US embassy cable - 04HANOI696

UNCLAS SECTION 01 OF 02 HANOI 000696 
 
SIPDIS 
 
SENSITIVE 
 
STATE PLEASE PASS TO USTR EBRYAN 
STATE ALSO FOR E, EB AND EAP/BCLTV 
USDOC FOR 6500 AND 4431/MAC/AP/OPB/VLC/HPPHO 
USDA FOR FAS/ITP/SHEIKH 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ETRD, EAGR, ECON, VM, BTA 
SUBJECT: Vietnam denies U.S. MFN Duty Reductions 
 
Sensitive but Unclassified -- Please protect accordingly. 
 
1. (U) Summary:  In February, in connection with a recently 
amended bilateral agreement with the EU, Vietnam reduced 
import duties on wines and motorcycles from the European 
Union.  In contravention of the U.S.-Vietnam Bilateral Trade 
Agreement, these lower duties have not been extended to U.S. 
products on an MFN basis.  GVN officials state that the GVN 
is reviewing internally the applicability of MFN to certain 
types of bilateral agreements, including "textile" 
agreements.  End summary. 
 
2. (U) On February 12, the Ministry of Finance issued 
Decision No. 17/2004/QD-BTC reducing duties on imports of 
European wines from 100 to 80 percent and duties on imports 
of European motorcycles from 100 percent to 70 percent. 
This Decision codified two of Vietnam's commitments in the 
February 15 amendment to the Agreement on Trade in Textiles 
and Clothing and Other Market Opening Measures between 
Vietnam and the European Union (EU).  (Note:  The Agreement 
was originally initialed in December 1992 and has been 
amended several times. End note.) Despite Vietnam's MFN 
arrangements with more than 60 countries, the GVN is not/not 
currently applying Decision 17 duty reductions to imports 
from any other country, including the U.S.  Article one of 
the U.S. Vietnam Bilateral Trade Agreement (BTA) guarantees 
the U.S. MFN.  The only exceptions listed in the BTA are 
advantages accorded to third countries involved in customs 
unions, free trade areas and frontier traffic with Vietnam. 
 
3. (U) Econoff raised the issue with Mr. Ha Huy Tuan, Deputy 
Director on the International Relations Department at the 
Ministry of Finance (MOF) on March 3.  Econoff expressed 
concern that the GVN is ignoring its MFN obligations, a 
fundamental principle in the BTA and that U.S. exports are 
being disadvantaged by the GVN's inaction.  Tuan responded 
that the GVN is discussing the application of MFN internally 
and trying to determine whether or not it applies to special 
agreements like the "textile agreement" between Vietnam and 
the EU.  Tuan then advised Econoff to raise the issue with 
the Ministry of Trade (MOT), noting that while MOF is 
responsible for levying duties, the MOT has the lead on 
issues related to MFN.  Tuan promised to convey U.S. 
concerns up to the Vice Minister of Finance. 
 
4. (SBU) Econoff subsequently raised the issue with Nguyen 
Hong Dzuong, Deputy Director General, Trade Policy 
Department for Europe and America at the MOT, who reiterated 
MOF's response that the GVN is currently internally debating 
application of the MFN principle and whether or not it 
applies to "textile agreements" (and anything contained in 
these agreements.)  Dzuong explained that on one side, there 
are officials who see this as a very clear-cut issue.  If 
you look at the BTA for example, there are no exceptions for 
wine (or other products) from MFN and so U.S. wines should 
automatically benefit from the reduction in duties applied 
to European wines.  Hardliners, on the other hand, reject 
this argument.  They take the view that textile agreements 
are an exception and thus the reductions on duties applied 
to EU wines are exempt from MFN treatment.  The hardliners 
are "uncomfortable" with the concept of MFN, Dzuong added. 
 
5. (SBU) Australian diplomats have also raised the MFN issue 
at both the MOF and MOT, without securing MFN treatment for 
Australian imports.  (Note:  Australia has had MFN since 
1990.  End note.)  A MOF official told an Australian 
diplomat that Australia would have better luck if it framed 
its arguments regarding MFN in the context of WTO accession 
negotiations with Vietnam, rather than in the context of a 
specific issue, such as wine. 
 
6. (SBU) In an effort to broaden the discussion within MOT, 
Econ/C requested an appointment with Tran Quoc Khanh, 
Director General of the Multilateral Trade Policy 
Department.  Khanh responded that he would not be available 
this week. 
 
7. (SBU) Comment:  The GVN does not appear to understand the 
ramifications of denying MFN to its major trading partners, 
even as it looks to move forward with WTO accession. 
Embassy will continue to push strongly the GVN to meet its 
obligations on this fundamental issue.  We recommend that a 
discussion of MFN be placed on the agenda of the next 
meeting of the BTA Joint Committee. 
BURGHARDT