US embassy cable - 04HANOI1056

UNCLAS HANOI 001056 
 
SIPDIS 
 
STATE FOR E, EB, and EAP 
STATE PASS USTR FOR EBRYAN 
STATE ALSO PASS USAID ANE AFERRARA and LBRADY 
TREASURY FOR OASIA 
USDOC FOR 4431/MAC/IFP/OKSA/HPPHO 
BANGKOK FOR USAID 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAID, EFIN, ETRD, ECON, VM 
SUBJECT: MCA Trade Indicator For Vietnam 
 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY. 
 
1. (SBU) In clearing the two-page Millenium Challenge 
Account Summary on Vietnam, we noted a problem with the data 
on Vietnam.  On the Economic Freedom Indicator on Trade 
Policy, we note that Vietnam's indicator has not changed 
since 1999 despite significant changes in trade policy, e.g. 
signing, ratification and implementation of the Bilateral 
Trade Agreement.  We found that this indicator is based on 
the Heritage Foundation's Index of Economic Freedom, which 
measures trade policy by using the World Bank's weighted 
average tariff rate for Vietnam.  The Heritage foundation 
website contains data as of 2001. 
 
2. (SBU) We have two concerns with this measure.  First, the 
measure itself is static, not dynamic.  It does not capture 
the significant shift from non-tariff barriers and quotas to 
tariffs in recent years.  Such a shift shows clearly that 
the GVN is greatly improving the transparency of its trade 
regime.  The publication last year of a tariff schedule is 
another major step forward for Vietnam.  Although the 
Heritage Foundation Quick Study describes progress for 
Vietnam, this is not reflected in the index.  Despite these 
significant changes, no progress is reflected in the 
quantitative data on the website or in what is presented as 
the objective criteria for Vietnam in the MCA brief which 
remains constant at a level of 5.0 (the lowest score 
possible on this indicator's scale). 
 
3. (SBU) Tangible proof that Vietnam's trade policy under 
the BTA and other bilateral agreements as well as the ASEAN 
trade commitments is changing can be shown by the increase 
in trade.  To cite the US example:  Two-way trade between 
Vietnam and the U.S. has risen from about $1.5 billion for 
2001 (the BTA took effect in December 2001) to $6 billion at 
the end of 2003.  Vietnam imported $2 billion from the U.S. 
last year.  As for overall trade, Vietnam imported about $25 
billion and exported about $20 billion.  Vietnam's trade 
regime may not yet be perfect, but it certainly merits a 
better score than others who receive 5.0 in this indicator 
such as North Korea, Libya and Burma. 
 
4. (SBU) COMMENT:  If we are to achieve the MCA's goal of 
convincing governments to change to fair, equitable and 
objective rule of law systems, we need strive to insure that 
our criteria are objective.  END COMMENT. 
BURGHARDT