US embassy cable - 04HANOI3313

UNCLAS SECTION 01 OF 03 HANOI 003313 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV and H 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EINV, OTRA, PREL, VM, WTO, IPROP 
SUBJECT:  Congressman Chabot Meets with Ministries of Trade, 
Planning and Investment, and Finance 
 
REF:  Hanoi 3301 
 
1. (SBU) Summary:  During a visit to Hanoi, Congressman 
Steve Chabot met separately December 13 and 14 with Vice 
Minister of Trade Luong Van Tu, Vice Minister of Planning 
and Investment Nguyen Bich Dat and Vice Minister of Finance 
Le Thi Bang Tam.  DCM accompanied the Congressman to the 
Ministry of Finance as well as a dinner hosted by the Hanoi 
Amcham.  GVN officials highlighted the positive state of 
U.S.-Vietnam economic and trade relations, asked for support 
for Vietnam's WTO accession, and identified GVN efforts to 
improve the climate for foreign investment. 
Congressman Chabot highlighted upcoming important milestones 
in U.S.-Vietnam relations, acknowledged the importance of 
WTO accession and explained the impact Vietnam's business 
climate will have on Congressional debate over Permanent 
Normal Trade Relations for Vietnam.  As reported reftel, 
Congressman Chabot also met separately with representatives 
of the Foreign Ministry and the National Assembly. 
 
U.S.-Vietnam Relationship Marks Positive Milestones 
--------------------------------------------- ------ 
 
2. (SBU) Vice Minister of Trade Tu opened his meeting with 
Congressman Chabot by noting that U.S-Vietnam bilateral 
economic relations are in a "good period."  Three years of 
implementation of the Bilateral Trade Agreement (BTA) and 
increased cooperation in other areas - including the signing 
of a bilateral aviation agreement in 2003 that had resulted 
in the recent initiation of direct flights between San 
Francisco and HCMC - have taken the bilateral relationship 
to "new heights." Vice Minister of Planning and Investment 
Dat also stressed the positive state of the relationship and 
highlighted the growth in bilateral trade since entry into 
force of the BTA in December 2001.  VM of Finance Tam 
welcomed Congressman Chabot's visit and categorized 
bilateral relations as "better and better." However, she 
also added that there are still "areas that need 
improvement" and she requested Congressman Chabot and other 
members of Congress "help Vietnam in this process." 
Congressman Chabot noted positively the growth in bilateral 
relations and pointed out that the two countries would mark 
several important milestones in 2005 including the thirty- 
year anniversary of the end of hostilities, the tenth 
anniversary of the normalization of relations and the 4th 
anniversary of the entry-into-force of the BTA. 
 
GVN asks for support for WTO Accession 
-------------------------------------- 
 
3. (SBU) All of Congressman Chabot's GVN interlocutors asked 
for his support for Vietnam's WTO accession.  Trade Vice 
Minister Tu highlighted that accession will bring both 
opportunities and significant challenges for Vietnam, 
because Vietnam is a "developing country with a low level of 
economic development."  Most Vietnamese businesses are small 
and medium-sized, he said, and they will face tough 
competition from U.S. companies.  While some aspects of 
Vietnam's economy "meet the requirements" of a market 
economy, other areas are still "in transition."  Vietnam 
needs time to prepare to meet the challenges posed by WTO 
accession, VM Tu said.  The BTA includes phase-in periods 
for Vietnam and the GVN is hoping for similar treatment in 
the WTO. 
 
4. (SBU) MPI VM Dat highlighted that Vietnam is fully 
engaged in the process of carrying out legal reform to open 
its markets on a gradual basis and remove trade barriers in 
compliance with WTO requirements.  The GVN has eliminated 
dual pricing, reduced infrastructure costs, passed a new 
Competition Law, and is working to finalize unified 
investment and enterprise laws (Note:  These laws are 
intended to harmonize the rules for domestic and foreign 
enterprises and investment.  End Note).  The GVN has 
concluded bilateral WTO negotiations with several WTO 
members, including the EU, and believes it will make "new 
progress" at the ninth Working Party in Geneva on December 
15, VM Dat said.  Vice Minister of Finance Tam emphasized 
that the United States is one of Vietnam's most important 
partners in the WTO process. 
 
Business Community Sentiment, Congress and PNTR 
--------------------------------------------- -- 
 
5. (SBU) Congressman Chabot acknowledged the importance of 
WTO accession for Vietnam and explained that members of 
Congress will have to decide whether or not to grant Vietnam 
Permanent Normal Trade Relations (PNTR).  The Congressman 
noted that during the debate on PNTR, members of Congress 
will get input from their business community constituents 
regarding their experiences in Vietnam.  U.S. companies are 
concerned about the need for better protection of 
intellectual property rights (IPR), improved transparency, 
and fair adjudication of investment disputes by Vietnamese 
courts.  They also are concerned about delays in GVN 
approval of business licenses and the negative impact of 
high auto taxes and tariffs on the auto sector.  The views 
of the business community will influence how individual 
members of Congress vote on PNTR for Vietnam, the 
Congressman added, and so it is important that the GVN talk 
to U.S. companies and resolve these issues.  Congressman 
Chabot noted that during his four days in Hanoi and HCMC he 
would have several opportunities to discuss business climate 
issues with U.S. companies, including at events hosted by 
the Hanoi and HCMC Amchams and during a tour of the Proctor 
& Gamble factory in HCMC later in the week. 
 
6. (SBU) Regarding the business community and PNTR, VM Tu 
responded that he has had a lot of opportunity to meet and 
talk to representatives of U.S. businesses.  Some companies 
want Vietnam to liberalize faster than the phase-in schedule 
established in the BTA.  In fact, he said, the GVN has done 
that, issuing some 100 percent foreign-owned licenses ahead 
of schedule.  The GVN is "looking at the requirements" and 
is "considering acceleration" of its BTA commitments in the 
insurance sector and other areas such as telecommunications. 
However, VM Tu noted, in some sectors where there has been 
faster liberalization, U.S. companies have not taken 
advantage of the opportunities.  In the banking sector, for 
example, he said, three U.S. banks used to operate in 
Vietnam, but now there are only two. 
 
7. (SBU) Both MPI VM Dat and MOF VM Tam asserted that the 
GVN is committed to improving IPR, including through 
accession to international IPR conventions.  (Note:  Vietnam 
joined the Berne Convention in October.  End Note.)  On 
taxes and tariffs, VM Dat explained that the GVN is 
struggling to balance the domestic producers needs for 
higher taxes and tariffs to protect their industry with 
Vietnam's international commitments. 
 
Insurance Licenses 
------------------- 
 
8. (SBU) Finance VM Tam responded directly to Congressman 
Chabot's point on the issuance of licenses to U.S. 
companies, focusing particularly on the insurance sector. 
She acknowledged that the GVN has been "stricter" about 
issuing licenses in the banking and insurance sectors but 
said that the GVN had informed U.S. insurance companies that 
it would grant them licenses to operate according to a GVN 
"roadmap." When pressed for more specifics by the DCM, VM 
Tam responded that in 1999, MOF had issued a 100 percent 
foreign license to AIG for life insurance services and MOF 
had recently decided to issue Marsh & McLennan Insurance a 
100 percent license for insurance brokerage services. 
(Note:  However, VM Tam also said the license for Marsh is 
pending resolution of Marsh's legal issues in the United 
States - perhaps referring to the New York Attorney 
General's fraud and anti-trust complaint recently filed 
against Marsh.  End note.) With respect to the long-pending 
life insurance license applications of New York Life and Ace 
INA, VM Tam said that the MOF has informed these companies 
of the specific dates of the licensing process and "they all 
agreed on the process." 
 
MIA and PNTR Linkage 
-------------------- 
 
9. (SBU) In the context of the discussion of PNTR, 
Congressman Chabot also highlighted the importance of GVN 
efforts in the fullest possible accounting of MIA's. 
Veteran's groups in the United States often contact members 
of Congress regarding this issue, he said.  The Congressman 
expressed appreciation for GVN efforts in this area and 
noted that these efforts have had a positive impact on the 
bilateral relationship. 
 
Textiles 
-------- 
 
10. Vice Minister Tu raised the issue of textile quotas and 
told Congressman Chabot that both the European Union and 
Canada have agreed to lift quotas on Vietnam's exports of 
textiles and garments beginning January 1.  (Note:  The EU 
lifted the quotas in exchange for other market access 
concessions from the GVN.  End Note.)  After the expiration 
of the WTO Agreement on Textiles and Clothing, only the U.S. 
will continue to place quotas on Vietnam's exports.  These 
quotas are a disadvantage to both the United States and 
Vietnam, the VM asserted.  Most U.S. importers and 
distributors support the removal of quotas on Vietnamese 
exports because they want Vietnam to be able to compete with 
other countries such as China and India, but quotas will 
make that more difficult.  (Note - Vietnam does not 
automatically benefit from the phase out of the ATC because 
it is not yet a member of the WTO.  End Note.) The VM 
pointed out that Vietnam's production of textiles and 
garments has resulted in significant imports of U.S. cotton 
(nearly 50,000 tons annually) and other U.S. products such 
as chemicals used in textile production.  He also noted that 
the income earned from the sale of textiles and garments has 
enabled Vietnam to purchase Boeing aircraft. 
 
MARINE