US embassy cable - 04HANOI2798

UNCLAS SECTION 01 OF 02 HANOI 002798 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB FOR BELLAR AND EAP/BCLTV 
STATE ALSO PASS USTR DWOSKIN, BRYAN, and KLEIN 
USDOC FOR LASHLEY AND 4431/MAC/AP/OPB/VLC/HPPHO 
USDOC ALSO FOR ITA/TD/OTEA/JJANICKE AND ITA/TD/SIF/CMUIR 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, VM, WTO, BTA 
SUBJECT: PASCAL LAMY BLINKS IN HANOI 
 
1. (U) Summary:  In Hanoi for the Fifth Asia-Europe Meeting 
(ASEM-5), EU Trade Commissioner Lamy closed out the EU's 
bilateral negotiations with Vietnam by accepting low levels 
of commitments not seen in recent accessions, especially on 
services.  In a speech to the European Chamber of Commerce, 
he previewed the deal, took a swipe the BTA and the U.S. 
case on Airbus subsidies recently filed to the WTO. End 
Summary. 
 
2. (U) On October 7, EU Trade Commissioner Pascal Lamy came 
to Hanoi to take part in the Fifth Asia-Europe Meeting (ASEM- 
5).  His WTO negotiating team had been involved in 
negotiations lasting into the early morning hours with their 
Vietnamese counterparts most of the week. Lamy took time out 
of his October 8 meetings with other partners as well as the 
GVN to give a luncheon speech to the European Chamber of 
Commerce that ECON/C attended. 
 
3. (SBU) Just before Lamy arrived to speak, the EC 
Ambassador to Hanoi told ECON/C privately that negotiations 
had been difficult because the Vietnamese were tough 
negotiators.  Lamy and Trade Minister Truong Dinh Tuyen had 
concluded a deal on goods at 3 a.m. October 8, but services 
talks were ongoing.  Problematic sectors included telecom, 
financial services and distribution.  Noting that he did not 
expect a deal absent a breakthrough, the EC Ambassador  said 
he was not sure how Lamy would characterize the situation in 
his public remarks. 
 
4.  (U) Lamy said that as Vietnam's largest trading partner, 
the EU was "sponsoring" Vietnam for accession.  As part of 
its sponsorship, the EU would seek to provide a "realistic 
bilateral deal to protect Vietnam from the excessive demands 
made by other partners."  He said that it was too early to 
tell whether there could be a deal with Vietnam, but there 
had been progress on WTO market access negotiations. 
Despite progress on goods, basic disagreements remain on 
market access for services, which both sides recognize as 
being most difficult.  Lamy mentioned telecom, courier, 
transport, distribution, environmental, tourism and "some" 
financial services as being hard areas.  With a precise idea 
of Vietnam's "red lines," he would need to see whether these 
might fall within the political parameters of a deal, Lamy 
said.  There might be room at the political level for a 
deal, but Lamy acknowledged he would not know this until 
later that day or, more likely, the following day. 
 
5. (U) Lamy also noted his preference for multilateral trade 
deals (i.e., WTO) over bilateral deals, which he 
characterized as less open and transparent since all parts 
were not published "as we know from the U.S. Bilateral 
Investment Treaty."  (Note:  We believe that he meant the 
BTA.) 
 
6. (U) Lamy also took the opportunity to describe the Boeing 
and Airbus "subsidies" as "apples and pears."  Subsidies for 
Airbus were completely transparent unlike those for Boeing, 
he opined.  He noted that he was certain that the timing of 
the filing of the U.S. case to the WTO had nothing to do 
with U.S. politics. 
 
7.  (U) On the following day, October 9, Lamy and Trade 
Minister Tuyen announced a deal in their bilateral market 
access negotiations.  Lamy said that with this deal, the EU 
wanted to set a benchmark to allow Vietnam, as a low income 
developing country, to open its economy with the necessary 
precautions and transitions and wanted other trade partners 
to understand this.  He said that Vietnam had committed to 
an average 16 percent tariff level on goods, between 
Cambodia's (22 percent) and China's (below 10 percent), 
which is a good reflection of Vietnam's level of 
development.  The EU showed flexibility regarding some "red 
lines" of Vietnam, which he attributed to the economic 
transition process in Vietnam. He noted for example the 30 
percent equity cap of investment in Vietnamese companies and 
the limitation of foreign ownership in telecoms.  This is 
about comparable to the Chinese commitments five years ago, 
he observed. 
 
8. (SBU) Comment:  In recent weeks, our EU colleagues had 
been quite sober in assessing prospects for a bilateral EU- 
Vietnam WTO deal during ASEM.  Apparently more interested in 
scoring points with the Vietnamese and others than in 
improving market access for the firms he represents, Lamy 
closed out the EU's bilateral negotiations.  In doing so, 
the EU settled for low levels of commitments not seen in 
recent accessions especially on services.  Minister Tuyen 
confirmed to the Ambassador on October 12 that the EU had 
left the hard issues for the United States and other 
countries.  If the GVN recognizes that the EU bar is 
artificially low, perhaps they will remain realistic and 
flexible when they come to Washington in late October.  End 
comment. 
MARINE