US embassy cable - 04HANOI2882

UNCLAS SECTION 01 OF 04 HANOI 002882 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, NP AND EB/TPP/BTA/ANA JBELLER 
STATE PASS USTR FOR EBRYAN, BWEISEL, DSPOONER 
TREASURY FOR IA/Asia Office 
USDA FOR FAS/ITP/SHIEKH 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
USDOC also for OTEXA 
GENEVA PASS USTR 
 
E.O. 12958: N/A 
TAGS: ETRD, EINV, ETTC, KIPR, VM, WTRO, APEC, MNUK, BTA, IPROP, WTO 
SUBJECT: VIETNAM:  EAP DAS HUHTALA DISCUSSES BILATERAL TRADE 
AND INVESTMENT 
 
1. (SBU) Summary:  On October 22, EAP DAS Ambassador Marie 
Huhtala, accompanied by the Ambassador, met separately with 
Vice Minister of Trade Luong Van Tu and Vice Minister of 
Finance Le Thi Bang Tam.  DAS Huhtala encouraged the GVN to 
ensure full implementation of all parts of the U.S.-Vietnam 
Bilateral Trade Agreement (BTA); stressed the importance of 
transparency and strong enforcement of intellectual property 
rights in attracting foreign direct investment; conveyed 
strong USG support for Vietnam's WTO accession; and urged 
the GVN to take the actions necessary to implement the Asia- 
Pacific Economic Cooperation (APEC) Leaders' Bangkok 
commitments.  GVN officials noted that a majority of the 
National Assembly's time is currently spent reviewing trade 
and investment-related legislation; expressed interest in 
further expansion of the trade and investment relationship 
with the United States; and acknowledged the importance of 
taking steps to prevent the proliferation of weapons of mass 
destruction (WMD). VM Tam previewed the upcoming bilateral 
WTO negotiations and agreed to consider an exchange of 
visits on EXBS.  End Summary.  DAS Huhtala was accompanied 
by the Ambassador, Econ/C and other Embassy officials. 
 
Strong Cooperation on BTA and WTO 
--------------------------------- 
 
2. (SBU) In her meeting with Trade Vice Minister Tu, DAS 
Huhtala applauded the success of the BTA in rapidly 
increasing the level of bilateral trade between the United 
States and Vietnam.  She urged VM Tu to ensure full 
implementation of all parts of the BTA and noted that 
implementation will make Vietnam more attractive to American 
investors.  DAS Huhtala also expressed strong support for 
Vietnam's efforts to accede to the WTO and the need for 
Vietnam to fully comply with all WTO regulations. 
 
3. (SBU) VM Tu noted his satisfaction with the results of 
the BTA and expressed appreciation for U.S. support for 
Vietnam's WTO accession.  He informed DAS Huhtala that the 
GVN is focused on speeding up the process of creating a 
legal framework for foreign and direct investment and WTO 
accession.  Towards this end, the National Assembly is 
dedicating two-thirds of its time on discussions of trade 
and investment related legislation.  The GVN hopes to 
finalize the legal changes required for WTO accession by 
early 2006.  VM Tu told DAS Huhtala that Vietnam is very 
interested in attracting additional U.S. investment.  He 
also said that representatives of U.S. companies have told 
him that, aside from some minor problems, their businesses 
in Vietnam are doing very well.  VM Tu highlighted his 
pleasure with the signing of the U.S.-Vietnam bilateral 
aviation agreement (in December 2003) and expressed his hope 
that there will soon be direct flights between the United 
States and Vietnam. (Note:  On October 18, the Civil 
Aviation Administration of Vietnam granted United Airlines 
the authority to begin direct flights between Ho Chi Minh 
City and San Francisco (via Hong Kong) starting December 10. 
End note.) 
 
4.  (SBU) In her meeting with Finance Vice Minister Tam, DAS 
Huhtala expressed hope that the remaining BTA elements would 
be accomplished in a timely fashion and indicated the strong 
support of the United States for Vietnam's WTO accession 
efforts.  In response, VM Tam expressed appreciation for 
this support which she had seen in her recent visit to 
Washington in her meetings with DUSTR Shiner and Treasury 
DAS Loevinger.  She noted that the bilateral market access 
negotiations in Washington starting October 25 would be very 
important, especially now that the EU and Vietnam have 
concluded their bilateral agreement.  She said that her 
Ministry had carefully prepared the GVN offers on tariffs, 
customs and financial services.  The goal would be to show 
progress from what Vietnam had proposed the last time and to 
garner support from the United States.  She opined that the 
United States was holding Vietnam to a higher standard than 
other recent entrants like China or Cambodia.  Huhtala 
interjected that the United States held all WTO entrants to 
a high standard.  She went on to say that the United States 
would particularly like to discuss financial services 
liberalization and tariffs.  Since there are some issues 
pertaining to BTA implementation involved, she hoped Vietnam 
would soon accede to WTO. 
 
5. (SBU) VM Tam noted that the BTA was generally being 
implemented in accordance with commitments.  There was, she 
said, an issue related to a BTA obligation to harmonize the 
special consumption tax (SCT) rates on domestic and imported 
automobiles.  She recognized that harmonizing SCT rates 
would be hard for Vietnam's domestic auto industry 
(including U.S. and other foreign investors.) (Note:  The 
GVN's plan is to harmonize the SCT rates up closer to the 
level currently applied on imported autos, significantly 
increasing the rate currently applied to autos produced 
domestically from imported kits.  This, according to Ford 
and other investors, will increase the retail price domestic 
manufacturers must charge and drive down sales.  End Note.) 
VM Tam said that the MOF had made preparations so that the 
two sides could find the optimal solution for the auto 
industry in the WTO negotiations. 
 
6.  (SBU) VM Tam went on to express her appreciation for 
technical assistance provided by the United States both on 
WTO and on integration into the world economy.  Singling out 
the USAID-funded Support for Trade AcceleRation Project 
(STAR) for praise, she said she hoped the Department of 
State would continue this support.  During her recent visit 
to USTR, she had enumerated five areas that her ministry was 
focusing on: taxation, customs, capital market development, 
stock market development and treasury operations. 
 
IPR and Transparency Key for Investment Climate 
--------------------------------------------- -- 
 
7. (SBU) DAS Huhtala highlighted to VM Tu the need for the 
Government of Vietnam to pay attention to two issues that 
impact Vietnam's investment climate and are of particular 
interest to the United States:  IPR and transparency.  She 
pointed out that IPR protection is critical for attracting 
the high technology investment that Vietnam requires. 
However, although Vietnam has moved forward with key IPR 
legislation, the United States remains concerned about 
enforcement.  IPR violations are a problem throughout Asia 
as well as in the United States, but all governments must 
work to protect IPR.  Additionally, DAS Huhtala noted, the 
publication of laws and decisions and the opportunity for 
public comment on draft legislation is very important for a 
country's investment climate.  Noting that Vietnam had made 
a lot of progress in the area of transparency, DAS Huhtala 
encouraged VM Tu to ensure that Vietnam continues its 
efforts. 
 
8. (SBU) VM Tu assured DAS Huhtala that Vietnam is concerned 
about the protection of IPR and is determined to fight 
violations.  He characterized Vietnam's decision to become a 
signatory to the Berne Convention for the Protection of 
Literary and Artistic Works as a very important step forward 
and noted that Vietnam's accession became effective on 
October 20.  VM Tu also asserted that the GVN is "very 
active" in making legal documents and decisions public and 
stated that the Prime Minister requires all ministries and 
industries to consult with businesspeople and other 
interested parties before making decisions.  He also noted 
that after legal documents are approved, ministries and 
government agencies publish them on their websites. 
Comment:  The GVN continues to focus its efforts on revising 
the legal framework for IPR, but has done very little to 
improve enforcement or reduce the quantity of pirated and 
counterfeit goods on the market in Vietnam.  End Comment. 
 
Expanding Ties across the United States 
--------------------------------------- 
 
9. (SBU) VM Tu expressed strong interest in working with the 
USG to expand bilateral trade and investment.  Although the 
total volume of bilateral trade in 2003 reached USD six 
billion, there is still a lot of potential for growth, he 
said.  In America, many states are not yet familiar with 
Vietnam or the potential business opportunities there.  DAS 
Huhtala agreed, but also pointed out that many states have 
trade promotion offices in Asia which could be used as a 
gateway to Vietnam.  Additionally, she encouraged VM Tu to 
send trade delegations to areas of the United States they 
have never visited before.  The Ambassador also encouraged 
VM Tu to take advantage of official trips to the United 
States to see new parts of the country and offered to help 
facilitate the planning of such trips. 
 
Implementing APEC Security Commitments 
-------------------------------------- 
 
10. (SBU) DAS Huhtala urged VM TU to ensure the GVN takes 
action this year to implement the APEC Leaders' Bangkok 
Commitments on security by agreeing to sign an International 
Atomic Energy Agency (IAEA) Additional Protocol and 
supporting the development of APEC export control best 
practices and Man-Portable Air Defense System (MANPADS) 
control guidelines.  She noted that terrorist acts such as 
the shooting down of an airplane or the proliferation of WMD 
would have a terrible impact on all countries' economies. 
 
11. (SBU) VM Tu responded that he had participated in the 
APEC meetings last year and understood these issues.  He 
noted that many different measures are necessary to prevent 
terrorist acts, including steps to prevent the proliferation 
of WMD.  He explained that Vietnam's experience hosting the 
Asia Europe Summit (ASEM) earlier this month had also given 
the GVN a better understanding of the need to ensure 
security at international meetings. 
 
EXBS Assistance 
--------------- 
 
12. (SBU) DAS Huhtala raised the issue of proposed USG 
assistance on export controls and border security (EXBS) to 
VM Tam.  (Note:  The Ministry of Finance is the parent 
agency of Vietnam's General Department of Customs.  End 
Note.)  Noting that the United States and Vietnam shared a 
common interest in preventing proliferation of weapons of 
mass destruction, DAS Huhtala said that the United States 
had set aside funds to explore assistance to Vietnam.  The 
Embassy had proposed an exchange of expert visits between 
Vietnam and the United States as an initial step, DAS 
Huhtala explained, and was still awaiting a response from 
the General Department of Customs.  The Vice Minister 
responded that Vietnam welcomed this proposal in principle. 
Vietnamese Customs would study the proposal and make a 
recommendation to the government.  There was a need for more 
discussion on specific activities because EXBS was "a new 
program to the GVN."  The GVN, VM Tam said, was "ready" to 
host U.S. experts in order to learn more about the program. 
She suggested that the Customs Department work with the 
Embassy to follow up.  (Note: since July, the Embassy has 
been in contact weekly with Vietnam's General Department of 
Customs to press for an answer on an EXBS visit.  This is 
the first concrete positive result.  End note.) 
 
Oracle Procurement 
------------------ 
 
13. (SBU) Ambassador Marine asked for a status report on the 
Ministry's procurement of a software package that Oracle 
would like to provide.  Noting that the project was designed 
to run until 2010, the Vice Minister said that the 
feasibility study for the project was still underway.  Upon 
completion of the study, the MOF will open the bidding 
process and announce this in the media.  MOF will welcome 
Oracle's bid, she said. 
 
Millennium Challenge Account (MCA) 
---------------------------------- 
 
14. (SBU) VM Tam noted that she had discussed the MCA 
program to provide assistance based on a range of qualifying 
criteria with U.S. Treasury officials and asked whether 
there was a way to help Vietnam.  DAS Huhtala responded that 
the MCA assists countries that meet criteria on ruling 
justly, economic freedom and investing in people.  The 
countries are carefully evaluated.  Few countries in East 
Asia had qualified.  The problem for Vietnam is that just 
and democratic government provisions include human rights 
and political rights.  The Millenium Challenge Corporation 
would be happy to consider Vietnam as the situation in these 
areas evolves.  The Vice Minister responded that these were 
very sensitive matters involving not just an economic 
aspect, but also a political aspect.  The focus on these 
matters was sharper in the midst of the elections in the 
United States. DAS Huhtala responded that it was not just 
related to the election.  She closed by noting that the 
United States had recently decided to provide Vietnam with 
USD 25 million to combat HIV/AIDS. 
 
15. (U) EAP DAS Huhtala cleared this cable. 
 
MARINE