US embassy cable - 04HANOI2745

UNCLAS SECTION 01 OF 03 HANOI 002745 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV, EAP/RSP, EAP/CM, EUR 
STATE PASS USTR EBRYAN 
 
E.O. 12958: N/A 
TAGS: PREL, ETRD, PBTS, CH, VM, ASEAN, CVR 
SUBJECT: VIETNAM: WEN JIABAO TO DISCUSS TRADE, BORDER DURING 
VISIT 
 
Reftels: A. Hanoi 558; B. Hanoi 1680; C. Hanoi 2638 
 
1. (SBU) Summary and Comment: Chinese Prime Minister (PM) 
Wen Jiabao will join the parade of Asian and European 
leaders to the ASEM 5 summit in Hanoi October 7-9. 
Reflecting China's status as Vietnam's ideological soulmate 
and "big brother," Wen will be one of only five leaders to 
also have a bilateral official visit.  Although border and 
territorial issues -- such as Vietnam's concern about the 
recent China-Philippines South China Sea agreement -- will 
be discussion topics, the main focus of the visit will be on 
trade and economic matters.  Deliverables may include 
economic and trade agreements to increase investment and 
some tariff and quota changes designed to boost trade 
volume.  The Vietnamese will ask China for a deadline for 
concluding WTO talks, but the PRC Embassy believes that 
setting a deadline would be premature.  The subject of a Hu 
Jintao visit to Vietnam will reportedly not be on the 
"official agenda."  We believe Vietnam's strong trade and 
investment ties and other unofficial relations with Taiwan - 
- which are in striking contrast with Vietnam's relatively 
modest economic interaction with China -- are at least 
partly driving the economic aspects of the visit.  End 
Summary and Comment. 
 
GVN PLANS FOR WEN'S VISIT 
------------------------- 
 
2. (U) PM Wen's Hanoi trip will mark the second bilateral 
head of government meeting this year, following Vietnamese 
PM Phan Van Khai's visit to China in May.  GVN sources said 
the focus of Wen's talks will largely be on economic issues, 
with the two sides expected to sign ten agreements and 
memoranda of understanding in areas such as technical 
economic cooperation, electrical power development, rail 
line improvement and animal quarantine procedures.  China 
and Vietnam are also expected to form a mechanism for 
regular meetings between Ministry of Trade and Ministry of 
Planning and Investment officials from both sides.  In 
addition, China and Vietnam will sign an MOU on forming two 
cross-border "economic corridors" to facilitate trade and 
investment:  Kunming-Lao Cai-Hanoi-Haiphong and Nanning-Son 
La-Hanoi-Haiphong.  Wen will also participate in the 
groundbreaking ceremony for the China Cultural Palace in 
southern Hanoi. 
 
3. (U) Dr. Do Tien Sam, Director of the Government-run 
Institute for Chinese Studies, told Pol/C October 4 that the 
largely economic focus of Wen's visit reflected concern in 
both countries that the development of bilateral political 
relations had outpaced that of economic relations. 
Specifically, Sam noted that, although bilateral trade 
volume was on the rise, Vietnam still ran a deficit with 
China.  Furthermore, China ranks only fifteenth among 
foreign investors in Vietnam, but most of this investment 
was small-scale, not technologically advanced and had only 
limited job creation ability, he added.  On the subject of 
Vietnam's WTO accession, Pham Cao Phong, a China expert at 
and Deputy Director General of the MFA-affiliated Institute 
for International Affairs, told Pol/C that Vietnam would 
seek from China a "WTO-related commitment" on the occasion 
of Wen's visit. 
 
SPRATLY PROBLEMS 
---------------- 
 
4. (SBU) Phong also said that bilateral political and 
territorial issues would be important agenda topics.  For 
example, the signing of an agreement between China and the 
Philippines for "joint exploitation" of a contested area of 
the Spratlys was an issue of "serious concern."  Although 
China and Vietnam had agreed recently to consult regarding 
decisions and actions that could affect one another in the 
South China Sea, China had not done so prior to inking its 
agreement with the Philippines, Phong noted.  According to 
the China Institute's Dr. Sam, Vietnam was now concerned 
that China would try to reach similar agreements with 
Indonesia, Malaysia and Brunei (the three other claimants to 
the Spratlys, not counting Taiwan), and that this would put 
Vietnam in awkward position.  For its part, the GVN believed 
in ASEAN solidarity and was loathe to criticize its ASEAN 
partners, but China's attempts to "drive a wedge" among them 
was troublesome, Sam said. 
 
5.  (U) According to Sam, another bilateral issue on the 
agenda is the demarcation of the Vietnam-China land border. 
Although the two sides had a border agreement, the 
demarcation process was moving ahead slowly because of 
"Chinese complications."  Among these were Chinese farmers 
crossing over the border to cultivate land and Chinese 
citizens exhuming and moving the graves of Vietnamese on the 
"wrong" side of the frontier.  At this point, the GVN hoped 
that this problem could be worked out by local authorities 
and that it would not affect the larger bilateral 
relationship.  Responding to Pol/C's question, Sam said that 
the subject of a possible Hu Jintao visit to Vietnam was not 
on the "official agenda" for Wen's visit.  However, now that 
Hu has assumed all three senior PRC leadership positions, he 
will "surely" visit in the near future, Sam concluded. 
 
PRC OFFICIAL DOWNPLAYS VISIT'S IMPORTANCE 
----------------------------------------- 
 
6. (SBU) According to Li Jingfeng, Attache at the Chinese 
Embassy in Hanoi, Wen's visit will be "nothing special."  Li 
told Poloff September 28 that the official focus of the 
visit would be economic relations and cooperation between 
the Vietnamese and Chinese Communist Parties.  Li said that 
the two countries had set a goal to reach USD 10 billion in 
bilateral trade by 2010.  To advance that goal, both sides 
would announce new trade privileges.  China would "raise the 
quota and lower the tariff" on Vietnamese rice imports, as 
well as "some other commodities," and Vietnam would "lower 
tariffs on some Chinese manufactured goods."  Li said he 
thought that, if tariff and quota restrictions were lifted, 
the natural trade volume between China and Vietnam would 
exceed USD 10 billion "within a short time."  As a result, 
the two governments were in a position to follow through on 
what were usually rhetorical calls for increased economic 
links. 
 
7. (U) Li said China was aware that the GVN wanted to 
extract a commitment to conclude bilateral WTO accession 
talks by a certain date.  "We know they want this," Li said, 
"but we are not ready to provide it." 
 
8. (SBU) In addition to the trade and commercial aspects of 
the visit, Li said the two sides need to discuss the border 
demarcation issue.  The agreement had been signed, Li noted, 
but the actual placement of the markers was going extremely 
slowly "due to local disputes of only a few meters."  He 
added that implementation of the fishing agreement the two 
sides had signed covering demarcation of the boundary in the 
Tonkin Gulf (ref A) was uncontroversial and so far 
"productive."  Cooperation in other areas of maritime 
security -- such as combating piracy or interdicting illegal 
migrants or weapons shipments -- is possible in theory but 
has not been addressed in detail bilaterally, Li added. 
Both sides have formally committed to supporting such 
cooperation, but, without specific implementation plans, 
that agreement would remain rhetorical. 
 
9. (SBU) Comment:  As many as 35 heads of state and 
government will attend the ASEM 5 summit this week in Hanoi, 
including heads of state or government from every ASEAN+3 
country except Burma.  In addition to China, France, 
Germany, Belgium and Korea will have official visits before 
or after ASEM.  For China and Vietnam, the issues and 
deliverables on Wen's agenda -- adjusting a number of quotas 
and tariffs, signing an agreement on "economic corridors" 
and discussing (again) border demarcation -- are all things 
that could have been accomplished during any of the hundred 
or so ministerial-level exchanges during the year.  However, 
it appears that the attitude (evident in our conversations 
here) that "Wen will be here anyway, so let's make it a 
bilat" combined with China's status as the dominant power in 
Vietnam's immediate neighborhood to upgrade the visit to 
official bilateral status. 
 
10. (SBU) Comment continued:  The Taiwan issue did not come 
up in our meetings as a possible agenda topic for the Wen 
visit, but the issues raised on the Vietnamese side danced 
all around it.  Economically, the relationship between 
Taiwan and Vietnam is the opposite of Vietnam's relationship 
with China: trade relations are in very good shape and by 
some measures Taiwan is Vietnam's largest investor.  Taiwan 
has invested huge sums over a long period of time in a 
diverse array of industries and geographical areas. 
Official journals in Vietnam praise Taiwan's investment in 
Vietnam as an example other countries should follow, and 
Vietnam officially credits Taiwan investment for raising the 
capacity of and living standards for large numbers of 
Vietnamese workers.  In contrast, China's investment in 
Vietnam is extremely low.  Actual investment is even lower 
than the official numbers, since Vietnam includes Hong Kong 
(which itself includes a great deal of Taiwan investment 
flowing through Hong Kong subsidiary companies) in its 
calculation of Chinese investment.  In the political China- 
Taiwan equation, Vietnam is staunchly pro-China.  At this 
point, however, the relationship with Taiwan is far more 
valuable economically to Vietnam, and the key aspects of 
this state visit may be in some part designed to address 
this contradiction.  End comment. 
MARINE