US embassy cable - 05HANOI3015

UNCLAS SECTION 01 OF 04 HANOI 003015 
 
SIPDIS 
 
STATE FOR EAP/MLS 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 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, VM, WTRO, WTO, APEC 
SUBJECT: VIETNAM WTO BILATERALS: THE VIEW FROM HANOI 
 
SENSITIVE - DO NOT POST ON INTERNET 
 
REF: A) Hanoi 2967 B) HCMC 944 C) Hanoi 2645 
 
1. (SBU) Summary: Our bilateral negotiations on 
Vietnam's accession to the World Trade Organization 
have not moved forward since September.  Senior GVN 
officials, including DPM Vu Khoan, have recently begun 
expressing their frustration publicly in the press and 
laying the blame on the United States and, to a lesser 
extent, Australia.  The usual din in the press that 
surrounds any major negotiation is being exacerbated in 
Vietnam by the pressures from a missed deadline, an 
upcoming Party leadership meeting and the imminent 
arrival of the APEC mantle to Vietnam. 
 
2. (SBU) Ministry of Foreign Affairs (MFA) Vice 
Minister Le Cong Phung made a measured appeal to the 
Ambassador November 8 for progress in the negotiations. 
While Vietnam is frustrated, so is the United States 
over the lack of movement by the Vietnamese side since 
mid-September.  The danger is that this frustration 
could spill over into and begin to affect other aspects 
of our relationship.  While we are not yet there, we 
may be getting close.  Less than six months ago, the 
President and Prime Minister committed to raise this 
relationship to a higher plane.  In about a year, the 
President plans to come to Hanoi for APEC.  The sooner 
we can finish these negotiations, the better.  Setting 
a definite time for a next meeting would be a useful 
way to reengage.  End Summary. 
 
Little Progress Since September 
------------------------------- 
 
3. (SBU) Our bilateral negotiations on Vietnam's 
accession to the World Trade Organization have not 
moved forward since the productive meeting in Geneva in 
September.  We have provided documents to Vietnam, but 
are still awaiting revised offers. Vietnam has not yet 
closed with the United States, Australia, New Zealand, 
Mexico, Honduras and the Dominican Republic.  No date 
has been set for the next Working Party Meeting or for 
another round of bilaterals.  The Australians confirm 
that they are also not making progress with the GVN. 
(In the press and privately, the GVN claims that it is 
making progress in its negotiations with Australia and 
is close to completion.) 
 
GVN Acknowledges It Will Not Meet its Goal 
------------------------------------------ 
 
4. (SBU) The GVN has been forced in recent weeks to 
acknowledge publicly that it will not meet its December 
2005 accession target.  Missing the important and long- 
set goal of joining the WTO by December is embarrassing 
to those in the Government who have pushed for economic 
reform and international integration.  Their failure to 
achieve this important goal may have weakened them and 
other reformers in the run-up to the Tenth Party 
Congress late next spring. 
 
5. (SBU) Earlier this fall, the well-placed editor of a 
leading Party daily in HCMC, who is also in the reform 
camp of the Party, indicated that reformers feel 
defensive since they have not been able to deliver an 
agreement with the United States on WTO accession. 
Internal Party maneuvering in advance of the Tenth 
Party Congress may be impacting the negotiating 
strategy of the Vietnamese (Ref A). HCMC officials 
foreshadowed this possibility in September (Ref B). 
 
6.  (SBU) Apart from losing face, the delay has a more 
practical effect.  Vietnam's assumption of the APEC 
leadership mantle in January will increase pressure on 
the already over-extended and limited number of English- 
speaking officials who are dealing with WTO issues. 
The longer Vietnam's WTO accession negotiations drag 
on, the greater the potential to diminish the overall 
effectiveness of Vietnam's APEC chairmanship. 
Blame the United States 
----------------------- 
 
7.  Earlier this fall, MOFA Vice Minister Le Van Bang 
told the Ambassador that some in the GVN saw the United 
States as the culprit in Vietnam's failure to meet the 
December target (Ref C).  In separate private meetings, 
some key members of Vietnam's negotiating team have 
expressed frustration with the lack of progress and 
indicated that they are not sure what to do next.  They 
say that the GVN's September offer was meant to close 
the gaps on everything but telecom, and there is little 
left to give.  Maintaining motivation for their staff 
is difficult with no sign of imminent closure or a next 
meeting.  They have also expressed frustration about 
the need for written offers before proceeding since 
this was not how other partners such as the EU had 
negotiated. 
 
8. (SBU) Whether a tactic to divert blame from 
themselves, a negotiating ploy or a sign of genuine 
frustration, or all of the above, senior GVN officials 
have recently begun expressing their unhappiness 
publicly in the press and laying the blame on the 
United States.  In an October 22 interview, Tuoi Tre 
newspaper quoted Vietnam's Ambassador to the WTO Ngo 
Quang Xuan as saying that the U.S. negotiating position 
reflected a "lack of good will" since demands are 
"beyond Vietnam's capability."  He said that 
difficulties at the negotiating table with the United 
States and Australia are currently the biggest 
obstacles to Vietnam's accession to the WTO and would 
prevent accession in December in Hong Kong.  Vice 
Minister of Trade Luong Van Tu, who heads Vietnam's 
negotiating team, echoed the "lack of good will" theme 
in remarks that appeared in the press on November 3. 
He noted that "the difficulties at the negotiating 
table are now sensitive matters such as too high 
standards in banking, telecommunications and cultural 
services (a reference to audio-visual issues)."  On 
November 5, Deputy Prime Minister Vu Khoan told 
reporters that the major obstacle preventing Vietnam 
from joining WTO is the trading partners of whom the 
United States is the most difficult one."  He said: "if 
we cannot join this year, it is not our fault. We exert 
maximum efforts, but we are not prepared to accept at 
any price.  We cannot accept things that may break our 
economy.  The Government has requested a more improved 
offer to better approach the U.S. requirements." 
 
U.S. Business Feeling Some Heat 
------------------------------- 
 
9. (SBU) In reaction to the media blitz and to their 
conversations with GVN officials exhorting them to tell 
the U.S. team to close out, U.S. business 
representatives have privately expressed concern that 
they may face difficulties until the deal is closed. 
They have cited some minor irritants, but cannot point 
to anything major as a consequence, though Boeing 
representatives speculate that there is a relationship 
between the WTO negotiations and their continuing 
difficulty in getting the deposit for aircraft sold in 
June. 
 
Meeting at MOFA on WTO 
---------------------- 
 
10. (SBU) The latest official discussion of WTO 
accession in Hanoi came November 8 when the Ambassador 
met Vice Minister Le Cong Phung at MOFA's request. 
Phung offered the following summation of Vietnam's view 
of the status of the negotiations.  Bilateral relations 
have developed well over the past ten years, 
culminating in the Prime Minister's visit to the United 
States during which President Bush had pledged to 
support Vietnam's WTO accession.  In October, the Prime 
Minister had written to the President asking for his 
help in fulfilling that pledge and proposing to upgrade 
the negotiations to the ministerial level.  Having 
closed bilateral negotiations with 22 out of 28 
countries, Vietnam's accession to the WTO now depends 
mainly on the United States and on U.S. goodwill.  It 
will be difficult for Vietnam to chair APEC discussions 
on WTO and the Doha Round next year if it is not a WTO 
member. 
 
11. (SBU) In response, the Ambassador described Phung's 
clear and nuanced message as more helpful than some 
recent comments in the press, particularly those of 
Vietnam's Ambassador to the WTO.  He assured Phung that 
a response to the Prime Minister's letter would come 
soon, although he could not predict the contents.  The 
United States wants to finish the bilateral 
negotiations so that Vietnam can join the WTO, but the 
content of the bilateral agreement is a commercial, not 
a political, question.  The U.S. side has provided some 
items owed to Vietnam from the September Working Party 
Meeting and will provide more this week, but has 
received nothing from Vietnam.  USTR Portman is very 
busy with other bilateral negotiations and preparations 
for the Doha trade talks, but there is a need to close 
the gaps even if the next meeting is not at the 
ministerial level.  The Ambassador cited two examples 
of areas where Vietnam ought to accept the U.S. 
position: binding tariffs at applied rates and lowering 
tariffs on certain agricultural products where China, 
Vietnam's main competitor, already has or will soon 
have zero tariffs.  The United States needs Vietnam's 
contribution to schedule the next meeting. Once 
received, the U.S. side would need about three weeks to 
analyze the materials.  Noting that the end of the year 
is coming, the Ambassador stressed the need to move 
quickly. 
 
12. (SBU) Phung stated that he hopes that Vietnam's 
counteroffer, now in preparation, would move closer to 
the U.S. request.  While not a negotiator, Phung looks 
at the framework of the negotiations.  He hopes that 
the Ambassador would convey Vietnam's concerns to 
Washington, as he would convey the Ambassador's points 
to the Ministry of Trade and others involved in the 
negotiations.  WTO accession is necessary to move the 
bilateral relationship to a higher level, but for 
Vietnam's accession to be achieved, the two sides must 
resolve commercial issues, the Ambassador responded. 
Noting that he and Assistant USTR Barbara Weisel had 
met with Trade Minister Tuyen the previous month, the 
Ambassador offered to see the Trade Minister again 
after USTR receives Vietnam's submissions. 
 
Comment 
------- 
 
13. (SBU) No doubt the usual din in the press that 
surrounds any major negotiation is being exacerbated in 
Vietnam by the pressures from a missed deadline, an 
upcoming Party leadership meeting and the imminent 
arrival of the APEC mantle to Vietnam.  In addition, 
Vietnam is looking for a political solution to its 
economic integration quest, an approach that has worked 
with the EU, China, Japan, Korea and the ASEANs, but 
not with the remaining partners.  Of course, that is 
not how the United States conducts WTO negotiations. 
While Vietnam is frustrated, so are we over Vietnam's 
public carping and its failure to provide revised 
offers.  The danger is that frustration could spill 
over into and begin to affect other aspects of the 
relationship.  While we are not yet there, we may be 
getting close. 
 
14. (SBU) Interest among potential U.S. investors in 
Vietnam is climbing and the pace of economic 
interaction is accelerating.  Closing the WTO deal 
would only serve to enhance prospects for U.S.-Vietnam 
trade and investment.  Without question, however, the 
deal must be complete.  For example, two significant 
sectors not yet resolved, telecom and financial 
services, are critical to U.S. firms, to the commercial 
viability of any PNTR package, and to the 
attractiveness of Vietnam as a business environment. 
The question is where to go from here to ensure that 
the hard work of the past year pays off soon.  Less 
than six months ago, the President and Prime Minister 
committed to raise this relationship to a higher plane. 
In about a year, the President plans to come to Hanoi 
for APEC.  The sooner we can finish these negotiations, 
the better. 
 
A Way Forward 
------------- 
 
15.  (SBU) The United States and Vietnam need an 
accession package that is strong on the substance both 
to ensure that PNTR will pass Congress and to create a 
solid basis for future development of our economic 
relationship.  However, because we need to be firm on 
substance, we should make every effort to accommodate 
Vietnamese concerns in other respects and demonstrate 
that we continue to negotiate seriously.  The visit of 
Barbara Weisel was helpful in showing high-level U.S. 
interest in the negotiations.  GVN officials' clear 
expectation, based on their experience with the BTA and 
other negotiations, is that a high-level meeting is 
needed to conclude negotiations.  What they are failing 
to understand is that such a meeting can only occur 
when the two sides have narrowed the issues to a few 
key points.  The Vietnamese believe that it is hard to 
motivate their bureaucracy without a timetable.  We 
might be able to use their need for a timetable and 
desire for a high-level meeting to our advantage, by 
pointing out the possible times for such a meeting and 
urging them to work towards making such a meeting a 
reality, though only if there were substance (i.e., 
revised offers) to justify it. 
 
MARINE