VZCZCXRO9220
RR RUEHHM
DE RUEHHI #1583/01 2481344
ZNR UUUUU ZZH
R 051344Z SEP 07 ZDK
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 6264
INFO RUEHHM/AMCONSUL HO CHI MINH 3637
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 001583 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS and EEB/OIPE 
STATE PASS TO USTR DAVID BISBEE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR VM
SUBJECT: SOME COMMITMENTS ARE HARDER THAN OTHERS -- PRODDING VIETNAM 
ON WTO IMPLEMENTATION 
 
REF: A) HANOI 1212 
 B) HANOI 310 
 C) 06 HANOI 2602 
 
HANOI 00001583  001.3 OF 002 
 
 
(U) This cable is sensitive but unclassified.  Not for Internet. 
 
¶1. (SBU) SUMMARY.  Vietnam, widely praised for its progressive and 
aggressive approach toward opening its markets, is finding that 
fulfilling some of its WTO commitments may be harder than it 
thought.  Entrenched local interests, poor coordination, and an 
overly-complex bureaucratic process can all block much-needed 
reform.  Recently published regulations impose new restrictions on 
foreign importers, forcing them to disband their de facto 
distribution networks and choose a single nationwide distributor. 
An eight month-overdue IPR criminal regulation is nowhere in sight, 
and the GVN now tells us that it will come next year at the 
earliest.  State-sponsored piracy of U.S. broadcast content 
continues unchecked, in blatant violation of Vietnam's trade 
commitments.  Mission Vietnam continues to encourage all levels of 
the GVN to hold to the spirit and letter of its WTO obligations, 
warning that these lapses could erode the country's hard-won 
reputation as a reliable trading partner. END SUMMARY. 
 
BLINDSIDING IMPORTERS WITH A MARKET BARRIER 
------------------------------------------- 
 
¶2. (U) There was an audible groan from the business and diplomatic 
communities when Vietnam finally issued long-awaited regulations in 
pursuance of its WTO trading rights commitments on July 17 of this 
year.  Ministry of Trade "Circular 9" (akin to an Executive Order) 
limits foreign importers to a single local distributor.  (Note: The 
hierarchies of legal instruments in Vietnam are as follows: laws, 
which must be enacted by the National Assembly; Decrees, which are 
issued by the Prime Minister; and Circulars, which are issued by the 
relevant ministries to provide detailed guidance to implement the 
higher-level documents.) 
 
¶3. (U) Circular 9 is clearly inconsistent with Vietnam's WTO 
commitments; in the Working Party Report Vietnam pledged that 
importers "would be free to select a distributor or distributors of 
their choice" and that Vietnam "would not apply any restrictions on 
the choice of the distributor or distributors".  Since 100% foreign 
owned distributors are not allowed to operate in Vietnam until 
1/2009, the new regulations could stifle competition.  Foreign 
importers are concerned that their market penetration will be 
limited if they are forced to rely on a single nationwide 
distributor.  Some sectors, like chemicals, do not even have a 
reliable local distribution network, let alone a distributor capable 
of nation-wide business activities. 
 
¶4. (SBU) Embassy Hanoi and Congen HCMC have met with U.S. importers, 
local AmCham representatives and the diplomatic community to discuss 
a strategy to urge Vietnam to resolve this WTO inconsistency. 
Emboffs also met with the drafters of Circular 9 at the Ministry of 
Industry and Trade (MOIT) on August 12 and again on August 30 to 
raise our concerns.  Working together with USTR, Mission submitted a 
list of 13 questions to the MOIT asking how it intends to reconcile 
the new restrictions with its WTO obligations, in preparations for 
an exhaustive review of Vietnam's recent trading right regulations 
during the second week of September. 
 
FROM A BAD CIRCULAR TO A MISSING CIRCULAR 
----------------------------------------- 
 
¶5. (U) Vietnam's Supreme Court (SPC) has yet to criminalize 
commercial-scale copyright and trademark infringement, eight months 
after it should have enacted a circular doing so.  Ultimately, 
Vietnam must revise its criminal code to cover the scope of 
copyright and trademark infringement included in its WTO 
Trade-Related Aspects of Intellectual Property Rights (TRIPS) 
obligations, but this will take time.  The GVN committed to U.S. 
negotiators during the WTO accession process that it would issue a 
circular by the time of accession to criminalize commercial-scale 
copyright and trademark infringement until the GVN can make the 
necessary revisions to its criminal code. 
 
¶6. (SBU) Despite repeated and extensive USG lobbying, the SPC has 
failed to act on Vietnam's commitment.  USTR has provided specific 
draft language to include in the circular on multiple occasions, and 
the Embassy and USTR have pushed both the SPC and the Ministry of 
Trade (now MOIT) to live up to Vietnam's TRIPS obligations (REF A 
and B).  Furthermore, in a recent conversation with Embassy 
officers, the SPC drafters said that they are unable to reconcile 
the TRIPS language with domestic laws, and reported that we "must 
likely wait until 2008, when the SPC begins to re-draft the criminal 
code." 
 
 
HANOI 00001583  002 OF 002 
 
 
¶7. (SBU) Coordination on WTO compliance issues are clearly a 
challenge for the GVN, as evidenced by the SPC's about-face from its 
discussions with USTR's intellectual property expert during the 
Annual BTA Review in June (REF A).  Mission has stressed to the MOIT 
negotiators who made the commitment that SPC's suggestion to wait 
until next year is unacceptable. 
 
UNCHECKED SIGNAL PIRACY 
------------------------ 
 
¶8. (SBU) In a blatant example of the GVN's unwillingness (or 
inability) to stop Vietnamese enterprises from violating its 
international trade commitments on IPR protection, the Television 
Technology Investment and Development Company (VTC) continues to 
pirate international broadcast content, including multiple 
U.S.-owned channels, and illegally distribute pirated content to an 
estimated 1.5 million customers.  VTC's actions are all the more 
egregious because it is a state-owned company, under the control of 
the Ministry of Information and Communications. 
 
¶9. (SBU) The Embassy, USTR and the broadcast industry have mounted a 
multi-year campaign to compel the GVN to stop VTC from pirating 
content.  While these efforts have at times yielded temporary 
results (VTC removed most U.S.-owned content from its lineup shortly 
following the June BTA Review), VTC has resumed its illicit 
activities.  Ambassador Marine raised this with numerous ministers 
and other GVN authorities over the past several years, as have 
industry leaders.  In recent months, cease and desist letters issued 
by several U.S. companies have led to VTC removing those channels 
from its broadcast package.  At the latest check, however, VTC is 
still illegally distributing two U.S.-owned channels. 
 
NEXT STEPS 
---------- 
 
¶10. (SBU) Trade agreement compliance issues feature prominently in 
recently arrived Ambassador Michalak's initial consultations with 
Vietnam's leaders.  The annual BTA review and the newly-formed TIFA 
Joint Council will both present excellent opportunities to focus 
attention on these issues.  Post will also continue to raise the 
criminal circular and signal piracy in our input into the annual 
Special 301 Review, a tool which has provided some traction with GVN 
authorities over the past several years. 
 
COMMENT: IS A PATTERN EMERGING? 
------------------------------- 
 
¶11. (SBU) Although there is little evidence of a concerted agenda to 
skirt WTO obligations, it is clear that these cases are not the 
result of carelessness or failure to anticipate the implications of 
Vietnam's trading commitments.  The MOIT drafters told Emboffs that 
there was much interagency discussion on the distributor 
restrictions and that former Minister Tuyen himself agreed to it. 
Although many of our contacts suspect protectionism, the biggest 
losers are the Vietnamese distributors. In the case of cable piracy, 
the reasons are clearer.  GVN officials themselves have admitted 
that "powerful interests" are behind VTC -- hinting not-so-subtly at 
influential corrupt officials 
 
¶12. (SBU) The failure to criminalize commercial-scale IPR violations 
appears more to be a case of the negotiators and drafters being 
unable to get the necessary inter-ministerial "buy-in," although it 
does not seem to be for lack of effort.  Moreover, the GVN remains 
willing to engage with the USG, and in many cases, U.S. industry 
members on these issues.  Continued and persistent dialogue with 
appropriate GVN authorities should help us move closer to resolution 
on these cases and prevent the development of a more widespread 
pattern of Vietnam failing to meet its international obligations. 
 
¶13. (U) This cable was coordinated with Congen HCMC. 
 
MICHALAK