US embassy cable - 04HOCHIMINHCITY1246

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001246 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
STATE PASS USTR FOR EBRYAN, BWEISEL, DSPOONER 
TREASURY FOR IA/Asia Office 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
USDOC also for OTEXA 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, EINV, KTEX, VM, WTO 
SUBJECT: EB PDAS DONNELLY MEETS WITH HCMC TEXTILE 
REPRESENTATIVES 
 
1. (SBU) SUMMARY:  During his September 29 visit to Ho 
Chi Minh City, EB Bureau PDAS Donnelly met 
representatives of Vietnam's textile and apparel 
industry to discuss Vietnam's competitiveness following 
expiration of the WTO Agreement on Textiles and 
Clothing (ATC) and Vietnam's bid for WTO accession. 
The textile reps noted that foreign garment buying 
companies see Vietnam as a counterbalance to China, but 
the uncertainty surrounding Vietnam's WTO accession 
makes planning difficult.  The reps urged the USG to 
reevaluate quota categories to improve Vietnam's 
competitiveness between the end of the ATC and 
Vietnam's WTO accession.  They observed that there are 
numerous categories of garments under quota are not 
produced in the U.S.  The reps also asked to borrow a 
small percentage of quota to address imbalances created 
by lowering quota levels earlier this year.  Donnelly 
told the group the GVN needed to make some tough 
decisions on WTO accession if it wants to accede in a 
timeframe that benefits the textile industry.  END 
SUMMARY. 
 
2. (SBU) Visiting EB PDAS Shaun Donnelly met 
representatives of local textile businesses, foreign 
companies, state-owned enterprises and textile 
associations in a roundtable at the Consulate General. 
The Chairman of the Vietnam Textile and Apparel 
Association (VITAS), Mr. Le Quoc An, stated that 
Vietnam has tried to produce more non-quota textile 
items in a bid to compete in the coming quota-free 
world; however, quota items still are in the highest 
demand.  Companies continue to receive large orders 
from U.S. buyers even though Vietnam has already 
shipped 97 percent of the allotted quota for this year. 
Mr. An acknowledged that Vietnam's accession to the WTO 
would not only provide benefits in the textile and 
garment sectors, but also in the services and financial 
sectors.  He went on to explain that VITAS believes the 
GVN should "hurry" to get into the WTO.  "We need the 
U.S. Government's and the U.S. business community's 
assistance in this accession," he stated.  In the 
meantime, he requested assistance to borrow a small 
percentage of quota to cover goods that were ordered 
before quota levels were lowered earlier this year, but 
that are now stuck in U.S. ports because they arrived 
following the reduction in quota. 
 
3. (SBU) Ms. Jocelyn Tran from MAST Industries, a 
subsidiary of Limited Brands, stressed that Vietnamese 
and U.S. businesses cannot afford to adopt a "wait and 
see" attitude toward the outcome of Vietnam's bid for 
WTO accession.  Economic stability and flexibility are 
important to buyers, and Vietnam has a good environment 
for U.S. businesses.  MAST is currently expanding 
operations in China; however, China is not the only 
place where the company wants to be located.  Not every 
country can make MAST products, so it will be either 
Vietnam or China.  However, if Vietnam does not have 
adequate access to the US market, MAST would quickly 
close up shop here.  "We cannot leave in 2005 and come 
back to Vietnam when they achieve WTO membership." 
 
4. (SBU) To maintain stability between the expiration 
of the ATC and Vietnam's WTO accession, the industry 
needs immediate help, Ms. Tran said.  There are 38 
categories currently under quota, but not all of these 
garment categories are produced in the U.S.  If Vietnam 
were granted quota-free categories for textiles and 
apparel not produced in the U.S., Vietnam could remain 
competitive in 2005 and encourage more buyers to 
remain.  Ms. Tran cited the sweater market as one 
possible category to be released from quota.  Vietnam's 
market in this product is still small, and production 
would not be in competition with U.S. producers. 
 
5. (SBU) Mr. Geoffrey Paul from Li & Fung Trading, 
Ltd., echoed these concerns.  Mr. Paul's company works 
closely with U.S. companies such as American Eagle 
Outfitters, and he agreed with a request for a more 
generous quota volume.  This would enable Vietnam to be 
competitive in 2005, and would allow U.S. businesses 
greater flexibility, as Vietnam is the best alternative 
to China. 
 
6. (SBU) Donnelly observed that the best way to address 
the textile industry's concerns was for Vietnam to 
accede quickly to the WTO, but he stressed that Vietnam 
cannot join the WTO only for gains in the textile and 
apparel industry.  There must be progress in all 
sectors under the negotiated WTO package.  While the 
U.S. strongly supports Vietnam joining the WTO quickly, 
some tough issues that are important to the U.S. 
remain.  How quickly the GVN makes decisions on these 
more difficult issues will determine how quickly 
Vietnam accedes to the WTO. 
 
7. (SBU) COMMENT:  The exchange between Donnelly and 
the textile reps was frank but friendly, with the reps 
not hesitating to point out that textile issues are not 
only trade questions for Vietnam.  As Ms. Tran 
observed, the garment industry is a matter of economic 
security employing 2 million people.  The industry is 
looking to overcome its short-term and long-term 
obstacles.  The reps may propose some creative ideas to 
achieve increased access to the U.S. market; one rep 
later wondered aloud to EconOff whether the U.S. would 
be willing to raise quotas if the GVN agreed to allow 
the U.S. early access to other markets (e.g. insurance) 
under the BTA.  END COMMENT. 
 
8. (U) PDAS Donnelly has cleared this message. 
 
WINNICK