US embassy cable - 05HANOI1863

UNCLAS SECTION 01 OF 05 HANOI 001863 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV AND EB/TPP/BTA/ANA JBELLER 
STATE PASS USTR FOR EBRYAN and GHICKS 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ETRD, VM, WTRO, BTA, WTO 
SUBJECT: AMBASSADOR'S MEETING WITH MOT VM TU ON WTO 
 
SENSITIVE BUT UNCLASSIFIED 
 
Ref: State 133130 
 
Sensitive -- Do not post on the internet. 
 
1. (SBU) Summary: On July 19, the Ambassador met with Vice 
Minister of Trade Luong Van Tu at the VM's request.  Both 
agreed on the need to maintain the momentum on Vietnam's WTO 
accession following the great progress made in the June 
talks as well as during Prime Minister Phan Van Kai's visit 
to Washington.  However, Tu acted very surprised to hear 
that the U.S. side would not be able to come to Hanoi in 
July or August and requested that the Ambassador convey 
Vietnam's offer to come to Washington.  The Ambassador 
agreed to do so, but cautioned that tight schedules of key 
USTR negotiators offered little hope of a bilateral session 
before September.  Tu was clearly stunned to learn that the 
United States now believes that Vietnam should work toward 
an early 2006 accession date.  Both he and the Ambassador 
acknowledged the importance of synchronizing timetables and 
staying in touch on the issues.  Since Tu stated that a 
number of issues, particularly on the multilateral side, had 
been covered in the documents submitted earlier in the week, 
it would be helpful to analyze the contents so that we can 
provide feedback quickly to the Vietnamese.  On July 21, 
Deputy Prime Minister (DPM) Vu Khoan requested a meeting 
with the Ambassador on July 25 without indicating a specific 
topic for discussion.  We believe that the DPM's request may 
in response to the Ambassador's meeting with VM Tu.  End 
Summary. 
 
2.  (U) The Ambassador, accompanied by Acting DCM, attended 
a lunch hosted by Vice Minister of Trade Luong Van Tu on 
July 19.  Also present from Ministry of Trade (MOT) were 
Director General of the Americas Department Nguyen Cam Tu, 
Director from the Office of the National Committee for 
International Economic Cooperation Nguyen Van Long and 
Deputy Director for Multilateral Affairs Luong Hoang Thai. 
 
3.  (SBU) The Vice Minister began by thanking the Ambassador 
and Embassy staff for their support in the successful visit 
of Prime Minister Phan Van Khai to the United States.  He 
expressed the desire that the momentum achieved on Vietnam's 
accession to the World Trade Organization, both in the 
bilateral negotiations preceding the visit and in President 
Bush's statement of support to the Prime Minister, would 
continue.  In that spirit, Vietnam had sent documents for 
the next Working Party (WP) to the Embassy the previous day. 
These documents had included the responses from the June 
negotiations on key issues including trading rights, 
industrial subsidies, and state owned enterprises and 
equitization.  VM Tu noted that he had sent letters both to 
the Ambassador and to Deputy USTR Josette Shiner seeking 
dates for another round of bilateral negotiations in July 
"as the United States had proposed," but so far, had 
received no response. 
 
4.  (SBU)  Confirming the receipt of both of those letters, 
the Ambassador explained that he had conveyed both of them 
to USTR.  The Ambassador noted that the two sides, 
especially Vietnam, had been working very hard on these 
negotiations and at a very high pace.  In the midst of these 
efforts, lines of communication had become twisted and he 
welcomed this opportunity to try to straighten them out. 
After the progress achieved in the entire relationship in 
the past year, it is important that the two countries not 
end up with misunderstandings that cause problems. For 
example, USTR has not yet had time to digest and understand 
the new documents for the next WP.  USTR acknowledges the 
receipt of the WP comments and revised offers on goods and 
services.  USTR is working on a revised tariff request that 
it hopes to send soon to Vietnam. 
 
5.  (SBU) Stressing that the United States wants Vietnam to 
become a WTO member as soon as possible, the Ambassador 
noted that President Bush had made clear to the Prime 
Minister that the United States is prepared to be Vietnam's 
advocate in this process.  An accession approval for the 
United States has many aspects including a vote by the U.S. 
Congress on Permanent Normal Trade Relations (PNTR).  To 
ensure a successful outcome, before submitting anything to 
Congress, the U.S. Administration needs to ensure that there 
is a complete package that will not attract opposition. 
This means that implementation of the Bilateral Trade 
Agreement (BTA) must be clean and complete.  Vietnam must 
have brought all of its relevant laws and regulations into 
compliance with the WTO.  Moreover, Vietnam's WTO 
commitments must exceed the current BTA commitments.  The 
U.S. Administration must be able to show progress beyond the 
BTA. The WTO commitments must also be acceptable to the U.S. 
business community whose support Vietnam will need for the 
PNTR vote.  USTR has consulted with Congress and believes 
that the best time to present the PNTR package would be 
early in 2006. 
 
6. (SBU) The Ambassador noted that the two timetables of the 
two sides were not synchronized and said it is important to 
consider how to solve this.  Vietnam has been using the Hong 
Kong Ministerial as its accession target date.  This target 
has been very effective and admirable.   The progress made 
so far would not be possible without such an ambitious 
target.  The United States estimates that two years of work 
have been compressed into nine months, thanks to this 
target.  He added that this achievement had entailed a high 
price in terms of hard work and effort for the Vietnamese 
government staff involved.  However, there is no technical 
reason to link an accession to a Ministerial meeting, he 
explained.  In fact, accessions can be granted at WTO 
meetings that take place every two months.  Thus, if the 
United States and Vietnam can sustain the current pace of 
work and Vietnam can deliver its commitments, there is no 
reason that Vietnam could not accede early in 2006, he 
concluded. 
 
7. (SBU) The Ambassador went on to say that at the last 
bilateral wrap-up meeting in June, USTR had said it would 
try to come to Hanoi, but both Deputy USTR Shiner and ASUTR 
Dwoskin had pointed out that it would be hard to do. 
Although they tried to make it happen, they had asked the 
Ambassador to inform the Vice Minister that coming to Hanoi 
in July will not possible.   USTR also considered coming in 
August, but that is the worst possible month in Washington 
because of summer holidays and it will not be possible for 
them to come at that time.  Instead, they would like to 
propose a meeting in Geneva in September at the time of the 
next WP meeting.  At that time, the two sides would hold 
intense bilaterals and work on the text of WP report with 
other WP members.  The pressures that make a meeting in July 
and August difficult will not be as severe in the fall so it 
will be easier for USTR to consider times for follow up 
meetings then.  In the meanwhile, the lead U.S. negotiators 
for various issues would be willing to meet for sector 
discussions in Washington, Geneva, or elsewhere. 
 
8. (SBU) Pointing out that the BTA covers eight sectors and 
62 sub-sectors, the Vice Minister noted that Vietnam's WTO 
offer had included more by covering ten sectors and 114 
subsections on services.  On goods, the BTA includes 300 
tariff lines, whereas the WTO offer includes 10,000 lines. 
Moreover, Vietnam had accepted a number of sectoral 
commitments in such areas as the Information Technology 
Agreement (ITA), chemicals, and civil aircraft.  In 
contrast, the Chinese had made WTO commitments in only nine 
sectors and 90 to 92 subsectors.  Thus Vietnam's offer had 
exceeded that of China, he stressed.  He implored the 
Ambassador to understand that the Government of Vietnam had 
made great efforts to open its market to U.S. business. 
 
9.  (SBU) The Ambassador acknowledged that Vietnam's 
expansion into other sectors was impressive.  He stressed, 
however, that the concern was in areas such as 
telecommunications and financial services where the two 
sides disagreed and hence the scope of Vietnam's offer was 
not satisfactory.  The Vice Minister replied that he hoped 
the two sides could narrow the gap and reach a conclusion. 
The Ambassador agreed that the June talks had narrowed many 
gaps in service sectors such as energy and environment. 
Ambassador Shiner had said that the end was in sight and the 
finish line was visible, he noted.  At this point, the U.S. 
side believes that reaching a bilateral agreement would not 
be as difficult as closing out the multilateral 
negotiations.  For that reason, it would be important to 
focus on making September's WP meeting a success. 
 
10.  (SBU) Turning to a more detailed presentation on the 
June bilateral discussions, the Ambassador said that there 
was more to do on telecom and financial services.  As for 
goods, the two sides have agreed to 85 percent of the 
agricultural tariffs under discussion.  But the remaining 15 
percent includes the issues critical to the United States 
where a show of flexibility by Vietnam would be useful.  The 
United States intends to send a revised request soon.  As 
for non-agricultural goods, there was a good exchange on 
priority and sensitive areas that should help both sides 
understand their differences.  The United States is 
analyzing Vietnam's last offer and hopes to be able to 
narrow the differences once this has been completed.  It is 
also very important for Vietnam to bind its tariffs at low 
applied rates. 
 
11. (SBU) Enacting legislation for the WTO is an essential 
step since it would take care of BTA implementation 
requirements, form the basis for a successful PNTR vote and 
set the stage for successful WTO entry, the Ambassador 
continued.  Vietnam has an ambitious schedule that it must 
adhere to as much as possible.  The United States needs to 
be able to get comments on draft laws to Vietnam in a timely 
manner, he acknowledged.  U.S. experts have provided 
comments on Vietnam's draft laws on IPR and investment. 
They are currently working on comments on additional 
legislation.  Noting that the United States had provided a 
draft checklist of the status of legislation to Vietnam in 
June, the Ambassador asked for confirmation that it was 
accurate.  He solicited input on whether there were ways to 
improve the format to make it more useful. 
 
12. (SBU) The Ambassador then took up four specific 
multilateral items, which he acknowledged might have been 
addressed in the draft WP documents Vietnam had submitted 
the previous day.  In June, the United States had noted that 
the transitions for trading rights were longer than those in 
the BTA and thus would not be viable for a successful PNTR 
package.  Good discussions in Washington on SOES and STES 
had helped clarify our outlook on them considerably.  As a 
result, the United States is in a better position to 
understand the key issues involved and looks forward to 
receiving Vietnam's comments on the paper provided in June. 
Resolving the prohibited subsidies issue is essential and 
the United States will look for suggestions in the WP 
documents.  The United States has also provided comments on 
Vietnam's draft IPR law.  Discussions with U.S. firms and 
the Congress have made clear that full TRIPs implementation 
by accession is essential. 
 
13.  (SBU)  The Ambassador said that he had been urging 
Washington to have this kind of conversation because he was 
not sure that the two sides had spoken this directly on 
timing before this.  He pledged to do all that he could to 
be sure that this sort of clarity is maintained and that 
each meeting will lead to a clearer view of what the two 
sides need to do.  In that spirit, he called on the two 
sides to use the next six to seven weeks to exchange 
information and narrow their differences to a point where 
the next round could perhaps be the final round.  However, 
having negotiations take place before doing the necessary 
preparatory work is sure to lead to frustration, he 
cautioned.  Progress in these negotiations is not just a 
question of sitting down and talking, he stressed.  Based on 
his understanding, the U.S. team has been working more 
intensely with Vietnam than with anyone else over the past 
year.  That demonstrates the U.S. commitment to Vietnam's 
accession, which USTR Ambassador Portman had reaffirmed 
during his meeting with PM Khai, will be maintained. 
 
14.  (SBU) The Vice Minister responded that it was helpful 
to exchange information and to speak frankly.  He agreed 
that the U.S. team had made great efforts with Vietnam in 
the seven rounds.  Regarding multilateral issues, he noted 
that Vietnam was committed to full TRIPS implementation 
after accession and had received useful comments from the 
U.S. side for the final draft of the IPR law that were being 
taken into consideration in revisions.  He noted that 
Vietnam intended to complete the WTO laws and decrees this 
year and had completed some 25 already with another 14 set 
for the October-November legislative session.  One advantage 
is that the National Assembly and the government both agree 
on the agenda.  He interjected his expression of 
appreciation for the good work that the USAID-funded Support 
for Trade Acceleration (STAR) project is doing to help with 
this legislative review.  On trading rights, he noted that 
there had been progress in the new offer submitted in July, 
which now is better than the BTA.  Regarding SOEs, he 
pointed out that only about one quarter of Vietnam's GDP 
comes from SOEs while the joint ventures, private firms, and 
foreign direct invested enterprises contribute the rest. 
(Note:  Official GVN and other estimates put this at over 30 
percent. End Note.)  Noting Vietnam's commitment to 
implement fully the BTA, he said that one or two issues were 
not yet implemented, but a diplomatic note expressing a 
commitment to full implementation had been sent to the 
Embassy.  (Note: We are checking on what he was referring 
to. End note.)  He pledged to assign a point of contact for 
trading rights issues the following week and provide this 
information to DUSTR Shiner, as promised during the June 
bilateral meeting. 
 
15. (SBU) Tu went on to say that USTR's new negotiation 
schedule is very "delayed."  While he had understood the 
Ambassador's explanation, he wished to express Vietnam's 
desire to hold the negotiations sooner and offered to fly to 
the United States if the U.S. side was too busy to go 
elsewhere.  Keeping the negotiations going continuously 
could lead to a quicker conclusion, while prolonging the 
process and seeing changes in personnel could delay closing. 
Therefore, in the spirit of the close bilateral relationship 
between Vietnam and the United States and the support 
expressed by President Bush in June for Vietnam's WTO 
accession, he requested that the Ambassador convey a 
proposal for Vietnam to go to Washington later in July for 
another round of bilateral negotiations.  The Ambassador 
replied that he would be happy to convey the request, but he 
held little hope that it would be possible.  Tu responded 
that he understood the U.S. difficulties, but still 
requested that the United States give Vietnam priority. 
While Vietnam was small for the United States, these 
discussions were very important to Vietnam. 
 
16. (SBU) The Ambassador replied that the issue was not 
small for the United States.  If it were, the U.S. team 
would not be working as hard as it is.  The United States 
views Vietnam's accession as important because it is setting 
the stage for the trading relationship of the future.  The 
comments on timing that he had conveyed are very measured 
and serious, the Ambassador added.  He went on to say that 
the United States would continue to work very hard with 
Vietnam, but that there is a need to look at and adjust 
Vietnam's schedule.  He stressed that this did not mean in 
any way that the United States would stop working on the 
accession.  The Ambassador noted that he would be in Hanoi 
all summer and available to have further conversations such 
as this one, but he can be a conduit, not a negotiator. 
 
17. (SBU)  Reminding VM Tu that passing new legislation was 
one of the biggest hurdles remaining, the Ambassador 
underscored the need for WP members to see drafts of laws 
for the fall session in advance so that they can have time 
to provide comments.  Tu promised to provide draft laws to 
the WP and noted that as required in the Law on Laws Vietnam 
would solicit public comments and invite legal experts from 
the United States and European Union to participate.  He 
expressed confidence that Vietnam's lawmaking process, which 
involves international experts, was better than that of 
China. 
 
18. (SBU) The Ambassador reiterated that there was no way 
around the PNTR legislative issue.  The Administration is 
not ready to give a PNTR package to Congress, so there is no 
way to complete Vietnam's accession until early in 2006. 
Asked whether there was any way to advance this schedule, he 
replied that an earlier date was very unlikely because of 
the other demands on Congress.  Acknowledging that the issue 
was very important for Vietnam, the Ambassador pointed out 
that just as USTR has to deal with other negotiations and 
trade issues, the U.S. Congress has to deal with other 
issues.  The United States believes that by the time the 
package is ready, there will be no space on the legislative 
calendar until early 2006.  He cautioned against trying to 
save space in the calendar since that would risk losing 
credibility to Members of Congress if, in the end, the 
package is not ready in time. 
 
19. (SBU)  VM Tu agreed to synchronize coordination with the 
U.S. side and wanted more help in getting Vietnam's message 
out since Vietnam was weak in "propaganda."  The Ambassador 
observed that the Prime Minister's trip had gone a long way 
towards changing that by increasing America's understanding 
of Vietnam today.  More progress in this area will be needed 
before the PNTR vote occurs, he noted.  That vote will be an 
occasion to review the trade relationship and other aspects 
of the relationship so it will be a chance for people to 
express viewpoints that may affect the vote.  Because of 
this, having a well-coordinated and complete PNTR package is 
vital.  A solid package will help garner support from the 
U.S. business community, Congress and others, thus making it 
easier to neutralize opponents.  Some are certain to oppose 
PNTR because of their concerns that progress on human rights 
and religious freedom has been inadequate, but it is 
important to ensure that there is no opposition on issues 
like IPR or trading rights.  Since the issue of PNTR for 
Vietnam comes at a time when there is considerable debate 
about U.S. trade policy, many in Washington will look at any 
new trade agreement with a critical eye.  The Ambassador 
said he was confident that the Vice Minister would report on 
this conversation to others in Vietnam who are interested 
such as Deputy Prime Minister Vu Khoan.  He called for close 
coordination with Vietnam on these issues in the coming 
months. 
 
20. (SBU)  Comment:  The Vice Minister and his staff looked 
stunned both when we noted that there would be no meeting in 
July and when we outlined a timetable for an early 2006 
accession.  It would be helpful to look carefully at the 
latest tranche of documents to determine whether what 
Vietnam has done is close or not to what is needed.  We will 
continue to try to maintain close touch with our Vietnamese 
colleagues. On July 21, Deputy Prime Minister Vu Khoan 
requested a meeting with the Ambassador on July 25 without 
indicating a specific topic for discussion.  We believe that 
the DPM's request may be in response to the Ambassador's 
meeting with VM Tu.  End Comment. 
 
MARINE