US embassy cable - 04HANOI2797

UNCLAS SECTION 01 OF 03 HANOI 002797 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV AND EB/TPP/BTA/ANA JBELLER 
STATE PASS USTR FOR EBRYAN AND DSPOONER 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO AND OTEXA 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ETRD, KTEX, KIPR, VM, WTRO, WTO, BTA, IPROP 
SUBJECT: VIETNAM: AMBASSADOR'S CALL ON MINISTER OF TRADE 
TUYEN 
 
Ref: (A) HANOI 2620 
     (B) HANOI 2752 
     (C) HANOI 2697 
     (D) STATE 214134 
 
1. (SBU) Summary:  In a meeting October 12, Minister of 
Trade Truong Dinh Tuyen told the Ambassador the GVN will be 
well-prepared for bilateral market access negotiations with 
the United States in October; that he hoped the United 
States and Vietnam could close WTO negotiations in early 
2005; and that although the GVN had closed its WTO bilats 
with the European Union (EU) last week, the EU had "left the 
hard negotiations for the United States."  The Ambassador 
reminded Minster Tuyen of upcoming Bilateral Trade Agreement 
(BTA) obligations, urged the Minister to resolve impediments 
to investment in the auto and insurance sector and briefed 
him on the USG's new Strategy Targeting Organized Piracy 
(STOP).  End Summary. 
 
WTO Accession Negotiations 
-------------------------- 
 
2. (SBU) The Ambassador congratulated Minister Tuyen on 
concluding bilateral WTO negotiations with the European 
Union (EU) during the Asia Europe Meeting Summit (ASEM) in 
Hanoi October 8-9.  Minister Tuyen acknowledged that the EU 
is an important trade partner for Vietnam and conclusion of 
bilats with the EU will help speed up Vietnam's WTO 
accession process.  He asserted that although the EU 
delegation made difficult demands of Vietnam during the 
negotiations, the EU also took into account Vietnam's status 
as a developing country.  When the Ambassador said he hoped 
the EU had not left the most difficult negotiations for the 
United States, Minister Tuyen smiled and said he "thought 
the EU had done just that." 
 
3. (SBU) Minister Tuyen noted that while conclusion of 
negotiations with the EU is significant, the United States 
is Vietnam's most important trade partner.  He assured the 
Ambassador that the GVN is preparing carefully for bilats 
with the United States at the end of October and would be 
prepared to discuss both bilateral market access issues and 
multilateral issues such as intellectual property rights 
(IPR) and sanitary and phyto-sanitary (SPS) measures. 
Minister Tuyen categorized the upcoming talks as a 
"milestone" and expressed his hope that the United States 
would have as "realistic" an attitude toward the 
negotiations with Vietnam as the EU had.  Minister Tuyen 
told the Ambassador that he expects the GVN to conclude its 
bilats with some partners, such as China and Japan, soon. 
He noted that although initially he had not expected to 
close with the EU so quickly, both sides had seized the 
opportunity to close during ASEM.  He expressed hope that 
the United States and Vietnam could also come to an 
agreement soon and not "miss the chance" to close in early 
2005. 
 
BTA Implementation 
------------------ 
 
4. (SBU) Minister Tuyen assured the Ambassador that the 
Ministry of Trade (MOT) is working to prepare for the next 
round of BTA obligations that come due for Vietnam in 
December.  He noted that he had already assigned staff on 
the Americas' Desk at MOT to summarize the upcoming 
obligations and begin preparing for implementation.  He said 
that he believes implementation of the BTA is an important 
step toward WTO accession. 
 
Insurance and Autos 
------------------- 
 
5. (SBU) The Ambassador reminded Minister Tuyen that U.S. 
companies play an important role in the WTO accession 
process and will have an important voice in the debate in 
the United States Congress over Permanent Normal Trade 
Relations status (PNTR) for Vietnam.  The Ambassador noted 
that American companies are interested in doing business in 
Vietnam but are still cautious because they want the GVN to 
improve the trade and investment climate.  He specifically 
highlighted the problems faced by American insurance 
companies seeking investment licenses and automakers faced 
with rising taxes and tariffs. 
 
6. (SBU) On insurance, Minister Tuyen noted that European 
insurance companies came to Vietnam earlier than American 
companies and Vietnam's insurance market is still 
developing.  He also noted that the Vietnamese insurance 
company (Bao Viet) still has limited capacity and there is 
not a consensus among senior GVN officials on the issuance 
of licenses to American companies.  American insurance 
companies are asking for a quicker phase-in of BTA 
commitments on insurance.  While noting that the GVN is not 
obliged to implement the BTA faster, Minister Tuyen also 
acknowledged that there is nothing preventing early issuance 
of insurance licenses to American companies.  Minister Tuyen 
stated that he supports issuing insurance licenses to 
improve the competitive environment in Vietnam, and is 
working to develop a consensus among senior GVN officials. 
However, he noted, it would be easier to persuade other 
ministries to agree to issue licenses to the U.S. companies 
if there were positive developments in the bilateral WTO 
talks.  Minister Tuyen reiterated a long-standing GVN 
request that the USG choose which American insurance company 
should receive a license first, and noted that it would be 
easier if only one American company had applied for a 
license.  He asserted that if the GVN issued a license to 
one company, the others would complain. 
 
7. (SBU) The Ambassador responded that granting these 
insurance licenses would provide a strong signal to foreign 
investors that Vietnam's investment climate is improving. 
In addition, it would help develop the financial services 
sector in Vietnam, which will be critical to further growth 
of the private sector.  Although the best step would be for 
the GVN to issue all the licenses, the Ambassador said, it 
is likely that the U.S. companies would also accept phased- 
in issuance of the licenses.  The biggest problem right now, 
the Ambassador added, is that there has been no movement 
forward by the GVN on the issue of insurance licenses. 
 
8. (SBU) On Vietnam's auto policy, Minister Tuyen explained 
that the GVN is trying to balance conflicting interests. 
The GVN has to protect the interest of investors, but also 
needs to maintain an acceptable level of traffic in Vietnam. 
At the moment, he said, the GVN is confused over how to find 
a compromise that meets both of these needs.  Vietnam's auto 
policy is intended to foster investment in and development 
of the auto sector, including both foreign and domestic 
companies.  However, the GVN also has significant concerns 
about infrastructure, traffic and safety.  More than 10,000 
people are killed on the road each year, Minister Tuyen 
said.  (Note:  The Minister noted that this is more than the 
number of Americans that have been killed in Iraq.  End 
Note.)  He also said that "quite a few" former Vietnamese 
leaders have criticized the GVN for not improving road 
safety.  Minster Tuyen concluded by stating that the GVN 
needs to develop a clear policy that both encourages 
development of the auto sector and controls accidents. 
However, he noted, a change in auto policy cannot happen 
quickly as tax changes have to be approved by the National 
Assembly. 
 
9. (SBU) The Ambassador noted that he had just returned from 
a trip to HCMC where he had spoken with many representatives 
of the American business community who had all cited lack of 
adequate infrastructure as an impediment to Vietnam's 
economic growth.  American automakers, including Ford, have 
indicated a willingness to work with the GVN on the issues 
of traffic and road safety.  Ford, for example, has a safety 
program and is willing to work with local and national 
authorities.  The best way forward is for the GVN to develop 
its auto industry in partnership with foreign investors, not 
to slow development by increasing taxes, he added. 
 
Textiles 
-------- 
 
10. (SBU) Minister Tuyen confirmed to the Ambassador that 
the GVN's investigation of corruption in the allocation of 
U.S. textile quota (reftels A and B) had found "negative 
acts and mistakes" by staff under his supervision.  (Note: 
The Vietnamese phrase "tieu cuc" translated as "negative 
acts" is often used as a euphemism for "corruption."  End 
Note.)  However, he added, the problems are not as serious 
as the media has made it sound.  Regardless, the Minister 
acknowledged the need to fix the "mistakes" and ensure 
allocation is done fairly and transparently.  He said that 
he had temporarily taken over supervising the quota 
allocation procedures and MOT would announce the 2005 quota 
allocation by October 15. 
 
11. (SBU) The Minister reiterated a request (made during EB 
PDAS Donnelly's visit to Hanoi September 28 and via dipnote 
(reftel C)) for 1.8 percent additional carryforward from 
Vietnam's 2005 quota in category 338/339.  He argued that 
the USG decision to reduce Vietnam's quota in May resulted 
in over-allocation of quota by the GVN.  This over- 
allocation is causing problems for U.S. companies such as JC 
Penney.  The Ambassador assured Minister Tuyen that his 
request had been conveyed to Washington and explained that 
the Committee for Implementation of Textile Agreements 
(CITA) would have to consider the request. 
 
STOP 
---- 
 
12. (SBU) The Ambassador briefed Minister Tuyen on the 
Strategy Targeting Organized Piracy (STOP) announced by the 
White House on October 4 and provided him with a copy of the 
STOP Fact Sheet (reftel D).  (Note:  Although MOT is not the 
primary GVN agency responsible for IPR, the Market 
Management Board (MMB) of MOT does bear some responsibility 
for enforcement.  End Note.) 
 
13. (SBU) Comment:  Minister Tuyen did not display much of 
his normally colorful personality in this meeting.  Between 
the textile quota corruption scandal and Vietnam's over 
allocation of T-shirt quota, Minister Tuyen is clearly 
feeling pressure over his management of Vietnam's second 
largest export sector.  Twice now he has categorized the 
request for additional textile carryforward from the United 
States as a "personal" request.  On the other hand, 
conclusion of WTO negotiations with the EU seems to have 
increased his confidence in Vietnam's ability to make 
progress in Vietnam's accession negotiations.  Minister 
Tuyen appeared more hopeful that Vietnam might be able to 
conclude deals with the United States and other major 
partners by early next year.  End Comment. 
 
MARINE