US embassy cable - 05HANOI2547

UNCLAS SECTION 01 OF 03 HANOI 002547 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV AND EB/TPP/BTA/ANA GOODMAN AND WICKMAN 
STATE PASS USTR ELENA BRYAN AND GREG HICKS 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EINV, PREL, PHUM, KIRF, PGOV, OVIP, VM, WTO 
SUBJECT: EAP DAS Eric John Meets AmCham and MOT Vice Luong 
Van Tu 
 
 
SENSITIVE - NOT FOR INTERNET DISTRIBUTION 
 
1.  (SBU) Summary:  In a September 27 luncheon with AmCham 
Board members and a separate meeting with Vice Minister of 
Trade Luong Van Tu, Deputy Assistant Secretary Eric John 
discussed Vietnam's WTO accession and BTA implementation. 
AmCham members expressed growing concern about the draft 
investment law's illiberal provisions on business licensing 
for domestic and foreign firms, their lack of opportunity 
for effective dialogue with the Vietnamese Government (GVN) 
on business issues, and the public perception in Vietnam 
that the United States is delaying Vietnam's WTO accession. 
VM Tu urged the United States to accelerate Vietnam's WTO 
accession, in fulfillment of President Bush's June 
commitment to Prime Minister Phan Van Khai.  He 
distinguished Vietnam from China, stressing that Vietnam has 
a much smaller volume of trade and that it imports from the 
United States many of the inputs used in its exports.  He 
complained that the United States is expecting Vietnam to do 
more than other countries.  DAS John affirmed that the USG 
wants Vietnam to accede to the WTO as quickly as possible, 
but on acceptable commercial terms.  End Summary. 
 
AmCham Luncheon 
--------------- 
 
2.  At a September 27 luncheon hosted by the American 
Chamber of Commerce in Vietnam (AmCham), EAP Deputy 
Assistant Secretary (DAS) Eric John, accompanied the 
Ambassador, Ho Chi Minh City Consul General Seth Winnick, 
poloff and econoff, discussed business concerns.  AmCham 
Board members were worried about some of the legislation 
that Vietnam is drafting to meet WTO accession requirements, 
particularly the proposed law on investment.  (Comment: 
Under the current investment law draft, both domestic and 
foreign companies would have to undergo onerous investment 
licensing procedures that presently apply only to foreign 
investors.  U.S. businesses had expected the new law to 
extend the current relatively simple registration procedures 
for domestic businesses to foreign companies.  The AmCham 
representatives expressed concern that the current draft of 
the investment law could choke off the growth of the private 
sector in Vietnam.  End comment.)  According AmCham's 
information, the Vietnamese National Assembly is likely to 
pass the law on schedule rather than reconsider it. 
 
3. (SBU)  The Ambassador asked if the AmCham had lobbied 
against the draft law.  AmCham members admitted that they 
had few contacts with National Assembly members, and those 
few contacts tended to be for the Assembly to explain its 
position rather than to work out problems.  In general, 
AmCham members felt they had few opportunities to bring 
their concerns to the attention of Vietnamese authorities; 
the meetings they did have offered no chance to follow up. 
Many U.S. companies hesitated to bring concrete complaints 
for fear of provoking unwanted attention from government 
regulators.  They noted an increase in regulatory 
inspections since publicizing their paper on WTO concerns. 
AmCham members stressed the importance of USAID's Support 
for Trade Acceleration Project (STAR)(providing technical 
assistance on trade related laws and regulations) as an 
avenue to get good policy advice to the Vietnamese 
government (GVN).  However, they noted that STAR's focus is 
on the implementation process of the Bilateral Trade 
Agreement (BTA).  Members were also concerned about the 
public perception in Vietnam that the United States was to 
blame for delaying Vietnam's WTO accession. 
 
 
Vice Minister of Trade Tu: Speed Up 
----------------------------------- 
4.  (SBU) EAP DAS Eric John, accompanied by ADCM Sam Watson, 
poloff and econoff notetaker, met with Vice Minister of 
Trade Luong Van Tu to discuss bilateral trade relations and 
Vietnam's WTO accession.  Warmly welcoming Mr. John, Tu 
noted that 2005 is the tenth anniversary of the 
reestablishment of bilateral relations and enumerated the 
many successes in the relationship, such as the visits of 
President Clinton in 2000 and Prime Minister Phan Van Khai 
this year.  DAS John said that it was wonderful to be back 
in Vietnam, which he regarded as his home in Southeast Asia 
since he had served two overseas tours related to Vietnam. 
He was amazed at the pace of development of bilateral 
relations.  The bilateral issues that we are dealing with 
now, such as WTO, are the kinds of issues that close friends 
work on together. 
 
5. (SBU) VM Tu made a strong pitch for the U.S. side to show 
more flexibility on WTO.  He pointed out that the BTA 
duplicates many of the WTO's requirements and claimed that 
Vietnam is ahead of schedule in implementing it.  He also 
stressed that President Bush, in his meeting with Prime 
Minister Phan Van Khai, had made a commitment to Vietnam to 
support Vietnam's WTO accession.  Tu urged the United States 
to consider Vietnam as a developing country that needs time 
to adjust.  Contrasting Vietnam and China, he argued that 
Vietnam's services offer was as good as China's, and hoped 
the United States would accept it, saying that it was beyond 
Vietnam's capability to do more.  He also hoped that the 
United States would not ask Vietnam for WTO plus terms.  He 
argued that, compared with China, the volume of Vietnam's 
trade is small.  Furthermore, unlike China, which has its 
own raw material resources, Vietnam imports U.S. raw 
materials to produce its exports. 
 
6.  (SBU) The Vice Minister noted the progress made in 
Geneva, but asked for help in persuading USTR to accelerate 
the accession process, complaining that Vietnam had closed 
with all countries except the United States, New Zealand and 
Australia.  He looked forward to the United States being an 
example for other countries expanding trade relations with 
Vietnam.  Other WTO accession countries only had to show a 
plan to come into compliance with WTO standards before 
accession, but the United States and other working party 
members expected Vietnam to have its laws in place before 
joining.  He thanked the United States for funding the STAR 
project and noted that Vietnam's National Assembly has or is 
in the process of passing some 27 new WTO-compliant laws. 
 
7.  (SBU) DAS John reaffirmed the U.S. commitment, expressed 
by President Bush, to work with Vietnam to achieve WTO 
accession as soon as possible.  Vietnam has advanced towards 
accession at a "world record" pace, but the toughest issues 
now remain.  It is unfortunate that there is a public 
misperception that the United States is standing in the way 
of Vietnam's accession.  The United States is working 
towards a "perfect" accession for Vietnam, which means that 
Hanoi needs to improve its offer.  The DAS also noted that 
it is important to keep in mind the importance of full 
implementation of the BTA for Congressional approval of 
permanent normal trade relations (PNTR) for Vietnam.  Under 
the BTA, Vietnam was given a ten-year phase in, while the 
United States had to comply immediately.  Some U.S. 
businesses are concerned that implementation under the BTA 
may be falling off pace.  BTA implementation is important 
for three reasons: it is an obligation, it affects U.S. 
business, and it affects U.S. political support for PNTR. 
 
8.  (SBU) VM Tu responded that the Vietnamese side is making 
its best efforts to implement the BTA and had even gone 
further than required under the BTA in granting market 
access in some areas such as insurance, and was reviewing 
requests by some U.S. companies seeking earlier phase-in of 
rights.  However, the Vietnamese side has concerns about 
U.S. implementation of the BTA, such as the opening of bank 
representation offices and establishment of 
telecommunications companies in the United States.  Tu also 
noted that he would meet next week with the AmCham to 
discuss their concerns. 
 
9.  (SBU) DAS John said that there was concern that the 
proposed new investment law would increase rather than 
decrease regulation and was contrary to the spirit of the 
WTO.  Tu emphasized that the draft investment law was still 
under discussion and that the GVN was taking comments.  He 
also mentioned the draft IPR law and said that he believed 
the U.S. side was satisfied with it.  ADCM Watson pointed 
out that there were still problems with IPR enforcement. 
 
10.  (SBU) VM Tu reiterated his concerns about U.S. BTA 
implementation.  U.S. banks, he said, had been allowed to 
open 100 percent-owned banks in Vietnam, but Vietnamese 
banks had not even been allowed to open a representative 
office.  The ADCM explained that the BTA did not exempt 
Vietnamese banks seeking to open offices in the United 
States from meeting U.S. regulatory requirements, including 
the requirement that foreign banks operating in the United 
States must come from countries that have effective anti- 
money laundering laws.  Despite repeated requests, Vietnam 
had not given the U.S. side a chance to review and comment 
on its recently issued decree on money laundering. 
 
11.  The Vice Minister also claimed that the United States 
had not permitted market access for Vietnamese telecom 
companies.  The ADCM expressed some surprise at this 
allegation and said that in his most recent visit to the 
Ministry of Posts and Telematics (MPT) the issue had not 
been raised.  (Note:  In Tu's September 6 letter to USTR 
(received on September 12), he referred to the case of the 
Vietnamese Telecommunication Company applying for the 
establishment of a joint venture in the U.S. and not being 
granted permission.  Embassy forwarded this letter to 
Department and USTR.  End Note.) 
 
MARINE