VZCZCXRO6231
OO RUEHHM
DE RUEHHI #0772/01 1151024
ZNR UUUUU ZZH
O 251024Z APR 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5219
INFO RUEHHM/AMCONSUL HO CHI MINH 2945
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 04 HANOI 000772 
 
SIPDIS 
 
SENSITIVE - DO NOT POST ON INTERNET 
SIPDIS 
 
STATE FOR EAP/MLS AND EEB/ABT 
STATE ALSO PASS USTR DBISBEE 
COMMERCE FOR A/S SPOONER AND 4430/MAC/AP/OPB/VLC/HPPHO 
 
E.O. 12958: N/A 
TAGS: ETRD ECON KTEX WTRO VM
SUBJECT: COMMERCE A/S DAVID SPOONER ADDRESSES CONCERNS OVER APPAREL 
MONITORING SYSTEM 
 
Ref: USDOC 03281 
 
¶1. (SBU) Summary:  In a much anticipated April 19 visit, Department 
of Commerce (DOC) Assistant Secretary for Import Administration 
David Spooner addressed concerns over the U.S. Textile and Apparel 
Products from Vietnam Monitoring Program with Vietnamese garment and 
apparel manufacturers, U.S. importers and Government of Vietnam 
(GVN) officials.  The GVN and industry members from both countries 
stressed that the uncertainty surrounding the monitoring program is 
having a "chilling effect" on exports to the United States. 
Consistent with past statements, Trade Minister Tuyen and other GVN 
officials pressed the Assistant Secretary to abolish the monitoring 
system, which it considers inconsistent with the WTO principle of 
non-discrimination.  The Assistant Secretary underscored to 
audiences throughout the day that the U.S. Administration cannot 
retract its commitment, but is working to develop a fair and 
transparent monitoring system that does not inhibit legitimate 
trade.  Overall, the Assistant Secretary's visit appears to have 
eased some of the tension surrounding this sensitive issue, and 
generated a number of positive articles in the Vietnamese press. 
End Summary. 
 
U.S. IMPORTERS SEEK MORE CLARITY 
-------------------------------- 
 
¶2. (SBU) Commerce Department Import Administration Assistant 
Secretary David Spooner had a series of productive meetings with the 
 
SIPDIS 
private sector and Vietnamese government officials in Hanoi on April 
¶19. The purpose of his visit was to address concerns over the U.S. 
Textile and Apparel Products from Vietnam Monitoring Program with 
Vietnamese garment and apparel manufacturers, U.S. importers and 
Government of Vietnam (GVN) officials. During an informal breakfast, 
an AmCham Apparel Committee meeting and an AmCham luncheon, U.S. 
importers and retailers explained that uncertainty surrounding the 
basis for a potential dumping case is affecting their decisions to 
source further apparel orders in Vietnam. 
 
¶3. (SBU) Industry representatives asked for more clarity on what 
would trigger an Administration decision to self-initiate a dumping 
investigation - a sharp increase in export volume, a rapid decline 
in per unit prices or some other indicator.  They warned that the 
industry's uneasiness will become evident in the third and fourth 
quarters of 2007, when a drop in back-to-school and holiday orders 
will result in lower figures compared with last year.  They 
explained that Vietnam's inexpensive yet high-quality workforce 
gives it unique advantages over other potential sources, but the 
risk of a potential dumping case is steering many firms to purchase 
from less-desirable locations.  Some retailers warned that they 
would likely pull out of Vietnam if "action is taken," while others 
indicated it would significantly impact their purchases.  Pointing 
to the fact that a 1989 U.S. textile anti-dumping case against 
Taiwan "killed the industry" there, all retailers agreed that an 
anti-dumping case in Vietnam would negatively impact customer 
confidence on the part of U.S. retailers. 
 
¶4. (SBU) Assistant Secretary Spooner stressed that DOC is still 
working to develop the parameters of the monitoring system, but 
assured industry representatives that no determination or "back room 
deal" has been made to self-initiate a dumping case.  He continued 
by explaining that U.S. anti-dumping laws are designed to prevent 
price discrimination (i.e., selling products in the United States 
for lower prices than in Vietnam), and that rising export volume or 
falling average prices can occur without dumping.  The Import 
Administration will conduct its first semi-annual review of imports 
after it has a full six months of data, which it expects will occur 
in late August or early September.  While refusing to speculate on 
what the data might show, the Assistant Secretary expressed his hope 
that the review will show no evidence of price discrimination.  His 
office will conduct a broad analysis of the data first, and would 
only investigate further if the data warrants.  For example, a sharp 
drop in per unit price might cause DOC to review the data more 
closely, but A/S Spooner affirmed that lower prices would not 
automatically trigger an investigation. 
 
¶5. (SBU) The high level of investment and technology required to 
open a garment factory means that once a company moves its orders 
from Vietnam to another country, those orders may never come back, 
industry members cautioned.  The Assistant Secretary noted his 
understanding that capital is highly risk averse, but that part of 
the concern and reaction by the industry may be due to a lack of 
familiarity with U.S. anti-dumping laws.  There must be both 
standing and injury to initiate a dumping case, and the leap from 
monitoring to a dumping investigation was quite large, A/S Spooner 
said.  He urged industry members to work with their Vietnamese 
partners to minimize the risk of a dumping case by encouraging 
Vietnamese manufacturers to develop transparent record keeping 
 
HANOI 00000772  002 OF 004 
 
 
practices.  He also encouraged them to provide Commerce with 
detailed information on what products U.S. firms were sourcing in 
Vietnam, and how those goods differ from apparel products 
manufactured in the United States. 
 
¶6. (SBU) U.S. retailers and importers hold different opinions on 
MOT's recently-instituted export licensing system, which the 
Ministry claims to have implemented to lessen the threat of a U.S. 
anti-dumping case.  While some hail the system as an effective way 
for the GVN to maintain greater visibility and prevent 
transshipments, others fear that a price-based licensing system will 
limit their ability to increase sourcing orders in Vietnam in the 
future.  Assistant Secretary Spooner commented that he is not 
familiar with how the licensing system operates.  (Note: In a later 
meeting, GVN officials explained that the licensing system entails 
no limitations, it is simply intended to aid data-gathering efforts. 
 The GVN agreed to share this data with DOC via email.  End note.) 
His primary concern, however, is that the system not create 
additional burdens or requirements which further impede trade.  He 
also noted that the World Trade Organization (WTO) agreement on 
licensing systems permits the implementation of a licensing regime, 
but puts forward a number of criteria for such systems, including 
transparency, objectiveness and predictability. 
 
VIETNAMESE APPAREL PRODUCERS ALSO EXPRESS CONCERNS 
--------------------------------------------- ----- 
 
¶7. (U) The Vietnam Textile and Apparel Association (VITAS) organized 
a briefing attended by more than 60 representatives from the 
Vietnamese industry.  VITAS's opening presentation gave an overview 
of the domestic industry.  In one slide, VITAS showed that apparel 
exports to the United States have grown from USD 45 million in 2001 
to USD 3.18 billion in 2006 (54 percent of total industry exports). 
VITAS estimated that the figure would further climb to USD 3.8 
billion in 2007.  Another slide showed that Vietnam ranks 9th in the 
world in terms of quantity of exports to the United States (with 2.2 
percent market share) while it ranks 6th in terms of value (3.65 
percent market share).  VITAS also provided statistics showing that 
the average unit value of garment and apparel exports from Vietnam 
exceed the world average, and is higher than many other major 
apparel exporting countries including China, India, Bangladesh and 
Mexico. 
 
¶8. (SBU) In his opening remarks, Assistant Secretary Spooner 
repeated that Commerce is working to develop the mechanism fairly 
and transparently.  He informed the attendees of the April 24 public 
hearing in Washington, DC and invited all interested parties to 
submit comments for the hearing, either orally or in writing. 
Noting the impressive performance of the Vietnamese industry 
depicted in the VITAS slides, A/S Spooner assured the group that the 
United States does not want the monitoring system to hinder that 
growth in any way. 
 
¶9. (SBU) In the Q&A session, manufacturers asked about the 
conditions under which Commerce would initiate a dumping case.  The 
Assistant Secretary explained the concept of price discrimination 
and the fact that increased export volume or falling prices will not 
automatically trigger an investigation.  In response to questions 
about designation of a surrogate country given Vietnam's non-market 
economy status, Mr. Spooner said that DOC has not yet chosen one, 
and if the six month review of import data does not show signs of 
dumping, Commerce may not need to.  In order to account for 
post-quota natural price drops, a concern raised by attendees, he 
asked attendees to supply any information they can on anticipated 
price changes.  A/S Spooner also asked for details on the products 
they are making in Vietnam to determine accurately what products 
directly compete with U.S.-made goods.  On the legality of a 
monitoring system under the WTO, countries have broad discretion to 
monitor imports, the Assistant Secretary said, and legal obligations 
only enter if the United States takes action on that information. 
 
 
GVN OFFICIALS DECRY MONITORING AS DISCRIMINATORY 
--------------------------------------------- --- 
 
¶10. (SBU) In a roundtable session, officials from the Ministry of 
Trade (MOT) and Ministry of Foreign Affairs (MFA) pointed to the 
"chilling effect" the U.S. monitoring mechanism was having on 
apparel manufacturing in Vietnam and on the sector's ability to 
attract new domestic and foreign investment.  They pressed the 
Assistant Secretary to revoke the "discriminatory" program as soon 
as possible.  A particular concern is the impact a slowdown will 
have on the nearly 6 percent of Vietnam's workforce currently 
employed in this sector, one MOT official noted.  Most Vietnamese 
apparel exports do not directly compete with products manufactured 
in the United States, and the officials requested that if the 
 
HANOI 00000772  003 OF 004 
 
 
program is not revoked, the DOC should at least restrict the number 
of categories that it monitors.  On average unit pricing, the GVN 
noted that after quotas were lifted in 2004, other ASEAN countries 
experienced a 10 to 30 percent natural price drop due to the removal 
of quota rent and other factors.  MOT officials urged Commerce to 
consider this when reviewing Vietnamese apparel export data. 
 
¶11. (SBU) A/S Spooner responded that he understands Vietnam is 
dissatisfied with this program, but that the U.S. Administration 
would not rescind its commitment to Senators Dole and Graham to 
monitor Vietnamese apparel imports.  He continued by expressing his 
interest in working with the GVN to implement the commitment in a 
transparent manner with as limited an impact on trade as possible. 
He explained his hope that the first six months of data will show 
there is no cause to initiate a dumping investigation, but any 
decision he made would have to be based on what the data showed.  He 
also agreed that the United States wants to limit the number of 
product categories that it is monitoring to those which directly 
compete with U.S. made products, and therefore asked Vietnam to 
provide as much information as possible about the types of products 
that Vietnam is manufacturing.  On the pricing point, Mr. Spooner 
explained that DOC will take this into consideration when reviewing 
the data. 
 
MINISTER TUYEN EMPHATICALLY OPPOSES DOC MONITORING 
--------------------------------------------- ----- 
 
¶12. (SBU) In a later meeting, Minister of Trade Truong Dinh Tuyen 
delivered a more sharply worded message.  The Minister emphatically 
protested that he was "unwilling to accept the monitoring program." 
While recognizing that the WTO does not have agreements prohibiting 
such programs, Minister Tuyen explained that by limiting monitoring 
activities to only imports from Vietnam, the United States is 
violating the basic WTO principle of nondiscrimination.  In addition 
to conveying the official GVN message that the DOC should abolish 
the monitoring program, MOT will continue to "do everything possible 
to protest" the system, including consider the possibility of 
bringing the monitoring program before the WTO.  Vietnam will cease 
its protests when the United States either abolishes the program 
entirely, or expands the program to monitor other countries, Tuyen 
said. 
 
¶13. (SBU) The Minister continued by explaining that the MOT has 
instructed all Vietnamese garment and apparel manufacturers not to 
subsidize production or export products at prices below the domestic 
level.  He repeated the other MOT officials' earlier calls for 
consideration of a natural price drop in Vietnamese exports this 
year. 
 
¶14. (SBU) Assistant Secretary Spooner reiterated that the 
Administration would not back away from its commitment to have the 
Department of Commerce monitor apparel imports from Vietnam.  He 
committed to work with Vietnam, however, to minimize the impact on 
trade between the two countries, noting his disappointment that 
uncertainty surrounding the mechanism has already affected Vietnam's 
apparel business.  The Assistant Secretary recognized that, based on 
the record of apparel imports from other countries in a post-quota 
world, it would not be surprising for there to be a natural price 
drop in apparel imports from Vietnam, and agreed his office would 
account for this in its review.  Stressing the message of 
transparency and objectivity, A/S Spooner said that anti-dumping 
reviews are factual investigations conducted in a quasi-judicial 
process, and determinations will be made without the interference of 
political pressure. 
 
¶15. (SBU) Minister Tuyen thanked Assistant Secretary Spooner for the 
recent visit of anti-dumping officials from the DOC Import 
Administration and also for his personal trip, which will allow the 
Assistant Secretary to understand Vietnam's concerns first-hand.  He 
closed by saying that A/S Spooner's visit will have a good impact on 
our bilateral relationship. 
 
A/S SPOONER DELIVERS A MESSAGE ON HUMAN RIGHTS 
--------------------------------------------- - 
 
¶16. (SBU) Assistant Secretary Spooner also raised growing concerns 
in Washington and the United States about human rights in Vietnam in 
his meeting with Minister Tuyen. 
 
Comment 
------- 
 
¶17. (SBU) Assistant Secretary Spooner's visit has helped to reduce 
some of the tensions around the highly-sensitive issue of the 
apparel monitoring system.  Industry representatives and GVN 
officials appreciated the opportunity to express their views 
 
HANOI 00000772  004 OF 004 
 
 
directly to the Assistant Secretary.  His presence in Vietnam also 
reinforced the message that the United States is actively seeking to 
work with Vietnam to minimize the negative impact on trade of the 
monitoring system.  A roundtable with Vietnamese reporters resulted 
in a number of positive press pieces, including Vietnam Investment 
Review's April 23 article, "DOC Calms Exporters' Nerves," Nhan 
Dzan's April 20 article, "U.S. Official Says Mechanism On Vietnam's 
Garments to be Transparent," and Thanh Nien's April 19 article, 
"Program won't Harm Vietnam Textile Exports, Assures U.S."  While 
the trip did not entirely placate Vietnam's concerns, these articles 
show that it did help to ease anxieties here.  It is also apparent 
that the main messages of transparency and cooperation came across. 
End Comment. 
 
¶18. (U) This cable has been cleared by Assistant Secretary Spooner. 
 
 
MARINE