERRORISM
--------------


13. (SBU) Military ties, for obvious historical reasons, have
developed less rapidly. But here too there has been progress.
Efforts to provide the fullest possible accounting of missing
personnel predate the establishment of diplomatic relations, and the
development of trust on the issue has made gains in other fields
possible. We would like to see more progress in areas such as
underwater recovery and archival access, but, overall, both sides
can be proud of our achievements: accounting for 880 Americans
previously listed as MIA (1766 remain missing throughout Southeast
Asia). Largely on these foundations, the two sides' militaries are
slowly developing ties and have discussed cooperation in search and
rescue, military medicine and meteorological information exchanges.
These and other initiatives -- such as expanding English-language
training under IMET, ship visits, and encouraging Vietnam to
participate in global peacekeeping operations -- were on the agenda
for political-defense talks, the first of their kind, which were
held in October 2008.


14. (SBU) While the Vietnamese people and the GVN have also made
great strides toward healing war wounds and getting on with the
business of building a future for their country, issues relating to
the status of former ARVN soldiers, as well as others associated
with the "former regime," remain painful. One of the next important
psychological steps that the GVN needs to take in order to move from
division to unity is to expand their drives aimed at reconciliation
with foreign soldiers who served in Vietnam to include Vietnamese
who served in the ARVN.


15. (SBU) Vietnam says the right things about the threat of global
terrorism and has participated with us in modest cooperative
activities, including USG-funded counterterrorism-related training
at the International Law Enforcement Academy (ILEA) in Bangkok and
military-to-military exchanges with an emphasis on counterterrorism
themes. Vietnam has signed eight out of thirteen UN terrorism
conventions. Vietnam recently hosted a team of technical experts
from the Department of Energy to discuss the possibility of
launching Megaports in the ports of Saigon and Haiphong. This would
be a major step forward, and the government is currently considering
a draft MOU proposed by the DOE.

AGENT ORANGE
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16. (SBU) The recent Supreme Court decision not to hear the appeal
by Vietnamese Agent Orange "victims" of the dismissal of their
lawsuit against U.S. chemical companies resulted in broad public
criticism, fanned by the local media. Your interlocutors most
likely will raise this issue with you. At the same time, over the
past few years we have made noticeable progress in our attempts to
remove this war legacy issue as an irritant to our bilateral
relationship. Our engagement has accomplished much, in both
transforming the tone of the dialogue and building capacity to
address environmental issues and provide assistance for the
disabled.


17. (SBU) Despite continuing disagreement over the scope of possible
health effects of dioxin, a contaminant in Agent Orange and other
herbicides, from 2001 to 2007, the USG spent over USD 2 million to
initiate technical dialogues and scientific conferences on the
effects of Agent Orange/dioxin, and fund a 4-year project to build
the capacity of Vietnamese scientists to analyze soil samples
collected from the Danang airport. The Joint Advisory Committee
(JAC) for Agent Orange/dioxin, which brings together scientists and
researchers from both governments to provide science-based advice to
policy makers for potential environmental and health cooperation,
held its third annual meeting last September, during which
Vietnamese and U.S. members set up task forces to implement health
and remediation recommendations.


18. (SBU) USAID has started to implement a 2007 USD 3 million
Congressional appropriation for "dioxin mitigation and health
activities," with the November 2008 announcement of USD 1 million in

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grants to three partner organizations to strengthen services for the
disabled in Danang city. As part of a growing multilateral
coalition, we are finalizing plans to spend up to USD 1.4 million on
remediation preparation efforts in Danang and will soon meet with
our GVN counterparts to discuss the additional USD 3 million
recently appropriated for Agent Orange in the FY09 Omnibus Budget
Bill.

HEALTH, TRADE, EDUCATION, CLIMATE CHANGE
--------------


19. (U) Health diplomacy has been a hallmark of Mission strategy
for over 10 years, has opened many doors, and currently about 80
percent of all funding is in health and disability. Combating the
spread of infectious disease has been one of the most vigorous areas
of bilateral cooperation. Including funds approved so far for
FY2009, which provide an additional USD 88.6 million, HIV/AIDS
assistance under PEPFAR totals USD 322 million since 2004devoted to
HIV/AIDS in Vietnam. The results have been encouraging, with
Vietnam achieving the targets set by the Office of Global AIDS
Coordination. Vietnam is one of a few global epicenters for highly
pathogenic avian influenza, which experts believe could lead to a
pandemic. Accordingly, the United States has made substantial
investment to prevent and control avian influenza, with total
funding since 2004 of about USD 45 million projected through FY

2009. Myriad other capacity building work, for example in
tuberculosis, research capacity building, and good clinical
practice, has been done. While we have strong disease-specific
investments, we are now working with the Vietnamese and our partners
to contribute a greater focus on general health system strengthening
to keep pace with rapid health sector reform.


20. (U) U.S. assistance in other areas remains disproportionally
low, particularly in relation to assistance levels in neighboring
developing nations. Even so, U.S. programs such as USAID's STAR and
the Vietnam Competitiveness Initiative have become the government's
preferred source of expertise in reshaping trade and economic
regulation, with secondary positive effects on governance. Treasury
is also starting to engage on economic issues, with programs in
areas such as anti-money laundering, taxation, insurance and bond
market development.


21. (U) Education, although a newer priority, is the focus of much
Mission activity. Joint efforts to improve Vietnam's system of
higher education -- including expanding opportunities to study in
the United States and enhancing educational opportunities in Vietnam
through partnerships with U.S. universities -- was a main focus of
PM Dung's June visit to Washington. As a product of the visit, the
two sides established an Educational Task Force to discuss ways
forward in several key areas, including establishing an American
university in Vietnam. Ongoing U.S. educational activities include
the Fulbright Program, which provides scholarships for two-year
Master's Degree programs at American universities for 25 Vietnamese
students each year, and the Vietnam Education Foundation, which
sends more than 40 students to the U.S. for Ph.D. study in the hard
sciences every year. The Fulbright Economic Teaching Program
provides high-quality training in economics and public policy for
mid-level administrators. In addition, the U.S. Mission actively
assists U.S. universities and colleges wanting to set up programs at
Vietnamese schools, while EducationUSA Centers in Hanoi and Ho Chi
Minh City provide information and counseling to encourage students
to study in the U.S.


22. (U) Vietnam's rapid economic growth has put strains on the
environment, and the government's failure to address unchecked
pollution from booming Export Processing Zones and Industrial Parks
has drawn the attention of local media. Climate change is an
increasingly high-profile issue, and Vietnam's leadership is aware
of scientific studies outlining the severe effects rising sea levels
and salinity will have on Vietnam's ecology and coastal economy,
particularly in the rice-producing deltas. The June 2008 Joint
Statement between President Bush and PM Dung prominently mentioned
climate change. During Dung's visit, the United States and Vietnam
agreed to accelerate cooperation on climate change adaptation and
mitigation, and announced the creation of the Delta Research and
Global Observation Network (DRAGON) Institute at Can Tho University.
Supported by the U.S. Geological Survey, DRAGON Institute is
specifically designed to enhance cooperation on environmental
issues, particularly climate change, threatening the Mekong Delta.
These efforts support initiatives already underway by various U.S.
agencies -- including USAID, the U.S. Forest Service, and NOAA --
that directly or indirectly support Vietnam's climate change
response. Expanded cooperation from the U.S. Department of Energy
and U.S. Nuclear Regulatory Commission to support the creation of
the necessary safety and security infrastructure for Vietnam's
planned civilian nuclear power sector may also help mitigate
Vietnam's future greenhouse gas emissions.


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ADOPTION
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23. (SBU) Over the past two years, the US Embassy has uncovered
serious irregularities in the adoption system in Vietnam.
Anti-fraud investigations have uncovered more than 10 cases where
children were taken without the consent of their birth parents; 75%
of birth parents interviewed reported receiving payment as direct
inducements for placing their child up for adoption; most did not
understand that they were permanently relinquishing custody of their
children. As a result of these problems, the U.S. did not renew our
adoption agreement with Vietnam and imposed a moratorium on new
adoptions from Vietnam. The United States, along with our
international partners, believe that it is essential that Vietnam
become a full member of the Hague Convention as soon as possible and
have offered technical assistance to help Vietnam reach this goal.
While meaningful legal reforms and Hague accession will likely take
several years, we are encouraged that the government has begun to
acknowledge the problem and has formed an inter-agency working group
on adoption policy reform coordinated by the Office of the
Government.

WHAT YOU CAN EXPECT
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24. (SBU) While the GVN recognizes the strategic importance of the
United States in the region and the world, leaders here are not shy
about raising the specter of U.S.-led efforts to bring about
political change or to criticize U.S. actions it perceives as
outside the multilateral system. They routinely chafe over U.S.
criticism of Vietnam's record of human rights and religious freedom.
Nonetheless, Vietnam's leaders are also pragmatic and value their
relationship with the United States, both for its intrinsic
importance and because Vietnam's security and economic growth have
become inextricably enmeshed in an international system of which the
United States remains the leader. As a result, you can expect your
interlocutors not only to be articulate and well informed, but also
to express support for the bilateral relationship. As noted above,
lingering suspicions still exist among conservatives in leadership;
however, the overall tenor is one of support for the development of
closer ties with the United States, albeit at a measured pace.
Media interest in your visit will be keen, and we expect extensive
and positive coverage in all major Vietnamese outlets for your
activities. This, too, will help to amplify the message you bring
of ongoing cooperation. Your upcoming trip to Hanoi and coverage of
it will add momentum to our efforts to help translate these good
feelings into sustainable accomplishments.


25. (U) We look forward to your visit and stand ready to do
everything we can to make your discussions as productive as
possible.