VZCZCXRO7103
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0358/01 0880924
ZNR UUUUU ZZH
P 280924Z MAR 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 7488
INFO RUEHHM/AMCONSUL HO CHI MINH 4501
RUEHGP/AMEMBASSY SINGAPORE 2568
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 05 HANOI 000358 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
SINGAPORE FOR TREASURY 
BANGKOK FOR JNESS 
TREASURY FOR SCHUN 
USTR FOR BISBEE AND RBAE 
COMMERCE FOR A/S SPOONER AND SSU 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EAGR EFIN KIPR EIND EPET KTDB VM
SUBJECT:  TIFA MEETINGS FOCUS ON TRADING RIGHTS, IPR AND MARKET 
ACCESS 
 
REF: HANOI 345 
 
HANOI 00000358  001.2 OF 005 
 
 
This cable is Sensitive But Unclassified.  For official use only, 
not for dissemination outside USG channels or posting on the 
internet. 
 
¶1. (SBU) Summary:  The United States and Vietnam conducted Trade and 
Investment Framework Agreement (TIFA) talks in Hanoi from March 19 - 
21, during which the sides followed up on a full range of WTO 
implementation and other issues including IPR, market access for 
pharmaceuticals and cultural products and excise taxes on alcoholic 
beverages.  USTR Southeast Asia Director David Bisbee, who led the 
U.S. delegation, pressed the Vietnamese to continue to implement its 
WTO accession commitments and make progress on outstanding issues to 
accelerate the development of our bilateral trade and investment 
relationship.  IPR issues - both long-standing ones like issuance of 
a criminal circular and emerging issues like internet piracy and 
ineffective implementation of data protection regulations - loomed 
large as the biggest hurdles in the trade relationship.  Bisbee 
pushed hard for increased market access for U.S. IP-based industries 
as a way to create a legitimate alternative to pirated products and 
allow U.S. right holders to play an active role in supporting better 
IP protection here.  The discussions under TIFA underscored the 
potential impact that Vietnam's weak IPR enforcement and protection 
regime could have on its goals to promote greater foreign investment 
and to be eligible for the U.S. GSP program.  This second round of 
TIFA talks was productive and largely positive, although there are 
growing concerns and frustrations on the IP front.  End summary. 
 
¶2. (U) From March 19-21, Office of the U.S. Trade Representative 
(USTR) Director for Southeast Asia David Bisbee met with officials 
from more than 15 Government of Vietnam (GVN) ministries to follow 
up on discussions begun during the first TIFA meeting in December 
2007 and to raise new issues under the umbrella of the TIFA.  U.S. 
Patent and Trademark Office (USPTO) Regional IP Attache Jennie Ness 
also participated, along with officers from Embassy Hanoi's Economic 
and Foreign Commercial sections. 
 
PRIVATE SECTOR MEETING 
---------------------- 
 
¶3. (U) Before the TIFA kicked off, the U.S. delegation met on March 
19 with the U.S. business community in Vietnam at a roundtable 
organized by the US-ASEAN Business Council.  The meeting was 
attended by representatives from GE and GE Money, Chevron, AES, 
Microsoft, GlaxoSmithKline, Emerson Electric, Ford, Motorola, UPS, 
Citibank, Pfizer, Merck, the Duane Morris, Baker McKenzie and 
Tilleke & Gibbins firms, and AmCham Hanoi. 
 
¶4. (SBU) The private sector representatives described engagement 
with the GVN as largely positive, especially at the higher levels. 
They noted, however, a lack of follow-up among working-level and 
implementing officials.  Many, including Ford and GE Money, cited 
cases where they are afforded insufficient time to comment on 
regulations affecting their sectors, and instances where they were 
not shown drafts at all prior to issuance.  Bisbee agreed that in 
many instances the GVN seems to lack the "right set of tools" to 
deal with implementation, and encouraged the private sector to keep 
USTR and the Embassy aware of their specific concerns, to be able to 
point to specific areas for improvement in discussions with the GVN. 
 The pharmaceutical industry noted their particular interest in 
working with USTR to ensure Vietnam has in place regulations to meet 
its WTO commitments and that the industry is ultimately able to 
establish a commercial presence in Vietnam and engage in a full 
range of business activities.  A key goal shared by all present at 
the briefing was a desire for all regulations to be sufficiently 
clear for local and provincial level officials to implement fully. 
 
¶5. (SBU) The USG and private sector participants discussed areas in 
which they could cooperate to improve capacity building, including 
in the judicial system.  "People would be happy to settle disputes 
in Vietnam if the court system was adequate," the managing partner 
of Baker McKenzie commented.  Bisbee noted Embassy Hanoi's education 
initiative as another promising area of private sector-USG-GVN 
partnership. 
 
TRADE AND DISTRIBUTION RIGHTS 
----------------------------- 
 
 
HANOI 00000358  002.2 OF 005 
 
 
¶6. (SBU) The TIFA talks coincided with an announcement from the 
Ministry of Industry and Trade (MOIT) that it was considering a 
repeal of the much-criticized one-distributor restriction, and 
allowing foreign firms - that are registered to do business in 
Vietnam but not licensed to conduct distribution activities - to, in 
effect, wholesale imported goods to multiple distributors -- albeit 
with some restrictions intended to prevent those foreign firms from 
operating a full-scale distribution network. USTR and Mission 
Vietnam have worked for months to persuade Vietnam to apply less 
restrictive measures on the distribution services sector, which is 
set to open to most foreign-owned firms in January 2009. 
 
¶7. (SBU) At the TIFA meeting on March 19, Bisbee and Econoff 
suggested to the MOIT that it would be simpler and easier to open 
the distribution sector (which includes retail sales) now and simply 
be done with all restrictions, rather than work to redraft 
regulations that would be obsolete in nine months.  Hoang Thi Hoa, 
Deputy Director of the MOIT Planning and Investment Department (and 
in charge of implementing the distribution rights schedule), said 
that she agreed but that with all the work done on redrafting the 
regulations (known as "Circular 9"), the GVN would probably go ahead 
and issue them.  Ms. Hoa said that her team is still working on the 
new Circular 9, and hoped to issue it sometime in April.  The two 
sides agreed to continue to coordinate closely on this issue under 
the TIFA to ensure that any future revisions to the implementing 
guidelines would be consistent with Vietnam's WTO obligations. 
 
¶8. (U) Bisbee also advised Ms. Hoa to do away with the "Economics 
Needs Test" (ENT), a provision that Vietnam had negotiated as part 
of its WTO service sector commitments, which now looks like 
"nobody's child."  The GVN has shown a murky understanding of what 
the ENT aims to do.  Ms. Hoa agreed that it was unclear and maybe 
not needed at all, and asked for assistance in finding alternate 
ways of regulating business zones.  (Note: During the last TIFA, in 
December 2007 in Washington, Ms. Hoa led a trade and distribution 
delegation to the United States sponsored by USAID.  During that 
trip, USTR had her and the delegation meet with Alexandria, VA, 
planning and zoning authorities when it became apparent that what 
the GVN understood by ENT was more akin to U.S. land use and zoning 
regulations.) 
 
VIETNAM'S GSP SUBMISSION 
------------------------ 
 
¶9. (SBU) The GVN acknowledged that it had work to do to improve 
labor standards and intellectual property rights (IPR) in the 
country; issues particularly relevant as the government consider 
seeking eligibility for the U.S. GSP program.  The two top officials 
of the MOIT's Americas Department said that they submitted a report 
to the Prime Minister the second week of March outlining the 
advantages and risks of submitting a GSP application.  A high-level 
official from the Labor Ministry (MOLISA) reported at the TIFA 
meeting that the GVN has asked the ILO for assistance in revising 
its Labor Code, including provisions relating to freedom of 
association and collective bargaining rights.  MOLISA also informed 
the delegation that the ministry was preparing written comments to 
provide updates to an existing CRS report on Vietnam's labor 
regime. 
 
¶10. (SBU) The MOIT report recommended that the Prime Minister or 
some other high-level GVN official submit the GSP application, 
presumably during a visit to the United States.  The MOIT officials 
said that it could well be during MOIT Minister Hoang's intended 
U.S. visit in late May or early June.  Concurrently, Vietnam is 
planning to apply for GSP with the EU, according to our EU 
counterparts. 
 
IPR CONCERNS LOOM LARGE 
----------------------- 
 
¶11. (SBU) The U.S. delegation noted ongoing concerns over Vietnam's 
IPR protection and enforcement to a roundtable of IP agencies led by 
the National Office of Intellectual Property (NOIP).  Most 
prominently, the U.S. officials reiterated longstanding and serious 
concerns with Vietnam's outstanding commitment to draft a regulation 
("Criminal Circular") to provide criminal remedies for commercial 
scale trademark and copyright violations.  Vietnam committed to 
issue this Criminal Circular upon accession to the WTO in January 
2007, and is now more than 14 months overdue.  USTR Director Bisbee 
 
HANOI 00000358  003.2 OF 005 
 
 
noted that the U.S. has worked closely with the drafters and has 
provided comments and suggestions on this Circular for over two 
years, yet the latest draft raises serious WTO TRIPS concerns. 
Bisbee urged the GVN to delay issuance of the draft if U.S. comments 
had not been incorporated. (Note: Post later learned that the draft 
circular was issued on March 18, and will take effect April 2.) 
 
¶12. (SBU) The language of the latest Criminal Circular appears to 
fall far short of what is needed to meet Vietnam's TRIPS obligations 
and to provide an effective deterrent to piracy, Bisbee continued, 
underscoring why the United States wants to engage with the 
legislative drafting committee for upcoming revisions to Vietnam's 
criminal code as soon as possible.  While the two sides have a 
tremendously strong relationship, Vietnam's failure to meet this 
important WTO accession commitment is overshadowing progress in 
other areas, and has the potential to stop other initiatives from 
moving forward until the deficiencies are fixed, he stated. 
 
¶13. (SBU) The U.S. delegation observed that Vietnam's reliance on an 
administrative system to deal with IP violations, which appears to 
be modeled after China's system, is not effective and is not 
deterring pirates and counterfeiters.  The fines are too low, right 
holders are required to send warning letters to infringers before 
any administrative action can be taken and administrative officials 
do not know how to determine what is infringing or counterfeit (NOIP 
no longer will perform this role).  In civil cases, the burden on IP 
right holders to prove actual damages serves as a bar to taking 
action.  They explained that the United States wants to work with 
Vietnam to address these concerns, particularly as China's system 
has already proven to be ineffective and controversial; highlighting 
that ASEAN countries themselves point to China as the biggest source 
of the region's IP woes.  NOIP General Director Tran Manh Hung 
acknowledged some of these faults but countered that the 
administrative system, while not perfect, provides a "rapid and 
effective" way to address IP violations.  He welcomed continued 
engagement from the United States to improve IPR enforcement. 
 
¶14. (U) Citing cooperation between the two governments last year to 
end the pirating of cable broadcast content by VTC, the state-owned 
cable company, the U.S. delegation asked the GVN's assistance in 
addressing a new issue - internet based piracy.  Two websites owned 
by state-owned telecom giant VNPT, socbay.com and zing.vn, offer 
links to download free music without the artists' authorization. 
Although pirated foreign music is available at these sites, the U.S. 
side pointed out that the biggest victims are Vietnamese artists. 
NOIP's Hung and representatives from the Ministry of Information and 
Communications and the Ministry of Culture, Sport and Tourism 
(MOCST) agreed to look into this issue.  USPTO's Ness encouraged 
Vietnam to consider joining the WIPO Internet Treaties, which she 
said could help Vietnam to stamp out this type of problem. 
 
PHARMACEUTICAL IP ISSUES AND MARKET ACCESS 
------------------------------------------ 
 
¶15. (SBU) Officials from the Ministry of Health's (MOH) Drug 
Administration told the U.S. delegation that pharmaceutical 
companies (including Swiss firms Novartis and Astra-Zenica) have 
filed five applications thus far under Vietnam's regulations for 
protection of data submitted in drug registration dossiers.  All 
five applications have been denied based on MOH officials' 
assessments that the products have been on the market "for years" in 
other countries and that the data is therefore publicly available 
and undeserving of protection in Vietnam.  MOH officials then 
described their process for assessing whether each dossier merits 
protection, including research to see whether the information in the 
dossier is a trade secret.  (Note: Pharmaceutical companies had 
separately told the delegation that MOH also required them to submit 
evidence of the costs of their clinical trials so as to prove that 
the data was the product of "remarkable investments." End note.) 
The U.S. delegation expressed concerns that the evaluation process 
the officials described is not consistent with the system Vietnam 
explained it would use to meet its WTO and BTA commitments during 
previous discussions.  MOH agreed that it would send the U.S. side 
an official response describing the reasons for refusal in these 
five cases and listing the conditions that companies must meet to 
merit data exclusivity. 
 
¶16. (U) Bisbee also asked the Drug Administration officials for 
clarification on a recent GVN circular seeking to regulate drug 
 
HANOI 00000358  004.2 OF 005 
 
 
prices in Vietnam by referencing prices for those drugs in other 
countries in the region.  Specifically, he raised concerns that this 
policy appears to only focus on the drug prices of foreign firms but 
not those of domestic drug producers.  The Vice Director of the Drug 
Administration Nguyen Van Thanh responded that the circular was 
passed to avoid "sudden surges" of drug prices in Vietnam and to 
protect Vietnamese consumers and patients from paying "unreasonably 
high" prices.  Initially insisting that the policy does not 
discriminate against foreign firms, Thanh ultimately admitted that 
it puts in place different systems to evaluate the prices used by 
foreign firms and by those who do not export.  He agreed to report 
this issue to his ministry's leadership, and will respond to the USG 
in writing.  Thanh also committed to answer U.S. questions about 
which activities foreign drug companies are permitted to conduct in 
Vietnam, and to address requests about how Vietnam's clinical trial 
requirements (i.e., drug companies can not rely on clinical trials 
performed in any other country to seek registration in Vietnam) 
relate to plans for further ASEAN integration on drug registration. 
 
FOREIGN INVESTMENT IN SOME CULTURAL AREAS STILL TABOO 
--------------------------------------------- -------- 
 
¶17. (SBU) The Ministry of Culture, Sports and Tourism confirmed that 
foreign companies have limited access to Vietnam's film market, and 
can work with local partners on certain book publications, but the 
sound recording and performance arts sectors remain closed. 
Pointing to a 1999 regulation, MOCST officials said that foreign 
investors are prohibited from the music, performance art, video and 
CD industries.  Although the ministry plans to update the regulation 
in the near future, there are currently no plans to expand market 
access for foreign firms.  Paradoxically, one MOCST official said 
that Vietnam first wants to rein in the rampant piracy of cultural 
products before it permits foreign investment.  To this end, MOCST 
has asked the Copyright Office of Vietnam to draft a decree on 
optical media regulation.  The MOCST officials emphasized that they 
take fighting IPR violations seriously, but could not initiate an 
immediate, wide-scale crackdown on stores selling pirated goods for 
fear it "may violate the human rights of those vendors."  USTR's 
Bisbee responded that permitting foreign investment and providing a 
legitimate market would allow foreign firms to become involved in 
efforts to combat piracy, and urged the GVN to consider permitting 
foreign participation in these "culturally sensitive" areas in the 
near future.  The MOCST officials agreed to continue dialogue on 
this issue with the U.S. side, and will provide further written 
clarification on permissible activities for foreign firms offering 
cultural products. 
 
RESPONSE ON BIT IS COMING SOON 
------------------------------ 
 
¶18. (SBU) An official from the Ministry of Planning and Investment's 
(MPI) Legal Department, the lead agency in ongoing BIT exploratory 
talks, told the U.S. delegation that the GVN faces "many challenges" 
before it can enter into a Bilateral Investment Treaty (BIT) with 
the United States.  The official pointed out that Vietnam is 
considering how this new agreement would affect the "the BTA and WTO 
commitments it has already undertaken," while also studying how a 
BIT would impact Vietnam's commitments under other frameworks such 
as ASEAN.  He underscored that Vietnam is also busy negotiating 
agreements with Japan, the EU, New Zealand, ASEAN, and most 
recently, Canada and Croatia, which is straining Hanoi's limited 
resources.  These "challenges" notwithstanding, Vietnam wants to 
continue BIT discussions and hopes to send its comments to the 
United States "very soon," the MPI official continued.  (Note: In a 
separate March 21 meeting, MPI Minister Vo Hong Phuc told visiting 
Deputy National Security Advisor Dan Price that Vietnam wants to 
pursue BIT talks -- REFTEL.) 
 
EXCISE TAX ON ALCOHOL 
--------------------- 
 
¶19. (SBU) Ministry of Finance officials told USTR's Bisbee that a 
recently-formed drafting committee will soon begin work on an Excise 
Tax Law to fulfill Vietnam's commitment to transition to a WTO 
consistent excise tax regime by 2010.  Bisbee stressed the 
importance of Vietnam finishing this law in time.  The MOF officials 
insisted they will complete the regulation by 2010, even allowing 
for the necessary National Assembly review and passage.  The 
Ministry plans to have a draft ready by June and wants to submit it 
 
HANOI 00000358  005.2 OF 005 
 
 
to the National Assembly for review during its November 2008 
session.  At Bisbee's request, the MOF officials confirmed that 
Vietnam would share the draft with the United States and will make 
it available for public comment on its website. 
 
¶20. (U) On a related issue, the MOF officials confirmed that 
Vietnam's import duty tariffs on alcohol will fall from the WTO 
initial rates to the final bound rates in equal linear stages, if 
not faster - pointing out that the 2008 rates were actually lower 
than required to meet Vietnam's commitments.  This confirmation was 
in response to questions raised by the delegation on behalf of the 
U.S. beer industry which had been incorrectly informed that Vietnam 
had not lowered its duty on beer as of January 1, 2008. 
 
OTHER ISSUES 
------------ 
 
¶21. (SBU) The United States consulted with the Vietnamese on their 
willingness to become an observer to the Government Procurement 
Agreement in the WTO and to consider joining the Multi-chip 
Agreement, an initiative discussed under the U.S.-ASEAN TIFA.  The 
MOIT expressed interest in both but was noncommittal.  The U.S. 
delegation also asked for more dialogue on Vietnam's draft Law on 
Laws, which sets forth the GVN's procedures for issuing new laws, 
including consultation timeframes.  "We want to ensure that the 
private sectors from both our countries have the opportunity to 
comment and engage Vietnam on important legislation," USTR's Bisbee 
noted.  An official from the Office of the Government commented that 
a mission from Vietnam's National Assembly would soon travel to 
Washington to learn more about U.S. lawmaking procedures. 
 
¶22. (SBU) The GVN also raised concerns over the Department of 
Commerce monitoring program for garment exports, particularly as the 
time approaches for the Import Monitoring Program's (IMP) next 
report in a few weeks' time.  The Director of the International 
Department of the Office of the Government, Bui Huy Hung said that 
he hoped that Commerce officials "do the same thing that they did 
the last time," when they came to Vietnam to explain how the IMP 
works in the weeks preceding the first report, released on October 
26, 2007.  In fact, a Commerce technical group will be in Hanoi in 
late March - early April to discuss garment exports and the IMP with 
the GVN and other interlocutors. 
 
COMMENT 
------- 
 
¶23. (SBU) The second round of TIFA talks moved forward a number of 
issues of bilateral importance and broadened our dialogue on trade 
and investment matters.  Vietnamese press reported positively on the 
talks; a sentiment which was underscored by press coverage of 
visiting Deputy National Security Advisor Dan Price's meetings.  GVN 
interlocutors throughout the meetings expressed an interest and 
willingness to continue to engage on key issues, including those on 
which the two sides do not fully agree.  IPR concerns, however, are 
becoming more prominent and threaten to stall progress in other 
areas, including Vietnam's aspirations for eligibility in the GSP 
program and desire to have the United States remove it from the 
Special 301 Watch List.  Despite U.S. technical assistance and 
extensive engagement on IP issues, Vietnam has put in place a legal 
framework and mechanisms which, in practice, have not yet resulted 
in deterrent penalties and appear to shield violators from effective 
prosecution.  Vietnam's rush to move forward with a highly 
problematic Criminal Circular that does not appear to take U.S. 
concerns into account is particularly troubling.  The TIFA remains 
an important tool to address this, and other outstanding issues. 
End comment. 
 
¶24. (U) This telegram was cleared by USTR's David Bisbee and USPTO's 
Jennie Ness. 
 
MICHALAK 
 
 
 
1