VZCZCXRO4577
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #1072/01 2610939
ZNR UUUUU ZZH
P 170939Z SEP 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8476
INFO RUEHHM/AMCONSUL HO CHI MINH 5123
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 04 HANOI 001072 
 
SENSITIVE 
SIPDIS 
 
SINGAPORE FOR TREASURY 
TREASURY FOR SCHUN 
USTR FOR DBISBEE 
 
E.O. 12958: N/A 
TAGS: ETRD EINV KIPR ECON EAGR ECIN EIND POL VM
SUBJECT:  PHARMA, IPR AND MARKET ACCESS TOP TIFA AGENDA 
 
REF: A) Hanoi 1027 (Vietnam Endorses Economic Liberalization); 
B) GSP Phrma Submission, August 4, 2008; 
C) Hanoi 194 (Vietnam Should Remain on the 301 Watch List); 
D) Hanoi 738 ("Focus on U.S. Business Concerns"); 
E) Hanoi 243 ("Vietnam Trade in 2007"); 
F) Hanoi 451 (Vietnam Opens the Door Wider on Distribution) 
 
HANOI 00001072  001.2 OF 004 
 
 
¶1. (U) This cable is sensitive but unclassified.  For official use 
only, not for dissemination outside USG channels or posting on the 
internet. 
 
¶2. (U) SUMMARY. The United States and Vietnam held the latest round 
of discussions under the Trade and Investment Framework Agreement 
(TIFA) in Hanoi during August 25-28.  The TIFA agenda included 
expanding market access for U.S. beef, pharmaceuticals and media 
products, and strengthening Vietnam's IPR regime, among other 
issues.  Vietnam raised market access for its fruits, concerns about 
the extension of the U.S. import monitoring program for apparel from 
Vietnam, and its pending application for eligibility for the 
Generalized System of Preferences (GSP).  The TIFA, just over a year 
old, has proven to be one of the most useful mechanisms at our 
disposal to address and resolve common investment and trade concerns 
and to develop new initiatives to further deepen bilateral ties. END 
SUMMARY. 
 
¶3. (U) Vietnam and the United States held the fifth meeting in an 
ongoing series of discussions under the TIFA since its inception in 
2007 (two at the ministerial level in the United States and three at 
the senior official level in Hanoi) from August 25-28.  The U.S. 
team was led by Deputy USTR John Veroneau (REF A) and included USTR 
Southeast Asia Director David Bisbee and Embassy Hanoi Economic and 
Commercial officers.  The Vietnamese TIFA side was led by the Office 
of the Government and the Ministry of Industry and Trade, and 
included the ministries of Foreign Affairs, Planning and Investment, 
and Health, and the National Office of Intellectual Property.  Some 
of the discussions also included the National Assembly. 
 
OPENING A DOOR TO U.S. PHARMACEUTICALS 
-------------------------------------- 
 
¶4. (U) A series of meetings with the Ministry of Health (MOH) during 
these TIFA discussions and the previous round in May showed the 
possibility of breakthroughs in simplifying regulations governing 
data exclusivity and clinical trials (REF B).  In May, MOH Officials 
had acknowledged that GVN policy on both issues had caused confusion 
among international pharmaceutical firms, and expressed an interest 
in improving implementation and ensuring Vietnamese policy is in 
line with international standards.  At the August 26 meeting, the 
MOH presented us with a new draft for clinical trials and asked us 
to comment on it and share it with the pharmaceutical industry for 
comments, which post and USTR have done. 
 
¶5. (SBU) On data exclusivity, the Director General of the MOH's Drug 
Administration (DAV) expressed a willingness to consider making 
changes to DAV's process for granting data exclusivity, which, if 
implemented, would provide the protection that the pharmaceutical 
industry seeks, as well as relieve the overwhelmed DAV adjudicators 
from having to examine every detail in new drug applications -- a 
practice so cumbersome that it has virtually paralyzed the 
application process.  The Deputy Director General of the National 
Office of Intellectual Property (NOIP), Phi Anh, agreed that this 
could be a good solution, and both offices will now submit the 
proposal up their chains of command. 
 
¶6. (U) At the meeting with the MOH, the two sides also discussed the 
need for a roadmap to clarify pharmaceutical industry access to the 
Vietnamese market.  [Vietnam excluded pharmaceutical products from 
its WTO distribution services commitments, creating considerable 
ambiguity regarding future opportunities for U.S. pharmaceutical 
firms.]   In January 2009, foreign firms will be able to exercise 
import rights for pharmaceutical products. Under current Vietnamese 
trading rights regulations this would include extending importation 
privileges to foreign importers operating inside Vietnam.  For 
pharmaceutical firms to take advantage of this phase-in they would 
need to establish a legal entity in Vietnam which would serve as the 
importer and initial link to the current distribution network. 
 
¶7. (U) Currently, most pharmaceutical firms not engaged in 
production are registered in Vietnam as representative offices and, 
as such, are not permitted to carry out commercial activities.  Some 
of these firms have expressed an interest in transitioning their 
representative offices into branch operations, but Vietnamese 
authorities are having difficulty coming up with a way to regulate 
the scope of operations of branches, particularly how to keep them 
 
HANOI 00001072  002.2 OF 004 
 
 
from engaging in restricted activities (key concerns being 
distribution and to some degree the activity known in the trade as 
'detailing' or promoting products through direct outreach to 
physicians and practitioners).  The two sides promised to continue 
discussions, and the Mission will monitor the situation closely, as 
the import rights implementation date approaches. 
 
IPR ISSUES ON THE TABLE 
----------------------- 
 
¶8. (SBU) NOIP Deputy Director General Phi Anh chaired a meeting of 
the TIFA IPR working group, which included officials from NOIP, the 
ministries of Industry and Trade (MOIT), Justice, Information and 
Communication, Culture, and Health.  The two sides continued their 
ongoing discussion on creating a work plan to address key 
deficiencies in Vietnam's administrative enforcement system as 
identified by U.S. and local rights-holders and based on extensive 
engagement by Post.  The U.S. side raised concerns by U.S. book 
publishers and music and film producers about the significant 
hurdles they face in entering the Vietnamese market because of 
restrictive regulations and weak enforcement of copyright 
protections.  The U.S. side also raised the issue of Ephim.com, a 
geo-restricted Vietnamese internet site that offers pirated U.S. 
media content and is hosted by FPT, Vietnam's largest privately 
owned ISP.  The GVN side said it would look into the matter. 
 
IPR ENFORCEMENT AND LEGISLATION 
------------------------------- 
 
¶9. (U) The TIFA IPR working group committed earlier this year to 
examine the primary obstacles in Vietnam for rights-holders seeking 
IPR enforcement, and review which information would be useful in 
facilitating enforcement cooperation.  Both sides agreed on the need 
to update and revise the Embassy Hanoi-created web-based "IPR Tool 
Kit," and DDG Anh said that his office would seek U.S. technical 
assistance to update the Toolkit.  One of the issues discussed 
earlier this year was the complaint by rights-holders that a cap on 
administrative fines levied for IP piracy due to a conflict between 
laws.  Vietnam took steps to address this conflict and during the 
meeting provided an update on newly issued Ordinance Number 4/2008, 
which clarified for GVN administrative agencies that the fines in 
the IP law are to be applied in cases of IP violations. 
 
¶10. (U) As part of the IPR Toolkit enhancement exercise, USTR 
Southeast Asia Director David Bisbee asked if the NOIP could produce 
a list of all the GVN agencies with administrative authority over IP 
issues, with specific contact information and a detailed list of 
procedures and formalities required by each agency for 
administrative action.  Such information would be useful for U.S. 
rights holders and would help them navigate the confusing set of 
agencies responsible for IP enforcement under Vietnam's 
administrative system.  DDG Anh said that he aimed for a "one-door" 
policy when it comes to IPR issues. 
 
¶11. (U) Bisbee said the United States recognizes Vietnam's progress 
in the area of IP protection and, with continued work by Vietnam, 
hopes the USG can acknowledge this progress during  the next Special 
301 Review in February 2009.  He suggested that a "roadmap" could be 
a good way for NOIP to prepare for the next review.  DDG Anh asked 
the U.S. side to consult with NOIP in advance of the next 301 Review 
to resolve misunderstandings or correct discrepancies. 
 
¶12. (U) The U.S. side also encouraged the GVN to join the World 
Intellectual Property Organization (WIPO) treaties, saying it would 
reaffirm Vietnam's commitment to IP protections.  The U.S. side 
pointed out that U.S. industry is very supportive of Vietnam's 
progress and, in its view, Vietnam has already completed much of the 
necessary work to implement the treaties.  Vietnam would be among 
the first countries in Southeast Asia -- and the first developing 
country in the region -- to actually implement the WIPO treaties. 
Bisbee urged the GVN to step up its enforcement of IP over the 
coming months, particularly in the digital environment.  He 
reemphasized the United States' willingness to deepen cooperation 
with the Ministry of Justice (MOJ) as it proceeds with the 
long-promised revision of Vietnam's criminal code provisions related 
to IP.  MOJ is currently working on the latest draft of the IP 
amendments, and indicated in the meeting that it hopes to have a 
final version passed by the National Assembly in November. 
 
BEEF AND FRUIT ACCESS 
--------------------- 
 
¶13. (SBU) The U.S. side asked the Vietnamese to identify which 
specific concerns were holding back full market access for U.S. beef 
 
HANOI 00001072  003.2 OF 004 
 
 
imports.  The GVN officials told us that they would be in a position 
to make a decision on granting market access to live cattle and beef 
from animals older than 30 months after it concludes its ongoing 
risk assessment.  On September 15, Vietnam presented a preliminary 
and inconclusive risk assessment that calls for further data 
gathering, which the relevant USG agencies are examining. 
 
¶14. (U) The GVN representatives said that they were eager to gain 
market access for longan, lychee and rambutan fruits (dragonfruit 
exports to the U.S. were approved on July 29, 2008).  They said that 
an Agriculture Ministry (MARD) delegation would visit the U.S. in 
October to discuss both the beef and fruit issues. 
 
GSP 
--- 
 
¶15. (SBU) At all levels, GVN officials reiterated their interest in 
getting GSP approval before the end of the year.  The U.S. team 
urged the Vietnamese to pay close attention to the public comments 
that were submitted during the process, and address particular areas 
of concern.  The U.S. side noted that labor, for instance, "will 
always come up in the trade context, so this is a great opportunity 
to address it and do a roadmap to move forward."  OOG Minister Phuc 
assured Veroneau in an August 26 meeting that Vietnam would make 
efforts to address the labor concerns. 
 
APPAREL IMPORTS AND MARKET ECONOMY 
--------------------------- 
 
¶16. (U) Vietnamese officials also expressed alarm that the Import 
Monitoring Program (IMP) for textile and apparel Vietnamese exports, 
which expires in December of this year, may be extended.   The U.S. 
side stated that the Administration has no plans to extend the 
program, but acknowledged that this did not foreclose the 
possibility of a congressionally-mandated extension.  Vietnam and 
the United States also discussed the way forward on the bilateral 
working group to review trade remedies and market economy status, 
and the Department of Commerce's proposal to have the first round of 
meetings on December 11-12, 2008 in Vietnam. 
 
BIT 
---- 
 
¶17. (SBU) The Vietnamese, up to the Prime Minister, reaffirmed their 
support for the Bilateral Investment Treaty.  Their team, led by the 
Planning and Investment Ministry (MPI), promised to share possible 
dates with us in order to schedule the first round of negotiations. 
Since then, however, the MPI negotiators have not committed to 
negotiation dates.  Post is following up with them and other GVN 
officials to commit to a first round timetable. 
 
IMPORT LICENSING AND OTHER AUTOMOTIVE CONCERNS 
--------------------------------------------- - 
 
¶18. (U) Faced with a trade deficit that has reached a record $16 
billion up to August, Vietnam has tried several ways to curb import 
demand.  One of those has been the institution of an "automatic" 
import licensing scheme that requires importers to apply for a 
permit for imports, showing proof of payment, among other things. 
The scheme, which has yet to be put into effect, would be burdensome 
and costly, according to foreign automakers and others in the 
private sector.  During the TIFA meetings, Industry and Trade 
Ministry (MOIT) officials said that they only sought to collect 
information in order to anticipate their foreign reserve needs, and 
assured us that no license would ever be turned down.  Relevant U.S. 
agencies are currently reviewing the new regime and developing a 
strategy for engagement. 
 
LUXURY TAXATION ON CARS AND LIQUOR 
---------------------------------- 
 
¶19. (U) Another concern from the automakers is the Special 
Consumption Tax (SCT or luxury tax) proposal under consideration by 
the GVN.   On automobiles, the tax regime would focus on engine size 
rather than capacity, as is the case now, hitting U.S. large engine 
manufacturers hardest. (REF D)  More problematic, the Ministry of 
Finance, which prepared the draft SCT law, is seeking to accelerate 
the implementation date of these changes from 2010 to 2009, which 
would not allow the carmakers sufficient time to adjust their 
production lines. 
 
¶20. (U) Embassy Hanoi, within the TIFA discussions and on other 
occasions, asked the National Assembly, the MOIT and the Ministry of 
Finance (MOF) to consider the automakers' concerns as well as the 
 
HANOI 00001072  004.2 OF 004 
 
 
overall implications of the rushed-in taxes on the country's 
business climate.  On September 9, the MOIT proposed a compromise 
that would reduce the tax burden on larger engine cars and reset the 
implementation date back to 2010, although it is not clear whether 
other concerned Vietnamese government agencies will agree to this 
position.  Post will continue to follow up on this issue. 
 
¶21. (U) The SCT draft would also harmonize luxury tax rates between 
domestic and foreign liquor (spirits, wine and beer), in line with 
Vietnam's WTO commitments.  Embassy Hanoi has met with the industry, 
which has been receptive of the draft.  During the TIFA discussions, 
the U.S. side noted, however, the irony of the GVN's justification 
of the 2010 implementation date for luxury taxes on liquor ("to 
allow more time for our domestic industry to adjust") with the MOF's 
refusal to consider doing the same for the automotive industry. 
 
DISTRIBUTION, ASSOCIATIONS AND REGIONAL DISSONANCE 
--------------------------------------------- ------ 
 
¶22. (U) All of the issues described above will continue to form part 
of the bilateral trade and investment discussion for the foreseeable 
future.  During this and previous TIFA meetings the U.S. has also 
raised our interest in engaging in other key issues, such as freeing 
Vietnam's regulations on associations (trade and otherwise), 
addressing complaints from the provinces that trade regulations are 
sometimes interpreted more restrictively at the regional level than 
by the central government (Septel), and our interest in ensuring a 
smooth opening of the distribution sector to fully-foreign owned 
firms in 2009. 
 
COMMENT: THE TIFA PROVING ITS WORTH 
----------------------------------- 
 
¶23. (SBU) The Vietnam-United States trade and investment 
relationship is moving at a very fast pace.  Bilateral trade this 
year has increased by 25% up to July from the same period in 2007, 
which was a banner year itself (REF E).  Our exports to Vietnam this 
year are up by 104% over the same period in 2007, while Vietnamese 
exports are down slightly by 12%.  U.S.-committed investment this 
year alone accounts for half of all U.S. investment over the last 10 
years.  By virtue of its flexibility, the TIFA has been one of our 
most useful tools in dealing with issues raised by this burgeoning 
relationship as they arise, whether in fixing troublesome 
distribution sector rule (REF F), IPR piracy or investment-related 
fixes. 
 
¶24. (U) This telegram was coordinated with the office of the USTR. 
 
MICHALAK 
 
 
 
8