VZCZCXRO7426
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0871/01 2100815
ZNR UUUUU ZZH
P 280815Z JUL 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8195
INFO RUEHHM/AMCONSUL HO CHI MINH 4953
RUEHBS/USEU BRUSSELS
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 02 HANOI 000871 
 
SENSITIVE 
SIPDIS 
 
SINGAPORE FOR TREASURY 
USTR FOR WEISEL AND BISBEE 
COMMERCE FOR ITA/IMPORT ADMIN SPOONER AND SU 
STATE FOR WHA/BSC FRIEDMAN 
 
E.O. 12958: N/A 
TAGS: ETRD EINV ECON KTDB VM
SUBJECT: VIETNAM NOT RUSHING TRADE DEALS 
 
HANOI 00000871  001.2 OF 002 
 
 
¶1. (U) This cable is Sensitive But Unclassified.  For official use 
only, not for dissemination outside USG channels or posting on the 
internet. 
 
¶2. (SBU) Summary: Vietnam has ongoing trade and investment 
multilateral and bilateral negotiations with Australia and New 
Zealand, the EU, Chile, Japan and Canada.  Aside from the first one, 
which has been in process longest, all others appear to be moving 
slowly.  Vietnam is taking a cautious approach, and many Government 
(GVN) officials tell us that implementing its existing commitments 
and pipelined investment well takes precedence over securing new 
trade or investment deals.  End summary. 
 
JAPAN AND VIETNAM EPA: REACHING A DEAD END 
------------------------------------------ 
 
¶3. (SBU) Japan and Vietnam announced negotiations on a free trade 
"Economic Partnership Agreement" (EPA) in October 2006, and held the 
first round in January 2007 amid high hopes for a quick conclusion. 
Eight formal rounds and countless other informal discussions later, 
the parties are nowhere near closing.  The sticking points, our 
colleagues on both sides tell us, are access to Japan's market for 
Vietnamese agricultural products and labor.  Vietnam is declining to 
budge on either.  Officials from the Japanese Embassy in Hanoi tell 
us that the impasse is now "political" and that a breakthrough will 
require "a political decision from Tokyo." 
 
¶4. (U) Bilateral trade between Japan and Vietnam was $12.24 billion 
in 2007, with a slight surplus of less than one million dollars in 
Japan's favor, according to GVN figures.  Japan is Vietnam's second 
largest investor, with $16.7 billion in licensed (registered) 
investment since 1988, of which $7.1 billion was licensed just in 
the first six months of 2008.  Actual (disbursed) cumulative 
investment for Japan from 1988 to June 2008 is $4.73 billion, also 
according to GVN numbers. 
 
AUSTRALIA AND NZ CLOSE TO AN ASEAN FTA 
-------------------------------------- 
 
¶5. (SBU) Australian and Kiwi diplomats in Hanoi tell us that they 
are very close ("within a round or two") to finalizing a free trade 
agreement with ASEAN.  The New Zealand Embassy's top economic 
officer told us that the parties have agreed already to do away with 
duties on over 90 percent of goods and may even include recognition 
of Vietnam as a market economy.  Although Vietnam has not taken a 
leading role in negotiations, Australian negotiators tell us that 
they have been cooperative.  "They haven't been too difficult," she 
told us, "and in services they have been particularly good." 
 
¶6. (U) Bilateral trade in 2007 between Australia and Vietnam was 
$5.71 billion, according to the Australian Government, with 
Vietnam's exports ($4.35 billion) making up the bulk of trade.  New 
Zealand enjoys a surplus with Vietnam, with $270 million in exports 
and $135 million in imports from Vietnam in 2007, according to the 
New Zealand Government.  Australia has one billion dollars in 
licensed investment in Vietnam since 1988 and New Zealand $70.4 
million. 
 
EU SEEKS TO CAST OFF LAGGARDS IN ITS ASEAN FTA 
--------------------------------------------- - 
 
¶7. (SBU) Negotiations between the EU and ASEAN have not moved much 
since they were launched in May 2007.  The EU Trade Counselor in 
Hanoi tells us that negotiations have been hampered by lack of 
leadership among the ASEAN countries and a general unwillingness 
among its members to sidestep the laggards.  He says that the EU is 
now proposing splitting off some of the most forward-leaning 
countries into working groups to see whether the talks can advance 
more rapidly.  Singapore, Brunei and Malaysia have made the short 
list, he added, but Vietnam (which would be welcome into the group) 
has yet to put its name forward. 
 
¶8. (U) Two-way trade between the EU and Vietnam in 2007 was $12.7 
billion.  EU exports were $3.3 billion while Vietnamese exports to 
the EU were $9.4 billion, according to the GVN.  Holland and France 
are the largest EU investors in Vietnam, with $2.6 and $2.31 billion 
in licensed investment, respectively. 
 
CANADA AND VIETNAM INVESTMENT AGREEMENT 
--------------------------------------- 
 
 
HANOI 00000871  002.2 OF 002 
 
 
¶9. (SBU) Canada and Vietnam held the inaugural round of their 
Foreign Investment Promotion and Protection Agreement (FIPA) 
negotiations in late February, 2008 in Hanoi.  The Vietnamese side 
(which is the same as the one that will conduct Bilateral Investment 
Treaty (BIT) negotiations with the United States) has told us that 
the FIPA should not be hard.  "It has very low commitments, it's not 
at all like your BIT," one of Vietnam's leading negotiators told us, 
with a chuckle.  Despite this, the Vietnamese were supposed to go to 
Canada for the second round last June, but unexpectedly cancelled, 
according to our Canadian counterparts in Hanoi. 
 
¶10. (U) Two way trade between Canada and Vietnam in 2007 
was $826 million, according to the GVN, with Vietnam's exports 
amounting to $539 million and Canada's exports to Vietnam $287 
million.  In 2008, Canada has become one of Vietnam's leading 
investors on the basis of a single real estate development licensed 
for over $4.23 billion, bringing Canada's cumulative registered 
investment total to $4.72 billion. 
 
P4 AND VIETNAM 
-------------- 
 
¶11. (SBU) A former Ministry of Trade and Investment (MOIT) official 
in charge of APEC told us earlier this year that Singapore had 
approached Vietnam to see whether it would be interested in joining 
talks on investment and financial services involving the United 
States and Chile, New Zealand and Brunei, the other P4 countries. 
According to the MOIT official, Vietnam could not immediately 
commit.  "We have so much on our plates at the moment," she said. 
Nonetheless, "It's a tempting offer," she admitted. 
 
COMMENT 
------- 
 
¶12. (SBU) There is much talk in Hanoi that, a year after its entry 
into the WTO, Vietnam is suffering from "negotiation fatigue." 
Another factor that may affect Vietnam's interest in negotiations is 
the current focus on surmounting macroeconomic challenges.  "There 
is definitely a climate of not doing anything more at all," an 
Australian trade negotiator told us, summing up a commonly-held 
feeling among foreign diplomats here.  This may explain, perhaps, 
why the Japanese are having such a hard time in closing, why the 
Chileans still do not have anyone to negotiate with, or why the EU 
may not be able to follow in the wake of the Australians and Kiwis. 
This does not mean that Vietnam will stand aloof, and indeed GVN 
officials stress they remain focused on implementing existing 
commitments well, which is clearly a good thing.  In addition, a 
former GVN negotiator assures us that, EU-ASEAN gridlock 
notwithstanding, Vietnam would jump at the chance to go bilateral 
with the EU.  In our assessment, what we are seeing is a Vietnam 
that has become more discriminating in assessing the value of deals; 
if the perceived benefit is sufficient, the GVN will engage. 
 
MICHALAK 
 
 
 
4