VZCZCXRO6302
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #0657/01 0800958
ZNR UUUUU ZZH
R 210958Z MAR 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 1176
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPTTREAS WASHDC
RUEHRC/USDA FAS WASHDC
RUEHGV/USMISSION GENEVA 1057
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 0733

UNCLAS SECTION 01 OF 04 HANOI 000657 
 
SIPDIS 
 
STATE FOR EAP/MLS 
GENEVA FOR USTR 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD WTRO PREL USTR VM
SUBJECT:  U.S.-VIETNAM BILATERAL WTO ACCESSION MARKET ACCESS 
NEGOTIATIONS, JANUARY 16-18 
 
 
HANOI 00000657  001.2 OF 004 
 
 
SENSITIVE BUT UNCLASSIFIED.  DO NOT POST ON THE INTERNET. 
 
¶1. (SBU) Summary:  Working within a theme of liberalization, 
linkages, and legislation, U.S. and Vietnamese negotiators 
made significant progress in bilateral WTO Accession market 
access negotiations held January 16-18 in Hanoi.  In the 
agricultural market access negotiations, tariff lines 
covering the most sensitive products - beef, pork, dairy, 
grapes, and apples - remain.  (Note: Vietnam gave China duty- 
free access on beef, pork, apples, and grapes under the 
ASEAN-China FTA.  End Note.)  Industrial tariff negotiators 
agreed on more than one-third of tariff lines on outstanding 
priority products in the construction equipment, energy 
equipment, chemicals, pharmaceuticals, paper, civil 
aircraft, and consumer goods sectors.  Difficult 
negotiations lie ahead on politically-sensitive products 
including autos and auto parts, motorcycles, tractors, pulp, 
appliances, and a limited number of pharmaceutical and 
electronic goods.  Vietnam's new offers on 
telecommunications, energy services, and branching for non- 
life insurance, and selected securities subsectors created 
new momentum for the services talks.  Hard work remains, 
including on banking, the product exclusions under 
distribution services, "public utility" exceptions and 
claimed need to protect essential security interests in 
energy and environmental services. 
 
¶2. (SBU) Traction was achieved in discussions on the 
following multilateral issues - trading rights, state 
enterprises, SPS, standards, IPR protection, subsidies, and 
quantitative restrictions.  Vietnam provided official 
translations of newly enacted laws and the United States 
undertook to review them and provide comments on their 
conformity with WTO rules and obligations.  In briefings on 
the conduct of the negotiations, the U.S. business community 
in Vietnam urged U.S. negotiators to secure improved 
commitments on market access and implementation of WTO rules 
and obligations.  The two sides agreed that meeting again in 
late March would give both teams sufficient time to consult 
with stakeholders and develop creative approaches to 
complete work on the market access negotiations and to 
resolve remaining problems in the multilateral talks.  End 
Summary. 
 
¶3. (SBU) Stressing the theme of liberalization, linkages, 
and legislation, AUSTR for WTO and Multilateral Affairs 
Dorothy Dwoskin led a senior trade policy team, including 
AUSTR for Southeast Asian and Pharmaceutical Affairs Barbara 
Weisel, to Vietnam January 16-18 for bilateral WTO accession 
market access negotiations.  The U.S. and Vietnamese teams 
used every available minute to narrow differences on 
Vietnam's market access offers on agricultural tariffs, 
industrial tariffs, and services.  On the theme of linkages, 
the two teams devoted considerable time to key multilateral 
issues including trading rights, the role of the state in 
the economy, subsidies, standards, sanitary and 
phytosanitary measures, intellectual property rights 
protection, and quantitative restrictions.  Vietnam provided 
official translations of the laws enacted in November 2005 
and promised to provide translations of decrees currently 
being drafted to implement those laws. 
 
¶4. (SBU) Taking full advantage of their presence in Hanoi, 
AUSTR Dwoskin and AUSTR Weisel met with Vietnamese officials 
at the highest levels of government, including Deputy Prime 
Minister Vu Khoan, Minister of Trade Truong Dinh Tuyen, 
Minister of Finance Nguyen Sinh Hung, Minister of Posts and 
Telematics Do Trung Ta, and Vice Minister for Agriculture 
and Rural Development Bui Ba Bong, to provide impetus to the 
talks.  In addition, the AUSTRs consulted closely with 
American companies present in Vietnam, twice briefing 
representatives of the American Chambers of Commerce in 
Vietnam.  Responding to the intense local interest in the 
negotiations, AUSTRs Dwoskin and Weisel held a press 
conference that was attended by over 100 members of the 
press and other interested parties. 
 
AGRICULTURAL MARKET ACCESS 
 
¶5. (SBU) Good progress was made in the agriculture 
negotiations.  U.S. negotiators held extensive consultations 
with stakeholders prior to the meetings to develop pragmatic 
 
HANOI 00000657  002.2 OF 004 
 
 
options, and Vietnam also came prepared to negotiate.  For 
the first time negotiations resulted in substantial 
movements rather than minor incremental concessions. 
Negotiators reached agreement on priority products such as 
cotton, soybean meal, nuts and processed meats and other 
processed food products.  Only the most sensitive products 
remain including beef, pork, whey, grapes, apples and 
distilled spirits.  U.S. agricultural group have repeatedly 
stressed that securing low duties on these commodities is 
particularly important given Vietnam provides zero duties to 
China for these products under the ASEAN-China preferential 
agreement.  Distilled spirits will continue to be 
contentious as the two sides remain very far apart on 
tariffs and Vietnam also maintains WTO-inconsistent 
differential excise taxes (on spirits and beer) and limits 
distribution rights for wines and spirits. 
 
¶6. (SBU) The U.S. side raised issues such as biotech, shelf 
life and BSE restrictions on bone-in beef and beef offals, 
as well as the importance of achieving proper implementation 
of WTO rules for Sanitary and Phytosanitary measures and 
Technical Barriers to Trade.  In a separate meeting the Vice 
Minister for Agriculture committed to lifting the 
restrictions on beef in accordance with OIE guidelines.  He 
also maintained that Vietnam's biotech policies would not 
result in restriction of trade, and that he wanted to ensure 
implementation of SPS upon accession.  The U.S. interagency 
team will be working with the U.S. Embassy to pursue 
resolution of the biotech and BSE issues in the coming 
weeks. 
 
INDUSTRIAL MARKET ACCESS 
 
¶7. (SBU) Negotiations on industrial goods continued to make 
good progress.  The two sides were able to agree on more 
than 250 tariff lines of U.S. priority products in the 
construction equipment, energy equipment, chemicals, 
pharmaceuticals, paper, civil aircraft, and consumer goods 
sectors.  Negotiators also agreed on textile tariffs 
following Vietnam's implementation of the tariff component 
our of bilateral textile agreement at the end of 2005. 
Remaining difficult issues include autos and auto parts, 
motorcycles, tractors, pulp, appliances, and a limited 
number of pharmaceutical and electronic goods.  Discussions 
on specific product sectors were closely linked to non- 
tariff barriers to market access, including distribution and 
trading rights for pharmaceuticals, import regulations for 
commercially-traded toxic chemicals, and import prohibitions 
on large motorcycles, electronic goods containing encryption 
technology and remanufactured goods covered by the 
Information Technology Agreement.  The United States has 
committed to further identify specific autos, auto parts, 
and motorcycle priorities in order to focus future 
discussions on these products.  Vietnam will consult on 
further flexibility on these outstanding issues and explore 
possible solutions for improved market access for large 
motorcycles. 
 
SERVICES 
 
¶8. (SBU) Services negotiations gained new momentum during 
the discussions in Hanoi.  Vietnam made significantly 
improved offers in some U.S. priority sectors, such as 
telecommunications, energy services and branching for non- 
life insurance and selected securities subsectors.  In 
banking there were no concrete improvements in Vietnam's 
offer, but both sides agreed to seek a strategy focused on 
creating new commercial opportunities upon accession, 
whether through 100 percent foreign-owned subsidiaries, a 
more liberalized branching regime, or acquisition.  The U.S. 
delegation also requested additional commitments in the 
Working Party Report (WPR) addressing certain regulatory 
barriers for insurance and noting Vietnam's intent to 
implement its financial services commitments in a manner 
consistent with international industry standards.  Important 
linkages between trading rights and distribution services 
were also discussed in detail, and Vietnam is at least 
considering a U.S. request to phase out product exclusions 
under distribution services.  Other remaining areas of 
concern are national security exceptions in Vietnam's offer 
for certain energy and environmental services, as well as 
broad exceptions for Vietnam's expansive definition of 
 
HANOI 00000657  003.2 OF 004 
 
 
"public utilities."  Both sides agree to specific follow-up 
work, including a proposal from the United States for 
additional commitments on licensing and transparency in the 
WPR. 
 
MULTILATERAL ISSUES - THE RIGHT TO IMPORT AND EXPORT 
 
¶9. (SBU) Vietnam has reduced the number of products subject 
to restrictions on the right to import and export.  Most 
products will receive trading rights by January 1, 2007, 
with a limited number of products delayed until 2009, and 
rice delayed to 2011.  Vietnam, however, has proposed 
limiting the right to import and export to firms that have 
established at least a representative in Vietnam.  In 
addition, importation of some key products (e.g., books and 
printed material), would only be through a state monopoly. 
The United States explained why the requirement for an 
investment in order to import would create WTO-inconsistent 
restrictions on trade and increase the cost of goods in 
Vietnam.  U.S. businesses in Vietnam provided useful 
estimates that trading right restrictions increased their 
cost of doing business in Vietnam by 10-20 percent. 
Vietnam's negotiator appeared to recognize the economic 
merits of the U.S. position, but expressed concern about 
accountability and meeting requirements for handling of 
goods in Vietnam, such as cold storage.  The two sides then 
discussed how these concerns could be met in a WTO- 
consistent way.  With a better understanding on Vietnam's 
part of how trading rights should operate, the two sides 
will return to the issue as trading rights are of interest 
to several WTO Members.  The U.S. side also emphasized the 
need to eliminate the import monopoly on books, printed 
material and audio-visual products. 
 
MULTILATERAL ISSUES - STATE ENTERPRISES 
 
¶10.  The two sides had a useful discussion of the commitment 
language that the United States proposed for Vietnam's WPR. 
A commitment that Vietnam's state-owned and state-controlled 
enterprises will operate based on commercial considerations 
and provide U.S. firms an opportunity to compete for 
purchases and sales of goods and services on a non- 
discriminatory basis is required for the United States and 
Vietnam to apply the WTO between them.  Vietnam had posed 
several questions about the specific language, focusing on 
which companies, purchases and sales would be covered. 
Although some further work remains on this section, the 
Vietnamese side stated that the detailed explanations made 
them much more comfortable with the commitment. 
 
LEGISLATION 
 
¶11. (SBU) Vietnam's National Assembly enacted 29 laws in 
2005 related to WTO accession.  The two teams made current 
their joint tracking chart of Vietnam's economic policy 
legal documents relevant to WTO accession.  Vietnam also 
provided official translations of the most recently enacted 
laws and promised to provide as soon as possible 
translations of decrees being drafted to implement key laws 
- the Commercial Law, Investment Law, Unified Enterprise 
Law, and IPR Law.  The U.S. team undertook to review the 
latest set of laws and provide comments, if needed, on their 
consistency or inconsistency with WTO rules and obligations 
prior to the next Working Party meeting. 
 
AMERICAN BUSINESS COMMUNITY CONCERNS 
 
¶12. (SBU) AUSTR Dwoskin and the U.S. negotiating team 
briefed over 50 U.S. company representatives at a January 17 
breakfast sponsored by the American Chamber of Commerce and 
at a post-negotiation event before departing Vietnam on the 
night of January 18.  After the review of the status of and 
U.S. goals for the negotiations, business leaders identified 
some of the problems they face in Vietnam and some of the 
specific objectives they would like to see achieved during 
the negotiations.  Insurance executives noted that they are 
currently barred from selling their products to state-owned 
enterprises and Vietnamese individuals and from selling 
mandatory insurance.  They stressed their desire for Vietnam 
to make a branching commitment in its services market access 
schedule.  The representative of a major U.S. bank 
emphasized that banks need to be able to establish 100 
 
HANOI 00000657  004.2 OF 004 
 
 
percent-owned subsidiaries in Vietnam, sub-branches, and to 
take unlimited deposits in Vietnamese Dong.  Pharmaceutical 
companies noted that their market access is severely 
restricted and asked that we seek full trading rights and 
broad distribution commitments in Vietnam's services 
schedule.  Consumer products manufacturers echoed this 
request.  Telecommunications companies asked us to obtain 
more liberal market access terms and another communications 
giant cited widespread cable piracy in Vietnam to stress the 
importance of ensuring that Vietnam has a TRIPS-consistent 
IPR regime prior to accession.  Representatives also sought 
updates on the status of our discussions on subsidies and 
information about USG intentions regarding the possibility 
of requesting a textile special safeguard. 
 
PRESS CONFERENCE 
 
¶13. (U) Nearly 100 reporters, photographers, and local 
television cameras attended AUSTRs Dwoskin's and Weisel's 
press conference at the Hilton Hotel.  After reading a 
prepared statement, AUSTR Dwoskin answered a series of 
informed and incisive questions on the process and substance 
of the negotiations.  AUSTR Dwoskin refuted allegations that 
the United States is demanding WTO plus commitments from 
Vietnam and giving higher priority to the Russian and 
Ukrainian accessions.  She also responded to questions about 
the role of Congress in the accession process and the 
necessity for a PNTR vote before Vietnam's accession 
protocol can be approved by the WTO. 
 
NEXT STEPS 
 
¶14. (SBU) In the closing plenary session, team leaders 
agreed that our discussions had been very productive, 
narrowing differences in all areas.  Both sides agreed that 
a meeting in the second half of March, when a Working Party 
meeting is likely, would give both teams sufficient time to 
consult with stakeholders and develop creative approaches to 
complete work on the market access negotiations and to 
resolve remaining problems in the multilateral talks. (Note: 
The WTO Secretariat has not set a date for the next Working 
Party meeting.  End Note.)  On multilateral issues, Vietnam 
pledged to submit its updated subsidies notification within 
two weeks and to provide draft implementing decrees as they 
are translated.  The United States undertook to review the 
official translations of Vietnam's recently enacted 
legislation and provide comments to help shape the 
discussion at the next Working Party meeting. 
 
 
MARINE